Action has to be taken in Supplier before initiating recovery proceedings on the Recipient for non filing of GST Returns by the Supplier
e-invoice threshold limit changes from 1st April 2022
The threshold limit for the issue of e-invoices has been reduced from ₹ 50 crores to ₹ 20 crores. Taxpayers who are having turnover above ₹ 20 crores have to issue e-invoices from 1st April 2022 and the recipient can take input tax credit only if the supplier has issued an e-invoice if required else they cannot avail input tax credit.
The taxpayers can verify from here for the eligibility for the issue of e-invoice.
The changes are notified wide Notification No 1/2022 – Central Tax dated 24th Feb 2022
Taxation Implication Crypto Currencies in India: Some Thoughts
Taxation Implication Crypto Currencies in India: Some Thoughts
Trade and Commerce play a vital role in the progress of any country’s economy. Trade started about 1,50,000 years ago, and in the initial days of trade, goods and services were exchanged. Over a period, bater has been replaced with physical currency. The currency issued by various Federal Governments is of two types, Gold Standard. The currency which is backed by the quantity of gold equivalently is known as Gold Standard. The other category is Fiat System. In this, the currency system is not backed by any Gold reserves. They are open to be issued, and the demand and supply determine the currency’s value. US dollars is the classic example for the Fiat system-based currency, and Indian Rupee is the example for the Gold Standard.
With the adoption of digitization, physical currency is being replaced with digital transactions. As per the latest information available with the National Payments Corporation of India, the number of transactions recorded using the UPI-based payment during Oct 2021 is 4.21 billion, amounting to US 100 billion dollars. Cryptocurrencies are the new buzzword in the market.
Cryptocurrency
The word “cryptocurrency” is derived from the encryption techniques which are used to secure the network. Cryptocurrency is a digital currency used over the internet to purchase goods or services or traded for profit. Cryptocurrencies are created using a technology called the blockchain. Blockchain is a decentralized technology spread across many computers that manage and records transactions.
Cryptocurrencies are fiat currency, and any Federal Government in the world do not regulate them. Though the cryptocurrencies are claimed to be safe, there were instances where millions of cryptocurrencies were stolen and used by anti-national forces. Some experts claim that Cryptocurrencies are the future of finance as the transfer of funds between two parties is instantaneous. There is no involvement of third parties like banks or financial institutions. The transfer happens with minimal charges compared to the traditional banking channels. The transfer happens through a combination of public and private keys.
In the cryptocurrencies world, they are termed public keys as they are public-facing, i.e., the address to which the cryptocurrencies are received. They are tagged with a public address like a country, city, street name, and house number. The public keys are based on a complex mathematical algorithm. Private Keys are like the password for the wallets, and the fund transfer happens on a combination of the public and private keys.
The cryptocurrencies started in 2009 with the introduction of bitcoin. The value of cryptocurrencies fluctuates on day to day basis. As per CoinMarketCap.com there are about 13K+ cryptocurrencies that are traded in the market. List of the top 10 cryptocurrencies with the highest market capitalization as per CoinMarketCap.com as of 8th Nov 2021.
| Sr.No | Cryptocurrency | Market Capitalization |
| 1 | Bitcoin | $1.2 trillion |
| 2 | Ethereum | $557.2 billion |
| 3 | Binance Coin | $107.7 billion |
| 4 | Solana | $73.6 billion |
| 5 | Tether | $72.6 billion |
| 6 | Cardano | $67.4 billion |
| 7 | XRP | $58.5 billion |
| 8 | Polkadot | $52.1 billion |
| 9 | Dogecoin | $36.5 billion |
| 10 | USD Coin | $34.3 billion |
Legal Status
Though cryptocurrencies are used very widely in many countries, it is yet to be declared or notified as legal tender. As of the date on El Salvador is the only country that has declared cryptocurrencies as legal tender. Now in El Salvador, the citizens can buy any goods or services using bitcoins or pay taxes. It also offers citizenship if anyone purchases three bitcoins.
In India, investors trading in bitcoins is very high though it is not legal tender. The recent Honorable Supreme Court Judgement has set aside the RBI Circular issued in April 2018 while delivering the verdict in the case of Internet and Mobile Association of India Vs. RBI. The honorable Supreme Court has stated that the circular issued by RBI instructing banks to make sure customers dealing in cryptocurrencies should not be allowed access to banking services is not legal in the absence of any legislative ban on the buying or selling of cryptocurrencies, the RBI cannot impose disproportionate restrictions on trading in these currencies. The court felt such restrictions would interfere with the fundamental right of citizens to carry out any trade that is deemed legitimate under the law.
Though the restriction has been lifted based on the judgment of the Honorable Supreme Court in the trading of cryptocurrencies, the Reserve Bank of India has asked banks to continue other due diligence procedures on cryptocurrency traders under rules linked to anti-money laundering and prevention of terrorism.
The basis on the recommendations of the RBI, in India, during the last 6 months, about 2 lacs accounts have been blocked by the top three cryptocurrency exchanges – WazirX, CoinSwitch Kuber and CoinDCX, citing malicious activities. It also means that there is still an active mechanism by the cryptocurrency exchanges with respect to KYC and monitoring the transactions from whom the users have received and the usage of the funds.
Taxation of Cryptocurrencies
Cryptocurrencies are about a decade old, and they are still in the evolving stage. As of date, only one country has made it a legal tender. Other countries are still evaluating the treatment of taxation (direct and indirect taxes) for transactions carried out with cryptocurrencies. Different countries have adopted different measures in taxing cryptocurrencies.
United States of America
The US Treasury has been issuing guidelines on cryptocurrencies since 2013, and they have not classified/declared them as currency. Cryptocurrencies have been declared as Money Services businesses. It has been declared as property for taxation purposes.
Profit from cryptocurrencies trading is considered for capital gains. The tax has to be paid based on the holding period, either as short-term capital gains or long-term capital gains.
Canada
Cryptocurrencies are used in Canada to buy goods and services online or offline stores as long as they accept them. However, the Government has not declared it as legal tender. The exchanges dealing with cryptocurrencies are required to registered as Money Services Business and register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
Canadian Revenue Agency considers Bitcoins as a commodity, which means that transactions carried out in cryptocurrencies will be a barter transaction. Once the transaction is classified as a barter transaction, the buyer paying in bitcoins has to issue a tax invoice, and Canadian VAT is applicable.
Russia
In Russia, cryptocurrencies are treated as digital assets like property, and they cannot make payments in cryptocurrencies. It means cryptocurrencies can be traded, and on trading, profits are taxable. Investors in cryptocurrencies have to disclose their holding in their returns income tax returns or pay a penalty of 10%. Reporting of holdings in cryptocurrencies is mandatory from April 2022.
United Kingdom
The United Kingdom has classified cryptocurrencies as property in 2020. The cryptocurrency exchanges have to be registered with Financial Conduct Authority. Individuals residing in the UK and holding cryptocurrencies will be taxed on profits made on the purchase and sale of cryptocurrencies as capital gains. The regular exemption on the capital gains up to £12,300 is available, which means that if the profit is less than £12,300, it is exempted and above that is taxable. It is not considered as a legal tender to date.
Australia
According to the Australian Tax Office, cryptocurrencies are viewed as digital assets. On cryptocurrency transactions, both income tax and capital gains taxes are applicable. In case if the business receives payments in cryptocurrency, it has to be recorded in the books with the amount received in cryptocurrency and in Australian currency.
Switzerland
In Switzerland, taxation is different for different cantons, and this can lead to some confusion. In Zurich, cryptocurrencies are treated as digital payment units and are considered virtual currencies. It means that it can be used for regular payments or as investments. Virtual currencies are subject to wealth tax.
In Bern, for individuals, cryptocurrencies are treated as private assets and are subject to wealth tax and are classified as “miscellaneous assets.” It means capital gains are also applicable
India
In India, cryptocurrencies are not considered legal tender. They are considered commodities as they are tradable in the exchanges. As they are treated as commodities, any profits or gains on the trading of cryptocurrencies are liable for taxation under Income Tax Act 1961 for capital gains.
From a GST perspective, there is uncertainty on the taxation and a lot of clarity is required. The main challenge is cryptocurrencies are not considered as legal tender by the Government. Suppose cyrpocurriences have to be considered legal tender. Section 22 and Section 26 of the Reserve Bank India Act 1934 have to be amended accordingly. Section 22 of the RBI Act 1934, only the Reserve Bank of India can issue Bank Notes. As per Section 26 of the RBI Act, only notes issued by RBI will be considered as legal tender. Suppose cryptocurrencies have to be declared as legal tender. In that case, the relevant provisions of the RBI Act have to be amended in the first place.
Can cryptocurrencies can be classified as security? If yes, we need to review the definition of security as defined in Section 2(h) of the Securities Contracts (Regulations) Act 1956. It defines securities as
Securities include
- shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company 14[or a pooled investment vehicle or other body corporate];
ia) derivative;
ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;
ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
id) ) units or any other such instrument issued to the investors under any mutual fund scheme;
securities” shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a combined benefit risk on the life of the persons and investment by such persons and issued by an insurer referred to in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938);
ida) units or any other instrument issued by any pooled investment vehicle;]
ie) any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;
- Government securities;
Iia) such other instruments as may be declared22 by the Central Government to be securities; and
- rights or interest in securities;
As cryptocurrencies cannot be classified as securities, it is paving the way for wider interpretation. There are various schools of taught processes on the taxation of cryptocurrencies, which gives an interpretation that it has to be classified as goods or services. The provisions of Section 7 of the CGST Act 2017 defined supply and included barter also.
For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business 1[and];
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
Consideration – Section 2(31)
“consideration” in relation to the supply of goods or services or both includes––
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Money Section 2(75)
“money” means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value;
Cryptocurrency cannot be considered as money basis on the above provisions in GST Act 2017.
Suppose cryptocurrencies are paid for the purchase of goods or services or both. In that case, the same transaction is to be considered Barter as per the above provisions. The buyer will be giving cryptocurrencies in place of legal tender in the form of cryptocurrencies. They are not legal tender in India at this point.
Example
A purchase a villa in the construction stage worth ₹ 5 crores in Hyderabad from builder B and pays B in cryptocurrency, i.e., pays Coinhaze coins (cryptocurrency) brought from Exchange E. The villa is transferred in A’s name, and an occupancy certificate is received subsequently. B Pays 140 coins of conihaze as consideration.
Why it is a supply under GST?
- There is a transaction of between A & B, B is giving Villa
- There is the consideration paid by A to B
A is supposed to pay in rupees, but he is paying in Coinhaze coins, which means there is an exchange of villa for Coinhaze coins, and this purely falls under the category of “barter.”
Cambridge dictionary defines barter as “to exchange goods for other things rather than for money:”
Merriam Webster defined barter as “to trade by exchanging one commodity for another : to trade goods or services in exchange for other goods or services”
From the above definitions, it is clear that the transaction between A & B is barter. It falls under the definition of supply as per the provisions of GST.
When the transaction is defined as barter, there will be a requirement to issue two tax invoices for a barter transaction. One tax invoice will be issued by the B for the sale of the villa. Another tax invoice has to be issued by A for Coinhaze coins, as it is not considered legal tender.
From the above, it is very clear that if cryptocurrency is used to purchase goods or services, it must be treated as supply, and GST is applicable. The next question arises: Is it to be treated as a supply of goods or services? As it is taxable under GST, the transaction has to be classified as either goods or services.
Definition of goods as per the provisions of Section 12(52) of the CGST Act 2017
“goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
The definition of goods in GST is borrowed from the definition of goods given in the Sale of Goods Act 1930.
Services are defined in Section 2(102) of the CGST Act 2017
“services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
The above two definitions clearly indicate that cryptocurrencies have to be classified as services. Cryptocurrency is intangible and cannot be seen physically or felt, or touched.
As per the definition of goods given in the Constitution of India, then it will be considered as goods. But going through some of the previous case laws gives an idea that it can also be classified as good as in the case of “electricity” based on the jurisprudence provided in the case of Associated Power Company vs. R.T Roy by the honorable High Court of Kolkata.
Goods have been defined in Article 366(12) as
“goods includes all materials, commodities, and articles.”
In the case of Associated Power Co. v. R.T. Roy, the Calcutta High Court held that electricity comes under the ambit of ‘goods’ under Article 366 (12) of the Constitution. It can be argued that since electrical energy can be brought and sold, it will come under the ambit of a ‘commodity or an ‘article’).
Taking a cue from the above judgment, we can also consider cryptocurrencies as goods as cryptocurrencies are traded as commodities in the exchanges. To classify it as goods or services as we have seen in other countries, there should be a clarification from the Government through legislation.
After classifying it as goods or services, the next question is the HSN code for cryptocurrencies is? It can be determined only as and when we have clarity on the classification and with necessary amendments for classification have been made. The basis on the classification, then only the tax rate can be determined.
If a tax invoice is required to be issued by A, the next question which comes into mind is on what value tax invoice has to be issued? It has to be valued as per provisions of Section 15 of CGST Act 2017; the transaction value paid in rupee terms for acquiring the villa can be taken, and, on that value, GST is to be computed.
Valuation – Section 15 of CGST Act 2017
(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
(2) The value of supply shall include–––
(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax(Compensation to States) Act, if charged separately by the supplier;
In the previous example, we have seen that A pays B 140 coins, which is also being paid on GST. Ideally, it is not required to be paid based on GST provisions for Valuation as it has explicitly excluded the CGST, SGS, IGST and Compensation Cess taxes.
Going by our initial example, A has to issue a tax invoice for ₹ 5 crores as he is paying consideration in other than money. Now the question is GST applicable additionally on ₹ 5 crores or not? If yes, who will pay the tax amount? This also needs to be notified by the department
| Particulars | Amounts |
| Value of each coin = A | 5,000 |
| Currency Exchange Rate (USD to INR) = B | 75 |
| Value in INR = C (A X B) | 3,75,000 |
| Cost of Villa = D | 5,00,00,000 |
| GST @5% = E | 25,00,000 |
| Total value = F (D X E) | 5,25,00,000 |
| No of coins to be issued if Tax is to be included = G (F/C) | 140 |
| No of coins to be issued if Tax is to be excluded = H (D/C) | 133 |
to keep away the ambiguity. Ideally, A has to pay a value of ₹ 5 crores and on that GST at the applicable rate as this is purely an independent transaction.
The input tax credit can be claimed if the buyer buys cryptocurrencies and uses them for business purposes. The exchanges charge some amount of fee for the transaction, and on the GST is applicable. The other question that arises is that as cryptocurrencies are to be treated as commodities, then is GST applicable to the value of cryptocurrencies purchased? Yes, it is applicable, and as of the date, it is not being charged by many of the exchanges.
The buyers have to obtain registration under GST if their threshold has crossed ₹ 40 lacs and pay GST on the transactions where they use cryptocurrencies to purchase goods or services or both. After obtaining GST registration, the buyer has to file GST Returns periodically and discharge GST with the input tax credit or cash for the invoices the buyer of cryptocurrencies.
Income Tax Implications
Now let’s review the impact from the Income-tax point. On the sale of cryptocurrencies, Income tax is applicable. It will be taxed as it is not explicitly exempted in the Income Tax Act 1961. If the cryptocurrencies are treated as commodities, they are taxed on the profit as business income. The applicable tax rate is the individual taxpayer’s bracket. There is also another school of taught which advocates cryptocurrencies as investments. If they are treated as investments, then it is applicable to be treated under capital gains based on the holding. The second school of taught may not hold good as the profit earned on the sale of cryptocurrencies is not a speculative income as per Income Tax Act Provisions as the delivery of cryptocurrencies has taken place.
Under the Income Tax provisions, what should be the treatment if the cryptocurrencies are purchased at a lower price and transferred to another person in exchange of goods or services? In such cases, is there any impact of Income Tax? The answer is yes, and it is to be taxed on the difference between the transfer price in Indian Rupees and the purchase price in Indian Rupees.
Normally wallets transfer coins to the holders as part of marketing and promotion to the existing holders, and it is termed as airdrops. The question is income tax applicability on the coins received as air drops when the recipient sells them or uses them to purchase goods or services? The answer is yes for the applicability of Income Tax. At the time of receipt of airdrops from the wallet owner, there is no GST as it is a gift in the recipient’s hands. Still, GST will be applicable if the coins received as gift are used to acquire goods or services or both.
Equalization Levy
As of date, the equalization levy does not apply to the cryptocurrencies purchased by the Indian citizens from the exchanges located outside India. As these exchanges are not paying any taxes, the Government may notify them down the line for the applicability of the equalization levy.
OIDAR
To provide a level playing field for the domestic players, digital services provided by foreign companies to recipients in India are taxed as part of OIDAR services. The foreign entity must take registration under GST in India and pay GST on the services provided by them to Indian clients.
As of date, many of the cryptocurrency exchanges based out of India are not paying GST under OIDAR Services. This could be a bone of contention, and the department may go behind them to recover duties. This is a low-hanging sword, and they have to cough up 18% as and when they are issued notices by the officials.
As of date, there is an ambiguity on the taxation of cryptocurrencies in India as there is no specific legislation for the same. The interpretation or analysis is purely the author’s views based on his experience and interpretation of the provisions. To clear this ambiguity, the Government should expedite the process of introducing the proposed Cryptocurrency Bill 2021, and it should clear the following grey areas
- Treatment of mining of cryptocurrencies
- Classification of Cryptocurrencies as goods or services
- Taxability of cryptocurrencies as taxable or exempted
- Applicable tax rates if they are treated as taxable goods or services
- Equalization levy applicability on purchase of cryptocurrencies by Indian from foreign companies
- The implication of trading of cryptocurrencies as per Income Tax, GST and other applicable laws
- How to determine the exchange value for converting into INR for compliance purposes
- Treatment of airdrops issued by the wallets to holders from time to time
- Treatment under Income Tax as asset or security for taxation purpose
Though cryptocurrency is not a legal tender in India, many people have started investing in cryptocurrencies. These are used to purchase goods or services or for trading to make money or as an investment. It is also learned that many NRIs are remitting to their family members in cryptocurrencies to save the financial charges levied by the financial intermediaries. Few companies in India are accepting cryptocurrencies for the goods or services supplied by them.
The Government and the Reserve Bank of India are also contemplating a lot on the legislation for cryptocurrencies. As of date, it has not been made as a legal tender as India; we follow the Gold Standard for the issue of currency notes. Still, in cryptocurrency, they are not backed by any sovereign guarantee as they are privately held. The value of cryptocurrencies is highly volatile. In multiple instances across the globe, it has been observed that cryptocurrencies are miss used by anti-national forces. The legislation should be brought on cryptocurrencies at the earliest to avoid litigation. It will clarify the future course of action for the investors and address the above challenges being discussed. If possible, the Government should introduce The Cryptocurrency and Regulation of Official Digital Currency Bill 2021in the upcoming winter session and take inputs from all the stakeholders similar to GST for effective implementation of the same and avoid disputes between the tax authorities with the trade & industry and investors.
Till it is made as legal tender, in any country it opens a can of worms for the law enforcing agencies on the taxation of the cryptocurrencies under the direct and indirect tax legislations in their countries.
Disclaimer Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions, or organizations that the author may or may not be associated with in a professional or personal capacity unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.
GST collection for October 2021 registered the second-highest since the implementation of GST
GST collection for October 2021 registered the second-highest since the implementation of GST.
The gross GST revenue collected in the month of October 2021 is ₹ 1,30,127 crore of which CGST is ₹ 23,861 crore, SGST is ₹ 30,421 crore, IGST is ₹ 67,361 crore (including ₹ 32,998 crores collected on import of goods) and Cess is ₹ 8,484 crore (including ₹ 699 crores collected on import of goods).
The government has settled ₹27,310 crores to CGST and ₹ 22,394 crores to SGST from IGST as regular settlement. The total revenue of the Centre and the States after regular settlements in the month of October 2021 is ₹ 51171 crore for CGST and ₹ 52,815 crores for the SGST.
The revenues for the month of October 2021 are 24% higher than the GST revenues in the same month last year and 36% over 2019-20. During the month, revenues from import of goods were 39% higher and the revenues from the domestic transactions (including import of services) are 19% higher than the revenues from these sources during the same month last year.
The GST revenues for October have been the second-highest ever since the introduction of GST, second only to that in April 2021, which is related to year-end revenues. This is very much in line with the trend in economic recovery. This is also evident from the trend in the e-way bills generated every month since the second wave. The revenues would have still been higher if the sales of cars and other products had not been affected on account of disruption in the supply of semiconductors. Chart 1 shows the upward trend in the number of e-way bills generated during the month and the amount of taxable value clearly indicating the recovery in economic activity.
The revenues have also been aided due to the efforts of the State and Central tax administration resulting in increased compliance over previous months. In addition to action against individual tax evaders, this has been a result of the multipronged approach followed by the GST Council. On one hand, various measures have been taken to ease compliance like nil filing through SMS, enabling Quarterly Return Monthly Payment (QRMP) system and autopopulation of return. During past one year, GSTN has augmented the system capacity considerably to improve user experience. On the other hand, the Council has also taken various steps to discourage non-compliant behaviour, like blocking of e-way bills for non-filing of returns, system-based suspension of registration of taxpayers who have failed to file six returns in a row and blocking of credit for return defaulters. Number of returns (GSTR-3B) of every month/quarter by the end of next month is a good parameter indicating timely payment of returns and filing of returns. After last date of filing of returns, special efforts are undertaken to ensure compliance by the end of the month in
form of messaging by GSTN and close follow up by the Centre and State tax administration. Chart 2 showing the upward trend in percentage of returns filed till the end of next month clearly indicates that timely payment of taxes has been increasing over a period of time due to policy measures and administrative efforts.
in every month out of the total returns filed, clearly indicating that the number of returns of the current month has increased considerably. 1.5 crore returns were filed in the month of July 2021 as taxpayers filed returns of past months taking benefit of the relaxation given due to Covid.
Resumption of Blocking of E-Way Bill (EWB) generation facility.
Resumption of Blocking of E-Way Bill (EWB) generation facility.
1. The blocking of E way bill generation facility had been temporarily suspended by Government on account of Covid pandemic. In terms of Rule 138 E (a) and (b) of the CGST Rules, 2017, the E Way Bill generation facility of a person is liable to be restricted, in case the person fails to file their return in Form GSTR-3B / statement in CMP-08, for consecutive two tax periods or more, whether Monthly or Quarterly.
2. The blocking of EWB generation facility has now resumed on the EWB portal for all the taxpayers. Going forward, from the tax period August, 2021 onwards, the System will periodically check the status of returns filed in Form GSTR-3B or the statements filed in Form GST CMP-08 as per the regular procedure followed before pandemic, and block the generation of EWBs as per rule.
3. To avail EWB generation facility on EWB Portal on continuous basis, you are, therefore, advised to file your pending GSTR 3B returns/ CMP-08 Statement on regular basis.
4. For details of blocking and unblocking EWB, Click on below link:
• https://tutorial.gst.gov.in/userguide/returns/index.htm#t=FAQs_unblockingewaybill.htm
Note: Please ignore this update if you are not registered on the EWB portal.
Key Features – File Validation Utility (FVU) version 7.2
New File Validation Utility has been released by NSDL for filing of 26Q, 27Q and 27EQ and the same is effective from 1st October 2021. Following are the changes
A. Addition of new Section code 194P for Form 24Q
194P: Deduction of tax in case of specified senior citizens
This section will be applicable for regular and correction statements pertaining to FY 2021-22 onwards.
B. Addition of new Section code 196D(1A) for Form 27Q
196D(1A): Income of specified fund from securities referred to in clause (a) of subsection (1) of section 115AD (other than interest income referred to in section 194LD).
This section will be applicable for regular and correction statements pertaining to FY 2020-21 Q3 onwards where date of payment is on or after 01/11/2020.
C. Addition of new Section code 194Q Form 26Q
194Q: Payment of certain sums for purchase of goods
This section will be applicable for regular and correction statements pertaining to FY 2021-22 Q2 onwards.
D. Addition of new remark values for Form 27Q
- Remark I: In case of no deduction is in view of sub-section (2) of section 196D in respect
of income of the nature of capital gains on transfer of securities referred to in section
115AD paid or payable to a Foreign Institutional Investor
This remark will be applicable for section codes 196D & 196D(1A) only. - Remark H: If no deduction is in view of proviso to sub-section (1A) of section 196D in
respect of an income paid to a specified fund which is exempt under clause (4D) of
section 10
This remark will be applicable only for section 196D(1A) - Remark J: If deduction is at higher rate in view of section 206AB for non-filing of return
of income by the non-resident having a permanent establishment in India
This remark will be applicable to all section codes except 192A, 194LBC, 194N and
194NF
E. Addition of new remark values for Form 26Q
- Remark P: In case of No deduction is on account of payment of dividend made to a
business trust referred to in clause (d) of second proviso to section 194 or in view of any
notification issued under clause (e) of the second proviso to section 194
This remark will be applicable only for section 194 - Remark Q: In case of No deduction in view of payment made to an entity referred to in
clause (x) of sub-section (3) of section 194A
This remark will be applicable only for section 194A - Remark U: If the deduction is on higher rate in view of section 206AB for non-filing of
return of income
This remark will be applicable to all section codes except 192A, 194B, 194BB, 194LBC,
194N and 194N
F. Addition of remark value in Form 27EQ
Remark I: If collection is at a higher rate in view of section 206CCA
This remark will be applicable to all applicable to all collection codes
These changes will be applicable for regular and correction statements pertaining to FY 2021-22 Q2 onwards
G. Change in validation related to section code 196D in Form 27Q
Existing remark value “C” will be applicable for this section with their existing validations in case of non-availability of PAN.
Newly added remark “I” and existing remark “G” will also be applicable to this section code for no deduction.
Remark “I” will be applicable in case of nil challan return.
These changes will be applicable for regular and correction statements pertaining to FY 2021-22 onwards
H. Changes in validations of Section 194K of Form 26Q
Existing Remark “B” (In case of no deduction on account of declaration under section
197A) will also be applicable to section for this section
These changes will be applicable for regular and correction statements pertaining to FY 2021-22 onwards.
This version of FVU is applicable with effect from October 01, 2021 onwards.
GST Revenue collection for September 2021
GST Revenue collection for September 2021
The gross GST revenue collected in the month of September 2021 is
₹ 1,17,010 crore of which CGST is ₹ 20,578 crore, SGST is ₹ 26,767 crore, IGST is ₹ 60,911 crore (including ₹ 29,555 crore collected on import of goods) and Cess is
₹ 8,754 crore (including ₹ 623 crore collected on import of goods).
The government has settled ₹ 28,812 crore to CGST and ₹ 24,140 crore to SGST from IGST as regular settlement. The total revenue of Centre and the States after regular settlements in the month of September 2021 is ₹ 49,390 crore for CGST and ₹ 50,907 crore for the SGST.
The revenues for the month of September 2021 are 23% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) are 20% higher than the revenues from these sources during the same month last year. The revenue for September 2020 was, in itself at a growth of 4% over the revenue of September 2019 of ₹ 91,916 crore.
The average monthly gross GST collection for the second quarter of the current year has been ₹ 1.15 lakh crore, which is 5% higher than the average monthly collection of ₹ 1.10 lakh crore in the first quarter of the year. This clearly indicates that the economy is recovering at a fast pace. Coupled with economic growth, anti-evasion activities, especially action against fake billers have also been contributing to the enhanced GST collections. It is expected that the positive trend in the revenues will continue and the second half of the year will post higher revenues
Centre had also released GST compensation of Rs. 22,000 crore to States to meet their GST revenue gap.
Advisory for Taxpayers regarding Generation of EWB where the principal supply is Supply of services.
Advisory for Taxpayers regarding Generation of EWB where the principal supply is Supply of services.
One of the common issued faced by taxpayers who are dealing with composite supply where there is requirement to ship goods also when executing a service contract. To address this GSTN has issued an advisory on the same.
1. Representations have been received from various trade bodies stating that they are not able to generate EWB bill for movement of those goods where their principle supply is classifiable as a service, since there is no provision for generating E-way Bill by entering SAC (Service Accounting Code-Chapter 99) alone on the E- way bill portal.
2. To overcome this issue, the taxpayers are advised as below:
a) Rule 138 of CGST Rules, 2017, inter alia, states “Information to be furnished prior to commencement of movement of goods and generation of e-way bill.-(1) Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees….” Thus, E way bill is required to be generated for the movement of Goods.
b) Therefore, in cases where the principal supply is purely a supply of service and involving no movement of goods, the e-way bill is not required to be generated.
c) However, in cases where along with the principal supply of service, movement of some goods is also involved, e-way bill may be generated. Such situations may arise in cases of supply of services like printing services, works contract services, catering services, pandal or shamiana services, etc. In such cases, e-way bill may be generated by entering the details of HSN code of the goods, along with SAC (Service Accounting Code) of services involved.
On demand fetching of Bill of Entry details from ICEGATE Portal
On demand fetching of Bill of Entry details from ICEGATE Portal
One of the common issued faced by the importer of goods, is Bill of Entry not being reflected in Form GSTR – 2B.
To address this, the portal has provided with a new functionality wherein the taxpayers/importers can fetch the records from the ICEGATE portal. In this context new feature has been released and an advisory is also issued by the GSTN for the ease of understanding of the taxpayers.
- To help importers of goods, and recipients of supplies from SEZ, search Bill of Entry details, which did not auto-populate in GSTR-2A, a self-service functionality has been made available on the GST Portal that can be used to search such records in GST System, and fetch the missing records from ICEGATE.
- Please note that it usually takes 2 days (after reference date) for BE details to get updated on GST Portal from ICEGATE. This functionality should, therefore, be used if data is not available after this period.
Note: The reference date would be either Out of charge date, Duty payment date, or amendment date – whichever is later. - Taxpayers can follow the below steps to fetch the requisite details:
- Login to GST Portal
- Navigate to Services > User Services > Search BoE
- Enter the Port Code, Bill of Entry Number, Bill of Entry Date and Reference Date and click the SEARCH button.
Note: The reference date would be either Out of charge date, Duty payment date, or amendment date – whichever is later. - If the BoE details do not appear in the Search results, click on the QUERY ICEGATE button, at the bottom of the screen, to trigger a query to ICEGATE.
- History of fetched BoE details from ICEGATE along with status of query are displayed after 30 minutes from the time of triggering the query.
- For records of type IMPG (Import of Goods), details of: Period for Form GSTR-2A (system generated Statement of Inward Supplies); Reference Date; Bill of Entry Details like Port Code, BoE Number, BoE Date & Taxable Value; and Amount of Tax would be displayed.
For records of type IMPGSEZ (Import of Goods from SEZ), details of: Period for Form GSTR-2A; Reference Date; GSTIN of Supplier; Trade Name of Supplier; Bill of Entry Details like Port Code, BoE Number, BoE Date & Taxable Value; and Amount of Tax would be displayed. - Taxpayers are advised to confirm correct details either from BE documents, or using ICEGATE portal
- For more details, click on: https://tutorial.gst.gov.in/userguide/taxpayersdashboard/index.htm#t=Manual_boe.htm
- In case of any problem, please create a ticket at the GST Helpdesk or GST Self-service portal by including following details:
- complete details of BE records
- GSTIN
- BE Number
- BE Date
- Port Code
- Reference Number
- Screenshot of ICEGATE portal with BE record
- Any error that they may have encountered while using the “Search BoE” functionality on GST Portal
- complete details of BE records
Recommendations of 45th GST Council Meeting
Recommendations of 45th GST Council Meeting.
The first meeting to take place in persons after the impact of COVID-19.
Some key decisions are taken in today’s meeting to augment revenue, stream line GST provisions on portal as per Law and some exemptions were provided for treatment of COVID-19 or extension of concessional rates extended till 31st Dec 2021.
- Life-saving drugs Zolgensma and Viltepso used in treatment of Spinal-Muscular Atrophy exempted from GST when imported for personal use
- Extension of existing concessional GST rates on certain COVID-19 treatment drugs upto 31 December 2021
- GST rates on 7 other medicines recommended by Department of Pharmaceuticals reduced from 12% to 5% till 31
December 2021 - GST rate on Keytruda medicine for treatment of cancer reduced from 12% to 5%
- GST rates on Retro fitment kits for vehicles used by persons with special abilities reduced to5%
- GST rates on Fortified Rice kernels for schemes like ICDS reduced from 18% to 5%
- Council also recommends major changes in GST rates and scope of exemption on Services
- Recommends several clarifications in relation to GST rates on Goods and Services
- Council recommends several measures relating to GST law and procedure
- Council decides to set up 2 GoMs to examine issue of correction of inverted duty structure for major sectors and for using technology to further improve compliance, including monitoring
The GST Council’s 45 meeting was held today in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the following recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure:
I. Recommendations relating to GST rates on goods and services
A. COVID-19 relief measure in form of GST rate concessions
1. Extension of existing concessional GST rates (currently valid till 30 September, 2021) on following Covid-19 treatment drugs, up to 31 December, 2021 , namely-
a) Nil Rate for Amphotericin B
b) 5% on Remdesivir
c) Nil rate on Tocilizumab
d) 5% on Anti-coagulants like Heparin
2. Reduction of GST rate to 5% on more Covid-19 treatment drugs, up to 31 December, 2021,namely-
a) Itolizumab
b) Posaconazole
c) Infliximab
d) Favipiravir
e) Casirivimab & Imdevimab
f) 2-Deoxy-D-Glucose
g) Bamlanivimab & Etesevimab
Major recommendations on GST rate changes in relation to Goods with effective from 1st Oct 20201 unless otherwise stated
a) GST Rate on Retro fitment kits for vehicles used by the disabled has been reduced from applicable rate to 5%
b) GST Rate on Fortified Rice Kernels for schemes like ICDS etc. has been reduced from 18% to 5%
c) GST Rate on Medicine Keytruda for treatment of cancer has been reduced from 12% to 5%
d) GST Rate on Biodiesel supplied to OMCs for blending with Diesel has been reduced from 12% to 5%
e) GST rate on Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others has been increased from 5% to 12%.
f) GST rates on Specified Renewable Energy Devices and parts has been increased from 5% to 12%
g) GST rates on Cartons, boxes, bags, packing containers of paper etc. has been rationalized to 18% from existing rates of 12% and 18%.
h) GST rates on Waste and scrap of polyurethanes and other plastics has been increased from 5% to 18%.
i) Rates have been rationalized on All kinds of pens from 12% & 18% to 18%.
j) GST Rates on Railway parts, locomotives & other goods in Chapter 86 has been increased from 12% to 18%
h) GST Rates on Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff) has been increased from 12% to 18%.
k) IGST on import of medicines for personal use, has been exempted from the current rate of 12% on Zolgensma
for Spinal Muscular Atrophy, Viltepso for Duchenne Muscular Dystrophy & Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.
l) IGST exemption on goods supplied at Indo-Bangladesh Border haats has bee rationalized from existing rates to Nil rate
m) Unintended waste generated during the production of fish meal except for Fish Oil is declared as Nil rated from 1st July 2017 to 30th Sep 2019.
C. Other changes relating to GST rates on goods
- Supply of mentha oil from unregistered person has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
- Brick kilns would be brought under special composition scheme with threshold limit of Rs. 20lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.
D. Correction in Inverted Duty structure in Footwear and Textiles sector
GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as was discussed in earlier GST Council Meeting and was deferred for an appropriate time, will be implemented with effect from 01.01.2022.
E. In terms of the recent directions of the Hon’ble High Court of Kerala, the issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After due deliberation, the Council was of the view that it is not appropriate to do so at this stage.
F. Major GST changes in relation to rates and scope of exemption on Services with effective from 1st Oct 2021 unless otherwise stated
a) Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022.
b) GST rates on Services by way of grant of National Permit to goods carriages on payment of fee has been reduced from 18% Nil Rate
c) GST rates Skill Training for which Government bears 75% or more of the expenditure [ presently exemption applies only if Govt funds 100%]. from current rate of 18% to Nil rate
d) GST rates Services related to AFC Women’s Asia Cup 2022. has been reduced from current rate of 18% to Nil Rate
e) GST rates on Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licencing services] has been increased from 12% to 18%.
f) Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media) has been increased from 12% to 18%
g) Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.
h) E Commerce Operators are being made liable to pay tax on following services provided through them
i) transport of passengers, by any type of motor vehicles through it with effective from 1st Jan 2022.
ii) restaurant services provided through it with some exceptions with effective from 1st Jan 2022
i) Certain relaxations have been made in conditions relating to IGST exemption relating to import of goods on lease, where GST is paid on the lease amount, so as to allow this exemption even if (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.
G. Clarification in relation to GST rate on Goods
- Pure henna powder and paste, having no additives, attract 5% GST rate under Chapter 14.
- Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HS code 2303 attract GST at the rate of 5%.
- All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of12%.
- Scented sweet supari and flavored and coated illachi falling under heading 2106 attract GST atthe rate of 18%
- Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice”attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.
- Tamarind seeds fall under heading 1209, and hitherto attracted nil rate irrespective of use. However, henceforth they would attract 5% GST rate effective from 1st Oct 2021 for use other than sowing. Seeds for sowing will continue at nil rate.
- External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [ 28% for batteries other than lithium-ion battery] while UPS/inverter would attract18%.
- GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for good sand services, respectively, during the period from 1st July 2017 to 31st Dec 2018 in the same manner as has been prescribed for the period on or after 1 January 2019.
- Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12%GST in the past have been regularised. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated.
- Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;
- It is being clarified that all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%].
- Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.
H. Clarification in relation to GST rate on services
- Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST
- Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract5% GST [ without ITC].
- Ice cream parlor sells already manufactured ice- cream. Such supply of ice cream by parlors would attract GST at the rate of 18%.
- Overloading charges at toll plaza are exempt from GST being akin to toll.
- The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption
- The services by way of grant of mineral exploration and mining rights attracted GST rate of18% with effective from 1st July 2017
- Admission to amusement parks having rides etc. attracts GST rate of 18%. The GST rate of28% applies only to admission to such facilities that have casinos etc.
- Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.
II. On the issue of compensation scenario, a presentation was made to the Council wherein it was brought out that the revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22. In this context various options, as have been recommended by various committees/ forums were presented. The Council deliberated at length on the issue. The Council decided to set up a GoM to examine the issue of correction of inverted duty structure for major sectors; rationalize the rates and review exemptions from the point of view of revenue augmentation, from GST. It was also decided to set up a GoM to discuss ways and means of using technology to further improve compliance including monitoring through improved e-way bill systems, e-invoices, FASTag data and strengthening the institutional mechanism for sharing of intelligence and coordinated enforcement actions by the Centre and the States.
III. Recommendations relating to GST law and procedure
I. Measures for Trade facilitation
1. Relaxation in the requirement of filing FORM GST ITC-04:
Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed asunder:
a. Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months ;
b. Taxpayers whose annual aggregate turnover in preceding financial year is upto Rs. 5 crores shall furnish ITC-04 annually.
2. In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, with effective from 1st July 2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized ” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% with effective from 1st July 2017.
3. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons
(entities having same PAN but registered in different states) , without going through the refund procedure, subject to certain safeguards.
4. Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:
a. Clarification on scope of “intermediary services
b. Clarification relating to interpretation of the term “merely establishment of distinct person ”in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services;
c. Clarification in respect of certain GST related issues:
- With effective from 1st jan 2021 , the date of issuance of debit note (and not the date of under lying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;
- There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;
- Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.
5. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.
J. Measures for streamlining compliances in GST
1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
2. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in
FORM GSTR-3B.
3. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
4.Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1 , if he has not furnished the return in FORM GSTR-3B for the preceding month.
5.Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in
FORM GSTR-2B
K. GST Council has also recommended amendments in certain provisions of the Act and Rules.
.Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of all stakeholders. The same would be given effect through relevant Circulars/ Notifications/ Law amendments which alone shall have the force of law.
Release ID: 1755925)
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