Amnesty Scheme for filing of appeals against demand orders where appeal could not be filed within the allowable time period

a. To permit the filing of an appeal against a demand order issued under Sections 73 or 74 of the Central Goods and Services Tax Act of 2023 (the “GST Act”) that was issued on or before March 31, 2023, but that could not be lodged within the deadline stipulated in Section 107 (the “Appeal Section”).

b. To additionally include decisions in which an appeal was denied for failing to be filed within the allotted window of time.

c. The deadline to file an appeal is January 31, 2024, but you must make a 12.5% pre-deposit of the challenged tax amount, of which at least 2.5% must be paid using an electronic cash ledger.

The issue with the mentioned amnesty

What about appeal cases that were dismissed because they were time-barred but that the local GST authority has already recovered? Will they be able to appeal and contest the already completed recovery?

Additional information to think about

As a result of a modification to the GST Act, Rule 108 of the Central Goods and Services Tax Rules, 2017 (the “CGST Rules”) now permits physical filing of an appeal when the order copy (against which the appeal is filed) is not accessible through the GSTN portal. In order to ensure that their appeal is lodged in time, taxpayers must not wait for the order copy to be uploaded to the GSTN portal.

Taxability of personal guarantee by director to bank against credit / loan sanctioned to Company

If the company paid the director nothing in exchange for their personal Guarantee to the bank, either directly or indirectly, the open market value would be classified as NIL, and no tax would be due on those supplies.

Consideration point

This will end the legal disputes surrounding the GST authorities’ prior demand that the banks’ personal guarantees be subject to GST. What about taxpayers who have already discharged GST on such services, though, remains an open topic.

Taxability of corporate guarantee by holding company to subsidiary companies

a. A holding company’s corporate guarantee of subsidiary entities that will be subject to GST taxation.

b. The CGST Rules will add a new rule 28(2) that will value corporate guarantees at 1% of the amount of the guarantee issued or the real consideration, whichever is higher.

c. The second proviso to Rule 28 of the CGST Rules, which states that any value declared on an invoice shall be recognized as open market value if the recipient is qualified for full ITC, will not apply to corporate guarantees.

Points for consideration

a. Will the changes to the Rules be made prospectively or retroactively?

a. If prospective, does GST apply to corporate guarantees provided prior to the amendment?

c. Can the taxpayer use Rule 28’s second proviso for the pre-amendment period valuation of a corporate guarantee before the introduction of this new valuation rule?

d. Does Schedule III of the CGST Act apply to corporate guarantees that are still contested as actionable claims?

Mandatory Input Service Distributor (‘ISD’) registration under GST

For distribution of ITC in regard to input services purchased by Head Office from a third party for all branches or for specific branches, ISD registration would be made prospectively obligatory under the GST law.

Consideration point

Due to this revision, even a business with only two GST registrations that uses standard third-party services will need to register for GST. This will increase the burden of compliance on taxpayers, particularly MSME taxpayers.

Instead of billing the Head office, the Companies may instruct the vendors to bill their respective GST registrations directly. However, because the service was provided to the Company rather than a particular place, it will be difficult to value the distribution of billing amongst multiple GSTIN by the suppliers.

Other significant modifications suggested by the GST Council

a. Receiving money into a Special INR Vostro account is admissible as an inward remittance in foreign currency for the purposes of defining the export of services (permitted by the RBI).

b. Clarification of the provisions relating to advertising services and co-location services regarding place of supply.

c. Starting on January 1, 2022, e-commerce companies that provide bus transportation services through their platforms will be required to pay GST in accordance with Section 9(5) of the CGST Act. Bus operators that operate as businesses, however, must remain exempt from Section 9(5).

d. The suggestion to exempt the provision of services for the government authorities in the areas of water supply, public health, sanitation conservancy, solid waste management, and slum improvement and upgradation.

Read More: Compliance with Section 194A TDS on Interest to NBFCS

e. GST will not be applied to extra neutral alcohol (ENA) utilized in the production of alcoholic beverages for human use.

f. A change to Rule 159(2) of the CGST Rules to permit automatic restoration of property that has been temporarily attached after a year has passed from the order of attachment.

g. Lower the 28% to 5% GST rate for molasses.

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