In the complex realm of taxation, disputes between taxpayers and tax authorities frequently arise over the interpretation of tax provisions. A landmark case that brings clarity to the treatment of commissions paid to working partners in a partnership firm is THE ACIT, CIR-SHILLONG, MEGHALAYA VERSUS M/S. DHAR CONSTRUCTION COMPANY – 2023 (1) TMI 166 – ITAT GAUHATI.
Background
Dhar Construction Company, a partnership firm engaged in construction, had several partners, including those actively involved in daily operations. These working partners received commissions for their services.
Issue
The core issue was whether the commission paid to the working partners should be deductible under the Income Tax Act, 1961.
Legal Provisions Involved
Section 40(b) of the Income Tax Act addresses the admissibility of remuneration, interest, etc., paid to partners. It specifies the conditions under which these payments can be claimed as deductions.
Section 194H mandates tax deduction at source on any commission or brokerage paid to a resident, with a 5% tax rate applicable if the total exceeds ₹15,000 in a financial year.
Arguments by the Revenue (ACIT)
The ACIT argued that the commission to working partners did not qualify as a deductible expense under Section 40(b).
Arguments by the Assessee
Dhar Construction Company contended that the commission constituted remuneration for services rendered. They argued such payments were essential for business efficiency and should be deductible under Section 37(1) of the Act.
Tribunal’s Analysis and Decision
The Gauhati Tribunal meticulously examined the arguments and legal provisions. Their analysis included several key points:
Definition of “Remuneration”
Section 40(b)(i) considers salary, bonus, commission, and remuneration collectively as “remuneration.” If the total remuneration falls within the limits set by Section 40(b)(v), no disallowance should be made.
Applicability of Section 194H
Section 194H requires TDS on commission or brokerage to a resident individual. The AO argued this should apply to partnership firms paying commissions to partners.
Applicability of Section 192
Section 192 mandates income tax deduction at source on salary payments. However, Explanation 2 to Section 15 clarifies that partner payments are not considered “salary” for tax purposes, and thus Section 192 does not apply.
Compliance with Section 40(b)(v)
Partnership firms must adhere to Section 40(b)(v) provisions to avoid disallowances when determining partner remuneration.
Conclusion
The Tribunal ruled in favor of Dhar Construction Company, concluding that the commission paid to working partners was indeed remuneration for their services and not subject to TDS under Section 194H. This ruling emphasizes the importance of understanding payment nature and compliance with legal provisions when claiming deductions.
Implications
This case holds significant implications for partnership firms and tax practitioners.
Clarity on Deductibility
It clarifies that commissions paid to working partners can be deductible if they qualify as remuneration under relevant provisions.
Compliance with Section 40(b)
Firms must ensure that partner remuneration stays within Section 40(b) limits and is authorized by the partnership deed to qualify for deductions.
Interpretation of Tax Laws
The case underscores the need for a purposive interpretation of tax laws, considering the specific circumstances rather than adopting a rigid approach.
In essence, the ACIT v. Dhar Construction Company case is a pivotal reference for understanding the deductibility of commissions paid to working partners in a partnership firm under the Income Tax Act.
The government is poised to restructure the Micro, Small and Medium Enterprises Facilitation Councils (MSEFCs) to address the perennial issue of delayed payments. This significant reform will be enacted through an amendment to the Micro, Small and Medium Enterprises Development Act, 2006, as revealed by sources familiar with the development.
The restructuring will endow these councils with enhanced powers, strengthening their capacity to resolve payment disputes. MSEFCs, constituted at the state level under the MSMED Act, serve as arbitrators or conciliators in disputes between suppliers within their jurisdiction and buyers across India. Upon reviewing a case, these councils direct buyers to settle dues with interest, calculated at three times the bank rate, within 45 days of accepting services.
The current system, however, is overburdened and inefficient, prompting the need for an overhaul. The revamped MSEFCs will be fortified to enforce their orders more effectively, addressing the backlog and ensuring swift resolution of disputes. According to the ‘MSME Samadhan’ portal, out of 198,453 applications filed, only 38,037 cases have been resolved, with a substantial number still pending or rejected.
One proposal under consideration is the mandatory inclusion of legal professionals in these councils to mitigate the loopholes often exploited in higher courts. Vinod Kumar, President of the India SME Forum, underscores the necessity of clearly defining the roles of these councils to encompass reconciliation and mediation, and transforming the MSME-Samadhan system into a comprehensive online dispute resolution platform.
Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), highlights the protracted execution of arbitral awards, which significantly hampers the financial stability of MSMEs. He emphasizes the need for a more expedient process to ensure timely benefits from arbitral awards.
Krunal Modi, founding member and manager of Presolv360, advocates for delegating disputes to specialized institutions to enhance efficiency. He points out the lack of guidelines from state governments that currently hampers this delegation, despite the provisions under the MSMED Act.
In a bid to amend the law, the MSME ministry is collaborating with various stakeholders, including the ministry of law and justice and National Law Universities, to refine the Act’s provisions to better serve MSMEs. The MSME Development Act mandates payment within 45 days for transactions backed by a written agreement and within 15 days otherwise.
Furthermore, the Finance Act of 2023 introduced a clause in section 43 B of the Income Tax Act, allowing the deduction of payments to micro and small enterprises as an expenditure only in the year of actual payment if delayed beyond the stipulated time. This provision aims to ensure timely payments but is under review to prevent unintended consequences, such as larger businesses avoiding smaller firms to circumvent stringent tax treatments.
The government’s initiative to restructure MSEFCs and amend related laws is a decisive step towards creating a more robust framework for resolving delayed payments, thus fostering a more conducive environment for the growth and stability of MSMEs.
Goods and Services Tax (GST), referred to in some countries as Value Added Tax (VAT), is a consumption tax imposed on the sale of goods and services at each stage of production and distribution. This tax, ultimately borne by the final consumer, distinguishes itself from other tax structures. It is crucial not to conflate GST with General Sales Tax or Government Sales Tax, despite the shared acronym.
GST—A Global Necessity or a Contested Reform?
The adoption of Goods and Services Tax has indeed catalyzed significant changes in various nations’ economic landscapes. Unlike traditional consumption tax and sales tax regimes, GST purports to offer a streamlined approach to tax collection, enhancing revenue streams while ostensibly lowering production costs. This dual benefit ostensibly serves both consumers and producers. However, the actual impact on production costs and consumer prices remains a subject of debate, with some arguing that the cost savings for producers do not always translate to lower prices for consumers.
GST’s role in fostering compliance and transparency is frequently lauded. By simplifying the tax system, it is said to promote a more straightforward and honest economic environment. Yet, this simplification can also mask complexities that arise in practice, especially for small and medium-sized enterprises (SMEs) that may struggle with the administrative burden of compliance. The harmonization of disparate tax structures, while facilitating smoother trade operations, can also lead to tensions between regional and national authorities over revenue distribution.
The promise of economic growth attributed to GST is compelling, yet it is essential to critically assess the evidence. While some economies have experienced growth post-GST implementation, others have faced challenges such as initial inflationary pressures and adjustments in the supply chain that disrupt business operations. The assertion that GST significantly curtails tax evasion is also nuanced; while it does create a more traceable system, it requires robust enforcement mechanisms that may be lacking in some jurisdictions.
Increased government revenue from GST is intended to fund developmental activities, which is a laudable goal. However, the effectiveness of this revenue in driving societal progress depends on transparent and accountable governance. In some cases, the anticipated benefits of GST have been undermined by inefficient allocation of funds and corruption.
In summary, while the implementation of GST-like systems worldwide represents a significant shift towards modernizing tax regimes, its benefits are not universally experienced nor uncontested. The critical examination of GST reveals a complex interplay of advantages and challenges, underscoring the need for careful consideration and tailored approaches to its implementation.
Global Adoption of the GST System
The Goods and Services Tax (GST), though recognized under varying terminologies, has been widely adopted across the globe, transforming the landscape of indirect taxation. This comprehensive examination sheds light on the countries that have integrated the GST system, analyzing its impact and nuances across different regions.
In the European Union (EU), the adoption of the Value-Added Tax (VAT) is ubiquitous among member states, serving as a cornerstone of their economic policy. Countries like Italy, Hungary, Luxembourg, Belgium, Germany, Spain, Sweden, and Austria have implemented VAT systems that significantly contribute to their fiscal revenues. The uniform adoption of VAT within the EU underscores its effectiveness in ensuring economic cohesion and financial stability across diverse economic landscapes.
Outside the EU, the VAT system has found favor in a plethora of countries, each tailoring it to suit their economic contexts. Nations such as Brazil, China, Indonesia, Argentina, Switzerland, the United Kingdom, Oman, Peru, South Africa, Turkey, Vietnam, and Chile have all embraced VAT, reflecting its versatility and broad applicability. Japan’s version, known as the Japanese Consumption Tax (JCT), further illustrates the global adaptation of the GST framework.
France’s pioneering role in introducing VAT in 1954 set a precedent that has seen approximately 174 countries worldwide adopt similar indirect tax systems. The recent implementation of VAT/GST by countries like India, New Zealand, Singapore, Australia, Canada, and the Maldives highlights the tax’s growing global footprint. These nations have recognized the advantages of a simplified tax structure, including enhanced transparency and more efficient tax collection mechanisms.
The GST system’s widespread adoption underscores its ability to adapt to various economic environments while maintaining its core principles of fairness and efficiency. As more countries continue to refine their tax policies, the GST/VAT model remains a critical tool in fostering economic growth and stability on a global scale.
The table below illustrates a few countries and their respective GST/VAT terminologies:
Country
Term for GST/VAT
Japan
Japanese Consumption Tax
Brazil
VAT
China
VAT
United Kingdom
VAT
India
GST
New Zealand
GST
Australia
GST
Canada
GST
Maldives
GST
VAT/GST vs. Sales Tax
In the domain of consumption taxes, the contrast between VAT/GST and Sales Tax systems is profound, with each impacting the point of sale for goods and services in distinct ways. This critical interpretation explores the intricate mechanisms and broader implications of these taxation models.
Sales tax, imposed solely on the final sale price of a product or service, is a singular, straightforward tax applied at the point of sale to the end consumer. In contrast, the Value Added Tax (VAT) operates on the principle of taxing the incremental value added at each production and distribution stage, making it a multi-stage tax. This distinction fundamentally alters the tax’s impact on the supply chain and consumer pricing.
In a sales tax system, the seller bears the responsibility for tax collection and remittance, collecting the tax from the consumer at the point of sale and forwarding it to the government. The simplicity of this system contrasts sharply with the Goods and Services Tax (GST) model, where each business in the supply chain collects tax on the value it adds and remits this to the government. This requirement for meticulous record-keeping of transactions introduces a layer of complexity absent in the sales tax system.
The scope of taxable transactions also differs significantly between these systems. Sales tax typically applies only to the sale of goods and services at the retail level, limiting its reach. Conversely, GST encompasses a broader spectrum of transactions, including intermediate and capital goods, imports, exports, and services. This expansive scope ensures a more comprehensive tax base but also demands more rigorous compliance mechanisms.
Critically, sales tax is often perceived as regressive, disproportionately affecting lower-income consumers who spend a higher percentage of their income on taxable items. VAT, by contrast, can be structured to mitigate this regressiveness through exemptions or zero-ratings for essential goods and services, offering a more equitable taxation solution. This progressive potential of VAT underscores its appeal in many jurisdictions.
Jurisdictions that employ a sales tax system instead of VAT/GST include Malaysia, the United States, and Puerto Rico. In Malaysia, the system is known as Sales Tax and Service Tax. In Puerto Rico, it is referred to as the Sales and Use Tax (SUT), while in the United States, it is simply known as Sales Tax. The choice of tax system in these regions reflects historical, economic, and political factors that influence their fiscal policies.
Key Differences Critically Interpreted
Basis of Taxation: Sales tax’s focus on the final sale price simplifies the tax application but limits its reach. VAT/GST’s incremental taxation at each stage enhances revenue generation and economic transparency.
Administration: Sales tax’s straightforward collection by the seller reduces administrative burden but can lead to tax evasion at earlier production stages. GST’s requirement for detailed transaction records and multi-stage collection promotes accountability but increases complexity and administrative costs.
Taxable Transactions: The limited scope of sales tax to retail transactions can narrow the tax base, while GST’s broader coverage ensures a more comprehensive tax base, contributing to greater fiscal stability.
Progressivity: The regressive nature of sales tax impacts lower-income consumers more harshly, whereas VAT/GST’s potential for progressive structuring through exemptions can lead to a fairer tax burden distribution.
Understanding these nuanced differences allows businesses and consumers to navigate the complexities of each system more effectively, ensuring compliance and optimizing financial planning within their respective frameworks. This critical examination highlights the strategic choices behind adopting either system and their implications on economic equity and administrative efficiency.
Who Pays GST?
The payment of Goods and Services Tax (GST) is subject to varying regulations across different countries, each prescribing distinct responsibilities for compliance.
In most jurisdictions, the primary obligation to pay GST rests with the supplier of goods and services. This entails the mandatory registration for GST, collection of the tax from customers at the point of sale, and subsequent remittance of the collected amount to the government. However, in cases where the supplier is not registered for GST, the responsibility shifts to the customer under what is known as reverse charge mechanism. Here, the customer assumes the obligation to declare and remit the GST directly to tax authorities, ensuring compliance even if the supplier is not in the GST framework.
The calculation of GST is based on the taxable supply of goods and services made by a registered entity during a specified period. The tax base for GST calculation represents the total consideration received or receivable by the registered supplier for the goods and services sold, net of any GST already included in the transaction price. This tax base is then subject to the applicable GST rate (or VAT rate, depending on the jurisdiction) to determine the amount of tax payable.
It’s essential to note that countries may adopt specific rules and adjustments for determining the tax base under GST, particularly for complex transactions or specific business contexts. Companies operating internationally or engaged in specialized transactions must navigate these nuances to ensure accurate compliance with GST regulations.
In conclusion, while suppliers typically bear the responsibility for collecting and remitting GST, the specifics of this responsibility can vary significantly across jurisdictions. Understanding these obligations is critical for businesses to maintain compliance and mitigate potential penalties associated with non-compliance.
The Central Board of Indirect Taxes and Customs (CBIC) has issued a game-changing notification effective from July 15, 2024. This exemption applies to services provided by Special Purpose Vehicles (SPVs) to the Indian Railways. India’s Dedicated Freight Corridor Corporation of India Ltd (DFCCIL), a vital SPV of the Indian Railways, is poised to benefit significantly from this exemption, boosting its financial model.
India’s Dedicated Freight Corridor Corporation of India Ltd (DFCCIL), an SPV under the Indian Railways, will be exempt from the 18% Goods and Services Tax. This strategic move is expected to eliminate the need for a revised revenue model or alterations in freight rates.
This exemption specifically targets the tax obligations on track access charges – payments made for accessing the rail network. These charges represent a fixed cost for the DFCCIL, which had previously amounted to an estimated ₹5,000 crore and was projected to increase with the corridor’s expansion.
On July 12, the CBIC officially notified the GST exemption for services rendered by the Indian Railways to the public and by SPVs to the Railways. This exemption takes effect from July 15, 2024.
According to the notification, services provided by SPVs to the Indian Railways—such as allowing the Railways to utilize infrastructure built and owned by the SPVs during the concession period in exchange for consideration—are now exempt from GST. Additionally, maintenance services supplied by the Indian Railways to SPVs concerning this infrastructure are also exempt.
A straightforward interpretation of this notification indicates that track access charges, which are remittances from the Railways, are now exempt from GST. Consequently, there is no need to reclassify such charges under a different accounting category or increase freight rates for corridor users.
Typically, remittances between government entities or departments are GST-exempt. However, as an SPV, DFCCIL operates as a separate entity providing track services, unlike other zones categorized by the Railways. Revenue generated by DFCCIL is credited to the Railways and subsequently remitted, encompassing fixed and variable costs including operations, maintenance, interest, land lease, employee expenses, and other overheads.
DFCCIL functions on a reimbursement model, primarily compensated by the Indian Railways through track access charges. Interestingly, DFCCIL has received support in the form of loans from multilateral agencies such as the Japan International Cooperation Agency (JICA).
This exemption is expected to streamline financial operations, reduce costs, and enhance the efficiency of the Dedicated Freight Corridor, positioning it as a cornerstone in India’s rail infrastructure growth.
In an effort to streamline the export process and address long-standing issues, the Commerce Department has committed to addressing the GST-related problems plaguing exporters. This proactive move aims to tackle compliance hurdles, expedite refunds, and simplify audits, ensuring exporters can focus on their primary business objectives.
Exporters have raised alarms over a spate of show-cause notices from GST authorities. These notices, often triggered either suo moto or based on audit objections, demand GST payments on overseas bank charges. This situation persists despite a prior consensus by the GST Council that such charges should be borne by Indian banks.
Red Tape and Red Sea: A Dual Crisis
Compounding these issues, the Red Sea crisis has disrupted shipments, causing delays that further complicate the 90-day deadline for EGM filing when exporters procure goods at a 0.1% concessional GST rate. Exporters are now urging for an extension beyond this 90-day period to accommodate the shipping delays.
A source revealed, “The Commerce Department has solicited feedback from various export bodies regarding their GST challenges. This feedback will be analyzed and presented to the GST Council and Finance Ministry for swift resolution.”
The Federation of Indian Export Organisations (FIEO) has independently approached Finance Minister Nirmala Sitharaman, highlighting the myriad problems under the GST regime and requesting solutions.
Clarification on Bank Charges
The issue of GST on overseas bank charges has been a point of contention. In a GST Council meeting in June 2022, it was decided that Indian banks, as the service recipients, should discharge the IGST, allowing them to utilize input tax credit (ITC) to offset the tax liability. This was echoed by the Fitment Committee, which clarified that domestic banks could avail ITC on tax paid via reverse charge.
The FIEO has urged the Finance Minister to instruct the Central Board of Indirect Taxes and Customs (CBIC) to clarify this to the GST authorities, to halt the issuance of unwarranted show-cause notices.
Extension for EGM Filing
Exporters, particularly affected by the shipping delays due to the Red Sea crisis, are struggling to adhere to the 90-day timeframe for export and EGM filing. They have requested an extension of an additional 60-90 days, on a case-by-case basis, to facilitate compliance despite logistical challenges.
In summary, the Commerce Department’s initiative to engage with the GST Council and Finance Ministry marks a significant step towards alleviating the burdens faced by exporters. By addressing compliance issues, facilitating refunds, and simplifying audits, the department aims to create a more conducive environment for exporters to thrive amidst global challenges.
A strategic Aadhaar-based biometric authentication initiative in Gujarat has led to a significant reduction in fraudulent GST registrations, decreasing by 24.3%.
Approximately 6,600 suspected applicants have refrained from visiting the GST Seva Kendras, fearing detection. This initiative focuses on identifying suspicious applications and requiring applicants to undergo in-person verification.
Following the launch of a pilot project for Aadhaar-based biometric authentication for new GST registrations in Gujarat, the state government announced on Monday that it has successfully curtailed fake GST registrations within the state.
Officials from the State Goods and Services Tax (SGST) department reported a 24.3% decline in GSTIN applications since the commencement of the pilot project in November 2023. The number of applications dropped from 202,000 between November 2022 and June 2023 to 152,000 during the same period in the following year.
An SGST official noted that the fear of detection has deterred over 6,600 suspected applicants from visiting the GST Seva Kendras, effectively reducing the number of fraudulent applications. Suspicious applications are flagged, and the applicants are required to present themselves at the GST Seva Kendras for verification.
During a visit to a GST Seva Kendra in Ahmedabad on Monday, State Finance Minister Kanu Mehta reviewed the operations and emphasized the decision made at the 53rd GST Council meeting to implement GST Seva Kendras nationwide.
Table: Comparative GSTIN Applications in Gujarat
Period
Number of Applications
November 2022 – June 2023
202,000
November 2023 – June 2024
152,000
This initiative marks a significant step towards enhancing the integrity of the GST registration process, ensuring that only legitimate businesses are registered, and deterring fraudulent activities through robust verification mechanisms.
The Ministry of Corporate Affairs (MCA) has unveiled transformative amendments to the Companies (Appointment and Qualification of Directors) Rules, 2014. These groundbreaking changes, set to take effect on August 1, 2024, aim to bolster transparency and streamline the appointment and qualification processes for directors.
Enhancing Personal Information Updates: In a pivotal move, Rule 12A has been amended to include a precise clause stipulating that personal information updates must occur “on or before 30th September of the financial year.” This critical addition mandates that directors update their personal information within this specified annual timeframe, ensuring timely and accurate records.
Multiple Updates with Ease: A noteworthy proviso has been introduced, allowing directors the flexibility to update their personal mobile numbers or email addresses multiple times within a financial year. To facilitate this, directors must submit the e-form DIR-3 KYC and remit a nominal fee of INR 500. This provision enhances the adaptability and responsiveness of directors in maintaining current contact information.
Effective Date: These significant amendments will come into force on August 1, 2024, affording companies and directors ample time to adjust and comply with the new regulations.
Historical Context: The original rules, published in the Gazette of India on March 31, 2014, and last amended on January 20, 2023, form the foundation of these new changes. The MCA’s latest amendments underscore its commitment to ensuring directors’ personal information is consistently up-to-date, thereby fostering superior governance and communication within corporate structures. Directors are urged to adhere promptly to these new mandates to avoid potential penalties and ensure seamless compliance.
In summary, the MCA’s new rules for directors mark a substantial shift towards enhanced corporate governance. By mandating timely updates of personal information and allowing multiple updates with a nominal fee, the MCA ensures directors maintain accurate and current contact details. This initiative not only streamlines processes but also reinforces the importance of transparency and effective communication within companies.
When navigating the labyrinthine process of GST appeals, it’s crucial to understand the various levels and their respective protocols. For any individual or entity aggrieved by a decision rendered by an adjudicating authority, there exists a structured pathway to seek redress. The appeal process begins with the Appellate Authority, moving up through successive levels if necessary. Each step in this journey is guided by specific provisions under the GST law, ensuring a comprehensive framework for resolving disputes.
Initiating the Appeal Process
The right to appeal is reserved for the person aggrieved by an adjudicating authority’s decision or order. This appeal must directly challenge an appealable order issued under the GST Act. The initial step involves approaching the Appellate Authority, where one can contest decisions made by the adjudicating authority. For higher appeals, the matter can be escalated to the Appellate Tribunal, specifically the Goods and Services Tax Appellate Tribunal (GSTAT). Here, any person dissatisfied with the Appellate Authority’s decision or a revisional order can seek further redress.
Formation and Functioning of GST Appellate Tribunals
The constitution of GST Appellate Tribunals is underway, with recommendations from the GST Council. The number and location of these tribunal benches have been delineated nationwide, and the eligibility criteria for the appointment of the President and Members of the GSTAT have been established. It is anticipated that these tribunals will commence operations shortly, providing an additional layer of adjudication.
Escalating Appeals to Higher Courts
If either the department or the assessee is dissatisfied with a tribunal’s decision, they may escalate the matter to the High Court. The High Court will admit such appeals if they involve substantial legal questions. It’s noteworthy that the tribunal serves as the final authority on matters of fact. Appeals to the Supreme Court from the High Court are permissible when the High Court certifies a case as fit for appeal based on an aggrieved party’s request.
Scope of Appeal
An appeal under GST is a statutory right, providing taxpayers (aggrieved persons) a remedy under the law. Other remedies include revision under Section 108 and rectification under Section 161. While the term “appeal” is not explicitly defined in GST law, it generally implies an application to a higher authority for reversing or modifying an impugned order. Not all orders are appealable, as stipulated in Section 121. The objective of an appeal is to resolve tax disputes, either by confirming, modifying, or quashing the impugned order.
Stages of Appeals under GST
First Level—
An aggrieved person must first file an appeal with the First Appellate Authority against an order passed by the adjudicating authority under Section 107 of the CGST Act, 2017. The relevant adjudicating authority may be a Commissioner (Appeals) if the original decision was made by an Additional or Joint Commissioner, or an Additional Commissioner (Appeals) if made by a Deputy or Assistant Commissioner or Superintendent.
Key Considerations for FilingAppeal to the Appellate Authority
Eligibility: Any aggrieved person or the department on the Commissioner’s direction can file an appeal.
Order Appealed Against: Decisions or orders passed by an adjudicating authority under the Act.
Time Limit: Appeals must be filed within three months from the order’s communication date, with a possible one-month extension. Departmental appeals have a six-month limit.
Pre-Deposit: A 10% pre-deposit of the disputed amount is required.
Adjournments: Up to three adjournments may be granted, with reasons recorded in writing.
Decision Timeline: Appeals should ideally be resolved within one year of filing.
Remand: Remand to the adjudicating authority is not permitted.
Appeal to the Appellate Tribunal
Eligibility: Aggrieved individuals or authorized departmental officers on the Commissioner’s direction.
Order Appealed Against: Orders issued by the appellate authority.
Time Limit: Appeals must be filed within three months, extendable by three more months for sufficient cause; departmental appeals have a six-month limit.
Pre-Deposit: A 20% pre-deposit of the disputed amount is required.
Adjournments: Up to three adjournments may be granted.
Decision Timeline: Appeals should ideally be resolved within one year of filing.
Appeals to Higher Courts:
Eligibility: Any aggrieved person.
Order Appealed Against: Appellate tribunal orders involving substantial legal questions.
Time Limit: Appeals must be filed within 180 days of the order’s communication, with provisions for delayed filings if justified.
Supreme Court
Eligibility: As per the Supreme Court Rules and Code of Civil Procedure.
Order Appealed Against: High Court orders or national/regional tribunal bench orders involving inter-state or state-centre disputes regarding the nature or place of supply.
Understanding and navigating these intricate processes is pivotal for any aggrieved party seeking justice under the GST framework. Each stage offers a systematic approach to resolving disputes, ensuring that the principles of fairness and legal propriety are upheld throughout the appeal process.
As we stride through the mid-year, it’s crucial to revisit the economic predictions made at the outset of 2024, evaluating their trajectory and real-time impacts on the Indian economy. With a keen focus on GDP growth, stock market dynamics, political strategies, consumer behavior, and the evolving employer-employee relationship, this analysis unravels the intricate patterns shaping India’s economic landscape.
Economic Growth Trajectory
The initial forecast for India’s GDP growth was set at 6%, with a global GDP growth prediction of around 3%. As we reach mid-year, the outlook has significantly improved. The Reserve Bank of India now anticipates a robust 7.2% growth, while a consensus among global economists pegs it at 6.5%. Despite this optimistic projection, the next two quarters remain pivotal. The United Nations World Economic Council’s prediction of a 2.6% global growth underscores a stark contrast. The primary concern within India is the sluggish pace of consumption, hindered by a retail inflation rate of 4.7%, predominantly driven by food prices. Nonetheless, the consistent surge in GST collections, amounting to ₹20.18 lakh crore last year, indicates a positive shift towards a more formal economy. The communication industry stands on the cusp of a transformative opportunity, poised to cultivate B2B brands, driven by this formalization and robust tax revenue growth.
Stock Market Surge and Employment Dilemmas
The Sensex, initially expected to hit 80,000 by the year’s end, has already soared close to this mark, reaching 79,476 by July 1st from 72,240 at the year’s start. This bullish trend, however, is propelled primarily by the top 30 companies, whose profits have surged without a corresponding spike in investment and job creation. Despite banks reporting an all-time low in gross NPAs at 2.8%, the broader employment scenario paints a grim picture. Unemployment stands at 7.6% as of March 2024, reflecting a disconnection between stock market exuberance and on-ground economic realities. The disparity between the pronouncements of job creation by CEOs and the actual employment statistics demands a more grounded and realistic approach to future forecasts.
Political Freebies and Marketing Strategies
The prevalence of freebies has pervaded both the political and marketing spheres. The Election Commission of India has reported a staggering $550 million in cash transactions this year, a sharp increase from 2019. Freebies, ranging from bus travel to rice and electricity, dominate the political landscape. Similarly, marketers leverage freebies in an attempt to influence consumer behavior, albeit with limited success. The ABC approach—attitude, behavior, and commitment—underscores the strategic intent behind these promotions, aiming to foster long-term brand loyalty. However, this strategy often falters, as the focus on promotions and discounts erodes brand value over time. The increasing trend of tribalism and abuse in both politics and marketing, exemplified by the unwarranted backlash against figures like Hardik Pandya, highlights a concerning shift towards divisiveness and hostility.
The Evolving Consumer Paradigm
The modern housewife, a pivotal consumer demographic, has become increasingly discerning, challenging traditional marketing stereotypes. The shift in advertising narratives, moving beyond the conventional saree-clad image, is a step towards acknowledging this change. The rise of Double Income No Kids (DINKS) families, growing at 30% per annum, particularly among rural nuclear families, signals a broader societal shift. Marketers must adapt to these evolving dynamics, crafting strategies that resonate with the sophisticated and multifaceted consumer of today.
Redefining the Employee-Employer Relationship
In a job market characterized by increasing uncertainty, employees wield unprecedented control, seeking flexibility in work hours, location, and workdays. The rigidity of traditional hierarchical structures is giving way to a more empathetic and engaging approach. High attrition rates, especially among women, underscore the necessity for flexibility. Companies investing in reskilling and nurturing their workforce stand a better chance at retention. The current landscape demands that employees be viewed not merely as resources but as pivotal stakeholders in an organization’s success, necessitating a paradigm shift towards inclusivity and empowerment.
Conclusion
As we navigate the complexities of 2024, it becomes evident that the Indian economy is at a critical juncture. The interplay of economic growth, market dynamics, political strategies, consumer behavior, and employment trends shapes a multifaceted and evolving landscape. A nuanced understanding and adaptive strategies are imperative for stakeholders across sectors to thrive in this dynamic environment.
The GST Council convened for its 53rd meeting on June 22, 2024, in New Delhi, resulting in notable amendments to the GST rates on a range of goods and services. These modifications, set to take effect from July 15, 2024, aim to streamline the tax structure and provide relief in key areas. The Council’s decisions were officially communicated through a series of notifications issued on July 12, 2024.
The 53rd GST Council meeting recommended significant rate adjustments affecting products such as milk cans, cartons, boxes, and solar cookers. These changes are documented in the newly issued notifications.
For a comprehensive understanding of these changes, stakeholders can refer to the press release of the 53rd GST Council meeting.
Download Notifications:
Notification No. 04/2024-Central Tax (Rate) – English | हिन्दी Seeks to amend Notification No 12/2017-Central Tax (Rate) dated 28.06.2017.
Notification No. 03/2024-Central Tax (Rate) – English | हिन्दी Seeks to amend Notification No. 2/2017-Central Tax (Rate).
Notification No. 02/2024-Central Tax (Rate) – English | हिन्दी Seeks to amend Notification No. 1/2017-Central Tax (Rate).
Compensation Cess Exemption
The CBIC’s Notification No. 01/2024 – Compensation Cess (Rate), issued on July 12, 2024, exempts the supply of goods under Heading 2202 by Unit Run Canteens to authorized customers from the GST Compensation Cess. This exemption, effective from July 15, 2024, specifically applies to carbonated beverages of fruit drink or carbonated beverages with fruit juice, benefiting defense personnel and their families.
Central Tax (Rate) Amendments
Notification No. 02/2024, effective from July 15, 2024, revises the GST rates for various goods. Key changes include:
Milk cans made from steel, iron, and aluminum: GST rate reduced from 9% to 6%.
Cartons, boxes, and cases of corrugated and non-corrugated paper or paperboard: GST rate reduced from 9% to 6%.
In a landmark decision, the GST Council, during its 47th meeting on June 29, 2022, in Chandigarh, spearheaded significant reforms under the esteemed leadership of the Hon’ble Union Finance Minister, Ms. Nirmala Sitharaman. The Council’s recommendation to redefine the GST applicability criteria for goods by replacing the “branded” exclusion with the “pre-packaged and labelled” condition marks a pivotal shift in tax policy. This crucial change aligns with the Legal Metrology Act & Rules, ensuring more precise tax governance on pre-packaged items.
Following this recommendation, the Central Board of Indirect Taxes and Customs (CBIC) took decisive action. On July 13, 2022, it issued Notification No. 6/2022-Central Tax (Rate), effectively amending the earlier Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017. This amendment redefined the GST applicability to encompass food items that are “pre-packaged and labelled,” thus moving away from the previous “brand name” criterion.
Continuing this momentum, the CBIC released Notification No. 02/2024 – Central Tax (Rate) on July 12, 2024, further modifying the CGST Rate Notification, effective July 15, 2024. The updated notification included an important addition to Schedule VII, detailing the definition of “pre-packaged and labelled” as specified in the Legal Metrology Act, 2009. Specifically, it underscores that a “pre-packaged commodity” must bear necessary declarations as mandated by the Act and its accompanying rules.
A pivotal proviso has been inserted, stipulating that agricultural farm produce in packages exceeding 25 kilograms or 25 liters does not fall under the “pre-packaged and labelled” category, thus exempting such produce from GST. This amendment is mirrored in Notification No. 03/2024 – Central Tax (Rate), dated July 12, 2024, which amends Notification No. 2/2017-Central Tax (Rate).
The ramifications of these notifications are profound, particularly for the agricultural sector. Previously, GST was applicable to food items deemed “pre-packaged and labelled” under the Legal Metrology Act, 2009. The new proviso, however, exempts agricultural produce supplied in large packages from this classification, thereby alleviating the GST burden on farmers and suppliers handling substantial quantities of produce.
This strategic reform is anticipated to invigorate the agricultural sector by reducing the tax load and enhancing business ease for stakeholders. It promotes a balanced and clear approach to GST application, harmonizing with the Legal Metrology Act while accommodating the unique requirements of the agricultural industry. These measures underscore the government’s commitment to fostering a conducive business environment for farmers, ensuring equitable and precise tax policies that support large-scale agricultural commerce.
Agricultural Sector Relief
The CBIC’s amendments, through Notification No. 03/2024, redefine the criteria for GST applicability on goods, replacing the “branded” condition with “pre-packaged and labelled” as per the Legal Metrology Act & Rules. This change exempts agricultural farm produce in packages exceeding 25 kilograms or 25 liters from GST, alleviating the tax burden on the agricultural sector and promoting ease of business for farmers.
Notification No. 4/2024 (Central Tax (Rate))
The 53rd GST Council Meeting has heralded significant changes in the tax landscape, with the Central Board of Indirect Taxes and Customs (CBIC) issuing Notification No. 4/2024 (Central Tax (Rate)). This move underscores a strategic effort to streamline and rationalize the GST rates applicable to essential goods and services.
In an endeavor to ensure uniformity across the nation, similar notifications have been concurrently issued under the Integrated Goods and Services Tax Act, 2017 (the IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (the UTGST Act). This harmonized approach ensures that the amended tax rates are uniformly applied, eliminating regional discrepancies and promoting a cohesive tax regime.
The amendments reflect a meticulous effort to address the evolving economic landscape, aiming to alleviate the tax burden on essential commodities while maintaining fiscal prudence. This strategic adjustment is poised to foster greater compliance and streamline the tax administration process, ensuring that the benefits of reduced rates are seamlessly passed on to the consumers.
Moreover, these changes signal a proactive stance by the GST Council in responding to the dynamic needs of the economy. By realigning the tax structure, the Council aims to enhance the affordability of essential goods and services, thereby bolstering consumer confidence and stimulating economic growth.
The harmonization of these rates across various jurisdictions underscores the Council’s commitment to a unified tax framework. This uniform application not only simplifies the tax compliance process for businesses operating in multiple regions but also mitigates the risk of litigation arising from inconsistent tax practices.
In summary, the recent amendments to the GST rates, as encapsulated in Notification No. 4/2024, mark a pivotal step towards a more rational and cohesive tax structure. This move, aligned with similar amendments under the IGST and UTGST Acts, exemplifies the Council’s dedication to fostering a more streamlined and equitable tax environment.
Uniformity Across GST Acts
The amendments also apply under the Integrated Goods and Services Tax Act, 2017, and the Union Territory Goods and Services Tax Act, 2017, ensuring consistent application of the new rates nationwide.
Impact Analysis
The recent notifications by the CBIC are designed to rationalize the GST structure, making it more efficient and equitable. The rate reductions on essential goods like milk cans and solar cookers are expected to provide substantial economic relief. The exemptions for agricultural produce aim to support the agrarian economy, fostering a more favorable business environment for farmers and large-scale suppliers.
In summary, the GST Council’s 53rd meeting and the ensuing notifications represent a strategic shift towards a more balanced and streamlined tax regime, reflecting the government’s commitment to economic efficiency and sector-specific relief.
CBIC’s Notification No. 02/2024 Alters GST Rates
On July 12, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 02/2024 – Central Tax (Rate), bringing substantial modifications to the GST landscape, effective from July 15, 2024. This notification amends the earlier Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017, introducing new serial numbers and entries for various goods.
The notification outlines several changes, notably for the following items:
Chapter / Heading / Sub-heading / Tariff Item
Description of Goods
Rate Before
Rate After
4819 10, 4819 20
Cartons, boxes, and cases of, – (a) corrugated paper or paperboard; or (b) non-corrugated paper or paperboard
9%
6%
7310, 7323, 7612, or 7615
Milk cans made of Iron, Steel, or Aluminium
9%
6%
7321 or 8516
Solar cookers
9%
6%
8436
Other agricultural, horticultural, forestry, poultry-keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators and brooders; parts thereof
6%
0%
4819 (except 4819 10, 4819 20)
All Goods (other than Cartons, boxes, and cases of, – (a) corrugated paper or paperboard; or (b) non-corrugated paper or paperboard)
0%
9%
7310
Tanks, casks, drums, cans, boxes, and similar containers, for any material (other than compressed or liquefied gas), of iron or steel, of a capacity not exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment; other than Milk cans made of Iron, or Steel
9%
0%
7321
Stoves, ranges, grates, cookers (including those with subsidiary boilers for central heating), barbecues, braziers, gas-rings, plate warmers, and similar non-electric domestic appliances, and parts thereof, of iron or steel [other than Kerosene burners, kerosene stoves and wood burning stoves of iron or steel, wood burning stoves of iron or steel, and solar cookers]
9%
0%
7612
Aluminium casks, drums, cans, boxes, etc.; other than Milk cans made of Aluminium
9%
0%
7615
All goods [other than table, kitchen or other household articles, of aluminium; Utensils; Milk cans made of Aluminium]
9%
0%
8516
Electric instantaneous or storage water heaters and immersion heaters; electric space heating apparatus and soil heating apparatus; electro-thermic hair-dressing apparatus (for example, hair dryers, hair curlers, curling tong heaters) and hand dryers; electric smoothing irons; other electro-thermic appliances of a kind used for domestic purposes [other than solar cookers]; electric heating resistors, other than those of heading 8545
9%
0%
Impact of the Notification
These adjustments by the CBIC have notable implications for the industry and consumers:
Reduction in GST Rates: The reduction in GST rates for cartons, boxes, and cases made of paper or paperboard, and milk cans made of steel, iron, or aluminum, is expected to provide significant relief to manufacturers and end-users alike, encouraging greater affordability and accessibility.
Promotion of Solar Energy: The reduced GST rate on solar cookers underscores the government’s commitment to promoting renewable energy sources, potentially driving increased adoption of solar cooking solutions.
Agricultural Sector Boost: The removal of GST on specific agricultural machinery will likely benefit farmers and agribusinesses, fostering growth and innovation in the sector.
Enhanced Compliance: The revised rates aim to streamline compliance and reduce the burden on taxpayers, fostering a more business-friendly environment.
In conclusion, Notification No. 02/2024 represents a strategic move by the CBIC to align GST rates with economic and policy objectives. By reducing the tax burden on essential goods and promoting sustainable practices, the notification is poised to have a positive impact on various sectors, enhancing overall economic efficiency and growth.