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05 January 2020

Tax Amicus: October 2019

Article

The dividend dilemma
by Sadhvi Gupta

The article in this 100th issue of Tax Amicus attempts to analyse the question as to whether the investment income earned in the form of dividends arising on account of ownership of shares is to be taken into consideration for reversal of common input tax credit under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017. Observing that the term ‘transaction in securities’ as appearing in Section 17(3) of CGST Act has not been defined in the GST law, the author refers to the meaning of the said term in foreign jurisprudence where it has been held that the payment of a dividend in respect of shares is not ‘a transaction in securities’. Further, referring to explanation to Chapter V of CGST Rules, the author believes that the scope of the said term is only limited to the transaction of sale of securities and hence payment of dividends may not amount to a ‘transaction in securities’ and a registered person may not be required to reverse ITC. The author also observes that even if a view is taken that receipt of dividends does not merit ITC reversals, yet every business will have to make reversals on sale of securities due to the presence of deeming fiction under Section 17(3).

Goods & Services Tax (GST)

Notifications and Circulars

  • Central Goods and Services Tax Rules, 2017 – 6th amendment of 2019
  • Airlines not liable for GST on PSF and UDF collected from passengers as pure agents
  • GST on supply of lending of securities clarified
  • Place of supply in composite supply of software/design services related to ESDM industry
  • Service of display of name of donor in charitable organization when not liable
  • Construction service – Explanation in Sl. No. 3(vi) of Notification No. 11/2017-CT(R) effective from 21-9-2017
  • No GST on grant of liquor licenses has no applicability for grant of other licenses

For GST Acts, GST Rules and Notifications (Central and States), Circulars, Press Releases and Notes, please use Knowledge tab in www.gst.lakshmisri.com.

Ratio decidendi

  • Anti-profiteering – Breach of natural justice when matter heard by 3 NAA Members, but order signed by four – Bombay High Court
  • Provisional attachment under CGST Section 83 to be taken only as a last resort – Gujarat High Court
  • Confiscation of conveyance and goods – Hearing and passing of speaking order mandatory – Gujarat High Court
  • Service by Court Receiver is not ‘supply’ - Supply doctrine does not contemplate a wrongful unilateral act or those resulting in payment of damages – Bombay High Court
  • Refund of IGST after adjusting higher rate of duty drawback – Kerala High Court
  • Anti-profiteering – Discount due to slump in market is not passing of ITC benefit – National Anti-profiteering Authority
  • Anti-profiteering – Agreement with buyer in violation of CGST Section 171 is void – National Anti-profiteering Authority
  • Construction service - No abatement on preferential location services & car parking services – AAR West Bengal
  • Recovery of parental health insurance premium from employees is not “supply” – AAR Maharashtra
  • Additional amount charged by stock broker on delayed payment is not ‘interest’ – AAR Madhya Pradesh
  • Prize money won in horse race competition is consideration against ‘supply’ – AAR Maharashtra
  • No ITC in respect of goods or services attributable to incentives provided to dealers – AAR Karnataka
  • Valuation – Subsidy received from government is not includible in value of services – AAR Karnataka
  • ITC on goods and services received before effective date of registration – AAR Karnataka
  • E-commerce platform not liable for supply of services by drivers through it – AAR Karnataka

Customs

Notifications and Circulars

  • Drawback - Education Cesses, SWS and Clean Environment Cess to be factored in Brand Rate
  • Steel Import Monitoring System - DGFT clarifies
  • Manufacture and other operations in warehouse under Customs Section 65 clarified
  • No Advance Authorization for gold medallions and coins or any jewellery articles manufactured by mechanised process
  • Pre-Shipment Inspection Agencies - Extension of validity
  • Transport and Marketing Assistance - Aayat Niryat Form 7(A)A amended
  • New online platform for filing and issuance of Preferential Certificate of Origin
  • Import and export of electronic cigarettes and parts or components thereof prohibited

Ratio decidendi

  • Drawback – Limitation for issue of SCN under Rule 16 of Drawback Rules, 1995 – Punjab & Haryana High Court
  • DFIA – Benefit available even when specific name of import product not mentioned in licence – CESTAT Ahmedabad
  • SAD refund - Deed of conveyance when satisfies requirement of sale invoice – CESTAT Mumbai
  • No late fee for delay in filing Bill of Entry where importer takes all efforts to clear goods within reasonable time – CESTAT Chennai
  • Prior contract for import does not affect validity of amendment to import policy – Rajasthan High Court
  • Valuation - Ship demurrage charges are not includible – CESTAT Delhi
  • Refund available even in absence of payment challan – CESTAT Ahmedabad
  • SAD refund - Time limit of one year starts from payment of sales tax/VAT – CESTAT Mumbai
  • Nata De Coco, jelly, pudding and Yogo ice are classifiable under Tariff Item 1704 9090 – CESTAT Ahmedabad
  • Refund - No unjust enrichment when disputed amount shown as asset in balance sheet – CESTAT Delhi
  • Revocation of Customs Broker’s Licence without disclosing reasons for disagreeing with findings of Inquiry Officer is not correct – Madras High Court

Central Excise and Service Tax

Ratio decidendi

  • Repeal of VAT Act – Savings clause saves all rules, regulations, orders, notifications, etc. – Bombay High Court
  • Withdrawal of exemption from duty/tax – Principle of promissory estoppel not invokable if public interest so warrants – Supreme Court Larger Bench
  • Provision of service to employee – Cenvat credit when available – CESTAT Hyderabad
  • No service tax on surrender charges for pre-mature termination of insurance policy – CESTAT Delhi
  • Cenvat credit on customer care services is proper – CESTAT Chennai
  • Cenvat credit on transportation from job work to depot of principal – Matter referred to LB – CESTAT Ahmedabad
  • Captive consumption exemption – Use of cement ‘in relation’ to manufacture enough – CESTAT Hyderabad

October, 2019/Issue-100 October, 2019/Issue-100

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