Category: GST News

Judiciary and Counsel Details

• Judges M.R. Shah and C.T. Ravikumar preside over the proceedings.
• Representing the petitioner are Ms. Soma Mullick, Vishwaranjan Kumar, Sebat Kumar Deuria, Anil Rana, Advocates, and Pranab Kumar Mullick, AOR.

Facts of the Case

The department apprehended the individual in question on grounds of suspicion that they were engaged in the fraudulent act of generating invoices for fictitious entities, complete with fabricated GST numbers, and subsequently disposing of them. Seeking their release, the individual approached the High Court, vehemently asserting their innocence and claiming to be falsely entangled in multiple First Information Reports (FIRs) filed by various complainants.

High Court Held

In the courtroom, the respected High Court carefully noted an important detail during the investigation: the person being accused had produced a fake bill, pretended to have made a purchase through a non-existent company, and unlawfully sold goods in the market. The investigation also showed that this person had frequent contact with the main culprit and played an active role in the crime, deceiving victims and extorting an enormous amount of three crores in rupees. As a result, bail was denied, leading the accused to file a special leave petition (SLP) before the highest court.

The esteemed Supreme Court took note of the allegations against the accused, stating that they were believed to have collaborated with other suspects in obtaining goods from fictional companies with fake GST numbers and later disposing of them. The Court recognized that investigations were still ongoing and that the need for custodial interrogations might arise. Consequently, the Court concluded that the accused should not be granted anticipatory bail, and the SLP was dismissed.

Court Details Judges:

• Vibhu Bakhru & Amit Mahajan
• Petitioner’s Counsel: Sandeep Chilana, Snehil Sharma, Prem Kandpal & Ms. Anjali Jain
• Respondent’s Counsel: Neeraj, Rudra Paliwal, Vedansh Anand, R. Ramachandran, Rajeev Aggarwal & Ms. Shilpa Singh

Case Summary

In this case, the petitioner has filed a petition seeking interest in a delayed refund. The petitioner argues that while the refund of SGST has been processed, the refund of CGST and IGST has not been processed despite the refund order. Therefore, it is contended that interest should be paid due to the significant delay in disbursing the refund.

High Court Ruling

The Honorable High Court acknowledges that the refund of SGST has been processed, but the refund of CGST and IGST was processed after the writ petition was filed. Even in situations where there is no statutory provision for the payment of interest, interest can be payable in case of unreasonable delays in refund disbursement. However, in this particular case, the Statute itself stipulates a 6% rate of interest to be paid by the department in case of refund processing delays. Consequently, the Court has directed the department to expedite the payment of interest at a rate of 6% per annum.

Judicial and Legal Details

Honorable Judges N.V. Anjaria & Devan M. Desai presiding. Bhaumik Dholariya representing the Petitioner. Raj Tanna representing the Respondent.

Case Background

In this case, the petitioner filed an interim prayer seeking the release of goods and conveyance. It was argued that while the goods were being transported, the GST authorities intervened and utilized their powers under section 129 of the CGST Act, 2017 (the Act) to seize both the goods and the conveyance. Subsequently, the authorities also invoked powers under section 130 of the Act and issued a confiscation order.

The petitioner asserted that the authorities took possession of the goods in transit under Section 129 of the Act. It was argued that Section 129, starting with a nonobstante clause, is an independent provision separate from Section 130. Hence, the authorities’ action of transitioning to Section 130 and issuing a notice thereunder, without granting the benefit of releasing the goods under Section 129, was deemed to be without jurisdiction.

The decision of the High Court

The Honorable High Court observed that in similar cases, this Court has already granted interim relief for the release of goods and conveyance, albeit subject to certain conditions. Consequently, the Court held that the matter will be scheduled for a hearing. However, as an interim measure, the goods and the vehicle shall be released by the authorities upon the payment of a penalty or the provision of a bank guarantee. This ruling ensures compliance with the conditions imposed by the Court in previous cases.

In the hallowed corridors of governance, the 43rd GST Council assembly convened as a seamless extension of its preceding 42nd counterpart on the auspicious day of October 12th, 2020. This virtual congregation was meticulously orchestrated by none other than the esteemed Finance Minister, Smt. Nirmala Sitharaman, who adroitly presided over the proceedings. In the esteemed company of Shri. Anurag Thakur, the Union Minister of State for Finance & Corporate Affairs, as well as a gathering of Finance Ministers hailing from various States and Union Territories, this rendezvous also attracted the presence of distinguished senior officials from both the Union Government and States. As befitting the gravity of this occasion, the foremost item on the agenda was the much-anticipated discussion surrounding the singular subject of paramount importance—item no. 9A.

Here are the key highlights of the 43rd GST Council meeting, presented in a professional style inspired by Ozan Varol:

1. The 43rd GST Council meeting concluded without achieving unanimity on the borrowing matter, thereby failing to reach a conclusive decision. Consequently, states are permitted to proceed with borrowing funds based on the previously provided options.
2. In line with the announcement made during the 42nd GST Council meeting, the imposition of compensation cess will extend beyond the initial 5-year period. However, the central government will be unable to secure funds through borrowing to cover the shortfall in compensation cess. Such an action would lead to an increase in the yield on G-sec bonds.
3. The Finance Minister elucidated that the central government has already issued a borrowing calendar, and surpassing this predetermined framework to secure additional funds would result in an elevation of G-Sec interest rates. Consequently, borrowing costs would rise for both states and the private sector, as G-Sec rates serve as a benchmark for all other borrowing endeavors.

“In the concluding press conference, Finance Minister Nirmala Sitharaman revealed that a consensus had not been reached by the conclusion of the meeting. Sitharaman noted that the majority of states had favored option 1, wherein states can access up to Rs 1.1 lakh crore through a specialized channel facilitated by the RBI. On the other hand, some states expressed the belief that a consensus should be achieved.

Sitharaman acknowledged that several members engaged in discussions about the Council’s authority to restrict states from pursuing independent borrowing endeavors. With regards to this, she questioned, ‘While I respect the absence of unanimity, can one Council member prevent another state from pursuing its desired course of action?’

The finance minister clarified her willingness to engage with states that are prepared to embrace option 1 and secure financial resources. She emphasized that the absence of unanimous agreement should not impede states in urgent need of funds from pursuing their borrowing strategies. Sitharaman stated, ‘I believe no entity can restrict the actions of individual states. Various perspectives were shared regarding why the central government cannot borrow, and appropriate responses were provided. The GST Council’s intention is not to hinder anyone,’ concluded the finance minister.”

Remarkable strides have been taken in curbing GST evasion, as revealed by a recent report highlighting the fiscal year of 2022-23. A substantial increase is evident, with tax officers successfully identifying instances of evasion amounting to over ₹1.01 lakh crore, marking a nearly twofold surge compared to the previous year.

The Directorate General of GST Intelligence (DGGI) deserves commendation for its diligent efforts in the fiscal year preceding this one, where a significant recovery of ₹21,000 crore was accomplished. In a display of astute governance, the authorities managed to bridge the gap between tax evasion and enforcement, leading to this substantial reclamation.

The approach to enhancing compliance has been comprehensive and technologically driven. By harnessing the power of data analytics and combining it with human intelligence, the government is actively targeting fraudulent activities. The results are evident in the impressive detection of evasion, amounting to ₹1,01,300 crore in the span of 2022-23. Out of this, a substantial sum of ₹21,000 crore has already been successfully retrieved, underlining the effectiveness of the measures in place.

In juxtaposition, the investigative prowess of DGGI in the preceding year, 2021-22, is noteworthy. Detecting evasion worth over ₹54,000 crore and subsequently recouping more than ₹21,000 crore in taxes exhibits a consistent pattern of diligent work by the agency operating under the ambit of the Goods and Services Tax (GST) regime.

The current fiscal year has witnessed a rise in the number of identified GST evasion cases, indicative of the ongoing commitment to eradicating such practices. The figures speak for themselves, with 2022-23 uncovering around 14,000 cases, an increase from the 12,574 cases in 2021-22 and 12,596 cases in 2020-21. This escalation further underscores the government’s resolve in tackling tax evasion head-on.

Diving into the modus operandi employed by those attempting to evade taxes, several tactics have been observed. These include underreporting the value of taxable goods and services to lower tax payments, incorrectly availing exemption notifications, wrongfully claiming input tax credit, evading tax on the supply of taxable goods and services through clandestine removal, and exploiting the system by availing input tax credit based on invoices issued by fictitious entities.

This vigorous response to tax evasion is not isolated but rather part of a broader timeline. The Finance Ministry’s recent response to the Lok Sabha revealed that GST evasion detected from July 2017 to February 2023 amounted to a substantial ₹3.08 lakh crore, an issue that has not gone unaddressed. Impressively, over ₹1.03 lakh crore of the evaded amount has been successfully recovered. Additionally, the authorities have demonstrated their commitment through legal actions, resulting in the arrest of 1,402 individuals over the last five and a half years until February 2023.

The current drive against GST evasion serves as a testament to the efficacy of diligent tax enforcement, propelled by a blend of advanced technological tools and human acumen. It is a journey marked by continuous learning, adaptation, and steadfast commitment to ensuring a just and equitable tax system.

Service Accounting Code (SAC) is a code assigned by the Goods and Services Tax (GST) Council in India to classify different services under the GST regime. The SAC code is used to determine the rate of tax that is applicable to a particular service.

The SAC code is a six-digit code that helps the government keep track of services provided by various businesses and to ensure that the correct tax is levied on each service. Each service is assigned a unique SAC code, which is used to identify the service when an invoice is issued.

In a B2C (business-to-consumer) transaction under the GST regime, if the value of the supply of services exceeds Rs. 50 lakhs in a financial year, it is mandatory to mention the SAC code in the invoice.

Is SAC Code always of 6 Digits?

Yes, a Service Accounting Code (SAC) under GST is always a 6-digit number. The structure of a SAC code is as follows:

• The first two digits are always “99” as services are covered under Chapter 99.
• The next two digits represent the major nature of the service.
• The last two digits represent the detailed nature of the service.

Understanding 6 Digits SAC Code in GST

When navigating the complexities of the GST regime, it’s crucial for business owners to grasp the significance of the SAC code. The SAC, or Services Accounting Code, is a six-digit code used to classify services under GST. Let’s break down the SAC code using the example of advertising services, which is designated by the code 998361.

1. First Two Digits (99): The initial two digits, 99, are standard across all service codes. This universal prefix denotes that the classification pertains to services.
2. Middle Two Digits (83): The next pair of digits identifies the major nature of the service. For advertising services, the middle two digits are 83, signifying that the service falls under the advertising category.
3. Last Two Digits (61): The final two digits provide specific details about the service. In this instance, 61 indicates that the service is related to advertising.

Understanding the Role of SAC Codes in GST

In the realm of Goods and Services Tax (GST), the Services Accounting Code (SAC) plays a crucial role. These unique six-digit codes are assigned to each service, providing a systematic approach to classifying and levying taxes on various services offered by businesses. Let’s delve into the key purposes and benefits of SAC codes in the GST framework.

Benefits of SAC Codes in GST

1. Uniform Taxation:
   SAC codes ensure a standardized tax system across the country. This uniformity means that similar services are taxed consistently, irrespective of where they are provided. Such consistency is vital for maintaining fairness and transparency in the taxation process.
2. Service Identification:
   By assigning specific codes to different services, SAC codes make it straightforward to identify and categorize services. This clarity helps in determining the appropriate GST rate applicable to each service, facilitating accurate tax computation.
3. Simplified Compliance:
   Using SAC codes significantly eases the burden of compliance for businesses. These codes streamline the process of tax calculation and the filing of GST returns. As a result, businesses can manage their tax obligations more efficiently and with fewer errors.
4. Enhanced Monitoring and Tracking:
   For the government, SAC codes are invaluable in monitoring and tracking the provision of services. This capability aids in more effective tax collection and ensures that services are not underreported or misclassified, enhancing overall tax compliance and revenue generation.

In summary, SAC codes are an essential element of the GST system, fostering uniformity, simplifying compliance, and enhancing the government’s ability to monitor and collect taxes. For businesses, understanding and correctly using these codes is critical to ensuring smooth and accurate GST processes.

Is Mentioning the SAC Code on Invoices Mandatory?

Under the Goods and Services Tax (GST) regulations, service providers must include the Services Accounting Code (SAC) on their invoices, which is always a 6-digit code. This requirement becomes mandatory if their annual turnover exceeds Rs. 5 crore. For those with an annual turnover below this threshold, it is still necessary to include the SAC code for Business-to-Business (B2B) transactions.

Incorporating the SAC code is crucial for the accurate classification of services and ensures the correct GST rate is applied. This practice not only streamlines the taxation process but also aids the government in monitoring tax collection and enforcing compliance with GST laws.

For businesses with an annual turnover up to Rs. 5 crore, it is essential to list the Harmonized System of Nomenclature (HSN) code for goods and the 6-digit SAC code for services on their invoices. If the turnover surpasses Rs. 5 crore, the requirement shifts to an 8-digit HSN code for goods, while the 6-digit SAC code for services remains the same.

By adhering to these coding requirements, businesses facilitate efficient tax administration and contribute to a transparent and organized tax system.

SAC vs. HSN Codes

While SAC codes classify services, HSN (Harmonized System of Nomenclature) codes are used for goods. Here are the key differences between these two types of codes:

• Purpose: HSN codes are exclusively for goods, whereas SAC codes are designated for services.
• Code Length: HSN codes are typically eight digits long, offering a more granular classification for goods. In contrast, SAC codes are six digits, simplifying the categorization of services.

Understanding these distinctions helps businesses accurately classify their offerings, ensuring compliance with GST regulations and simplifying the tax filing process.

By focusing on these codes, businesses can streamline their GST filings, avoid penalties, and ensure they are in full compliance with government regulations.

Some of the different types of SAC codes are:

SAC 99 – Miscellaneous Services
SAC 98 – Services by way of transfer of a going concern
SAC 97 – Renting of immovable property service
SAC 96 – Construction services
SAC 95 – Business support services
SAC 94 – Transport of goods and passengers
SAC 93 – Financial services
SAC 92 – Telecommunication services
SAC 91 – Information technology services
SAC 90 – Tourist transport services

It is not possible for us to list all the Service Accounting Codes (SAC) under the Goods and Services Tax (GST) regime in India as there are thousands of SAC codes covering a wide range of services. The SAC codes are constantly being updated and new codes are being added, so a comprehensive list would be difficult to maintain.

It is important for businesses to use the correct SAC code for each service they provide and to keep themselves updated with the latest GST laws and regulations. Businesses can refer to the official GST website or consult a tax professional for the latest list of SAC codes.

The recent decision by the central government to slash the GST rate on ethanol from 18% to a mere 5% marks a pivotal step in driving the Ethanol Blended Petrol (EBP) Program. This strategic move was underlined by Rameswar Teli, the Minister of State for Petroleum and Natural Gas, in response to a parliamentary query. With the intent of fortifying the integration of ethanol into fuel, the government has decisively reduced the tax burden on ethanol meant for blending, invigorating its presence in the market.

To substantiate this endeavor, the government has also unveiled the Pradhan Mantri JI-VAN Yojna, a scheme designed to invigorate the production of Second Generation (2G) ethanol. Notably, the government has established fixed procurement prices for ethanol derived from sugarcane-based sources such as C&B heavy molasses, sugarcane juice, sugar, and sugar syrup. Additionally, Public Sector Oil Marketing Companies will determine the pricing for ethanol sourced from food grain-based materials, on an annual basis.

In a comprehensive approach aimed at diminishing reliance on imported gasoline, the government has embarked on various strategic measures. These encompass policy initiatives directed at augmenting domestic crude oil production through improved geoscientific data accessibility, allocation of new exploration areas, expediting production from emerging development zones, and intensifying output from existing production sites.

An important milestone in promoting biofuels within the country was achieved with the inception of the National Policy on Biofuels (NPB) in 2018. This visionary policy has sanctioned the use of diverse feedstocks for generating bio-ethanol, thereby fostering an augmented supply of ethanol for amalgamation with petrol. Bolstered by progress on the ethanol supply front, the government has advanced the target for ethanol blending in petrol from 20% by 2030 to an earlier timeline of 2025-26.

The government’s commitment to fostering Second Generation (2G) ethanol production is also evident through the Pradhan Mantri JI-VAN Yojna. This initiative seeks to boost the production of 2G ethanol, encompassing cellulosic, lignocellulosic, and even petrochemical routes, through financial support mechanisms. In essence, this multifaceted approach demonstrates the government’s resolve to invigorate ethanol integration and domestic biofuel production, underscoring its dedication to sustainable and forward-looking energy strategies.