News Update

GST Enters Constitution of India

DDT in Limca Book of Records - Third Time in a rowTIOL-DDT 2927
09 09 2016

THE Constitution (One Hundred and First Amendment) Act, 2016 has become a reality with the Presidential assent yesterday, making GST a constitutional fact. The Act will come into force from a date to be notified by the Central Government. Different dates can be appointed for different provisions of the Act. It may be relevant to remember that the Eighty Eighth Amendment was never notified and is deleted by the present Amendment (Please see yesterday's DDT). If this is asflaunted, the biggest tax reformsince independence, what was the biggest tax reform before independence?

Now that Parliament has passed the Bill and it is ratified by more than half the States and the President has given his assent, the whole Constitution is in the hands of the Central Government for three years to do anything to make GST workable.

Clause 21 of the Amendment Act states:

Power of President to remove difficulties.

21. (1) If any difficulty arises in giving effect to the provisions of the Constitution as amended by this Act (including any difficulty in relation to the transition from the provisions of the Constitution as they stood immediately before the date of assent of the President to this Act to the provisions of the Constitution as amended by this Act), the President may, by order, make such provisions, including any adaptation or modification of any provision of the Constitution as amended by this Act or law, as appear to the President to be necessary or expedient for the purpose of removing the difficulty:

Provided that no such order shall be made after the expiry of three years from the date of such assent.

Restructure GSTN or No GST - Subramanian Swamy: Dr. Subramanian Swamy tweeted yesterday, "My view of the security disastrous & corrupt friendly GSTN has found wide acceptance in places where it matters. Restructure GSTN or No GST."

Swamy had been very critical of the GSTN. According to him:

+ The most significant player it is obvious, in this tax collection effort should be the one who generates data collection. In this case, that would be the Central and State Governments. Everything else such as adjusting the percentage of GST for various states are just a matter of programming, which could be done by the Government itself through its Department of Electronics. After all, Government has already codified Income Tax. Nothing can be more complicated than that!

+ It may not be possible to implement GST unless private companies are replaced by state-owned firms in the GSTN, the backbone for putting in place the new indirect tax regime.

+ In the "normal" course security clearance from the Ministry of Home Affairs should have been obtained as GSTN would be handling sensitive tax data.

+ The government of India holds 24.5 per cent stake in GSTN while state governments together hold another 24.5 per cent. The balance 51 per cent equity is with non-government financial institutions, like HDFC Bank, HDFC Ltd, ICICI Bank, NSE Strategic Investment Corporation and LIC Housing Finance.

+ Tax administration is a matter that deals with sensitive private information. Being such a large shareholder, this automatically means that HDFC and ICICI will be the bankers of public money collected through taxes. Thus a large amount of money will pass through these banks!

+ GSTN cannot take off unless you first get security clearance. Rajya Sabha Select Committee that scrutinised the GST Bill had said that presence of private companies, with significant foreign holding, in GSTN is not "desirable".

One Bench decides based on a precedent, the other disagrees & refers the matter to the Larger Bench

IN the case of JCB India Ltd. - 2014-TIOL-09-CESTAT-MUM the CESTAT, WZB, Mumbai had held thus -

CE - Word 'Automobile' is not defined in the CEA or CETA - Loader, Backhoe loader & Road Rollers are Automobiles as they are required to be registered with Road Transport authorities under Rule 2 of the Central Motor Vehicles Rules, 1989 & also certificates are required to be taken from Automotive Research Association of India, Pune and also satisfy Section 2 of the Air (Prevention and Control of Pollution) Act, 1981 - Parts, components and assemblies of Loader, Backhoe Loader and Road Rollers are covered by "parts, components and assemblies of Automobiles" mentioned in Third Schedule - purchase of various parts of Loaders, Backhoe Loaders, Road Rollers from different suppliers in India and abroad & repacking these parts with new packing material and affixing Logo, fixing of MRP and selling under own brand name amounts to manufacture in view of provisions of s. 2(f)(iii) of CEA, 1944 - being notified goods they are subject to valuation in terms of section 4A of CEA, 1944.

This decision was relied upon by the Tribunal while deciding the case of Larsen & Toubro - 2014-TIOL-2561-CESTAT-MUM.

It was held -

CE - Parts of scania trucks, dumpers, motor graders, wheel loaders, dozers and hydraulic excavators on which tag is put are subject to assessment u/s 4A of CEA, 1944 as they are covered by the broad definition of automobile - Even putting a tag, whether on individual or group of automobile parts, would amount to labelling the goods & will amount to manufacture covered u/s 2(f)(iii) of CEA, 1944.

In a recent case, the Mumbai Bench of CESTAT followed the decision in Larsen & Toubro and while upholding the demand for the extended period of limitation extended the benefit of cum-duty price and CENVAT and remanded the matter for re-working out the duty liability and consequent penalty, interest.

Please see Breaking News

However, the Division Bench of CESTAT, Chandigarh was not at all impressed with the decision in JCB India Ltd. case (supra). Expressing its disagreement with that decision, the Bench has opined that it would be in the interest of justice to refer the following issues to the Larger Bench for consideration:

(i) How to define expression 'automobiles' when it is not defined in Central Excise Act/Rules or any Notification issued thereunder. Can the expression given in the Acts, namely, Air (Prevention and Control of Pollution) Act, 1981 or Motor Vehicles Act, 1988 be adopted or the meaning of the expression 'automobiles' can be assigned from the uniformally defined in the various dictionaries and known in common parlance? and

(ii) The Notification No.11/2011 dated 24.03.2011 giving the effect of demand of duty w.e.f. 29.04.2010 on the parts, components and assemblies of goods falling under Tariff Item No. 8426 41 00, headings 8417, 8429 and sub heading 8430.10 is clarificatory and applicable prior to 29.04.2010 or mandatory and applicable from 29.04.2010 onwards.

The matter has been referred to the President for a say in the matter. See 2016-TIOL-2344-CESTAT-CHD

FTP - simultaneous benefits of Zero Duty EPCG and SHIS - DGFT Clarifies

DGFT has received references from Directorate of Revenue Intelligence and various exporters, on the subject of incorrectly issued simultaneous benefits of Status Holder Incentive Scheme (SHIS) and Zero Duty EPCG Authorization under Foreign Trade Policy 2009-14.

The issue involves Para 5.1(b) of FTP and Para 3.10.3(b) of HBP 2009-14. The representations have been examined by DGFT in consultation with Department of Revenue and it has been decided that exporters who have been issued or availed such simultaneous benefit of these schemes shall be allowed flexibility to choose one of the two schemes subject to certain conditions.

No penal action in cases of incorrect issuance: On account of different interpretations on the issue in the past, it has been decided in consultation with DoR that any erroneous issuance of SHIS/Zero Duty EPCG Authorisation will be considered bonafide error and no penal action shall be taken against exporters by RAs / field formations of Customs, including DRI.

Consequential Action by CBEC: The CBEC would be issuing a separate Circular for guidance of its field formations.

DGFT Public Notice No. 30/2015-2020., Dated: September 08 2016

Customs - Delay in issuing of Sub Manifest Transshipment Permit - CBEC Instruction

RECENTLY, NitiAayog while examining the inter-ministerial issues relating to Port Eco System Efficiency Parameters has recommended that Customs will issue SMTP for transfer of cargo destined to ICDs by rail without waiting for full discharge of the vessel.This recommendation has been accepted by the Board.

Board wants the Chief Commissioners to take immediate necessary steps for implementation of this recommendation and to strictly ensure that there is no delay in granting SMTP for the cargo meant for clearance in ICDs.

CBEC F No.450/25/2009-Cus-IV., Dated: September 07 2016

Customs - Entry of factory stuffed (including self sealed) export containers into port terminals prior to LEO

UNDER the current practice at JNPT, following category of export containers are allowed direct entry into the port terminal prior to granting LEO.

a) Refrigerated Containers.

b) Over Dimensional Cargo (ODC)

c) Motor Vehicles.

d) Perishable non-refrigerated cargo: Containers stuffed under the supervision of the Central Excise/Customs officers, containing perishable non-refrigerated cargo like onion, garlic etc.

e) Factory stuffed Cargo of Exporters having Status Certificate, 100% EOUs and units of SEZs.

In addition to the above, facilitation measures CBEC has vide Circular No. 33/2016-Cus allowed Direct Port Entry to all AEO Tier-I/II/III status holders.

Recently, NitiAayog while examining the inter-ministerial issues relating to Port Eco-System Efficiency Parameters has recommended that all manufacturing firms should be allowed Direct Port entry (DPE).

Board has advised all Customs Houses to issue suitable trade notices allowing factory stuffed export containers of all manufacturing entities after discussing the matter with the Port authorities about measures to handle the additional inflow of the export containers.

CBEC F No.450/25/2009-Cus-IV., Dated: September 07 2016

Income Declaration Scheme, 2016 - Cash Accepted

THE Income Declaration Scheme, 2016 (the Scheme) has come into effect from June 1, 2016. In this connection, it has been brought to the notice of RBI by the Government that banks are hesitant in allowing deposit of large amounts of cash by the declarants under the Scheme, with them, for credit to Government account.

RBI advises that banks must invariably accept cash, irrespective of amount, over the counters from all declarants who desire to deposit cash at the counters, including deposits under the above Scheme through challan ITNS- 286.

RBI DBR.No.Leg.BC. 13/09.07.005/2016-17., Dated: September 08 2016

Death and taxes and childbirth! There's never any convenient time for any of them!

Until Monday with more DDT

Have a nice weekend.

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