Ambivalence under GST

There are various topics which can be seen as debatable since the implementation of GST as each one of us have our own set of interpretation therefore such areas are considered to be inconclusive. An effort has been made to bring clarity on such equivocal topics and update with recent changes which are relevant for day to day working.

Let’s have a look on few of those:

  1. Interest Liability:
  • There was a lot of ambiguity whether interest would be payable on gross tax liability or net tax liability on late filing of GSTR-3B. Some Advance Rulings had specified that interest would be payable on gross tax liability. Govt. also issued notices in some states asking the registered persons to deposit interest on gross tax liability. Several representations were sent to Govt. for clarifying the confusion within the trade & industry regarding payment of interest on gross or net tax liability.
  • CBIC vide Notification No. 63/2020-Central Tax, dated 25th August 2020, has specified that Interest is to be levied on “Net Tax liability” w.e.f. 01/09/2020.
  • But this created further confusion in the minds of taxpayers as the amendment was made applicable prospectively w.e.f. 01/09/2020 hence, there was no clarity in respect of period prior to 01/09/2020. CBIC has further clarified vide a tweet that no notices shall be sent to the registered persons demanding tax on Gross Tax Liability for the period prior to 01/09/2020.

2. Gift for Dealer:

  • Input tax credit on goods disposed off by way of gifts to dealer incurred in the nature of business promotion shall be eligible to be claimed only when gift item is directly related to the business of the taxpayer.
  • On the other hand, Input tax credit is restricted on any goods disposed-off by way of gift item that is not directly related to business of the registered person.
  • In other words, registered persons claiming ITC in respect of goods being disposed-off as gift shall be allowed only if such gifts relate to the business of the registered person.

3. Taxability of Notice Period Recovery

  • Notice period recovery has been a debatable issue even in the erstwhile regime of Service Tax & continues to be a debatable issue under GST.
  • There were few HC judgements given under the service tax regime which were in favour of the assesses, holding that notice pay recoveries are not subject to service tax.
  • In one of such decisions, The Hon’ble HC, Madras in the matter of GE T & D India Limited v. Deputy Commissioner of Central Excise, held that service tax is not leviable on the payment received by the Petitioner in lieu of notice period paid by the outgoing employees.
  • But there is no such clarification by the government on taxability of notice period recovery under GST regime.
  • Under GST regime, as per section 7(1)(d) of the CGST Act, 2017 the activities listed in Schedule II were to be treated as supply, either as supply of goods or supply of services.
  • But as per CGST Amendment Act, 2018, clause (d) has been omitted w.e.f. 01st February 2019 and shall always be deemed to have been omitted.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Tarun Kapoor

AKGVG & Associates

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