Tax Due Date – February 2023

Sr No	Due Date	Related to	Compliance to be made
1	11.02.2023	GST	Filing of GSTR 1 for the month of January, 2023

2

20.02.2023

GST

Payment of GST for the month of January, 2023 Filing of GSTR 3B for the month of January, 2023

3

07.02.2023

TDS/TCS (Income Tax)

· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of January 2023. · Deposit TDS from Salaries deducted during the month of January 2023 • Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2023, if any

HC allows rectification of GSTR-3B after the expiry of the statutory time limit

This Tax Alert summarizes a recent ruling of Karnataka High Court (HC) allowing rectification of GST returns with respect to availment of input tax credit (ITC) for the month of July 2017 and March 2018.

The petitioner had inadvertently considered integrated tax (IGST) paid on imports as other IGST in July 2017 and as central tax (CGST) and state tax (SGST) in March 2018. This error resulted in a mismatch between the GSTR-3B and GSTR-2A.

During audit, Revenue sought to disallow such ITC. The petitioner requested to rectify these errors by submitting a revised table in GSTR-3B, but the same was rejected on the ground that such rectification had become time-barred.

HC observed that the authorities must avoid a blinkered view while adjudicating/ assessing the tax liability of a dealer.

Revenue has, in the absence of GSTR-2A, referred to the IGST import figures reflected on ICEGATE portal for all the months except those in which the errors have been committed.

This clearly indicates that the Revenue is aware of the actual figures and also that there is an error committed by the petitioner but has chosen to selectively ignore the IGST import amounts reflected on ICEGATE portal for the tax periods in dispute.

HC noted that there cannot be said to be any cascading effect, since the petitioner only seeks to shift the ITC already claimed from one head to another.

Accordingly, HC held that the petitioner is entitled to make the necessary changes in GSTR-3B returns for July 2017 and March 2018.

Comments

While the HC allowed rectification beyond statutory time limit with a rider that the ruling shall not have any precedential value, taxpayers who have committed similar errors in the initial phase of introduction of GST may rely on this judgement to counter denial of ITC by the department.

The Government may consider issuing a Circular allowing taxpayers to belatedly rectify such mistakes where there is no revenue implication.

Validate your intra group TP documents every year.

The issue of Intra Group Services under Indian Transfer Pricing has continued to haunt MNC for a long time now. In the past we have seen numerous cases of TP additions on ground that the Indian service recipient is not able to demonstrate the evidence of receipt of services (AKA Need Benefit Test). However, lately the TP offices, were accepting TNMM as a an alternate method for IGS. However, in recent case of Lintas India Private Limited the Global Information Services, Client Coordination Services and Management Services received for and paid by Indian taxpayer was subject to disallowance on grounds of a weak Need Benefit Test documentation.
       
The tribunal while ruling on the case, observed that TP assessment is a fact driven exercise and as such for each year test of rendition of services, need of such services, benefits derived from the services and is required to be established by assessee based on proper documentation. Therefore, decisions rendered in earlier years by the authorities either in favour of the assessee or against the assessee does not help the case of the either party because these tests are required to be satisfied every year and also needs to be examined every year. ITAT thus restores the issue back to the TPO to determine ALP of the IGS based on documents produced by assesse.    
 
Key Takeaways – Taxpayers should now brace themselves with increased transfer pricing scrutiny on IGS services and should ideally firm up their NBT defence documentation.

Focus areas of a CFO for a startup

Given below the focus area of a CFO for a startup.

1. The CFO should create financial projections, budgets, and statements to guide the company’s decision making and ensure financial stability.
2. The CFO should play a key role in raising capital for the startup through various means.
3. The CFO should closely manage cash flow and ensure the company has enough money to meet its obligations, while keeping expenses under control.
4. The CFO should identify and mitigate financial risks to protect the company’s assets and ensure long-term success.
5. The CFO should ensure compliance with relevant laws and regulations, such as tax laws and accounting standards.
6. The CFO should ensure the accuracy of financial statements, timely filing and payment of taxes, and readiness for audits.
7. The CFO should track and understand key financial and business metrics to ensure the company is on track to reach its goals.
8. The CFO should work closely with the CEO and management team to align the financial plan with the company’s strategy.
9. The CFO should maintain a strong relationship with investors and keep them informed of the company’s financial performance and future.

CBIC notifies Customs (Assistance in Value Declaration of Identified Imported Goods) Rules 2023

This Tax Alert summarizes a recent notification issued by the Central Board of Indirect Taxes and Customs (CBIC) notifying Customs (Assistance in Value Declaration of Identified Imported Goods) Rules, 2023 (the Rules).

The Rules provide as follows:

a. CBIC may issue order specifying complete description of the identified goods with 8-digit HSN (harmonized system of nomenclature) Code, the particular unique quantity code, technical or other specifications necessary to be declared in the bill of entry and the checks to be exercised. The said order shall be valid for a period not less than one year and not exceeding two years.

b. An importer of identified goods shall be required to declare the value of goods using the unique quantity code specified in the order.

c. Where required by the Customs Automated System, the importer shall also fulfill the specified obligations. In case such obligations are not fulfilled, the proper officer shall provide an additional time period of ten days.

d. The officer may also ask for further information and documents from the importer to examine truthfulness and accuracy of the declared value. He may provisionally assess and clear goods subject to importer furnishing appropriate security.

e. Where the requisite information is not provided or the proper officer still has a reasonable doubt about the value declared basis the details furnished by the importer, the further proceedings shall be in accordance with rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.


The rules will be operationalized from 11 February 2023.

Comments
a. The objective of the Rules seems to prevent undervaluation of the notified class of goods. Presently, the same is being done by the authorities as post import activity.

b. In order to avoid any subjectivity, appropriate guidelines may be issued for officers seeking additional information from importers under the Rules.

c. Businesses may need to analyze whether the exception with respect to imports not involving duty would cover the imports made by EOUs and SEZs.

d. At present, the Rules seem to be silent on the procedure to be followed if the license or authorization conditions are not met.

e. It is relevant to note that in the draft rules, imports made by warehouses licensed under section 65 of Customs

HC directs Revenue to deal with bonafide errors in GSTR-1 for FY 2019-20 in accordance with the clarification issued by CBIC for FY 2017-18 and 2018-19

HC directs Revenue to deal with bonafide errors in GSTR-1 for FY 2019-20 in accordance with the clarification issued by CBIC for FY 2017-18 and 2018-19 This Tax Alert summarizes a recent ruling of the Karnataka High Court (HC) dealing with bona fide mistakes in GSTR-1 while furnishing details of the recipient. In the given case, assessee had inadvertently furnished incorrect GSTIN of the recipient in GSTR-1 for the financial years (FY) 2017-18 to 2019-20. Consequently, it filed a writ petition before the HC seeking direction to Revenue to allow rectification of GSTR-1, so that the recipient can claim input tax credit (ITC). Earlier, Central Board of Indirect Taxes & Customs (CBIC) had issued clarification vide Circular [2] to deal with cases where ITC availed in GSTR-3B is different from the amount reflected in GSTR-2A for FY 2017-18 and 2018-19 due to inter-alia incorrect details furnished by the supplier in GSTR-1. HC observed that the language employed in the Circular contemplates rectification of bona fide and inadvertent mistakes committed by the persons at the time of filing and submitting returns. Therefore, the same would be directly and squarely applicable to the facts of the present case. Though the Circular refers only to the FY 2017-18 and 2018-19, since there are identical errors committed by assessee in FY 2019-20, by adopting a justice-oriented approach, assessee would be entitled to the benefit of the Circular for the said year. Basis above, HC allowed the writ petition directing Revenue to take necessary steps in relation to transactions for FY 2017-18 to 2019-20, in accordance with the Circular. Comments: The ruling is likely to resolve the ambiguity regarding the applicability of the Circular to FY 2019-20, particularly for the period prior to the introduction of Rule 36(4) of the Central Goods and Services Tax Rules, 2017.

Wrongly Paid IGST not Adjustable with CGST & SGST – High Court

This update intends to apprise you about the recent Telangana High Court (‘HC’) decision in the case of OLA Fleet Technologies Private Limited v. Union of India, WP No. 4210 of 2021.

Facts of the case

• The taxpayer made certain intra-State supplies and instead of paying CGST & SGST, the taxpayer paid IGST.

• The taxpayer requested the Court to direct Authorities to adjust the IGST wrongly paid with the CGST and SGST.

HC Decision

• The Court observed that, in these cases, Section 77 of the CGST Act and 19 of the IGST Act clearly provides that the correct taxes must be paid, and wrongly paid tax be claimed as refund.

• The Court, therefore, directed the taxpayer to pay the CGST and SGST and thereafter, directed authorities to grant the refund within 2 month of refund application.

. | Remarks

• The decision lays down a correct proposition. Although interest is not payable on such mistakes, the imposition of penalty under Section 125 of the CGST Act cannot be ruled out.

• The law is clear on the outward side; however, it is silent on the eligibility of Input Tax Credit (‘ITC’) at the recipient’s end. Given how Section 16 is framed, there seems to have no problem for recipient’s ITC.

• However, GST Authorities have started disallowing recipient’s ITC invoking the mala fide aspect of the transaction.

• The Authorities have observed that some taxpayers are asking their out of State vendors to charge IGST instead of CGST and SGST to avail the ITC on the same. This evasion practice is going on successfully since the vendor’s jurisdictional officer has no authority over the recipient’s jurisdiction to challenge their ITC and vice-versa.

Delhi HC holds tax cannot be recovered in guise of suo-moto payment by taxpayer during the course of search proceedings

This Tax Alert summarizes a recent ruling of the Delhi High Court (HC). The writ petition dealt with the issue whether the amount deposited by assessee during the search proceedings can be considered as a voluntary payment of tax.

In the writ petition, assessee alleged that it made payment of tax, interest and penalty under coercion during the course of search proceedings.

The HC observed that the Central Goods and Services Tax Act, 2017 (CGST Act) and the Rules framed thereunder, makes provisions to enable a person to suo-moto pay arrears of tax, along with interest and penalty. Thus, when the taxpayer takes recourse through such route, the proper officer is restrained from serving any notice, unless the amount which is self-ascertained by the taxpayer falls short of the amount payable as per the law. In such cases, the proper officer is required to issue an acknowledgement accepting the payment.

In the present case, although the payments were made in GST DRC-03, no document has been given by the officers acknowledging acceptance of payment. Failure to follow the prescribed procedure will, as in this case, lead to a conclusion that the deposit of tax, interest and penalty was not voluntary, more so when such deposit was made before the search was concluded.

Accordingly, HC directed Revenue to return the amount so deposited along with interest. Further, it also directed Central Board of Indirect Taxes and Customs (CBIC) to align its Instruction on deposit of tax during the course of search, inspection or investigation with the directions issued by Gujarat HC.

Comments

• Judgement of Delhi HC is likely to provide relief in cases where taxes are recovered through coercive means during the course of search, inspection or investigation proceedings and treated as suo-moto payments.
• Direction to CBIC to align its Instruction with the guidelines provided by the Gujarat HC is a welcome move and may aid in streamlining the search and investigation proceedings.

Types of funding for start ups

Starting a new business can be terrifying. One way to reduce that fear is by obtaining financial support. To provide capital, expertise, and connections that can really push a start-up to succeed, there are various types of investment that a start-up can pursue, including:

● Seed funding: This is the earliest stage of start-up financing, and it is usually used to fund the development of a prototype or the creation of a business plan. Seed funding can come from friends and family, angel investors, or venture capital firms.

● Angel investing: Angel investors are often successful entrepreneurs or business professionals who want to support and mentor new business owners in exchange for ownership equity.

● Venture capital: Venture capital firms invest in start-ups that have the potential to grow quickly and generate a high return on investment. Venture capital firms typically invest larger sums of money and take a more active role in the management of the start-
up.

● Crowdfunding: Crowdfunding is a way for a start-up to raise capital through small contributions from a large number of people, typically through an online platform.

Bombay HC restricts scope of writ jurisdiction against order passed by AAAR

This Tax Alert summarizes a recent ruling of the Bombay High Court (HC) on the admissibility of a writ petition against the order of the Appellate Authority for Advance Ruling (AAAR).

The key observations of the HC are:

• The legislative scheme indicates that the provisions relating to the advance ruling are distinct from the appeal and revision. The order of the AAAR is binding on the applicant and the concerned jurisdictional officer. No further appeal is provided. This legislative scheme has to be kept in mind when the applicant challenges the order passed by the AAAR invoking writ jurisdiction.

• In the present case, the AAAR followed the entire procedure, and full opportunity was given to the assessee. There is no ground raised of breach of principles of natural justice on account of not giving an opportunity of being heard.
• The view taken by AAAR is based on the material placed before it. The assessee’s intention to convert this limited inquiry into an appellate inquiry is not permissible to be undertaken in the writ jurisdiction. 
• The Authorities have dealt with the issue in extenso, having considered the submissions and the law cited. The view taken in the matter cannot be considered as suffering from fundamental error or absurd or perverse.

Accordingly, HC dismissed the writ petition filed by the assessee, challenging the order passed by the AAAR.

Comments

• In the past, HCs have entertained writ petitions against the orders passed by AAARs in cases where principles of natural justice were violated, proper procedures were not followed, or such orders exceeded the jurisdiction. In such cases, the Courts have remanded the matter back to AAAR for fresh consideration with specific directions.
  .

Since the advance rulings cannot be appealed before the courts on merits, taxpayers may consider adopting different route while taking a position on issues requiring interpretation of law