Category: GST Insight

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:

1. Notification No. 04/2024-Central Tax (Rate) – English | हिन्दी
   Seeks to amend Notification No 12/2017-Central Tax (Rate) dated 28.06.2017.
2. Notification No. 03/2024-Central Tax (Rate) – English | हिन्दी
   Seeks to amend Notification No. 2/2017-Central Tax (Rate).
3. 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%.
• Solar cookers: GST rate set at 6%.

Notification No.3/2024 (Central Tax (Rate))

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.

Adjudication proceedings in tax administration are crucial, providing taxpayers the essential opportunity to present their case before any action is taken against them. The issuance of a Show Cause Notice (SCN) is a fundamental step in this process, serving as a formal notification to the taxpayer about the proposed actions by the tax authorities. The adjudicating officer, responsible for reviewing the SCN, must carefully consider the taxpayer’s response and all relevant evidence before reaching a decision. To ensure the process is legally sound, an SCN must adhere to specific principles.

At its core, adjudication involves the judicial determination of disputes by applying the law to the facts and issuing an authoritative resolution. Section 75 of the CGST Act, 2017, outlines the fundamental principles for adjudication within the GST framework, guiding officers under Sections 73 and 74 and other relevant provisions.

Departmental officers, acting as quasi-judicial entities during adjudication, bear significant responsibility. They must execute their duties with the utmost impartiality and caution, free from any bias. It is crucial for them to thoroughly understand and accurately process the facts, applying the appropriate legal provisions and notifications pertinent to each case.

According to Section 75(4) of the CGST Act, 2017, a personal hearing opportunity must be provided to the taxpayer in specific circumstances: when a written request is made by the taxpayer or when an adverse decision is anticipated against them.

Navigating Show Cause Notices

Upon receiving an SCN and submitting a response, preparing for the adjudication hearing becomes critical. Key actions include ensuring attendance at the scheduled hearing. If attendance is not possible, a written request for adjournment, citing valid reasons, must be submitted. Note that no more than three adjournments will be granted. Failure to attend the hearing or seek adjournment can result in ex-parte adjudication, eliminating any argument of violating natural justice principles.

Drafting and preparing additional written submissions for presentation during the hearing is essential. These submissions, explicitly stated as supplementary to the initial SCN response, must be considered by the adjudicating authority. They may include new judicial precedents, additional defenses, circulars, clarifications, or binding precedents not previously provided. These documents may also need to be emailed upon request.

Conducting SCN Hearings

The adjudication of any SCN is a quasi-judicial process handled by the designated officer. Taxpayers or their representatives must attend personal hearings as scheduled, with the option to appoint a consultant or advocate via a power of attorney or vakalatnama. Arriving at the hearing with all relevant documents, explanations, and submissions is crucial, and these should be formally submitted, with an acknowledgment obtained or noted in the proceedings sheet.

During the hearing, the officer will prepare a proceedings sheet summarizing the discussion, which must be signed by both the taxpayer/representative and the officer. It is essential to ensure all defense arguments are presented comprehensively. If additional time or documents are required, requesting another hearing date is common, as multiple hearings are often granted. Accurately recording all discussions in the proceedings sheet is vital, and it is essential to insist on proper documentation.

The adjudicating authority often notes that the taxpayer “reiterated the reply to SCN and had nothing more to add.” It is crucial to agree or disagree with this statement as appropriate.

Following the 53rd GST Council meeting on June 22, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued a series of clarifying circulars, numbered 207 to 222, on June 26, 2024. These circulars address key issues including taxability, place of supply, and time of supply, ensuring compliance and clarity for taxpayers. Here is a comprehensive analysis of the most significant circulars issued.

CBIC’s New Circulars: An Overview

CBIC has introduced 16 circulars (Nos. 207 to 222-GST), formulated from the recommendations of the GST Council meeting on June 22, 2024. These circulars cover a spectrum of critical issues:

Circular No. 207 focuses on reducing government litigation by setting monetary thresholds for departmental appeals before the GST Appellate Tribunal (GSTAT), High Courts, and the Supreme Court. Circular No. 208 provides special procedures for manufacturers of specified commodities. Circular No. 209 clarifies the provisions related to the place of supply under Section 10(1) of the Integrated Goods and Services Tax Act, 2017.

Overview of Key Circulars

Circular No.	Issue
207	Reduction of Government Litigation – fixing monetary limits for filing appeals or applications by the Department before GSTAT, High Courts, and Supreme Court
208	Clarifications on various issues pertaining to special procedure for the manufacturers of specified commodities
209	Clarification on the provisions of clause (ca) of Section 10(1) of the Integrated Goods and Service Tax Act, 2017 relating to place of supply
210	Clarification on the valuation of supply of import of services by a related person where the recipient is eligible for full input tax credit
211	Clarification on the time limit under Section 16(4) of the CGST Act, 2017 in respect of RCM supplies received from unregistered persons
212	Clarification on the mechanism for providing evidence of compliance with conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers
213	Seeking clarity on the taxability of reimbursement of securities/shares as SOP/ESPP/RSU provided by a company to its employees
214	Clarification on the requirement of reversal of input tax credit in respect of the portion of the premium for life insurance policies which is not included in the taxable value
215	Clarification on the taxability of wreck and salvage values in motor insurance claims
216	Clarification in respect of GST liability and input tax credit (ITC) availability in cases involving Warranty/ Extended Warranty, in furtherance to Circular No. 195/07/2023-GST dated 17.07.2023
217	Entitlement of ITC by the insurance companies on the expenses incurred for repair of motor vehicles in case of reimbursement mode of insurance claim settlement
218	Clarification regarding the taxability of the transaction of providing a loan by an overseas affiliate to its Indian affiliate or by a person to a related person
219	Clarification on the availability of input tax credit on ducts and manholes used in the network of optical fiber cables (OFCs) in terms of section 17(5) of the CGST Act, 2017
220	Clarification on the place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors
221	Time of supply on Annuity Payments under HAM Projects
222	Time of supply in respect of the supply of the allotment of Spectrum to Telecom companies in cases where an option is given to the Telecom Companies for payment of licence fee and Spectrum usage charges in instalments in addition to an option of upfront payment

Reduction of Government Litigation in GST (Circular No. 207/1/2024-GST)

The CBIC, under Section 120 of the CGST Act, has established monetary thresholds below which appeals or applications will not be filed by Central Tax officers. This measure aims to minimize unnecessary litigation and optimize judicial resources. The thresholds are:

Appellate Forum	Monetary Limit (₹)
GSTAT	20,00,000
High Court	1,00,00,000
Supreme Court	2,00,00,000

Only the aggregate amount of tax in dispute is considered, excluding interest and penalties. These limits apply to CGST, SGST, UGST, IGST, and Compensation Cess disputes. In cases of interest, penalty, late fee, or erroneous refunds, the respective amounts are considered for the monetary limit.

The thresholds are non-applicable in certain circumstances, including cases involving constitutional validity, valuation of goods or services, classification disputes, refunds, place of supply issues, and recurring interpretational matters. Additionally, cases with adverse comments or costs imposed on the government or its officers are excluded.

Special Procedure for Manufacturers of Specified Commodities (Circular No. 208/2/2024-GST)

Based on the GST Council’s recommendations, the CBIC has clarified various issues pertaining to the special procedure for manufacturers of specified commodities such as pan masala, tobacco, and hookah. Key points include:
The make and model number of machinery are optional in Table 6 of FORM GST SRM-I.
The special procedure is not applicable to manufacturing units in Special Economic Zones (SEZs).
Chartered Engineers with certification from the Institute of Engineers India (IEI) are qualified to issue certificates.
The special procedure applies to all individuals involved in manufacturing, including job workers and contract manufacturers. If unregistered, the principal manufacturer bears the compliance responsibility.

Place of Supply of Goods to Unregistered Persons (Circular No. 209/3/2024-GST)

The CBIC has provided clarity on the place of supply for goods delivered to unregistered persons, especially when supplied through e-commerce platforms. According to clause (ca) of Section 10(1) of the IGST Act, effective from October 1, 2023:
When goods are supplied to an unregistered person, and the delivery address differs from the billing address, the place of supply is the delivery address recorded on the invoice.
Suppliers may record the delivery address as the recipient’s address on the invoice for determining the place of supply.

These insights from Circulars No. 207, 208, and 209 underscore the CBIC’s commitment to simplifying GST compliance, reducing litigation, and providing clarity on critical tax issues. By setting clear guidelines and thresholds, the CBIC aims to streamline the tax administration process and ensure a more efficient dispute resolution system.

Key Takeaways from the Latest CBIC Circulars

The CBIC’s recent circulars provide a roadmap for taxpayers and tax officials alike, clarifying procedures and reducing ambiguities in GST implementation. With these updates, the GST regime continues to evolve, aiming for greater transparency and efficiency in tax administration.

In the aftermath of the pivotal 53rd GST Council meeting on June 22, 2024, the Central Board of Indirect Taxes and Customs (CBIC) has released a series of 16 circulars, numbered 207 to 222, all dated June 26, 2024. These circulars provide critical clarifications on various aspects such as taxability, place of supply, and time of supply. This article delves into Circulars No. 210, 211, and 212, highlighting their significant provisions and implications.

Circular No. 210/4/2024-GST: Valuation of Supply of Import of Services by Related Persons

Following the recommendations of the 53rd GST Council, the CBIC has clarified the valuation of services imported by related persons where the recipient is eligible for full input tax credit (ITC). According to the second proviso to Rule 28(1) of the CGST Rules, the invoice value is deemed the open market value for such transactions.

The circular reiterates the guidelines issued on July 17, 2023 (Circular No. 199/11/2023-GST), concerning services between distinct persons eligible for full ITC. It extends these provisions to cover imported services between related entities. If the Head Office (HO) does not issue an invoice for services provided to a Branch Office (BO), the service value is considered Nil and deemed as open market value.

Moreover, for foreign affiliates providing services to related domestic entities eligible for full ITC, the invoice value is considered the open market value. If the domestic entity does not invoice these services, they are also deemed Nil and considered the open market value.

Circular No. 211/5/2024-GST: Time Limit for Availment of ITC under RCM Supplies from Unregistered Persons

This circular, based on the GST Council’s recommendations, clarifies the time limit for availing ITC under Section 16(4) of the CGST Act, 2017, for supplies received from unregistered persons under the reverse charge mechanism (RCM).

For supplies where the recipient must issue an invoice per Section 31(3)(f) of the CGST Act, the financial year relevant for calculating the ITC availment time limit is when the recipient issues the invoice, provided the tax is paid, and all conditions of Sections 16 and 17 are met. Should the recipient delay issuing the invoice and tax payment, interest on the delayed tax payment and possible penalties under Section 122 of the CGST Act will apply.

Circular No. 212/6/2024-GST: ITC Mechanism for Providing Compliance Evidence by Supplier

To ensure uniformity and compliance with Section 15(3)(b)(ii) of the CGST Act, 2017, regarding the reversal of ITC when a supplier issues a tax credit note, the CBIC has introduced a clarificatory mechanism. Currently, the GST portal lacks functionality for verifying ITC reversal compliance. Therefore, suppliers must provide substantial proof to avoid demands from GST authorities.

Until a portal-based verification system is available, suppliers must submit a certificate or self-undertaking from the recipient to prove ITC reversal. For tax amounts exceeding Rs 5,00,000 in a financial year, the recipient must provide a certificate from a Chartered Accountant (CA) or Cost Management Accountant (CMA). For amounts below this threshold, an undertaking or certificate from the recipient suffices. These documents must detail the credit notes, relevant invoice numbers, ITC reversal amounts, and reference documents like FORM GST DRC-03.

These certificates or undertakings will serve as admissible evidence under Section 15(3)(b)(ii) during scrutiny, audits, or investigations. They can also be retrospectively procured to provide necessary compliance evidence for past periods.

Summary of Circulars

Circular No. / Date	In Relation To
Circular No. 210/4/2024-GST	Valuation of supply of import of services by related persons
dated 26.06.2024
Circular No. 211/5/2024-GST	Time limit for availment of ITC under RCM supplies from unregistered persons
dated 26.06.2024
Circular No. 212/6/2024-GST	ITC related mechanism for providing evidence of compliance by supplier
dated 26.06.2024

In conclusion, these circulars from the CBIC, grounded in the GST Council’s recommendations, aim to streamline tax processes and ensure clarity on critical GST provisions. They emphasize the importance of meticulous documentation and compliance to avoid legal complications and facilitate smooth tax administration.

The advent of the Goods and Services Tax (GST) in India marks a pivotal transformation in the nation’s indirect tax structure, fostering a cohesive and streamlined market. Among the various sectors reshaped by GST, the realm of Online Information and Database Access or Retrieval (OIDAR) Services stands out due to its inherently digital nature and far-reaching impact.

OIDAR services encompass a broad spectrum of digital offerings, including online libraries, comprehensive databases, information retrieval systems, and access to diverse online content. These services, characterized by their automation and internet-based delivery, are indispensable for businesses and individuals in pursuit of timely and accurate information. The quintessential feature of OIDAR services lies in their digital format, enabling effortless cross-border dissemination without necessitating a physical presence within the consumer’s jurisdiction.

Since its inception under the erstwhile Service Tax regime, the concept of OIDAR services has sparked considerable debate. Initially, the scope of these services was relatively narrow, but the rapid evolution of the internet has significantly broadened their reach. This expansion underscored the necessity for a unified regulatory framework to govern and tax these services effectively, culminating in their incorporation under the GST regime.

To address this need, the Integrated Goods and Services Tax Act of 2017 (IGST Act, 2017) instituted specific provisions for the administration and collection of GST on OIDAR services. A comprehensive examination of these provisions is delineated below.

DEFINITION & SCOPE

Section 2(17) of the IGST Act, 2017 defines OIDAR services as:

“online information and database access or retrieval services” means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as, –

From the definition provided, it’s clear that OIDAR services encompass two main components: the meaning part and an illustrative list of transactions. These transactions include internet advertising, cloud services, online streaming services, and digital data storage services, among others. This clarity aids in understanding which services fall under OIDAR. However, for services not explicitly listed, taxpayers must rely on interpreting the meaning part of the OIDAR definition.

Before the amendment by the Finance Act, 2023, a critical requirement for qualifying as OIDAR services was that the service had to be “essentially automated and involving minimal human intervention.” The term “minimal human intervention” was not defined under GST Law, leaving ambiguity regarding the exact degree of human involvement needed to exclude a service from OIDAR classification.

This lack of clear guidance led to widespread uncertainty within the industry. To address this, the definition of OIDAR services was amended to eliminate such ambiguity. Following the amendment, the scope of taxable OIDAR services has significantly expanded. Now, it includes any services reliant on information technology and delivered over the internet or an electronic network, regardless of the level of human intervention involved.

Taxability of OIDAR Services

In the realm of Online Information Database Access and Retrieval (OIDAR) services, taxability hinges on the principle of destination-based tax, which mandates that tax revenue is allocated to the jurisdiction where the service is consumed. This ensures equitable distribution of tax revenues, benefiting the regions where the end-users are located, rather than where the service providers operate.

Both domestic and foreign providers delivering OIDAR services to Indian consumers fall under the ambit of GST. With an exception for e-books classified under Heading 9984, these services attract a standard GST rate of 18%. This rate aligns with the broader tax structure for goods and services in India, maintaining consistency and clarity for stakeholders.

The Integrated Goods and Services Tax (IGST) Act, 2017, under Section 14, stipulates the liability of non-taxable territory suppliers to remit tax when supplying OIDAR services to Non-Taxable Online Recipients (NTORs). Essentially, if a supplier from a non-taxable region provides OIDAR services to an NTOR, the onus to deposit IGST falls squarely on the supplier.

The term “NTOR” is specifically defined in Section 2(16) of the IGST Act, 2017. It encompasses unregistered individuals receiving OIDAR services in taxable territories, including entities registered solely for Tax Deduction at Source purposes (e.g., government departments, local authorities, and various government agencies). This definition clarifies that if the Indian recipient of OIDAR services is unregistered under GST or registered only for TDS purposes, the foreign service provider must remit IGST for the provided services.

Additionally, according to Notification No. 10/2017-Integrated Tax (Rate) dated 28-06-2017 (as amended), if any service is supplied by an entity in a non-taxable territory to any person (excluding NTORs) in a taxable territory, the GST liability under the Reverse Charge Mechanism (RCM) is triggered. This stipulates that the recipient of such services is responsible for depositing the applicable GST, ensuring compliance and proper tax collection within India’s jurisdiction.

When OIDAR services are provided by a foreign service provider to a registered recipient in India, the recipient is obligated to pay GST under the Reverse Charge Mechanism (RCM). This scenario is crucial in understanding the taxability framework for OIDAR services. Below is a concise summary:

Location of Supplier of OIDAR Services	Location of Recipient of OIDAR Services	Taxability
INDIA	INDIA	FORWARD CHARGE
OUTSIDE INDIA	INDIA (RECEPIENT IS NTOR)	FORWARD CHARGE
OUTSIDE INDIA	INDIA (RECEPIENT IS OTHER THAN NTOR)	REVERSE CHARGE
OUTSIDE INDIA	OUTSIDE INDIA	NO GST APPLICABLE

The table above highlights the diverse tax implications based on the geographical locations of both the service provider and the recipient. Understanding these nuances ensures compliance and optimizes financial operations within the OIDAR service landscape.

Place of supply

In the realm of OIDAR services, the determination of the place of supply for transactions between foreign service providers and recipients located in India is meticulously outlined by Section 13(12) of the IGST Act, 2017. According to this statutory provision, the location of the service recipient is pivotal in identifying the place of supply.

To elucidate, the Explanation to Section 13(12) delineates certain exceptions that, when met, mandate the place of supply as within the taxable territory. Crucially, if any two of these criteria are satisfied, the supply is deemed taxable within this jurisdiction. Noteworthy exceptions include scenarios where the recipient’s device IP address is situated within the taxable territory, or the billing address of the recipient falls within this domain. This precise legal framework ensures the accurate taxability of cross-border digital services, fortifying the integrity of the taxable territory.

Registration, Payment of Tax & Returns

Under the GST Law, it is imperative for all suppliers of Online Information Database Access and Retrieval (OIDAR) services, including foreign entities, to register for GST if they provide services to recipients in India. Domestic service providers are required to register once their Aggregate Turnover surpasses the designated threshold limit.

Notably, foreign service providers must secure GST registration regardless of turnover if supplying OIDAR services to unregistered recipients in India. This registration can be facilitated through the Simplified Registration Scheme by submitting FORM GST REG-10. If a foreign service provider supplies services to Non-Taxable Online Recipients (NTOR) through an intermediary, the intermediary must register for GST and remit the applicable Integrated Goods and Services Tax (IGST).

Additionally, if there is a representative in India acting on behalf of the foreign service provider, this representative must obtain GST registration and remit the necessary IGST. In the absence of a physical presence or representative in India, the foreign service provider is obligated to appoint an Indian representative for the purpose of IGST payment.

Foreign service providers registered as OIDAR Service Providers are not entitled to claim Input Tax Credit of GST. They must file a monthly return using Form GSTR-5A by the 20th of the following month, ensuring all GST liabilities for the return period are settled. Even if there is no business activity during a tax period, Form GSTR-5A must be filed as a Nil Return.

Conversely, Indian service providers with GST registration are required to file regular returns using Form GSTR-1 and Form GSTR-3B, adhering to the prescribed schedules and compliance mandates.

Significant Judgments on OIDAR Services within the GST Framework

Amogh Ramesh Bhatawadekar

In a pivotal ruling, the applicant, Amogh Ramesh Bhatawadekar, engaged in the provision of e-goods through “Online Gaming.” The process began with the applicant soliciting lists of digital products—predominantly online games—from various suppliers. These digital products were transmitted to the applicant via email or instant messaging services, followed by a payout. Subsequently, the received digital goods were evaluated and stored on cloud servers, ready for delivery to customers who visited the applicant’s website and made payments. Upon payment, the online games were delivered to the customer via email from the cloud server.

Initially, the applicant did not obtain a GSTIN, assuming these transactions to constitute the export of digital goods. However, the Authority for Advance Ruling clarified that the provision of online games or digital goods qualifies as a supply of service, not goods, and falls under the classification of Online Information Database Access and Retrieval (OIDAR) services. Consequently, the applicant is mandated to remit GST on the transactions involving the purchase and sale of these digital goods.

NCS Pearson Inc

In another crucial judgment, the GST Appellate Advance Ruling Authority addressed the nature of services provided by NCS Pearson Inc. The case pertained to the company’s administration of online tests, specifically Type-3 tests. The authority observed that these tests employed a system where the reliability was gauged based on the agreement among human raters. Although human scorers were involved to ensure the AES program’s reliability, the primary objective was to evaluate candidate performance using an automated system.

The Appellate Authority concluded that the human element’s role in assessing essay responses constituted “minimum human intervention.” This minimal human involvement satisfied the criteria for the service to be classified as OIDAR. Thus, the Type-3 test conducted by NCS Pearson Inc. was deemed to fall under the purview of OIDAR services, necessitating compliance with GST regulations.

These rulings underscore the nuanced interpretation of digital transactions within the GST regime, particularly the classification of services as OIDAR, and highlight the imperative for businesses to meticulously adhere to tax obligations.

Conclusion

The taxation landscape of OIDAR services introduces a multifaceted array of challenges that necessitate continuous vigilance and flexibility from the Government. The revised definition of OIDAR services encompasses a broad spectrum of applicability and interpretation, inevitably leading to potential disputes between taxpayers and Revenue Authorities. It is imperative that the Government provides further clarity on this matter to mitigate such disputes effectively.

Additionally, the legislative intent behind the specific GST Law provisions aims to track foreign entities supplying OIDAR services to NTOR. However, enforcing GST compliance among these foreign entities presents distinct challenges. Addressing these issues requires a blend of technological innovations and robust regulatory frameworks. Through diligent oversight and proactive regulation, the Government can fully leverage the revenue and economic growth potential inherent in OIDAR services.

Navigating the Indian GST framework can be challenging, especially for tax professionals tasked with filing appeals within strict deadlines. Despite best efforts, there are instances where appeals might be delayed beyond the initial three-month period allowed by law. In such cases, a request for condonation of delay becomes necessary.

The legal landscape for condonation of delay in GST appeals is intricate and necessitates a detailed understanding of the relevant legal provisions and judicial precedents. Tax litigators must meticulously prepare to substantiate the reasons for delay, as the success of their appeal depends heavily on the acceptance of their condonation plea.

Key case laws provide critical insights into how courts interpret and decide on these requests. For instance, the judiciary often considers whether the delay was due to circumstances beyond the control of the appellant and if there is a reasonable cause that justifies the delay. Legal experts must, therefore, present a compelling argument that aligns with these judicial expectations.

In-depth technical knowledge of the GST law and a strategic approach are crucial in navigating the condonation of delay. Professionals must stay updated with the latest judicial pronouncements and ensure that their appeals and condonation requests are meticulously documented and robustly argued.

By understanding the nuances of condonation of delay and leveraging relevant case laws, tax professionals can enhance their effectiveness in managing GST appeals. This proactive and informed approach not only improves the chances of success in appeals but also ensures compliance with the legal mandates of the GST framework.

Legal Framework for Condonation of Delay in CGST Act

The Central Goods and Services Tax (CGST) Act, 2017 sets a clear timeline for filing appeals. The statutory period to file an appeal is strictly 90 days from the date when the order is communicated. If you miss this window, the appellate authority does have the power to extend the deadline, but only by an additional month, provided there is a valid reason. This means that you essentially have a maximum of 120 days to file an appeal if you can demonstrate sufficient cause for the delay.

However, beyond these 120 days, the CGST Act does not offer any provision for further condonation of delay. This lack of flexibility has resulted in significant legal challenges. Courts have had to interpret these limitations, often leading to complex judicial decisions. As a result, taxpayers and legal practitioners must be extremely diligent in adhering to these timelines to avoid losing their right to appeal due to procedural delays.

Understanding this framework is crucial for anyone dealing with GST-related appeals. By recognizing the strict deadlines and the limited scope for extensions, you can better navigate the legal landscape and ensure compliance with the statutory requirements of the CGST Act.

Judicial Precedents Supporting Condonation of Delay

Numerous High Courts have examined the matter of condonation of delay in GST appeals. They have frequently drawn on the principles of justice and fairness to prevent appellants from facing excessive penalties due to procedural mistakes.

In various rulings, these courts have emphasized that strict adherence to deadlines should not override the pursuit of substantial justice. The courts have highlighted that a balanced approach is necessary, where the merits of the case are given due consideration rather than focusing solely on procedural compliance.

The judiciary’s stance is rooted in the belief that fair play and equity should guide the interpretation of laws governing GST appeals. By adopting a compassionate view, the courts aim to ensure that minor lapses do not obstruct the delivery of justice. This approach helps maintain trust in the legal system, showing that it is flexible enough to accommodate genuine delays while still upholding the law.

01. Calcutta High Court on Arvind Gupta (04-Jan-2024)

In the matter of Arvind Gupta, the Calcutta High Court underscored the appellate authority’s inherent power to condone delays beyond the statutory limit when justified by the circumstances. The court deemed the appellate authority’s refusal to extend the delay period beyond four months as flawed, ordering a reevaluation of the appeal based on its merits. This ruling highlights the judiciary’s commitment to prioritizing substantial justice over strict procedural constraints.

S.K. Chakraborthy & Sons

The court ruled that Section 107 of the CGST Act does not preclude the application of Section 5 of the Limitation Act, 1963. Thus, the appellate authority is permitted to consider delay condonation beyond the specified period, harmonizing GST law with the broader justice principles outlined in the Limitation Act.

Kajal Dutta (2023)

In this instance, the appeal was delayed due to the appellant’s illness, corroborated by a doctor’s certificate. The court accepted the delay, reaffirming that genuine medical emergencies are valid grounds for delay.

02. Andhra Pradesh High Court Decision on Shaik Abdul Azzez (09-Jan-2024)

In a significant ruling, the Andhra Pradesh High Court addressed the issue of delay condonation under Section 107 of the APGST Act. The court acknowledged that while the appellate authority lacks the power to extend delays beyond the statutory limit, there are exceptional circumstances that necessitate judicial intervention. In exercising its writ jurisdiction, the court chose to condone the delay, emphasizing that procedural rules should not obstruct the fundamental right to a fair hearing.

Abiswathika Infra Case (2023)

In the matter concerning Abiswathika Infra, the court dealt with the cancellation of the petitioner’s GST registration. Due to the absence of the GST Tribunal, the High Court directed a reconsideration of the case. This decision underscored the necessity for procedural flexibility when appellate forums are not readily available, implicitly affirming the need for judicial adaptability in ensuring justice.

03. Madras High Court on Sathya Furnitures (2023)

In 2023, the Madras High Court addressed a pivotal case involving Sathya Furnitures. The court decided to forgive a one-week delay caused by an accountant’s mistake, emphasizing that taxpayers should not bear the brunt of their representatives’ errors. This ruling reflects a broader judicial trend prioritizing fairness and justice over rigid procedural adherence. By focusing on the equitable treatment of taxpayers, the court reinforced the importance of addressing each case’s unique circumstances to ensure just outcomes.

Great Heights Developers LLP (2024)

In 2024, the court showed leniency in another significant case involving Great Heights Developers LLP. Here, the appellant managed to demonstrate valid mitigating circumstances, including a severe medical condition. The court’s decision to condone the delay underscores the principle that genuine hardships warrant consideration to uphold a fair adjudication process. This case highlights the judiciary’s commitment to accommodating real-life challenges faced by individuals, ensuring that the pursuit of justice remains compassionate and equitable.

04. Analysis of Himachal Pradesh High Court’s Stand on Procedural Delays in Sunil Kumar Case (2022)

In a significant ruling, the Himachal Pradesh High Court addressed the issue of procedural delays in the Sunil Kumar case (2022). The court criticized the rejection of an appeal due to a one-day delay, describing the decision as overly technical. This case underscores the judiciary’s disapproval of strict interpretations of procedural rules that can obstruct the delivery of justice. It serves as a reminder that the primary goal of the legal system is to ensure fair and equitable outcomes, rather than to rigidly adhere to technicalities. The court’s stance promotes a more flexible and just approach, emphasizing the importance of substance over form in judicial proceedings.

05. Allahabad High Court Decision on Ramji Kirana Store (2023)

In a landmark ruling in 2023, the Allahabad High Court addressed the procedural shortcomings in the case of Ramji Kirana Store. The court ruled that assessment orders issued without giving the assessee a chance to be heard, and appellate orders that dismissed delay condonation applications without proper consideration, are fundamentally flawed and cannot stand. This decision underscored the critical importance of ensuring due process and fair hearings in the adjudication of such cases. The court remanded the case for a fresh hearing, reiterating that all parties must be given an equitable opportunity to present their arguments.

Discussion

In our analysis of recent case laws, a clear judicial trend emerges: courts are increasingly accommodating delays in GST appeals when there are genuine and sufficient reasons. This trend aligns with the principles of the Limitation Act, 1963, which permits the condonation of delays if the appellant can show a bona fide reason for the delay.

Section 5 of the Limitation Act, 1963, is particularly influential in this context. It grants courts the discretion to condone delays if “sufficient cause” is demonstrated. Various High Courts have effectively integrated this principle into the GST framework, even though the timelines stipulated by the CGST Act appear rigid.

Additionally, courts have upheld the doctrine of substantial justice. This doctrine emphasizes that procedural lapses should not override the fundamental right to a fair hearing. It ensures that appellants are not unfairly deprived of their statutory right to appeal due to unavoidable delays.

Key Takeaways:

1. Judicial Flexibility: Courts are flexible with GST appeal deadlines when justified reasons are presented.
2. Limitation Act, 1963: Section 5 is pivotal, allowing courts to condone delays based on sufficient cause.
3. Substantial Justice: Emphasizes fair hearings over procedural technicalities, protecting appellants’ rights.

Let’s Dive Deeper:

• GST Appeal Delays: Have you faced delays in your GST appeals? Understanding this judicial trend can provide valuable insights for navigating such situations.
• Limitation Act Principles: Are you aware of how Section 5 of the Limitation Act can work in your favor? Knowing this can significantly impact your appeal strategy.
• Ensuring Fair Hearings: Do you feel procedural rules have compromised your right to a fair hearing? The doctrine of substantial justice ensures that your appeal is heard on its merits, not dismissed on technical grounds.

By comprehending these judicial tendencies and legal principles, you can better prepare and argue your case in GST appeals. Always remember, the courts aim to ensure fairness and justice, even if it means overlooking procedural delays for genuine reasons.

Conclusion

Understanding the law around condonation of delay in GST appeals is key for tax litigators. Courts strive to balance the importance of following procedural timelines with the need to deliver fair justice. To advocate effectively for delay condonation, tax litigators must be well-versed in judicial precedents and the principles behind them.

When the deadline for filing an appeal nears, it’s crucial to act promptly. If delays occur, be ready with strong legal and factual arguments to support your request for condonation. This preparation ensures that justice is pursued without sacrificing procedural integrity.

Are you prepared for the approaching deadlines? Do you have the arguments needed to substantiate your delay condonation requests? Knowing the law and being ready with robust arguments can make a significant difference in your advocacy efforts.

Section 75 of the Central Goods and Services Tax (CGST) Act, 2017, delineates the foundational principles governing adjudication within the GST framework. This section underscores the procedural norms to be meticulously followed by officers executing adjudication under Sections 73 and 74, or any other GST-related provisions.

The adjudicative role of departmental officers, who act as quasi-judicial authorities, is laden with significant responsibility. It mandates a scrupulous, unbiased application of the law, ensuring decisions are rooted in a thorough understanding of the case facts, relevant sections, rules, and notifications.

A pivotal aspect of adjudication is the issuance and response to Show Cause Notices (SCNs). Crafting a compelling reply to an SCN demands adept drafting and interpretive skills. Here are critical considerations for managing and responding to SCNs effectively:

Navigating Show Cause Notices (SCNs) and Crafting Replies

Avoidance of SCNs can occur under two primary circumstances. Firstly, if the scrutiny, audit, or investigation that precipitated the SCN is managed to the officer’s satisfaction, the notice may be circumvented. Secondly, engaging in pre-SCN consultations and addressing concerns convincingly can prevent escalation to the SCN stage.

Upon receiving an SCN, ensure its completeness by verifying the inclusion of all annexures and relied-upon documents (RUDs) as referenced. A thorough reading of the SCN is imperative before drafting any reply, ensuring comprehensive understanding of the allegations.

Replying to an SCN is indispensable. The taxpayer must respond to seek any potential relief. The SCN will specify a deadline for the response, and it is crucial to adhere to this timeframe. If the SCN issuing authority differs from the adjudicating authority, confirm that the reply is directed to the correct entity.

Typically, SCNs provide a 30-day window for responses. If this period is insufficient, request an extension, providing a legitimate reason in writing. While extensions are generally granted, avoid repeated requests as they may be denied.

Failure to reply within the stipulated time may lead the officer to proceed with adjudication. However, a response can still be submitted on the hearing date if not done earlier.

When drafting a reply, ensure it is exhaustive and addresses all allegations and demands comprehensively. Support your arguments with relevant documents such as agreements, invoices, and other evidentiary materials. Reference all RUDs where necessary and express the desire for a personal hearing.

Ensure the reply is meticulously organized, indexed, page-numbered, paragraphed, and submitted with proper acknowledgment or via registered post. It should be dated and signed, reflecting a professional and assertive approach.

By adhering to these expert guidelines, taxpayers can navigate the complexities of GST adjudication with confidence, ensuring their responses to SCNs are robust, comprehensive, and persuasive.

Next week, crucial economic data releases will set the stage for the new government’s policy framework. Five key high-frequency indicators will be unveiled, and apart from GST collections, all are expected to surpass estimates.

GDP and Fiscal Deficit Data

The Government’s Statistics Office will release the growth data for FY24 and Q4 of FY24 on May 31. This will include the GDP figures and the fiscal deficit for FY24, along with April’s fiscal deficit for FY25. The core sector performance data will also be made public on the same day. Economists predict that the fiscal deficit for FY24 will be lower than the revised estimate of 5.8%, possibly by 10-20 basis points. This is due to better-than-expected tax and non-tax revenue, driven by strong GST collections and dividends from Central Public Sector Undertakings (CPSEs).

Reducing the fiscal deficit is crucial for achieving the target of 4.5% by the end of FY26. The upcoming data will provide insights into the government’s progress towards this goal.

GDP Growth Expectations

Various economists and research agencies have forecasted GDP growth for FY24 to be between 7.5% and 7.8%. India Ratings & Research (Ind-Ra) expects growth to be in the range of 6.9% to 7%. ICRA projects a year-on-year expansion of GDP to moderate to 6.7% in Q4 FY24 from 8.4% in Q3 FY24. This moderation is attributed to a smaller increase in net indirect taxes and a narrower dip in subsidy outgo for the full year. ICRA expects GDP and Gross Value Added (GVA) growth to be at 7.8% and 7%, respectively.

GST Collection Trends

After achieving a record-high GST collection of ₹2.10 lakh crore in April, May’s collection is anticipated to be lower month-on-month but higher year-on-year. The generation of e-Way bills, a key indicator of GST collection, slowed in April to 96.7 million from 103.5 million in the previous month. This suggests a potential moderation in GST collections for May, according to CARE Edge.

Purchasing Managers’ Index (PMI)

On June 3, the Purchasing Managers’ Index (PMI) for May will be released. This data will provide further insights into the manufacturing and services sectors’ performance, influencing the overall economic outlook.

Conclusion

These upcoming data releases will be critical in shaping the economic narrative for the new government. They will offer a clear picture of the current economic conditions and help guide policy decisions moving forward. With GDP growth expected to be strong and fiscal deficit potentially lower than anticipated, the new government will have a solid foundation to build its economic policies. However, the anticipated moderation in GST collections will require careful monitoring. Overall, these indicators will provide essential insights for navigating the economic landscape in the coming months.