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GST WEEKLY UPDATE : 39/2023-24 (24.12.2023)

1. GSTN introduced a new feature ‘Grievance Against Payment (GST

PMT-07)’ on the GST Portal:

The Goods and Services Tax Network (GSTN) has introduced a new feature on the GST Portal,
empowering users to address grievances related to payments through the Grievance against
Payment (GST PMT-07) system.

To access this functionality, users can log in to the GST Portal and navigate to the “Services”
section. From there, they should proceed to the “Payments” category, where they can find the
option to file a “Grievance against Payment (GST PMT-07).”

2. CBIC Encourages Taxpayers to Submit GSTR-9 Annual Returns Prior

to Deadline:
The Central Board of Indirect Taxes and Customs (CBIC) is encouraging taxpayers to submit
their Goods and Services Tax Annual Returns: Form GSTR-9 on or before the specified due
date.

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3. AAR & Important Judgements:

(i) AAR On GST TREATMENT FOR INCENTIVES UNDER ATMA NIRBHAR GUJARAT SAHAY
YOJNA:
(Applicant – Rajkot Nagarik Sahakari Bank Ltd)

Appellant’s Grounds for Appeal:

The Appellant challenged the GAAR ruling on several grounds:

They argued that the incentive is akin to a subsidy and should not be considered as
consideration undersection 2(31) of the CGST Act.
They contended that the incentive is not covered under the definition of the scope of supply
under section7(2) of the CGST Act.
They claimed that the incentive, even if considered a supply, should be excluded from the
value of taxablesupply under section 15(2)(e) of the CGST Act.

Analysis and Findings:

i. Subsidy vs. Incentive: The GAAR correctly emphasized the distinction between
‘interest subsidy’ provided to loan beneficiaries and the ‘incentive’ granted to banks based on
their performance. The Appellant’s argument that both terms are synonymous was refuted
based on the explicit use of different words in the government resolution.

ii. Consideration under Section 2(31): The GAAR held that the incentive is a consideration for
the services provided by banks in extending loans. The definition of ‘consideration’ under
section 2(31) of theCGST Act includes any payment made for the inducement of the supply of
goods or services, and there is no exemption for subsidies in this context.

iii. Scope of Supply under Section 7(2): The Appellant failed to demonstrate how the incentive
falls within the scope of section 7(2) or Schedule III of the CGST Act, and the GAAR ruling
stands unchallenged in this regard.

iv. Exclusion under Section 15(2)(e): The GAAR rightly dismissed the argument that the
incentive should be excluded from the value of taxable supply under section 15(2)(e). The
incentive is a consideration for the services rendered by the banks and does not meet the
criteria for exclusion.

v. Actionable Claim: The Appellant’s argument that the incentive is an actionable claim was
debunked. The definition of ‘actionable claim’ in the CGST Act refers to claims related
to debts or beneficial interests in movable property, and the incentive does not fit this
definition.

vi. Compensation Towards Interest: The Appellant’s claim that the incentive
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compensates for the lower interest rate charged under the scheme was deemed
unsubstantiated. Without clear evidence of the interest rates charged outside the scheme,
this argument lacked merit.

vii. Case Law References: The reliance on case laws like Rashmi Hospitality Services
Pvt. Ltd. and Ponni Sugars and Chemicals Limited was found to be misplaced, as these cases
dealt with different factualand legal scenarios.

Conclusion: In conclusion, the GAAR’s ruling on the GST treatment of incentives under the
Atma Nirbhar Gujarat Sahay Yojna is well-founded and legally sound. The incentive received
by the Appellant is considered a consideration for the services provided and is therefore liable
to GST. This case highlights the importance of understanding the nuances of GST law,
especially in the context of government schemes and incentives, to ensure compliance and
avoid potential disputes.

(ii) Madras HC remands ITC Claim for Fresh Consideration:

A Single Bench of Madras High Court has remanded the Input Tax Credit (ITC) Claim of
Assessee owing to cash crunch that led the assessee to file GSTR-3B and GSTR-2 belatedly and
in offline modes, while the same was rejected for belated filing. The petitioner is doing
business related to Petroleum Gases and other Gaseous Hydrocarbons in Urangampatty and
registered with the respondent department in GSTIN.33BAGPA0449A1ZM and was promptly
filing monthly returns. Based on the scrutiny and verification of GSTR-3B returns filed in the
financial year 2017-2018 and 2018-2019, the 2nd respondent issued notice dated 27.04.2022
and directed the petitioner to show cause why there was a belated claim of Input Tax Credit
(ITC) and also directed to remit back the same as wrong claim of ITC and proposed to reverse
the same. Further it is alleged that the petitioner had claimed on the purchase of Petroleum
product. The petitioner submitted that due to financial crisis the petitioner had submitted
GSTR-3B physically and the same was already explained to the respondents in person through
his Accountant and hence the allegation by the respondents that the said claim is false and
cannot be accepted. The contention of the petitioner is that he had also explained the fact that
the claim of ITC is described under Rule 60 of the TNGST Rules and the Form prescribed is
Form GSTR-2, but the same was not notified. Moreover, the filing of GSTR-3B is to avail the
input tax credit and not for claiming the same. So the reversal of input tax for belated claim as
per Section 16(4) of TNGST Act is not applicable, since the filing of GSTR3B is not meant for
claim of input tax credit. The further contention of the petitioner is that the sales made to the
petitioner and the tax collected from the petitioner were duly reported by other end suppliers
through their respective GSTR-1 and the petitioner could not claim the same since Form
GSTR-2 is not notified. The bench noted that the petitioner has accounted for the purchases
and credited the tax payment made through tax invoice, claimed ITC in the books of accounts
and availed the same through GSTR-3B filed physically holding that, the allegation of belated
claim of ITC itself is false and misleading. The 2nd respondent, The Deputy State Tax Officer-1
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had filed a counter affidavit in both the writ petitions stating that the writ petitions are not
maintainable since the petitioner has an alternative remedy to prefer an appeal before the
jurisdictional Appellate Deputy Commissioner (GST Appeals). Prima facie the revision of
assessment was made out based on the scrutiny of GSTR-3B returns and hence notices in
Form- GST-DRC-01A (Rule 142(i)) were issued to explain the issue with the documentary
evidences why there was a belated claim of ITC. It was added that the statute is very clear that
the burden of proof is lying with the taxable person and he has to prove that there is no
evasion of tax. It was further submitted that, “The taxable person is mandated to file monthly
returns only electronically and not by manually. Since the petitioner had not filed any
objections and had not attended the personal hearing, the respondents left with no other
option than to confirm the proposal already made in the notice. Accordingly, the order, dated
16.08.2022, was passed.” Therefore, the 2nd respondent prayed to dismiss the writ petitions.
The Bench heard Raja Karthikeyan, Counsel appearing for the petitioner in both the writ
petitions and A.K.Manikkam, Special Government Pleader appearing for the respondents in
both the writ petitions and perused the records. It was observed that, “the respondents
without giving any opportunity to file the returns by notifying the Form GSTR-2, cannot expect
the taxable person to file returns. In fact, the petitioner has no intension to violate the
provisions of the Act.” “In order to show his bonafide, he has filed physically. Moreover, all tax
liability is paid and there is no loss to the department. Moreover, the petitioner has also
claimed financial crisis. Even though the financial crisis cannot be a ground for not filing the
returns in time, not notifying of Form GSTR-2 is clearly a ground to consider the petitioner’s
claim of belated returns”, the bench further noted. It was further noted, with the relevant issue
in mind, that, “The next contention of the petitioner is that the ITC can be claimed through
GSTR-3B, but GSTN has not permitted to file GSTR-3B in online if the dealers had not paid
taxes on the outward supply / sales. In other words, if the dealer is not enabled to pay output
tax, he is not permitted to file GSTR-3B return in online and it is indirectly obstructing the
dealer to claim ITC.” Further, In the present case the petitioner was unable to pay output taxes
and so the GSTN not permitted to file GSTR-3B in the departmental web portal it is
constructed that the petitioner had not filed GSTR-3B online, that resulted the dealer unable to
claim his ITC in that particular year in which he paid taxes in his purchases The most
important observations being, “Hence if the GSTN provided option for filing GSTN without
payment of tax or incomplete GSTR-3B, the dealer would be eligible for claiming of input tax
credit. The same was not provided in GSTN network hence, the dealers are restricted to claim
ITC on the ground of non-filing of GSTR-3B within prescribed time. if the option of filing
incomplete filing of GSTR-3B are provided in the GSTN network the dealers would avail the
claim and determine self-assessed ITC in online. The petitioner had expressed real practical
difficulty. The GST Council may be the appropriate authority but the respondents ought to
take steps to rectify the same. Until then the respondents ought to allow the dealers to file
returns manually”, the bench allowed the appeal in favour of the assessee. The Single Bench of
Justice S Srimathy thus held that, “impugned orders are quashed. The respondents shall
permit the petitioner to file manual returns whenever the petitioner is claiming ITC on the
outward supply / sales without paying taxes. Further the respondents are directed accept the
belated returns and if the returns are otherwise in order and accordance to law, the claim of
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ITC may be allowed. Hence, the matter is remitted back to the authorities for reconsideration.”
The Madras High Court’s observation regarding the hindrance created by the absence of an
option to file incomplete GSTR-3B online highlights the need for improvements in the GSTN
infrastructure. The suggestion that the GST Council should address these practical difficulties
and consider allowing manual filing until online options are optimized adds a policy
dimension to the judgment

Disclaimer:
This publication contains information for general guidance only. It is not intended to address the
circumstances of any particular individual or entity. Although the best of endeavour has been
made to provide the provisions in a simpler and accurate form, there is no substitute to detailed
research with regard to the specific situation of a particular individual or entity. We do not accept
any responsibility for loss incurred by any person for acting or refraining to act as a result of any
matter in this publication.

THANKING YOU.

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