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Blocked Input Tax Credit (ITC) under GST: Key Points You Need to Know

editor — Thu, 25 Apr 2024 05:48:46 +0000

In the realm of Goods and Services Tax (GST) in India, understanding Input Tax Credit (ITC) is crucial for businesses to ensure compliance and optimize their tax liabilities. However, not all GST paid on purchases can be claimed as ITC. There are certain scenarios where the Input Tax Credit is blocked, preventing businesses from claiming it against their output tax liability. In this comprehensive guide, we delve into the concept of Blocked Input Tax Credit under GST, highlighting key points and recent rulings.

What is Blocked Input Tax Credit (ITC)?

Blocked Input Tax Credit, as per GST laws, refers to specific goods and services on which GST is paid but businesses are ineligible to claim them as Input Tax Credit. These items are deemed ineligible because they are not considered as inputs directly utilized in the production or provision of taxable goods or services.

Recent Rulings and Clarifications:

Introduction:

In the complex landscape of Goods and Services Tax (GST) in India, the eligibility of Input Tax Credit (ITC) plays a significant role for businesses. The recent ruling by the Maharashtra Appellate Authority for Advance Ruling regarding Las Palmas Co-Op. Housing Society sheds light on crucial aspects of ITC denial. Let’s delve into the details to understand the implications of this ruling.

Facts of the Case:

Las Palmas Co-Op. Housing Society sought to avail Input Tax Credit for lift installation charges paid to the lift contractor. However, the Maharashtra Appellate Authority upheld the ruling of the Maharastra Advance Ruling Authority, denying the society’s eligibility for ITC. Citing sections 16(2)(b), 17(5)(c), and 17(5)(d) of the CGST Act, 2017, the authority emphasized that ITC would only be available for tax paid on works contract services when such services are utilized as input for further supply of works contract service.

Issue:

The central issue revolves around the eligibility criteria for Input Tax Credit under the CGST Act. The appellant, Las Palmas Co-Op. Housing Society, failed to fulfill the conditions outlined for availing ITC on works contract services. The authority highlighted that the society, not being a works contract service provider, did not provide any works contract service to its members, thereby rendering it ineligible for ITC.

Held:

The Maharashtra Appellate Authority for Advance Ruling affirmed the decision of the Maharastra Advance Ruling Authority, ruling that Las Palmas Co-Op. Housing Society is not eligible to avail Input Tax Credit in respect of the GST paid on lift installation charges. The authority emphasized that the appellant did not meet the criteria outlined in sections 16(2)(b), 17(5)(c), and 17(5)(d) of the CGST Act, 2017. Consequently, the appeal filed by the appellant was deemed not maintainable and liable to be rejected.

Introduction

The case of Malabar Cements Limited, brought before the Authority for Advance Ruling in Kerala, sheds light on the complexities surrounding input tax credit under the Goods and Services Tax (GST) regime in India. This case revolves around the eligibility of Malabar Cements Limited to claim input tax credit on the GST charged by a service provider for hiring buses or motor vehicles with a seating capacity of more than 13 persons for employee transportation. Understanding the outcome of this case is crucial for businesses navigating the nuances of GST regulations.

Facts of the Case

Malabar Cements Limited, a government-owned Public Sector Company in Kerala, sought an advance ruling regarding the admissibility of input tax credit on GST charged by a service provider for providing transportation facilities to its employees. The company operates its factory round-the-clock in remote areas where public transportation is limited. To ensure the commuting needs of its employees are met, Malabar Cements Limited engages a service provider to provide non-air-conditioned buses with a seating capacity exceeding 13 persons. The service provider levies a GST of 5% on the hiring charges, leading to the question of whether Malabar Cements Limited can avail input tax credit on this GST.

Issue

The central issue in this case is twofold. Firstly, it concerns the eligibility of Malabar Cements Limited to claim input tax credit on the GST charged by the service provider for hiring buses or motor vehicles with a seating capacity exceeding 13 persons for employee transportation. Secondly, it delves into the extent to which the input tax credit can be availed by Malabar Cements Limited, particularly considering the portion of the transportation cost borne by the company itself.

Held

Upon thorough examination of the relevant legal provisions and the arguments presented by Malabar Cements Limited, the Authority for Advance Ruling concluded that the company is indeed eligible to avail input tax credit on the GST charged by the service provider. However, the extent of this credit is restricted to the cost of transportation borne by Malabar Cements Limited. This ruling provides clarity on an important aspect of GST compliance for businesses engaged in employee transportation services and underscores the need for meticulous adherence to statutory provisions.

Introduction

The recent ruling by the Authority for Advance Ruling (AAR) in Madhya Pradesh has significant implications for businesses in the amusement park industry, particularly regarding Input Tax Credit (ITC) under the Goods and Services Tax (GST) regime. The case of Atriwal Amusement Park sheds light on the eligibility criteria for claiming ITC on various components and services utilized in the construction of water parks, offering crucial guidance to businesses operating in this sector

Facts of the Case

Atriwal Amusement Park, a company specializing in the construction of water parks, sought clarification from the AAR regarding the eligibility of Input Tax Credit (ITC) on several aspects of its construction activities. The key components and services under scrutiny included the purchase of water slides, site development services, and the construction of swimming pools or wave pools, all of which are subject to taxation under GST regulations.

Issue

The central issue in this case pertains to the eligibility of Atriwal Amusement Park to claim Input Tax Credit (ITC) on specific components and services utilized in the construction of water parks. The inquiry seeks clarification on whether these elements qualify as ‘Plant and Equipment’ under GST provisions, thus enabling the applicant to avail of ITC benefits.

Held

Upon careful consideration of the facts and legal provisions, the Authority for Advance Ruling (AAR) in Madhya Pradesh arrived at the following decisions:

Water Slides: The AAR ruled in favor of Atriwal Amusement Park, affirming its eligibility to claim Input Tax Credit (ITC) on the purchase of water slides made from durable PVC material. This decision is based on the classification of water slides as ‘apparatus, equipment, and machinery,’ thereby meeting the criteria for ITC under GST regulations.

Site Development Services: However, the AAR denied ITC claims on goods and services related to site development and preparation where water slides are installed. The rationale behind this decision lies in the exclusion of land-related services from the definition of ‘Plant and Equipment’ eligible for ITC benefits.

Swimming Pools or Wave Pools: Similarly, the AAR ruled against the eligibility of ITC on the construction of swimming pools or wave pools. Despite being integral components of amusement parks, these structures were deemed civil in nature and not considered part of the supportive framework or foundation of the plant, thus falling outside the scope of ‘Plant and Equipment’ for ITC purposes.

Introduction

The integration of solar power systems has become increasingly common as businesses seek to adopt sustainable and eco-friendly energy solutions. This article examines a specific case, the ruling in the matter of Unique Welding Products Pvt. Ltd. vs. GST AAR Gujarat, to explore the eligibility of Input Tax Credit (ITC) for the installation and commissioning of a roof-top solar system.

Facts of the Case

Unique Welding Products Pvt. Ltd., a welding wires manufacturing and sales company based in Anand, Gujarat, installed a roof-top solar system with a capacity of 440 KW on its factory roof for captive power generation. The company sought clarification on its eligibility for ITC under the Central Goods and Services Tax (CGST) Act, 2017.

Issue

The main issues raised in the case were whether Unique Welding Products Pvt. Ltd. is eligible for ITC on the purchased roof-top solar system with installation & commissioning and whether the roof-top solar system, along with its installation and commissioning, constitutes plant and machinery, making it eligible for ITC under section 17(5) of the CGST Act.

Held

The ruling authority concluded that unique Welding Products Pvt. Ltd. is eligible to avail ITC on the roof-top solar system with installation & commissioning under the CGST/GGST Act and the roof-top solar system, with installation and commissioning, qualifies as plant and machinery for the company, making it eligible for ITC under section 17(5) of the CGST/GGST Act.

Introduction

The West Bengal Appellate Authority for Advance Ruling recently tackled the question of Input Tax Credit (ITC) eligibility concerning the construction of immovable property subsequently leased out for commercial purposes. This article provides an overview of the ruling, its implications, and the legal context surrounding it.

Facts of the Case

M/s. Mindrill Systems and Solutions Private Limited, hereinafter referred to as “the Respondent,” constructed a warehouse and leased it to a commercial entity. GST was duly paid on this supply of service. Subsequently, the Respondent sought an Advance Ruling from the West Bengal Authority for Advance Ruling (WBAAR) regarding the availability of Input Tax Credit (ITC) for capital expenses incurred during the warehouse’s construction. The question pertained to whether these expenses could offset tax liabilities arising from renting out the warehouse.

Issue

The central issue at hand revolved around whether Input Tax Credit (ITC) could be claimed in relation to the construction of immovable property subsequently let out for commercial purposes.

Held

The West Bengal Appellate Authority for Advance Ruling, in Appeal No. 04/WBAAAR/Appeal/2023, deliberated on the matter. It observed that clauses (c) and (d) of sub-section (5) of Section 17 of the Central Goods and Services Act, 2017 (“the CGST Act”), dictate that ITC is not available for works contract services or goods or services received for the construction of immovable property. Therefore, such transactions fall within the purview of blocked credit.

Furthermore, the Authority noted that the explanation provided in clause (d) of Section 17 specifies that credit is also blocked for reconstruction, renovation, additions, alterations, or repairs capitalized in the books of accounts. However, it clarified that the condition of capitalization in the books of accounts applies solely to the mentioned activities related to immovable property.

In conclusion, the West Bengal Appellate Authority for Advance Ruling held that no Input Tax Credit (ITC) is available concerning the construction of the warehouse subsequently leased out by the Applicant.

Introduction

The recent ruling by the GST AAAR Tamilnadu has shed light on a crucial aspect of Input Tax Credit (ITC) concerning structural support for overhead cranes within an ‘Integrated Factory’ building. Coral Manufacturing Works India Private Limited brought forth an appeal challenging the existing orders of the Advance Ruling Authority, Tamil Nadu, seeking clarification on the applicability of ITC in this scenario.

Facts of the Case

Coral Manufacturing Works India Private Limited constructed a warehouse and let it out for commercial purposes, paying GST on the service provided. The company filed an application for Advance Ruling, questioning whether ITC could be availed for the capital expenses incurred on the construction of the warehouse. The West Bengal Authority for Advance Ruling held that ITC was not admissible for expenses capitalized in the books of account. Dissatisfied with this ruling, the Revenue Department appealed against it.

Issue

The primary issue revolved around the eligibility of Input Tax Credit (ITC) concerning structural support erected for overhead cranes within an ‘Integrated Factory’ building. Coral Manufacturing Works India Private Limited sought clarification on whether the Integrated Factory Building itself could be considered as plant and machinery under the CGST Act.

Held

The GST AAAR Tamilnadu held that while the overhead crane and its structural support qualified as plant and machinery, the Integrated Factory Building itself did not. Consequently, Coral Manufacturing Works India Private Limited was only eligible for an ITC proportional to the structural support for the overhead crane, but not for the construction of other civil structures like the building’s side walls and roof.

Introduction

In the case of Raminfo Limited, the GST AAR Telangana has made a significant determination regarding the eligibility of Input Tax Credit (ITC) on the purchase of a 7-seater vehicle, which will be converted into an ambulance for onward supply. This article explores the details of the ruling, its implications, and the broader context of GST regulations.

Facts of the Case

Raminfo Limited has secured a work order from the Government of Tripura to supply ambulances, specifically Mobile Common Service Centres. To fulfill this order, they are procuring Maruti Suzuki Eeco (7 seater) vehicles and modifying them in their workshop located in Hyderabad, Telangana State. Seeking clarity on GST rates and ITC admissibility, Raminfo Limited filed an advance ruling before the AAR Telangana.

Issue

The primary issue at hand is whether Raminfo Limited is eligible to claim Input Tax Credit (ITC) on the purchase of Maruti Suzuki Eeco (7 seater) vehicles, which will be transformed into ambulances for onward supply to the Government of Tripura.

Held

The AAR Telangana, in its order TSAAR Order No.02/2023, concluded that Raminfo Limited is indeed eligible to avail ITC on the purchase of vehicles used for further supply. Citing Section 17(5)(a) of the CGST Act, the AAR noted that ITC on such purchases is not blocked. Therefore, Raminfo Limited can claim ITC on the tax paid for the purchased vehicles. Additionally, the AAR clarified that GST at the rate of 28% will be applicable on the supply of ambulances to the Government of Tripura.

Understanding Blocked Input Tax Credit under GST is paramount for businesses to avoid unnecessary tax liabilities and ensure compliance. By staying updated with recent rulings and clarifications, businesses can make informed decisions regarding their tax planning strategies. It’s imperative to consult with tax experts to navigate the complexities of GST laws effectively.

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Extension of Appeal Filing Time by the Appellate Authority

editor — Fri, 12 Apr 2024 05:00:41 +0000

Introduction:

The authority of the Appellate Authority to extend the period for filing an appeal was deliberated upon in the case of Jyanata Ghosh v. State of West Bengal by the Hon’ble Calcutta High Court.

Facts of the Case:

Mr. Jyanata Ghosh, referred to as the Petitioner, received a Show Cause Notice (SCN) which lacked essential details regarding personal hearing.
Following the SCN, an Order was issued on August 11, 2023, under Section 74 of the Central Goods and Services Tax Act, 2017, demanding a significant sum from the Petitioner for a specified period.
The issuance of this order violated principles of natural justice as it did not grant the Petitioner an opportunity for personal hearing.
Challenging this order, the Petitioner appealed before the Appellate Authority under Section 107 of the CGST Act, only to have the appeal dismissed on the grounds of limitation.

Issue:

Whether the Appellate Authority possesses the jurisdiction to extend the period for filing an appeal.

Held:

The Hon’ble Calcutta High Court directed that the Appellate Authority should have granted the Petitioner a personal hearing and decided the appeal on its merits, emphasizing the violation of the principle of natural justice.
The court cited precedents such as Murtaza B Kaukawala v. State of West Bengal and S.K. Chakraborty & Sons v. Union of India, highlighting that delay can be condoned if the principles of natural justice are violated.
It was further noted that the prescribed period for filing an appeal, initially set at 30 days, can be extended by the Appellate Authority, as mandated by Section 5 of the Limitation Act, 1963.
Consequently, the court condoned the delay in filing the appeal and allowed the writ petition by setting aside the impugned order dated January 17, 2024. Additionally, it ordered a stay on the recovery proceedings pending the disposal of the appeal case, upon the Petitioner’s deposit of the pre-deposit amount, thereby disposing of the writ petition in favor of the Petitioner.

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Understanding the Mechanisms of Tax Relief: Remission and Extinguishment

editor — Wed, 10 Apr 2024 08:33:34 +0000

Introduction:

The concepts of remission and extinguishment of tax demand involve the cancellation or forgiveness of a taxpayer’s outstanding tax liabilities. These legal mechanisms offer relief to taxpayers facing difficulties in settling their tax obligations fully. In this article, we will delve into the provisions of remission and extinguishment of tax demand, exploring their definitions, legal frameworks, and implications.

Government Initiatives:

Recent Example in India (as of March 2024):

In the 2024 Interim Budget, the Indian government announced a remission and extinguishment program for specific direct tax demands, waiving outstanding tax demands up to a certain limit depending on the tax year.

Key Points to Remember:

Remission of Tax Demand:

Legal Framework:

Grounds for Remission:

Procedure for Remission:

Extinguishment of Tax Demand:

Legal Basis:

Key Considerations:

It's not a refund; the forgiven amount is not returned to the taxpayer.
There may be limitations on the amount of tax that can be remitted or extinguished, as well as the reasons for doing so.
This concept typically applies to direct taxes like income tax and may not apply to indirect taxes like sales tax.

Conclusion:

Remission and extinguishment of tax demand are crucial legal mechanisms that provide relief to taxpayers facing financial difficulties. While remission offers relief through forgiveness of outstanding tax liabilities, extinguishment permanently terminates the taxpayer’s tax liability. Understanding the legal framework and procedures associated with these concepts is essential for taxpayers and professionals navigating the complexities of tax law. By comprehending the intricacies of remission and extinguishment, taxpayers can seek relief when appropriate, ensuring compliance and mitigating potential financial hardships. Additionally, tax authorities must administer these mechanisms judiciously, balancing relief for deserving taxpayers with revenue collection for the benefit of society as a whole.

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Understanding the Tax Advantages of Section 115H for NRIs

editor — Wed, 10 Apr 2024 08:11:09 +0000

Overview of Section 115H:

Section 115H of the Income Tax Act provides favorable tax rates for non-resident Indians (NRIs) on specific investments, encouraging them to invest in India and boosting the country’s attractiveness as a financial destination.

Benefits Under Section 115H:

Claiming the Benefit Under Section 115H:

Continuing Benefits After Becoming a Resident Indian:

Key Considerations:

Tax benefits under Section 115H are applicable only to income earned from specific investments held by NRIs in India.
NRIs must file their income tax returns in India if their taxable income exceeds the basic exemption limit.
Seeking guidance from tax professionals is advisable to understand the nuances of Section 115H and maximize tax benefits.

Difference Between Section 115 and Section 115H:

Conclusion:

Understanding the eligibility criteria, benefits, and claiming process of Section 115H enables NRIs to make informed investment decisions and optimize their tax liabilities in India.

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7 Alternative Tax-Saving Avenues Besides Section 80C for FY 2023-24

editor — Sat, 30 Mar 2024 11:45:35 +0000

Introduction:

Beyond Section 80C, there exist numerous avenues for tax savings. In FY 2023-24, explore various deductions such as NPS contributions, health insurance premiums, medical expenses, home loan interest, electric vehicle purchases, charitable donations, savings account interest, and tax rebates. These deductions effectively lower taxable income, leading to significant tax savings.

Tax Saving with NPS (Section 80CCD (1B)):

Investing up to Rs. 50,000/- in NPS offers additional tax savings, augmenting benefits available under Section 80C. Moreover, NPS contributions can be utilized within the Rs. 1,50,000/- limit of Section 80C, resulting in a total deductible amount of Rs. 2,00,000/-.

Tax Savings on Health Insurance Premiums (Section 80D):

Section 80D allows deductions for health insurance premiums paid for self, family, and parents, along with medical expenses up to Rs. 25,000/- and Rs. 50,000/- respectively. This provision extends to preventive health check-ups.

Tax Savings on Medical Expenses towards Disabled Dependent (Section 80DD):

Under Section 80DD, deductions of Rs. 75,000/- or Rs. 1,25,000/- (for severe disability) are available irrespective of expenses incurred for a disabled dependent.

Deduction in Respect of Interest on Loan Taken for Residential House Property (Section-80EE):

First-time home buyers can claim deductions under Section 80EE for interest paid on home loans, capped at Rs. 50,000/- per annum.

Deduction in Respect of Purchase of Electric Vehicle (Sec-80EEB WEF AY 2020-21):

Interest on loans taken to purchase electric vehicles is deductible up to Rs. 1,50,000/-, subject to conditions.

Donations to Charitable Institutions (Section 80G):

Donations made to approved charitable institutions are eligible for deductions under Section 80G, with categories offering 50% or 100% deductions.

Interest on Saving Bank Accounts (Section 80TTA / 80TTB):

Interest earned on savings bank accounts is deductible up to Rs. 10,000/- per annum, and for senior citizens, up to Rs. 50,000/-.

Rebates (Section 87A):

Individual residents with total incomes not exceeding Rs. 5,00,000/- are eligible for tax rebates up to Rs. 12,500/- or 100% of the income tax, whichever is less.

Conclusion:

By exploring these alternative tax-saving options, individuals can effectively reduce their tax liabilities for FY 2023-24. Leveraging deductions on NPS, health insurance, medical expenses, home loans, electric vehicles, charitable donations, savings accounts, and rebates optimizes tax planning strategies, leading to maximized tax savings.

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Assessee is entitled to interest from the date immediately after the expiry of sixty days from the date of receipt of the GST refund application

editor — Tue, 26 Mar 2024 06:28:11 +0000

The Hon’ble Delhi High Court, in the case of Raghav Ventures vs. Commissioner of Delhi [Writ Petition (Civil) No. 12209 of 2023 dated March 01, 2024], held that the payment of 6% interest under the Section 56 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is statutory and does not depend if the claim made by the Assessee. It is automatically payable if the GST refund is not made within 60 days from the date of receipt of the application.

Facts of the case:

Raghav Ventures, referred to as “the Petitioner,” engaged in exporting mobile phones and accessories to M/s AZ Logistic, Dubai, UAE, and paid Integrated Goods and Services Tax (IGST). The normal procedure for claiming GST refunds involved submitting shipping bills, which Customs processed through ICEGATE.

In December 2022, exports amounted to Rs. 9,06,49,174/- with IGST payment of Rs. 1,63,16,851/-. In February 2023, exports totaled Rs. 2,80,38,271/- with IGST payment of Rs. 50,46,889/-. Similarly, in March 2023, exports amounted to Rs. 95,90,489/- with IGST payment of Rs. 17,26,288/-, and in May 2023, exports of mobiles and accessories worth Rs. 76,96,568/- were made, with IGST payment of Rs. 13,85,382/-.

According to Sub-Rule (2) of Rule 96 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”), export invoice details from Form GSTR-1 are electronically transmitted to Customs. Once the system confirms export, GST refunds are processed through ICEGATE under Rule 96(3) of the CGST Rules.

The Petitioner submitted GST returns in Form-GSTR-3B and refund applications for the mentioned periods via Form-GST-RFD-01. Acknowledgments were received via Form-GST-RFD-02, confirming receipt of the GST refund applications.

While the writ petition was pending, the IGST refund for the period was credited to the Petitioner’s bank account on December 4, 2023, without any interest. On December 6, 2023, the Petitioner applied to the Special Commissioner, Department of Trade & Taxes (“the Respondent”), seeking 6% interest from the refund application date until December 3, 2023.

Therefore, aggrieved by these circumstances, the present writ petition was filed, requesting the Respondent to grant the total IGST refund of Rs. 2,44,75,410/- for the tax periods of December 2022, February 2023, March 2023, and May 2023, along with interest as per Section 56 of the CGST Act.

Issue:

Does the Assessee have a statutory entitlement to interest on delayed GST refunds?

Held:

The Delhi High Court, in Writ Petition (Civil) No. 12209 of 2023, ruled as follows:

It was observed that interest payment under Section 56 of the CGST Act is mandatory and not contingent upon the Assessee's claim. It automatically becomes due if the GST refund is not issued within 60 days from the date of application receipt. Denial of GST refund based on waiving interest claims in FORM GST-RFD-01 is unjustifiable. Additionally, interest is only applicable if the refund isn't granted within 60 days from the application date, making interest payment obligatory and automatic.
It was also noted that Circular No. 125/44/2019-GST dated November 18, 2019, clarifies that interest calculation starts from the day immediately following the 60-day period from the application receipt until the amount is credited to the applicant's bank account.
The court held that the Petitioner is entitled to statutory interest at a rate of 6%, starting from the day immediately following the expiry of the 60-day period from the application receipt until the refund is credited to the Petitioner's bank account. The Respondent was instructed to process the refund of interest and credit it to the Petitioner's account within four weeks. Consequently, the petition was resolved along with the pending application.

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ITC Transition not to be denied in case of Input Service Distributor (ISD)

editor — Sat, 23 Mar 2024 06:22:00 +0000

In the case of Siemens India Ltd. v. Union of India [Writ Petition No. 986 of 2019 dated February 09, 2024], the Hon’ble Bombay High Court, drawing upon sub-section (7) of Section 140 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”), postponed the proceedings for further examination. The court upheld the temporary halt granted to the Assessee, who is an Input Service Distributor (“ISD”), emphasizing that Input Tax Credit (ITC) legitimately available to the Assessee before the Appointed Day should not be forfeited due to the absence of an effective procedural mechanism for transferring ITC to the Electronic Credit Ledger for utilization. This situation could lead to the permanent loss of such ITC.

Facts of the case:

Siemens India Ltd. (“the Petitioner”), registered as an Input Service Distributor (ISD), initiated a writ petition regarding the transition of Input Tax Credit (ITC) available to them on July 1, 2017 (“the Appointed Day”). The petition contested the Revenue Department’s (“the Respondent”) refusal to allow transition or utilization of ITC in the Electronic Credit Ledger, citing a defective electronic mechanism.

These proceedings stemmed from a Supreme Court order dated March 24, 2023, in Union of India and Ors. v. Siemens Ltd. and Ors [SLP (Civil) Diary No. 7213 of 2023], directing a fresh consideration of the case, taking into account relevant contentions and legal provisions.

Issue:

Is an Input Service Distributor (ISD) entitled to transition ITC available on the Appointed Day?

Held:

The Bombay High Court, in Writ Petition 986 of 2019, made the following determinations:

The primary concern revolves around the legal ramifications of sub-section (1) and sub-section (7) of Section 140 of the CGST Act, outlining transitional arrangements for the carry-forward and utilization of ITC by ISDs.
Citing sub-section (7) of Section 140 of the CGST Act, the Court emphasized that legitimately available ITC with the Petitioner before the Appointed Day cannot be forfeited due to the absence of an effective procedural mechanism for transferring ITC to the Electronic Credit Ledger for utilization, thus preventing permanent loss of such ITC.
The Court suggested that a thorough examination of these issues by the GST Council would aid in the adjudication process.
It was decided that interim relief granted to the Petitioner would remain in force.
The case was adjourned until August 9, 2024.

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Optimizing Tax Planning with Political Party Donations

editor — Fri, 22 Mar 2024 07:21:06 +0000

The difference between tax saving and tax evasion becomes apparent when individuals seek deductions under sections 80GGB/80GGC of the Income Tax Act 1961 for contributing funds to a political party or an electoral trust.

Eligibility for Deductions

Deduction Limits

Tax Savings Example

Gross Total Income	Donation Amount	Deduction Claimed	Tax Savings
Rs. 10,00,000/-	Rs. 2,00,000/-	Rs. 2,00,000/-	Substantial

Risks of Bogus Donations

Consequences of Failure to Prove Genuineness

Steps to Prove Genuineness

Obtain Registration Certificate: Confirm party registration under section 29A.
Verify on Official Website: Check legitimacy on eci.gov.in.
Request PAN Card: Obtain PAN of the political party.
Cross-Verify Bank Details: Use cancelled cheque.
Get Stamped Receipt: Ensure a physical receipt from the party.

Supporting Documentation

Conclusion

Donating to political parties can offer tax benefits but requires careful consideration, documentation, and compliance to avoid penalties. Proper evidence is crucial to substantiate the genuineness of the transaction.

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Opting for GST Composition Scheme Deadline Extended to March 31, 2024: Check Eligibility and File Form CMP-02 for FY 2024-25

editor — Mon, 18 Mar 2024 06:34:53 +0000

Introduction

The deadline for GST-registered individuals to opt for the GST Composition Scheme for the fiscal year 2024-25 has been extended to March 31, 2024. This scheme simplifies tax compliance for eligible taxpayers, allowing them to avoid regular filings if their turnover remains within specified limits.

Eligibility Criteria

Businesses, including eateries, with an annual turnover of up to Rs 1.5 crore (or Rs 75 lakhs for certain northeastern and hill states) are eligible for the GST Composition Scheme. Service providers, excluding restaurant services, must not exceed a Rs 50 lakh turnover to qualify.

Enrollment Process

Taxpayers can enroll in the GST Composition Scheme during their initial GST registration or before the new financial year begins if they are already registered. For initial GST registration, the scheme is an option. Existing registrants aiming to switch must submit Form CMP-02 electronically before the next financial year starts.

Application Process

To opt for the Composition Scheme, existing GST registrants should log in to the GST portal, navigate to ‘Services’, then ‘Registration’, and select ‘Application to Opt for Composition Levy’ to fill and submit Form CMP-02.

Flexibility and Reversion

Taxpayers can revert to the regular GST system from the Composition Scheme at any time by submitting Form CMP-04 within the fiscal year. This allows for the resumption of normal tax payments and the issuance of tax invoices for all taxable supplies. Additionally, taxpayers can reclaim Input Tax Credit for various stocks and capital goods once they transition.

Ineligibility

Certain taxpayers are ineligible for the GST Composition Scheme, including casual taxable persons, non-resident taxable persons, those involved in inter-state supply of goods and services, providers of non-taxable goods and services, and suppliers through e-commerce platforms responsible for tax collection at source. Additionally, manufacturers of specific items like ice cream, pan masala, aerated drinks, tobacco products, fly ash bricks, and certain construction materials are prohibited from using the Composition Scheme as per GST Council directives.

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CBDT Simplifies Business Reorganization ITR Filing Process for Successor Companies

editor — Thu, 14 Mar 2024 10:26:14 +0000

The Central Board of Direct Taxes (CBDT) has issued an order on March 13, 2024, under section 119 of the Income-tax Act, 1961, providing relief to successor companies involved in business reorganizations such as amalgamations, mergers, or demergers sanctioned by competent authorities such as High Courts, Tribunals, or Adjudicating Authorities as per the Insolvency and Bankruptcy Code, 2016. This order addresses situations where the reorganization orders were issued between June 1, 2016, and April 1, 2022, predating the introduction of section 170A by the Finance Act, 2022.

Entities undergoing business reorganizations have faced challenges in filing income tax returns post-reorganization, especially when orders were issued before April 1, 2022. The CBDT’s order aims to simplify this process and provide relief to such successor companies.

Background and Legal Context

The CBDT’s order is based on the judgment in Civil Appeal Nos. 9496-99 of 2019, where the Supreme Court held that successor companies could file returns considering the Scheme of Arrangement and Amalgamation sanctioned by the National Company Law Tribunal (NCLT). This judgment paved the way for successor companies to seek relief in filing their income tax returns post-reorganization.

Provisions and Relief Offered

Section 170A of the Income-tax Act, 1961, introduced by the Finance Act, 2022, allows entities to file modified income tax returns within six months from the end of the month of issuance of the reorganization order. However, this provision applies only to orders issued after April 1, 2022. For orders issued between June 1, 2016, and April 1, 2022, the CBDT’s order provides relief by allowing successor companies to furnish returns with modified particulars in accordance with the reorganization order.

Process for Filing Modified Returns

The CBDT has outlined a streamlined process for successor companies to file modified returns, taking into account the reorganization order. The entities are required to communicate with the Jurisdictional Assessing Officer (JAO) by April 30, 2024, for enablement of electronic filing of returns. The JAO will then verify whether the return is resulting from and limited to the reorganization order and enable electronic filing through the ITBA system. Taxpayers must file their returns by June 30, 2024.

The full order can be assessed at: https://www.nyca.in/wp-content/uploads/2024/03/Order-under-section-119-of-the-Income-tax-Act-1961.pdf

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