NEWSLETTER OCTOBER 2017 - Baroda Branch of WIRC … · -NEWSLETTER BARODA BRANCH OF ... Project Developed 10 Cherising Memories 11 GST Update 5 6 ... Travancore Cochin Udyoga Mandal

-NEWSLETTERBARODA BRANCH OF WESTERN INDIA REGIONAL COUNCIL OF

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Volume - IX | October 2017

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

e

MANAGING COMMITTEE

EDITORIAL TEAM

CONTENTS

CA. Arpan Dodia

CA. Dhiren Parikh

CA. Hitesh Agrawal

CA. Krunal Bhrambhatt

CA. Pradeep Agrawal

CA. Viral K Shah

CA. Vin d Pahilwani

CA. Abhijit J Kotecha

CA. Manoj Sahu

98983 83530Chairman

93762 11099Vice-Chairman

99980 28737Secretary

78748 11551Treasurer

98985 60967Ex-officio

98243 62211IP - Chairman

98980 78176Committee Member



o

CA. Arpan Dodia CA. Abhijit J Kotecha

CA. Rahul Parikh CA. Nayan R Kothari

CA. Neena Patel CA. Gunjan Agrawal

CA. Vrushali Shah CA. Priyanka Doshi

CA. Dhruti Vaidya CA. Sagar Mehta

Forthcoming Events 2

Direct Tax Updates 3

Judicial Decisions onIndirect Taxes 4

Credit Notes Under GST

FAQ on ICDS- III PART IV 9

Registration Of Real EstateProject Developed 10

Cherising Memories 11

GST Update 5

6

Painting by CA. Anjali PrabhuWINNER - Paint Your Patriotism Competition

Dated : 15th August, 2017

Dear colleagues,

“It is not the Strongest of the species that survives,

nor the most intelligent, but the one most responsive to change”.

The above quote is very aptly applies to our the society, especially to our profession, in currentsituation. There are wide number of changes keeps on attacking us and we have not only accept it butact according to it.

The month began with the most decorated event of the year by WIRC i.e. 32nd Regional Conference atThe Grand Hayat Hotel, Mumbai. The experience at the conference was outstanding. We enjoyed feastof knowledge served by expert speakers.

Later in the month the branch had organized events extremely relevant for members. We have also gota change to represent the CA fraternity in a event organized by GST Department of Vadodara for takingsuggestions for batter implementation of GST in the nation. The event was headed by Adj. CBEC wherein many suggestions was conveyed for mitigating the teething issues after implementation of GST.

Friends, as you are aware, the Braoda Branch is hosting the WIRC Regional Tax Conclave on 1st & 2ndDecember. The detailed structure of the Conclave is overleaf. The event is also a part of Golden JubileeCelebration of Baroda Branch and thus the event is going to inaugurate on 1st December i.e. thefoundation day of Baroda Branch. I urge all the members to be a part of this celebration by attending theconference. Members willing to assist the branch in various tasks of organizing conclave are heartilywelcomed.

The month of October is carrying the biggest festival of our nation. May this Diwali brings lots ofhappiness and fortune to all the lives on the earth.

Baroda Branch has organized Diwali Milan for all the members with family on 11th November at theAlkapuri Club, Vadodara. All the members are requested to join with family to celebrate Diwali.

I, on behalf of Team Baroda, very warmly wish Happy Diwali and Prosperous New Year to all therespected seniors and beloved members.

We will always be happy to receive your feedback and suggestions on [email protected].

With best regards

- Charles Darwin

CA. Arpan Dodia

Baroda Branch of WIRC of ICAI 2

FORTHCOMING EVENTS

BRANCH EVENTS

Diwali Milan with Garba for Members with Family

Day & Date :

Time :

Fees :

Saturday, 11-11-2017

7:00 pm onwards

Rs. 250/- (including 18% GST)

Venue : Alkapuri Club, Vadodara.

WIRC RegionalTax Conclave

FRIDAY & SATURDAY, DECEMBER 1 & 2, 2017

VENUE : SIR SAYAJI NAGAR GRUH, VADODARA

ORGANISED BY

HOSTED BY

WESTERN INDIA REGIONAL COUNCIL OF ICAI

BARODA BRANCH OF WIRC OF ICAI &

ANAND BRANCH OF WIRC OF ICAI

JOINTLY

DAY - 1

8:00 am to 9:00 am REGISTRATION & BREAKFAST

9:00 am to 10:30 am INAUGURAL SESSION

10:45 am to 01:15 pm TECHNICAL SESSION - I

Chief Guest: * Rajkot

Revenue Secretary, Ministry of

Finance, Govt. of India

Guest of Honor: *

Hon. President ICAI

*

Hon. Vice President ICAI

Session Chairman: Ahmedabad

Past President, ICAI

Impact of ICDS on Mumbai

business qprofits &

reporting under Tax

Audit report with case

studies

Shri Hasmukh Adhia,

CA. Nilesh Vikemsey,

CA. Navin N D Gupta,

CA. Sunil Talati,

CA. Jagdish Punjabi,�

�

�

�

�

�

�

�

Assessment, Survey

& Search after Mumbai

demonetization

Concept of Supply

with special emphasis Bengaluru

on transactions

without consideration

including employer

employee –

Input Tax Credit –

Issues & Intricacies Vadodara

Followed by Dinner

Chairman of the Session:

Bengaluru - CCM, ICAI

Classification & Delhi

Valuation - Is it more

complex than previous

regime –

Industry specific

impact analysis of

after GST regime -

- Real Estate

- Manufacturing

- Service Industry

- EOU

Structuring of Mumbai

International

Transactions

in light with

GAAR & POEM

Panel Discussion on Threat Panel Moderator:

of Matching / Mismatching in Jaipur

Report under GST v/s DT

Direct Tax Panellist:

Vadodara

Anand

GST Surat

Vadodara

Provisions Related to Delhi

Benami Transactions &

Specified Cash

Transaction

CA. Bhupendra Shah,

Adv. V Raghuraman,

Mr. Sanjay Saraswat,

CA. Madhukar Hiregange,

CA. Bimal Jain,

Eminent Faculty

CA. T. P. Ostwal,

*Adv. Sanjay Jahwar,

CA. Rahul Parikh,

CA. Sanjay Patel,

CA. Avinash Poddar,

CA. Abhay Desai,

Dr. Girish Ahuja,

*Subject to confirmation

1:15 pm to 2:30 pm LUNCH BREAK

2:30 pm to 5:30 pm TECHNICAL SESSION - II

7:00 pm Onwards CULTURAL EVENT

8:00 am to 9:00 am BREAKFAST

9:00 am to 11:30 am TECHNICAL SESSION - III

11:45 am to 01:15 pm

01:15 pm to 2.30 pm LUNCH BREAK

2:30 pm to 4:00 pm PANEL DISCUSSION

4:15 pm to 5:45 pm TECHNICAL SESSION - IV

5:45 pm to 6:00 pm SPECIAL SESSION &

VALEDICTORY SESSION

DAY - 2

CPEHRS.12


WICASA EVENTS

Contributed by :

can be reached atnarendrahindocha

@gmail.com

CA. Narendra Hindocha

DIRECT TAX UPDATES

1. Claim for expenditure in dispute

2. Deposit of Capital Gains in wrong account

Decision of Supreme Court in Civil AppealNo.2015 Of 2007 in case of Commissionerof Income Tax Cochin Versus M/sTravancore Cochin Udyoga Mandal relatesto a case in which Assessee took land onlease from Government. By order dated

The assessee objected toit. and prayed for its suitable reduction. Byorder dated

The Assessee

but the same was

considering that it was a statutoryliability because it was determined, fixed,payable and recoverable under the KeralaLand Assignment Act, 1960.

The the issue toTribunal on the ground that the question asto

while claiming deductionunder the Income Tax Act and, if so, in whichyear of assessment is a

This left me with the following :

when theAssessee claimed deduction in a later year.Why did Revenue or the AppellateAuthorities

And finally why did the Supreme Court leavethe matter undecided in spite of simpleundisputed facts.

In case of Ajeet Kumar Jaiswal V. Incometax Officer ITA No.1707/Hyd/2016, theTribunal was more pragmatic. The Assessee

25.06.1988, the State Government fixed

the lease rent.

07.11.1991, the State

Government rejected the respondent's

request. claimed deduction

for the rent in Assessment year 1992-93

disallowed on the

ground that it was allowable only in A.Y.

1989-90

Supreme Court set aside

whether the fixation of rent and its

payment is statutory or contractual and,

if so, its effect

mixed question of

law and fact not decided by authorities

below.

thoughts

Why was the Revenue aggrieved

not consider the decisions

including that of Gujarat High Court in

case of Nagri Mills, to the effect that

efforts should not be wasted on such

issues which have little consequence

when you consider two years together.

Schedule of Mock Test Paper for the studentsof IIPC and Final for November’ 17 Examination

Sr. Date Time: Course & Paper

1 03-10-2017 IIPC Course Paper 1: Accounting

2 04-10-2017 Final Course Paper 2: Strategic Financial Management

3 05-10-2017 Final Paper 5: Advanced Management Accounting

4 06-10-2017 Final Paper 1: Financial Reporting

5 07 2017 IIPC Paper 6: Auditing and Assurance

6 08 2017 Final Paper 7: Direct Tax Laws

7 09 2017 Final Paper 3: Advanced Auditing & Professional Ethics

8 10 2017 IIPC Paper 5: Advanced Accounting

9 11 2017 Final Paper 8: Indirect Tax Laws

10 12 2017 IIPC Paper 3 Cost Accounting and Financial Management

11 13 2017 Final Paper 4: Corporate and Allied Laws

12 14 2017 IIPC Paper 7: Information Technology and StrategicManagement

13 15 2017 Final Paper 6: Information Systems Control & Audit

14 16 2017 IIPC Paper 4: Taxation

15 17 2017 IIPC Paper 2: Business Laws, Ethics and Communication

(2 -5 pm)

-10-

-10-

-10-

-10-

-10-

-10-

-10-

-10-

-10-

-10-

-10-

Organised by Wicasa BarodaVenue : ICAI Bhawan, Vadodara. Fees : Rs. 100/- per Paper

O b i t u a r y

CA. Madhusudan A. DaveDoB.: DoD.:02-08-1924 | 26-09-2017

Those we love can never

be more than a thought

away...

for as long as there’s a

memory...

they live in our hearts

to stay.


Contributed by :

can be reached [email protected]

CA. Anirudh Sonpal

JUDICIAL DECISIONS ON INDIRECT TAXES

I. CENVAT CREDIT

1.1 An assess was eligible for refund in cash of the accumulated cenvat credit on surrender ofregistration certificate. The Honourable High Court observed that a benefit which wasotherwise available to an assessee was required to be paid in any form, including cash.[Lav Kush Textiles vs CCE, Jaipur – Rajasthan HC]

1.2 A manufacturer can claim refund of cenvat credit on inputs used in manufacture of goodscleared to EOU against CT-3 certificate. The Honourable High Court observed thatclearances to EOU to be treated as deemed export since an EOU cannot sell its products in

local market and is obliged to export allits products.[CCE, Noida vs JBM Auto Ltd –Allahabad HC]

2.1 The appellant had collaborated with twoother companies for research anddevelopment of drug chemicals forforeign client. The appellant was deniedthe export benefits on the ground thatthey were sub-contractors of agent ofthe two other companies and hencecannot be said to have exported theirservices to a foreign client. TheHonourable Tribunal held that theappellant was not a sub-contractor buta co-venturer with the other companiessince as per the agreement, each of thethree companies were providingservices in their individual capacity andnot as sub-contractor of the other;since the payment was received inforeign currency by the lead venture,the export benefits could not have beendenied.Jubiliant Chemsys Ltd vs CCE&ST,Noida – Allahabad Cestat]

2.2 Board has very consciously prescribedthe Sales Tax Form 14B and/or Form Has proof of export for the reason that thesaid Forms are issued by the Sales TaxDepartment only in respect of thosegoods, which are exported; if thesupplies made by the appellant getcorrelated with the details bearing in theSales Tax Form H and/or Form 14B, thesame must be accepted as proof ofexport and neither any duty can bedemanded on such clearances nor thesame is includible in the aggregateclearance value of the exempted goodsunder SSI exemption; cer tificatesissued by the merchant exporter, whichfortify the claim of the appellant that thegoods cleared by them have beenexported and it cannot be brushedaside particularly when the appellantshave submitted Form-H/Form-14B.[Bhalaria Metal Craft Pvt Ltd vs CCE –Mumbai Cestat]

2.3 The revenue authorities had disputedthat where the payment was received inforeign exchange but DFRC was notconsidered, the same cannot beconsidered as an export of service andhence the export benefits were not

II. EXPORTS

deposited capital gains in normal fixed deposit in place of deposit under Capital GainsAccount Scheme, for availing exemption under section 54. The Tribunal agreed with thecontention of the assessee that the

It held that the exemption should be allowed provided allthe conditions of the capital gains account scheme are fulfilled (like not taking loanagainst the same and use of money for acquiring house) except for the nomenclature ofthe account.

Section 263 authorises the Commissioner to revise an order which is erroneous andprejudicial to Revenue. The Commissioners use this power even in case when the matteris not a clear error but when two views in the matter are possible and the AssessingOfficer has taken the view that supports assessee. The in case ofCommissioner Of Income Tax Vs. Kwality Steel Suppliers Complex (From the order ofGujarat High Court reported as Kwality Steel suppliers vs. CIT (2004) 191 CTR (Guj) 94held that and the AO has taken one view,

or prejudical to the interest of theRevenue.

deals with a case of TDS on interest ondeposits made under the Capital Gains Accounts Scheme, 1988 where the depositor hasdeceased. It states that the banks are issuing TDS certificates in the name of thedeceased depositor, which is not in accordance with the law. It states that in such type ofsituations, the TDS certificate on the interest income for and

and forthe,

unless a declaration is filed under sub-rule(2) of Rule 37BA of the Income-taxRules, 1962 to that effect.

Order under section 119 dated 31st August 2017 extends, in respect of all assessees'covered under clause (a) of Explanation 2 to sub-section (1) of section 139 of the Act, the'due-date' prescribed therein for filing the return of income as well as various reports ofaudit prescribed under the Income-tax Act which are required to be filed by the said 'duedate' from

Normally extension orders are issued shortly before or after due date while this order isabout a month earlier.

Also the order clarifies on the face of it that the extension is also for filing all audit reportswhile earlier we had to wonder whether it was so. I still had to check if the extension isonly for filing or also for signing the audit reports.

defect is only a technical defect as there is little

difference between the two.

Supreme Court

where two views are possible Assessment

order cannot be treated as an order erroneous

Notification No. 08/2017 dated 13-9-2017

upto the period of death of

the depositor is required to be issued on the PAN of the deceased depositor

period after death of the depositor is required to be issued on the PAN of the

legal heir

30th September, 2017 to 31st October, 2017.

3. Revision under section 263 in respect of debatable matter

4. TDS certificate in case of death of depositer

5. Extension of due date for filing Returns and Audit reports


available. The Honourable Tribunalobserved that DFRC is only aprocedural requirement and ifotherwise the payment was received inforeign exchange, the export benefitscannot be denied; even if paymentswere received in Indian Rupees fromforeign banks who had received thepayment in foreign exchange andremitted the same in Indian Rupees, itwould not take away the status ofexport of service and even in suchcases, export benefits cannot bedenied.[Continental Mercantile Corporation vsCST – Mumbai Cestat]

3.1 The staff of the appellant was providedrent free accommodation in thepremises of the client for providingservices. The Honourable Tribunalobserved that the notional value of suchrent free accommodation was to beincluded in the value of taxable serviceprovided to the client since theaccommodation used had a directbearing on the provision of services andwas a case of consideration receivedpartly in money and partly in non-monetary terms, which was required tobe converted in money for inclusion inthe taxable value.[Bee Am Industries Pvt Ltd vs CCE&ST,Meerut – New Delhi Cestat]

3.2 Toll tax paid by the transporter andreimbursed by the respondent is notliable to service tax as part of the grossvalue of the GTA service; toll tax per seis not a service charge and the same isa statutory levy enumerated at Sr. No.59 of list-II (State list) in the Seventhschedule of the Constitution of India;service tax is not chargeable on anystatutory levy whereas it is chargeableonly on the service charge.[CCE vs Indian Oil Corporation Ltd –Mumbai Cestat]

3.3 Where assessee, a manufacturer ofautomotive seating systems, receiveddesigning charges and tooling costfrom purchasers by way of partialreimbursement of designing andtooling cost, said charges would formpart of 'sale price'.[Tata Johnson Controls Automative Ltdvs State of Maharashtra – Bombay HC]

III. VALUATION

GST UPDATE

Contributed by :

can be reached [email protected]

CA. Manilal Parsiya

The Central Government vide seeksto specify the last date to file the return in FORM GSTR-3B for the months of August toDecember, 2017 as under:

August, 2017 20th September, 2017

September, 2017 20th October, 2017

October, 2017 20th November, 2017

November, 2017 20th December, 2017

Liability towards tax, interest, penalty, fees or any other amount payable shall be paid beforefurnishing the return in FORM GSTR-3B.

The Central Government vide seeksto bring Seventh amendment to the CGST Rules, 2017 as under:

1. Person who has been granted registration on a provisional or who has applied forregistration afresh may opt to pay tax under section 10 with effect from the first day ofOctober, 2017 by electronically filing an intimation in FORM GST CMP-02, before thesaid date and shall furnish the statement in FORM GST ITC-03 for reversal of inputcredit relating to inputs held in stock, semi-finished and finished goods held in stockand capital goods held in stock, within a period of ninety days from the said date. Suchpersons shall not be allowed to furnish the declaration in FORM GST TRAN-1 after thestatement in FORM GST ITC-03 has been furnished.

2. Every registered person who has submitted a declaration electronically in FORM GSTTRAN-1 within the time period specified in rule 117, rule 118, rule 119 and rule 120may revise such declaration once and submit the revised declaration in FORM GSTTRAN-1electronically on the common portal within the time period specified in the saidrules or such further period as may be extended by the Commissioner in this behalf.

3. For constitution of the anti-profiteering authority technical member shall have at leastone year post of Commissioner of State or Central Tax to be nominated by theCouncial.

4. E-way bill inserted vide Notification No. 27/2017-Central Tax dated 30.08.2017, to beeffective from the date as shall be notified. Now a proviso has been inserted thatprovided that where goods are sent by a principal located in one State to a jobworkerlocated in any other State, the e-way bill shall be generated by the principal irrespectiveof the value of the consignment. Provided further that where handicraft goods aretransported from one State to another by a person who has been exempted from therequirement of obtaining registration, the e-way bill shall be generated by the saidperson irrespective of the value of the consignment.

5. The details of bill of entry shall be entered in place of invoice where the consignmentpertains to an import in the Notes to “FORM GST EWB-01.

The Central Government videappoints the 18th day of September, 2017 as the date on which the TDS provisions of sub-section (1) of section 51 of the said Act shall come into force in case:

(a) an authority or a board or any other body, - (i) set up by an Act of Parliament or a StateLegislature; or (ii) established by any Government, with fifty-one percent ormoreparticipation by way of equity or control, to carry out any function;

Notification 35/2017-Central Tax, dated 15-09-2017



Month Last Date for filing of return in FORM GSTR 3B


INTRODUCTION

LEGAL ANALYSIS

Some say that credit note in respect of supply of taxable goods or services or both can beissued only with the GST component. In other words, one is compulsorily required to giveeffect to GST in the credit note. As an example if taxable supply was made for INR 10,000plus GST of INR 1,800, if credit note is to be issued for INR 2,000 it must be issued withproportionate GST of INR 360 (18% of 2,000) indicated thereon. One cannot issue creditnote without giving GST effect. We differ with this view. Allow us to explain why.

Tax is payable on the value of supply determined u/s 15 of the Central Goods & Services Tax(‘CGST’) Act, 2017. Said section provides for various inclusions as well as exclusions.Credit note is a document issued by the supplier for effecting reduction in the value. Suchreduction in value by way of credit note may be permitted under the law or may not bepermitted under the law from the point of view of claiming adjustment in the tax alreadycharged on the invoice. Where such reduction is permitted, is it mandatorily required to carryout adjustment by issuing credit note always with tax amount ? And where such reduction isnot permitted, is it mandatorily required to issue credit note with tax and the registeredrecipient is required to reverse the credit but the supplier shall not get the deduction ? Let usanswer both these questions.

Sec. 34 of the CGST Act, 2017 deals with provisions related to credit notes and debit notes.Hence the same is reproduced below for ready reference:

“Sec. 34. (1) Where a tax invoice has been issued for supply of any goods or services or

both and the taxable value or tax charged in that tax invoice is found to exceed the taxable

value or tax payable in respect of such supply, or where the goods supplied are returned by

the recipient, or where goods or services or both supplied are found to be deficient, the

registered person, who has supplied such goods or services or both, to the

recipient a credit note containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or

services or both shall declare the details of such credit note in the return for the month

during which such credit note has been issued but not later than September following the

end of the financial year in which such supply was made, or the date of furnishing of the

relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such

manner as may be prescribed:

may issue

Provided that no reduction in output tax

liability of the supplier shall be permitted, if

the incidence of tax and interest on such

supply has been passed on to any other

person.

(3) Where a tax invoice has been issued for

supply of any goods or services or both and

the taxable value or tax charged in that tax

invoice is found to be less than the taxable

value or tax payable in respect of such

supply, the registered person, who has

supplied such goods or services or both,

to the recipient a debit note

containing such particulars as may be

prescribed.

(4) Any registered person who issues a

debit note in relation to a supply of goods or

services or both shall declare the details of

such debit note in the return for the month

during which such debit note has been

issued and the tax liability shall be adjusted

in such manner as may be prescribed.

Explanation.–– For the purposes of this Act,

the expression “debit note” shall include a

supplementary invoice.”

From the above provision one can observe

that credit note for claiming tax adjustment

can be issued in following scenarios:

shall issue

1. Taxable value or tax charged in the taxinvoice is in excess of taxable value ortax payable on supply – This covers ascenario where the value or taxcharged in invoice is in excess of value(as determined u/s 15) or the taxpayable on supply.

2. Goods supplied are returned by therecipient – This covers a scenariowhere the goods supplied are returnedby the recipient. Hence an option isgiven to treat the goods return throughcredit note rather than treating it as anew supply in which case the recipientreturning the goods shall issue taxinvoice.

3. Goods or services supplied are foundto be deficient – Word ‘deficient’means not having specified quality oringredient (Oxford Dictionary). Thus itcovers a scenario where the goods orservices supplied are not as per thecontractual requirement.

One can also observe that Sec. 34(1)

Contributed by :can be reached at

[email protected]

CA. Abhay Desai

CREDIT NOTES UNDER GST– TO BE ISSUED WITH TAX OR WITHOUT TAX ??

(b) society established by the Central Government or the State Government or a LocalAuthority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings

Provided that the said persons shall be liable to deduct tax from the payment made orcredited to the supplier of taxable goods or services or both with effect from a date to benotified subsequently, on the recommendations of the Council, by the Central Government.

The Central Government vide seeksto grant exemption to a casual taxable person making taxable supplies of handicraft goodsfrom the requirement to obtain registration.

The Central Government vide seeksto waive the late fee for late filing of FORM GSTR-3B, for the month of July 2017.

The Central Government videnotifies detailed E-way bill rules with effect from date to be notified.





uses the word “may” and not “shall”for issuance of credit note. On theother hand, Sec. 34(3) uses the word“shall” for issuance of debit note as thedifferential tax on increase in value ofsupply needs to be paid mandatorily.This is because in case of credit note,Government has already got tax on thehigher invoice value. Claiming backproportionate tax through credit note isleft to the supplier as an option. Hencein scenarios where credit note ispermitted u/s 34, it is upon thesupplier’s discretion to issue the sameand claim adjustment in tax. Suppliercan thus opt to issue credit notewithout tax adjustment.

One may also argue that if credit note isissued without tax, depar tment maycontend that the value of such credit noteincludes tax element and hence the recipientis required to reverse proportionate credit.Similar issue had come up before Hon.Mumbai CESTAT in the case of Brown KraftInds. Ltd. v Commissioner of Central Excise2007 (212) ELT 369 (Tri-Mumbai). It washeld that if the duty charged in the invoicehas been paid by the recipient to the supplierand in turn supplier would have paid thesame to the Government in a prescribedmanner, there is no loss to revenue andhence even if credit note is issuedsubsequently without tax element, noreversal is required by deeming the value ofcredit note as inclusive of tax. Only if there isshort payment of duty by the supplier ofgoods , depar tmen t can demandproportionate reversal. Same view was alsotaken by Hon. Mumbai CESTAT in the caseof ACS Hydraulics Pvt. Ltd. v CCE (AppealNo. E/1557/07).

In the GST regime, due to concept of invoicematching it will not be possible for recipientto claim input tax credit of the tax shown ininvoice and the supplier paying less tax byclaiming adjustment of credit note issuedwithout tax. Hence ratio of both the abovedecisions shall squarely apply in the GSTregime and if the supplier wishes not toissue credit note with tax, he is free to do soand recipient will also entitled to tax credit ofthe full tax amount show in the invoice.

With this background let us analyze theimplications in detail. Credit notes can be

divided into two broad categories.

First category of credit notes (hereinafter referred as “quantity credit notes”) is issued forchanges in quantity transacted vis-à-vis quantity stated in the tax invoice. For example,recipient (now referred as ‘customer’) has received short goods and hence credit note isissued to account for the difference by granting credit in the account of the customer of thevalue of quantity short received. Another example can be return of goods. Customer maychoose to return the goods and hence supplier will issue credit note for giving credit in theaccount of customer for said returns. Issuing credit notes in both such scenarios is coveredunder Sec. 34(1). In case of short supply, as supply of some units have not taken place thevalue and tax payable as per invoice is in excess of value and tax payable against actualsupply. Scenario of goods return is also explicitly covered.

Let us first take a case where quantity credit note is issued in a B2B transaction. For ourdiscussion it is assumed that input tax credit considering the nature of supply is available tothe customer. As per Sec. 16 of the CGST Act, 2017 input tax credit is available only if thegoods in respect of which input tax credit is claimed have been received and used in thecourse or furtherance of business. In case of short receipt of goods, input tax credit shall notbe allowed as goods have not been received by the customer. In case of goods return, as thegoods will not be used in the course or furtherance of business since the same are returned,credit shall not be allowed. Since customer is not entitled to input tax credit, it will make nosense to issue credit note without GST as in such case even the supplier will not be able torecoup the proportionate GST paid on supply. In such situation issuing credit notes with taxwill be beneficial as the tax not claimed by the customer can be recouped by supplier.

One important point to keep in mind in case of goods return is the time period within whichadjustment of tax reflected on the credit note can be claimed. As per Sec. 34(2) of the CGSTAct, 2017 adjustment of tax reflected on credit note can be claimed not later than Septemberfollowing the end of the financial year in which supply was made, or the date of furnishing ofthe relevant annual return, whichever is earlier. If such time limit is crossed, it would befruitful to make goods return by treating it as a new supply by the customer. In such casecustomer shall issue a tax invoice for return of goods.

It may also be noted that as per Rule 73 of the CGST Rules, 2017 reduction in the outputliability ledger on account of credit note claimed in GSTR -1 will be granted to the supplieronly if such credit note is accepted by the customer in GSTR - 2. On acceptance of same bycustomer, tax amount of credit note shall be reduced from his input tax credit claim.

Now let us understand the implications in a B2C transaction. In such transaction it is alsosuggested to issue credit note with tax. It is again for the same reason stated above that thesupplier can recoup the tax proportionate to the credit note value and hence to that extent itwill benefit the customer as even proportionate tax amount will be refunded to him. However,in such cases we have to deal with one challenge. As recipient is not registered, he shall notbe in a position to reverse the credit since at first instance he has not availed any input taxcredit. Hence requirement of Rule 73 will not be met. Will it mean that no adjustment of tax onaccount of credit note can be granted ? Answer is no. If one reads Sec. 34(1) carefully itpermits the supplier to issue credit note in case of goods return. It does not qualify that suchreturn must be only from registered person. Secondly Sec. 34(2) provides that credit noteissued should be declared in the return within the stipulated date and tax liability shall beadjusted. In absence of any other procedural formalities to be complied in case of returnfrom unregistered supplier, we are of the opinion that as Act allows the adjustment of tax,same should be permitted. Rule 73 cannot be applied to such cases. However if the creditnote is not issued with the prescribed time u/s 34(2), supplier shall not be able to recoupproportionate tax and hence customer will bear the cost.

QUANTITY CREDIT NOTES

QUANTITY CREDIT NOTES – B2B SUPPLY

QUANTITY CREDIT NOTES – B2C SUPPLY


VALUE CREDIT NOTES

VALUE CREDIT NOTES – ADJUSTMENT PERMITTED – B2B

Second category of credit notes is issued for difference in value (hereinafter referred as“value credit notes”). For examples, discounts are given post preparation of invoice. Anotherexample could be rate difference. We can sub-divide such value credit notes into twocategories. First category shall cover credit notes where adjustment in tax is permitted andsecond category shall cover credit notes where adjustment in tax is not permitted.

As per Sec. Sec. 15(3) of CGST Act, 2017 discount post supply is allowed as a deductiononly if two conditions are satisfied. Relevant portion is reproduced below for readyreference:

Let us first discuss scenario where adjustment of tax reflected in the credit note issued fordiscounts is permitted. If one reads Sec. 15, deduction in value is allowed only if suchdiscounts are based on agreement drawn before the supply of goods in respect of whichdiscount is given and the customer reverses the credit attributable to such discounts. Beforeanalyzing the issue let us also consider one important facet. Let us say that a supplier hasmade supply to a registered person (B2B) and credit is available to such recipient. In suchsituation issuing credit notes with GST can only increase administrative burden in followingmanner. The supplier has to first of all link every credit note with the corresponding invoiceand establish that such credit note has been issued in accordance with agreement enteredinto before the time of supply. Supplier also has to keep tab of time limits for issuing creditnotes. On other hand recipient who has availed the credit on tax invoice is required to reverseproportionate credit mentioned on the credit note. On his reversal of credit, supplier will getconfirmed reduction in liability. For this supplier has to also ensure follow-up with therecipient. Why to do all these if it will yield no benefit as only the amount reversed by therecipient will be reduced from the liability of supplier. It makes sense only if the recipientcannot claim full credit due to legal restrictions or will have accumulation of credit in hisledger if such reversal is not done. In rest all other cases it shall yield no benefit.

Is it then really necessary to issue value credit notes with GST in such B2B cases eventhough deduction in value is permitted ?

From the point of view of registered recipient, he shall be entitled to input tax credit of the taxcharged in the invoice provided he uses the goods or services in the course or furtherance ofbusiness. In case of value credit note, registered recipient has admittedly receivedgoods/services. This is not the case where he has not received the goods/services or he hasreturned the goods. Assuming that the goods or services are used for business, input taxcredit of the full tax amount charged in the invoice shall be allowed.

Despite the above conclusion that one can avail input tax credit of full tax amount charged onthe invoice, someone will argue that second proviso to Sec. 16(2) provides that input taxcredit needs to be reversed if the value of supply and tax thereon is not paid within 180 daysfrom date of invoice. Said proviso is reproduced below for ready reference:

“Sec. 15(3) The value of the supply shall not include any discount which is given—

(b) after the supply has been effected, if—

(I) such discount is established in terms of an agreement entered into at or before the

time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount on the basis of document issued by

the supplier has been reversed by the recipient of the supply.”

“Provided further that where a recipient fails to pay to the supplier of goods or services or

both, other than the supplies on which tax is payable on reverse charge basis, the amount

towards the value of supply along with tax payable thereon within a period of one hundred

and eighty days from the date of issue of invoice by the supplier, an amount equal to the

input tax credit availed by the recipient shall be added to his output tax liability, along with

interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be

entitled to avail of the credit of input tax on

payment made by him of the amount

towards the value of supply of goods or

services or both along with tax payable

thereon.”

“A doubt raised is as to whether the receiver

of input service can take credit only after the

full value that is indicated in the invoice, bill

or challan raised by the service provider,

and also the service tax payable thereon,

has been paid. It has been represented that

in many cases, after the invoice is issued by

the service provider, the service receiver

does not make the full payment of the

invoiced amount on account of discount

agreed upon after issuance of invoice; or

deducts cer ta in amount due to

unsatisfactory service; or withholds some

amount as security to be held during

contract period. Due to these reasons the

value paid may not tally with the amount

indicated in the invoice, bill or challan. In

such cases the department has raised

objections to the taking of credit as it does

not meet the requirement of the said sub-

rule (7).

Thus the following issues relating to

availment of CENVAT credit need

clarification,-

Whether CENVAT credit can be claimed

(a) when payments are made through

If one issues credit note without taxadjustment, can it be said that as there willbe no reduction in the value of supply andsince the amount paid by recipient will benet of credit note, it would amount to non-payment of the differential value of supplyand hence proportionate credit has to bereversed ?

Let us go back to history. As per Rule 4(7) ofCENVAT Credit Rules, 2004, CENVAT Creditwas allowed only if payment of value ofservice as well as tax was made to theservice provider. In many cases involvingcredit notes without tax adjustment,officer’s used to take a view that as fullpayment is not done, proportionate creditwill be disallowed. To clarify the positionCBEC issued Board Circular No.122/3/2010-ST dated 30/4/10. Relevantportion of said circular is reproduced forready reference:


debit/credit notes and debit/credit

entries in books of account or by any

other mode as mentioned in section

67 Explanation (c) for transactions

between associate enterprises; or

(b) where a service receiver does not pay

the full invoice value and the service

tax indicated thereon due to some

reasons.

Matter has been examined and clarification

in respect of each of the above mentioned

issues is as under,-

(a) When the substantive law i.e. section

67 of the Finance Act, 1994 treats

such book adjustments etc., as

deemed payment, there is no reason

for denying such extended meaning to

the word ‘payment’ for availment of

credit. As far as the provisions of Rule

4 (7) are concerned, it only provides

that the CENVAT credit shall be

allowed, on or after the date on which

payment is made of the value of the

input service and of service tax. The

form of payment is not indicated in the

same and the rule does not place

restriction on payment through debit

in the books of accounts. Therefore, if

the service charges as well as the

service tax have been paid in any

prescribed manner which is entitled to

be called ‘gross amount charged’ then

credit should be allowed under said

rule 4 (7). Thus, in the case of

“Associate Enterprises”, credit of

service tax can be availed of when the

payment has been made to the service

provider in terms of section 67 (4) (c)

of Finance Act, 1994 and the service

tax has been paid to the Government

Account.

(b) In the cases where the receiver of

ser v ice reduces the amount

mentioned in the invoice/bill/challan

and makes discounted payment, then

it should be taken as final payment

towards the provision of service. The

mere fact that finally settled amount

is less than the amount shown in the

invoice does not alter the fact that

service charges have been paid and

thus the service receiver is entitled

to take credit provided he has also

paid the amount of service tax,

(whether proportionately reduced or the original amount) to the service provider.

The credit taken would be

equivalent to the amount that is paid as service tax.

The invoice would in fact stand amended to that extent.

However, in case of subsequent

refund or extra payment of service tax, the credit would also be altered accordingly.”

Reasoning of the said circular is equally applicable under GST regime. Hence input tax creditof the tax charged in the tax invoice is not required to be proportionately reversed if creditnote is issued without tax adjustment.

Thus in B2B cases referred above, we suggest that credit note be issued without taxadjustment. This will save lots of hassles.

Now let us consider a B2C case where value credit note along with tax is issued as per theagreement entered into before the time of supply. One more condition as per Sec. 15(3) to befulfilled is that input tax credit as is attributable to the discount on the basis of documentissued by the supplier has been reversed by the recipient of the supply. In case of B2C supplyas the recipient has not availed any input tax credit, there is no question of imposing thesecond condition as the same will come into play only if input tax credit has been claimed.This is evident from the language itself which says that input tax credit needs to be reversed.One can reverse the credit only if it has been claimed. Hence to recoup the tax attributable todiscount given in a B2C case, it is suggested to issue credit note with tax in cases wheresuch discount is given based on agreement made before supply. This will benefit thecustomer as he shall get the refund of proportionate tax amount which shall reduce his cost.

Second sub-category for discussion is the scenario where credit note is issued fordifference in value and adjustment in tax is not permitted as per law. As an example, ifdiscount is given without any agreement made before supply. Is it mandatory to issue creditnote with tax in such cases ? It may be noted that as per Sec. 15(3) the supplier shall not getthe deduction of such discount from the assessable value. On the other hand, if such creditnote is issued with tax, department may ask recipient to reverse the proportionate input taxcredit.

On the basis of our conclusion above that issuance of credit note is not mandatory, it issuggested that in cases where adjustment in value will not be granted, one must not issuevalue credit notes with tax. Credit note without tax component shall do. Even the recipientshall not be required to reverse any input tax credit proportionate to credit note amount.

We may summarize above conclusions through following matrix for easy reference:

VALUE CREDIT NOTES – ADJUSTMENT PERMITTED – B2C

VALUE CREDIT NOTES – ADJUSTMENT NOT PERMITTED

CONCLUSION

Nature of Type of Whether to be issued What if time limit exceededCredit Note* Supply with tax effect for issuing Credit Note

Quantity Credit Note B2B Yes Treat goods return as supply andrecipient shall charge tax.

Quantity Credit Note B2C Yes Proportionate tax will be cost tocustomer. Credit note to be issuedwithout tax effect.

Value Credit Note B2B Not recommended** Credit note to be issued withouttax effect. Recipient is entitled toinput tax credit of tax charged inthe tax invoice.

Value Credit Note B2C Yes Proportionate tax will be cost tocustomer. Credit note to be issuedwithout tax effect.

* Covers cases where adjustment in value is permitted. Where adjustment in value is notpermitted, credit note should not be issued with tax effect.

** Applicable only if the registered recipient can avail full input tax credit on the supply and is


e igh t spec ia l l y cons t i tu ted AreaDevelopment Authorities for Jamnagar(JADA), Bhavnagar (BADA), Vadinar(VADA), Bhuj (BHADA), Bhachau (BHADA),Anjar (AADA), Rapar (RADA) and Kevadia(KADA).

In addition, 90 municipalities have beendesignated as Area DevelopmentAuthorities under the Act for carrying out thepreparation and implementation ofdevelopment plan. Twenty-Four gramPanchayats have also been designated asArea Development Authorities under theAct. Thus, there are 127 development plansunder implementation in the State and other10 development plans are underpreparation.

Development Plan is macro strategic planwhich is generally prepared by either UrbanD e v e l o p m e n t A u t h o r i t y o r A r e aDevelopment Authority. The DP is revised bythe authority generally in 10 years. As perthe process, authority prepares draftDevelopment plan & receives objectionsand suggestions from the public & than it ismodified if required before sending it to theState Government of Gujarat for approval.The State Government may suggest themodification keeping in mind the interest ofthe public in general & approves the plan.Thereafter the authority prepares TPS forsmaller portion of the development area,say around 100 & 200 hectors involving100 to 250 landowners for whichdevelopment plan is prepared. Hence TownPlanning Schemes are the part of theDevelopment Area & any project which isunder taken within the Town PlanningScheme is required to be registered underthe Real Estate Regulation Act-2016.

There may be certain projects which areundertaken outside the Town PlanningScheme Area but within the DevelopmentArea i.e. lands which are covered under theapproved DP or Proposed DP, is required tobe registered under the Real EstateRegulation Act-2016. Hence in case of ourexample if project of weekend homes isundertaken on the land which is coveredunder the Development Plan than suchproject is required to be registered under theRERA-2016.

Contributed by :can be reached at

[email protected]

CA. Tejas Purohit

REGISTRATION OF REAL ESTATE PROJECTDEVELOPED IN “PLANNED AREA”

Real Estate (Regulation & Development Act 2016) is implemented by the CentralGovernment w.e.f. 01/05/2017 and all the real estate projects within planning area needs tobe register with the Real Estate Regulatory Authority before commencement of marketingactivity and construction activity. Further all the existing projects which has not receivedcompletion certificate from the competent authority also needs to get apply for registrationwith Real Estate Development Authority within 3M from the date of implementation of theact. Hence presently all the existing projects needs to apply for registration with regulatoryauthority on or before 31/07/2017. In generality we know that all the real estate projectswhich is carried out within the urban area or city, needs to be registered with regulatoryauthority but question may arose in our mind that whether any project which is going to bedeveloped or is developing in some rural areas say weekend home scheme taking place nearPavagadh or any other outskirt places requires to be registered under RERA Act-2016. Let’stry to understand the meaning of “Planning Area”.

As per the provisions of section 2(zh) of the Act, “Planning Area” means:

- a planning area or;

- a local planning area or;

- a development area or;

- a regional development plan area or;

- any other area specified as such by the appropriate Government or the CompetentAuthority

- any area designated by the appropriate Government or the Competent Authority to be aplanning area for future planned development

under the law relating to Town and Country Planning for the time being in force and as revisedfrom time to time.

From the definition it becomes clear that the RERA-2016 is considering planning area whichis being planned as per the law relating to Town and Country Planning. In Gujarat townplanning is undertaken by appropriate authorities as per the The Gujarat Town Planning &Urban Development Act 1976. In Gujarat urban development planning is done at two stages.The first stage is preparation of “Development Plan (DP)” for the entire city or developmentarea. The DP is a broad development vision of the city or area. The second stage ispreparation of “Town Planning Schemes (TPS)” for smaller portion of the development area.Preparation of DP or TPS are generally under taken by the appropriate authority which isconstituted as per the provisions of The Gujarat Town Planning & Urban Development Act1976. Appropriate Authority means Urban Development Authority or Area DevelopmentAuthority.

There are five specially constituted Urban Development Authorities for Ahmedabad (AUDA),Surat (SUDA), Vadodara (VUDA), Rajkot (RUDA) and Gandhinagar (GUDA). Also, there are

not resulting in credit accumulation.

In majority of cases value credit notes are issued in B2B transaction. Issuing the credit notewith tax effect will only increase the hassle of linking the same with respective invoice andensuring that the registered recipient shall reverse the proportionate credit. Why to do suchwork ? Peter Drucker said that there is nothing so useless as doing efficiently that whichshould not be done at all. As per our opinion, where input tax credit is available there is noneed to issue value credit note with tax effect. This will save time, effort as well as cost.


Cherising Memories...Lecture Meeting on “Filling of GSTR 1 & 2 Under GST”on 02-09-2017

CA. Dhruvank Parikh

Lecture Meeting on “ICDS - How toTackle Compliance Issues”on 09-09-2017

CA. Abhay Desai CA. Dhruvank Parikh

Lecture Meeting on “Filling ofTRAN 1 for Real Estate Companiesunder GST” on 25-09-2017

STUDY CIRCLE EVENTS

“Impact of GST on Chartered Accountants andIndustry Expectation” on 26-09-2017

CA. Abhay Desai Mr. D S Mahajani

Lecture Meeting on “ICDS - How to Tackle Compliance Issues”on 09-09-2017

CA. Pradip R Shah

WICASA EVENTS for the month of September-2017

Baroda Branch of WIRC of ICAI

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NEWSLETTER OCTOBER 2017 - Baroda Branch of WIRC … · -NEWSLETTER BARODA BRANCH OF ... Project Developed 10 Cherising Memories 11 GST Update 5 6 ... Travancore Cochin Udyoga Mandal