MAY 08, 2019

By Vijay Kumar

THERE is a record collection of GST in April. The Finance Ministry proudly announced,

"GST Revenue collection for April, 2019 recorded highest ever collection since GST implementation w.e.f. 1st July 2017. Total Gross GST revenue collected in April, 2019 is Rs.1,13,865 crore of which CGST is Rs.21,163 crore, SGST is Rs.28,801 crore, and IGST is Rs. 54,733 crore".

The government has settled Rs 20,370 crore to CGST and Rs 15,975 crore to SGST from IGST as regular settlement. Further, Rs 12,000 crore has been settled from the balance IGST available with the Centre on provisional basis in the ratio of 50:50 between Centre and States. The total revenue earned by Central Government and the State Governments after regular and provisional settlement in the month of April, 2019 is Rs 47,533 crore for CGST and Rs 50,776 crore for the SGST.

So here is what the Central Government got (in Rupees crores):

The Budget 2019 estimated the GST+IGST collection to be 6,60,000 Crores for 2019-20, which means a monthly collection of Rs.55,000 crores and the revenue for the first month is less by more than a thousand crores. We should get better collections in the next 11 months.

GST confuses customs

By now, almost every concerned importer and exporter must be aware of the pre-import conditions introduced during the early GST regime.

When GST was introduced, the advance authorisation scheme did not provide for exemption from IGST and compensation cess on the imported goods. Subsequently, in October, 2017, the scheme was amended to allow exemption from IGST and compensation cess but with conditions and the export obligation was required to be fulfilled only by physical exports.

The Directorate of Revenue Intelligence (DRI) booked cases on several companies availing exemption under advance license as to whether the additional conditions were fulfilled or not. On challenge, the Madras High Court held, - 2018-TIOL-2308-HC-MAD-CUS

Even by not allowing exemption of IGST at the time of import, no benefit in the AA scheme is altered by the Government, though collateral costs get fastened on the petitioner and the likes by way of blockages in cash flow and attendant interest liabilities. And clearly, it is a matter of public policy. And rightly, the choice of policy is for the decision maker, in this case the Government, to make and not for the Court. Nor has been established before this court that the decision suffers from perversity, irrationality or arbitrariness.

The writ petition was dismissed. But the same issue came up before the Gujarat High Court, which did not agree with the Madras High Court and struck down the "pre-import condition" contained in paragraph 4.14 of the Foreign Trade Policy, 2015-2020 inserted vide Notification No.33/2015-2020 dated 13.10.2017 and clause (xii) in Notification No.18/2015-Cus vide Notification No.79/2017-Cus dated 13.10.2017, as being ultra vires the Advance Authorisation Scheme as contained in the Foreign Trade Policy, 2015-2020 as well as the provisions of the Handbook of Procedures. Consequently, all proceedings initiated for violation of "pre-import condition" would no longer survive. - 2019-TIOL-459-HC-AHM-CUS

Now what should the Central Government do? It has a favourable order from one High Court while another High Court struck down the provisions. And it seems writ petitions are filed in several High Courts. The CBIC has instructed the field formations that: [F/No.276/73/2019-CX.8A, dated 23.04.2019]

1. High Courts concerned may please be apprised of the fact that the Madurai Bench of Madras High Court has upheld of Pre-import condition vide DGFT Notification No.33/2015-20 dated 13.10.2017 and Customs Notification No. 79/2017-Cus dated 13.10.2017, so that any adverse interim/final order by the respective High Courts may be avoided.

2. In case of any adverse order, appropriate action in terms of filing Review Petition/Writ Appeal and

3. If Review Petition/Writ Appeal is not possible, forwarding of SLP proposal to Board (as per extant instructions) may also be examined, in consultation with the Law officer/ Standing Counsel.

Obviously, the Revenue is keen to keep the litigation alive in the Supreme Court and maybe try to solve the issue after the 2029 elections.

service tax though debited to the profit and loss account but not credited to the Central Government - the Income Tax Angle

An Income Tax assessee filed a return of income for Assessment Year 2006-07 on 29.3.2007 declaring income of Rs.6,48,57,187/-. The assessee was engaged in the business of providing detection and security services. During the examination of the Balance Sheet, the Assessing Officer, inter alia, noted that the Company had claimed Rs.5,12,22,734/- being unpaid service tax as its liability. It is stated that the gross receipts include the service tax but whenever it is due and payable, namely, when the amount for the services is realised, it would be remitted. That is how the above sum was shown as liability in the Balance Sheet.

The Assessing Officer was of the view that by virtue of Section 43B of the Income Tax Act, 1961, service tax can be allowed only when paid and, therefore, the amount is not liable as deduction. Hence, the same was added as income.

Being aggrieved by this order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals) and he held in favour of the assessee.

Then, the matter was carried in appeal to the Tribunal and the Tribunal, relying upon its finding in the earlier assessment years, came to the conclusion that though the service tax was included in the bill raised on the customers but it was not actually collected from them. The Tribunal agreed with the First Appellate Authority and dismissed the Revenue's appeal.

Revenue took the matter in appeal to the High Court. The High Court noted that in an earlier case, the Court had held that Section 43B does not contemplate liability to pay service tax before actual receipt of the funds in the account of the assessee. Hence the liability to pay service tax into the Treasury will arise only upon the assessee receiving the funds and not otherwise. Thus, the consideration has to be actually received and thereupon the liability will arise.

Therefore, the High Court held that there was no substantial question of law and dismissed the appeal. - 2018-TIOL-1913-HC-MUM-IT Revenue does not keep quiet in such situations and took the matter to the Supreme Court. The Apex Court was kind enough to condone Revenue's delay, but dismissed the SLP. - 2019-TIOL-174-SC-IT

Let history not be repeated in GST.

An irrelevant quote - Quis custodiet ipsos custodes? - a Latin phrase found in the work of the Roman poet Juvenal from his Satires. It is literally translated as "Who will guard the guards themselves?"

Until next week