GST Intermediary Dispute Remains Unresolved

GST Intermediary Dispute Remains Unresolved

Recently, a circular -159/51/2021-GST-Clarification on Doubts Regarding the Scope of ‘Intermediary’ was released, but I’m not sure if the doubts were cleared or persisted…

First and foremost, the term “intermediary” is defined as “a person who acts as a middleman between two parties.”

‘A broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services, or both, or securities, between two or more persons, but does not include a person who supplies such goods or services, or both, or securities on his own account,’ says the definition.

The term “intermediary” was borrowed from the Service Tax Regime in the GST. As stated in the circular, the scope of ‘’intermediary services” under the GST REGIME does not differ from the scope of ‘’intermediary services” in the Service Tax REGIME.

The circular merely mentions who is a middleman, however, it is unclear if the services provided by the intermediary are considered exports of services or not –– the debate continues —–

Read More…

[pt_view id=”c8bb8e9z6d”]

Several instances are offered in a circular format but are only described once

Who is the intermediate

I.e., who arranges or facilitates the provision of products or services, i.e., a third party between two parties, although it is unclear if intermediary services are exportable or not?

Let’s look at an example:

A- Machine Manufacturer and Supplier in India

B- if you want to buy a machine but don’t live in India.

C- Assists ‘’B” in identifying customers –

C acts as an intermediary, invoicing ‘’B” in order to complete the transaction between ‘’A” and ‘’B”.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year. 

Why can’t C’s services be classified as exports of services because he provides services outside of India?

The supply of any service when it is exported is referred to as service export.

  • Supplier of service located in India –i.e A and C
  • Recipient of service located outside India- i.e B
  • Payment for such service received in convertible foreign exchange.
  • Place of supply of service is outside India – as per Sec 13(8) clause (b) IGST ACT 2017

IN THE CASE OF INTERMEDIARY SERVICE – SUPPLY PLACE – SUPPLIER LOCATION

The location of the supplier in India does not justify the export of services in this case.

The foregoing is still disputed, and litigation is ongoing, according to the circular.

Conclusion: If GST is a destination-based consumption tax, and C is providing a service to B – OUTSIDE INDIA, and payment is made in convertible foreign currency, why can’t it be classified as a service export?

So, unless the government clarifies the above, the litigation will continue.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Businesses that fail to file a summary return or pay monthly GST will be unable to file a GSTR-1 sales return for the following month beginning January 1 of the following year. The GST Council met in Lucknow on September 17 and resolved on a slew of steps to simplify compliance, including requiring firms to use Aadhaar authentication when filing refund claims.

These steps will aid in preventing revenue leakage from the Goods and Services Tax (GST), which was implemented on July 1, 2017.

With effect from January 1, 2022, the Council agreed to alter Rule 59(6) of the Central GST Rules to specify that a registered person will not be allowed to file Form GSTR-1 if he has not filed the previous month’s return in Form GSTR-3B.

[pt_view id=”c8bb8e9z6d”]

Currently, the legislation prohibits businesses from filing a report for outward supplies, or GSTR-1, if they have not filed a GSTR-3B for the previous two months.

Businesses file GSTR-1 for a given month by the 11th day of the following month, but GSTR-3B, which is used to pay taxes, is filed in a staggered fashion between the 20th and the 24th day of the following month.

The GST Council has also made the Aadhaar authentication of GST registration essential for filing refund claims and applications for registration revocation or cancellation.

New GST registration denial have a serious impact on our economy 

With effect from August 21, 2020, the Central Board of Indirect Taxes and Customs (CBIC) has notified Aadhaar authentication for GST registration.

The announcement also stated that if a business does not give an Aadhaar number, GST registration will only be approved after a physical inspection of the business location.

Businesses will now be required to link their GST registration with biometric Aadhaar in order to claim tax refunds and apply for revocation or cancellation of registration, according to the Council.

In its 45th meeting, the Council, which consists of central and state finance ministers, also determined that GST refunds will be paid into the same bank account as the PAN used to get GST registration.

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

Three opposition-ruled states stated on Sunday that the compensation sum guaranteed by the Centre is expected to be more than the Rs 1.58 lakh crore anticipated by the Centre and that a special session of the GST Council will be summoned to debate it.

The finance ministers of Kerala, Punjab, and Chhattisgarh claimed during the GST Council meeting on May 28 that there was no unanimity on the compensation required for 2021-22 and that a special session will be summoned specifically to examine ‘Revenue Augmentation and Post June 2022 Compensation.’

Manpreet Singh Badal, Punjab Finance Minister, said that all states are experiencing revenue shortfalls of 20-50 per cent, and that “we have recommended that the Council should convene every quarter to discuss the income status of states.”

[pt_view id=”c8bb8e9z6d”]

“Punjab has a compensation gap of Rs 5,000 crore as of April. All opposition-ruled states agreed that the compensation sum from the federal government should be increased “PTI quoted Badal as saying.

Punjab, he added, has been lobbying for a discussion on the compensation system that will be implemented after June 2022, since states continue to experience revenue gaps as a result of the GST implementation compared to pre-GST times.

Kerala Finance Minister K N Balagopal stated that the Centre owes the state Rs 4,077 crore in compensation, and that the Centre should ensure that the states receive the promised revenue rise of 14%.

“The revenue growth projection of 7% is not a guess. Because some states are experiencing negative growth, this premise is invalid. We’ll have a conversation about it “Balagopal continued.

gst

T S Singh Deo, the Finance Minister of Chhattisgarh, said the Centre has made forecasts on compensation and borrowing, and that a comprehensive debate will take place at the GST Council’s special session, the date of which has yet to be determined.

For the current fiscal year, the Centre estimates that states will need Rs 2.69 lakh crore in compensation. According to the agenda note distributed before the Council meeting, over Rs 1.11 lakh crore will come from a cess on luxury, demerit, and sin items, which would be handed to states to compensate them for the revenue gap resulting from GST implementation.

The remaining Rs 1.58 lakh crore will have to be borrowed to satisfy the promised compensation, according to the note, which is predicated on the expectation that state revenue growth will be 7% this fiscal.

Section 206C(1H) of the Income Tax Act 1961 at a Glance

The Centre borrowed on behalf of the states and issued Rs 1.10 lakh crore in the fiscal year 2020-21 to make up for the GST revenue shortfall. A total of Rs 68,700 crore was collected through a cess charge.

However, there are voices against the extension. Former Bihar deputy chief minister Sushil Kumar Modi, who was closely associated with formulation of GST laws and represented Bihar in the GST Council till October 2020, said, “I don’t think it will be practical to extend the guaranteed compensation further. Except in FY18, revenue collection was not enough to achieve annual growth of 14% in any other year.

The average revenue growth of most states was 8-9% in pre-GST period and roughly, the rate has been same in the GST regime.” He added that it won’t be ‘feasible’ for the Centre to give states assurance of revenue growth for another five years. “It will take at least four years for the Centre to repay the loans (being taken for compensating states in FY21 and FY22) with interest. If the same assurance is extended, it will create a fresh liability. The cess collections won’t be enough to cover servicing of the existing debt (FY21 and FY22) and to give fresh compensations,” Modi noted.