News

KA AAR: No GST on Sale of Site from Developed Land

The applicant was unregistered Individual under GST who owned 3 acres of land in Chitradurga District, Karnataka. The applicant applied for permission from Government Authorities to convert the land for residential usage.

The applicant developed the land as per regulations of the District Town and Country Planning Act. The development of Land included formation of roads, rainwater drains, installation of electricity cables, water pipes, sewerage lines, borewells for supply of water, construction of water tank for storage and supply of water, setting up of a power sub-station and establishment of connection from Electricity Board for supply of electricity, etc.

Without providing these basic amenities, the concerned authorities would not grant permission to sell the plots to a third party for the purpose of the construction of houses.

Queries:

 

The applicant sought an advance ruling for the following questions:

  1. Whether GST would be applicable for the consideration received on the sale of sites? If yes at what rate and on what value?
  2. Whether GST would be applicable for the advance received towards sale of sites? If yes at what rate and on what value?
  3. Whether GST would be applicable on the sale of plots after the completion of works relating to basic necessities?
  4. If GST would be chargeable on any of these transactions, could the applicant collect the GST from the prospective buyers?
  5. If GST would be chargeable on any of these transactions whether the applicant is eligible for claiming the Input Tax Credit that they pay on the expenses, they incur on development?

Ruling:

 

At the outset, the Karnataka AAR analysed whether the sale of sites/plots with basic necessities would fall under Entry No. 5 of Schedule III of the CGST Act, 2017. Referring to the CBIC circular no. 177 dated 03/08/2022, the AAR held that the sale of developed land is also the sale of land and is covered under Entry No. 5 of Schedule III of CGST Act, 2017. Accordingly, AAR concluded that the sale of site from developed land will not attract GST.

News

Deadline for filing Form 10A further Extended till November 25

The CBDT has once again extended the time limit for charitable organizations to file Form 10A for registration under Section 12AB of the IT Act, 1961. The initially proposed due date was 30th June, 2021,  but after Circular No.22/2022, Form 10A is currently required to be filed on or before 25th November, 2022.

The Circular states that the said extension has been granted on consideration of difficulties reported by the taxpayers and other stakeholders in the electronic filing of Form No. 1 OA. Therefore, with a view to avoid ‘genuine hardships,’ that Board condoned the delay up to 25th November, 2022.

News

FAQs Released on E-filing of Form 27C Under Section 206C(1A)

Section 206C (1) of the Income Tax Act 1961 (“Act”) requires the collection of tax at source (“TCS”) by sellers dealing in the sale of alcoholic liquor for human consumption, tendu leaves, timber, any other forest produce, scrap and minerals, whether coal or lignite or iron-ore.

Sub-section (1A) of the said section provides that the seller shall not collect TCS from a resident buyer who furnishes a declaration to the effect that the specified goods are to be utilised for the purposes of manufacturing, processing, or producing articles or things or for the purposes of generating power and not for trading purposes. The format of the declaration to be furnished by the buyer is provided in Part-I of Form 27C.

Sub-section (1B) of the said section provides that the seller who receives such a declaration from the buyer shall file a copy of such a declaration with the Principal Commissioner / Commissioner, on or before the 7th day of the next following month in which such a declaration is furnished to him by the buyer.

Recently, the Income Tax authorities have released FAQs to clarify the procedure involved in filing Form 27C by the seller.

The FAQ clarifies that:

  1. It is the responsibility of the seller to file Form 27C on the E-filing portal.
  2. The buyer is required to manually fill Part-I of Form 27C and submit it to the seller.
  3. For the filing of Form 27C on the E-filing portal, the seller should have an active TAN and it should be registered on the E-filing portal.
  4. The procedure to be followed by the seller while filing Form 27C is as under:
    • Login to the Income Tax Portal (incometax.gov.in) using the TAN as the user ID.
    • Navigate to e-file >> Income Tax Forms >> File Income Tax Forms >> Persons not dependent on any Source of Income (Source of Income not relevant) >> Form 27C.
    • Fill the details in “Part I: Details of the Buyers” and “Part II: Details of the Seller, Attachments, and Verification.”
    • The seller shall scan, and upload Part-I of the form as received from buyers as attachments under “Part II- Details of seller, Attachments and Verification” of the online form before filing Form 27C.
  5. Following documents/details are required to file Form 27C:
    • Details of the buyers (Name, PAN/Aadhar, Address, Status, Email Id, Mobile No, Nature of Business, Nature of Goods and Purpose of utilizing the Goods) shall be provided for each Buyer
    • Date on which a declaration is furnished
    • Date of debiting of the amount payable by the buyer to the account of the buyer or receipt of the amount payable from the buyer in cash or by issue of a cheque or draft or by any other mode
    • Self-certified copies of the declaration made by the buyers stating that the goods purchased are not to be used for trading purposes.

FMA Comment: The above FAQs provide much-needed procedural clarity to buyers and sellers in fulfilling their statutory obligations w.r.t. filing Form 27C under the extant provisions of Sec. 206C (1A & 1B).

News

CBIC Issues Clarification on Compliance to Changes Notified in Finance Act 2022

The CBIC had notified the proposed amendment to the Finance Act 2022, vide Notification No. 18/2022-Central Tax dated 28.09.2022, for compliance with sections 100 to 114, except clause (c) of section 110 and section 111 of the said Act. However, various doubts were raised whether the said extended timelines are applicable in respect of compliances for FY 2022-23 onwards or for FY 2021-22 and whether there is an extension of the due date to file monthly/quarterly returns of the month of October.

The CBIC has clarified that the extended time limit for compliance with sections 100 to 114 is FY 2020-21 onwards and it is also clarified that no extension of the due date of filing monthly returns/statements for the month of October (due in November) or the due date of filing quarterly return/ statement for the quarter ending September.

News

Govt. Enables the Filing of Updated Return in Form ITR-U on IT Portal

In the Finance Act, of 2022, the Government introduced an additional facility for filing income tax returns called “Updated Return”, in addition to existing facilities like original, belated and revised returns. Updated Return is an opportunity given to taxpayers to voluntarily file their income tax return(s), if not filed earlier, or to correct the mistakes or omissions in the income tax return(s), already filed by them.

Recently, the Government has enabled the filing of Updated Return in Form ITR-U on the Income Tax portal.

 

Who can file an Updated Return?

 

Any person can file an Updated Return, irrespective of whether such person has already filed an income tax return for that year or not. However, a specific category of persons cannot file Updated Return (discussed in detail below).

It needs to be noted that the taxpayer has to select one of the following reasons while filing Form ITR-U:

  • Return previously not filed;
  • Income not reported correctly;
  • Wrong heads of income chosen;
  • Reduction of carry forward loss;
  • Reduction of unabsorbed depreciation;
  • Reduction of tax credit under Section115JB/115JC;
  • Wrong rate of tax; or
  • Others

 

What is the time limit for filing an Updated Return?

 

An Updated Return can be filed at any time within 24 months from the end of the relevant assessment year. Accordingly, Updated Return can be filed from Financial Year (FY) 2019-20 i.e., Assessment Year (AY) 2020-21 and onwards.

 

Is there any additional tax that the taxpayer would be required to pay while filing Updated Return?

 

Yes, taxpayers filing Updated Return need to pay Additional Income Tax on their outstanding taxes:

  • at the rate of 25%, if the Updated Return is filed within 12 months from the end of the relevant AY; and
  • at the rate of 50%, if the Updated Return is filed within 24 months from the end of the relevant AY.

The Additional Income Tax paid would be in addition to applicable interest and fees till the date of filing the Updated Return.

Further, all the taxes, additional taxes, interest, fee etc. has to be paid prior to the filing of the Updated Return and the details of such payment made have to be given in the Updated Return.

 

What are the circumstances under which an Updated Return cannot be filed?

 

An Updated Return cannot be filed in the following three circumstances:

1: Updated Return cannot be filed if it:

  • is a return of loss (except in cases where it results in the reduction of loss to be carried forward); or
  • results in a reduction in tax liability determined based on income tax return already filed by the taxpayer for such AY; or
  • results in or increases the refund due based on income tax return already filed by the taxpayer for such AY.

2: Updated Return cannot be filed where in case of the taxpayer:

  • any proceeding in relation to assessment, reassessment, re-computation, revision etc. is pending/completed for such AY;
  • a search has been initiated u/s 132 of the Income Tax Act, 1961 (ITA);
  • books of account / other documents / any assets are requisitioned u/s 132A of ITA;
  • a survey has been conducted u/s 133A (except TDS survey u/s 133A(2A)) of the ITA;
  • a notice has been issued to the effect that any money, bullion, jewellery or valuable

article or thing, or books of account or documents seized or requisitioned u/s 132 or 132A of the ITA, in the case of any other person, belongs to the taxpayer.

In cases of search, survey or requisition (as discussed above), Updated Return cannot be filed for the year in which such investigation is initiated, or survey is conducted or requisition is made and for any preceding years.

3: Updated Return cannot be filed where:

  • an updated return has already been furnished by the taxpayer for such AY;
  • the Assessing Officer has information under the below-mentioned laws, regarding the taxpayer and has communicated the same to the taxpayer, prior to the date of furnishing of Updated Return:
    1. The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976;
    2. The Prohibition of Benami Property Transactions Act, 1988;
    3. The Prevention of Money-laundering Act, 2002;
    4. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
  • information has been received under an agreement referred to in section 90 or section 90A of ITA in respect of the taxpayer and the same has been communicated to the taxpayer, prior to the date of furnishing of Updated Return;
  • any prosecution proceedings have been initiated in respect of the taxpayer, prior to the date of furnishing of Updated Return.

News

CBDT: Conditions for Claiming Tax Exemption on Payments Received for Covid-19 Treatment

The Finance Act, 2022 had provided tax exemption for amounts received by taxpayers for expenditure actually incurred by them towards their medical treatment or treatment of any member of their family, in respect of any illness related to Covid-19, as well as amounts received as ex-gratia payment by family members of taxpayers who had lost their life due to COVID-19, subject to certain conditions.

The Central Board of Direct Taxes (“CBDT”) vide three notifications, all dated August 05, 2022, has now notified the specific conditions for claiming such tax exemption.

 

In case the employee taxpayer has received any sum for treatment of COVID-19 for himself or his family members from his employer (Notification No. 90/2022):

The employee taxpayer would be required to submit the following documents to the employer:

 

  • COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations;
  • all necessary documents of medical diagnosis or treatment related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive; and
  • certification in respect of all expenditure incurred on the treatment of COVID-19 or illness related to COVID-19.                                          

 

In case the taxpayer has received any sum for treatment of COVID-19 for himself or his family members from any person (other than his employer) (Notification No. 91/2022):

The taxpayer would be required to keep a record of the following documents:

 

  • COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations; and
  • all necessary documents of medical diagnosis or treatment related to COVID-19 suffered within six months from the date of being determined as COVID-19 positive.

The taxpayer would also be required to furnish a statement in Form No. 1 with the Income Tax authorities, containing details of the amount received and actually incurred by him, towards expenditure for his or his family member’s medical treatment, which has, in turn, to be furnished within nine months from the end of the financial year, in which the amount is so received, or December 31, 2022, whichever is later.

 

In case of any sum received by a family member of taxpayers, who have lost their life due to COVID-19 (Notification No. 92/2022):

The family member of the deceased individual would be required to keep a record of the following documents:

 

  • COVID-19 positive report or medical report, if clinically determined to be COVID-19 positive, through investigations; and
  • A medical report or death certificate issued by a medical practitioner or a Government civil registration office, in which it is stated that the death of the person is related to COVID-19.

The notification also provides that the exemption would be available only if the death of the individual is within six months from the date of testing COVID-19 positive or being clinically determined as a COVID-19 case.

 

The family member of the deceased individual is also required to furnish a statement in Form A to the Assessing Officer, containing details of the amount received from the employer of the deceased individual and from any other person, which has to be furnished within nine months from the end of the financial year in which the amount is received, or December 31, 2022, whichever is later.

A family member in relation to an individual has been defined to mean:

  1. The spouse and children of the individual; and
  2. The parents, brothers and sisters of the individual or any of them, are wholly or mainly dependent on him.

News

CBIC Notifies FAQs on GST Applicability on ‘Pre-Packaged and Labelled’ Goods

On 17th July, the CBIC issued FAQs clarifying the GST applicability on pre-packaged and labelled goods. The said changes were introduced following the recommendations of the GST Council in its 47th meeting. The recommendations have come into effect from 18th July 2022. 

The FAQs clarified that  all pre-packaged items containing a quantity up to 25 Kg (or 25 litre), will attract 5 per cent GST. However, items, which are pre-packaged above 25 Kg, in a single packet will be exempt from GST.

The FAQs also addressed if GST would be applicable to a package containing multiple retail packages. The clarification stated that if several packages intended for retail sale to the ultimate consumer are sold in a larger pack, then GST would apply to such supply. Such a package may be sold by a manufacturer through a distributor.

Further, packaged commodities supplied for consumption by industrial consumers or institutional consumers are excluded from the purview of the Legal Metrology Act. Therefore, no GST will be attracted to in such instances.
 
However, if a manufacturer is supplying to a distributor, dealer and to the retailer then GST will be applicable to it but the manufacturer/wholesaler/retailer would be entitled to input tax credit on GST charged by their supplier in accordance with the Input Tax Credit provisions in GST.

News

GST Relief for the Real Estate

In Munjaal Manishbhai Bhatt vs. UOI, the Appellant had entered into an agreement for the purchase of land from a developer and the construction of a building on the same land. Separate consideration was agreed upon for both the elements of the transaction. The Appellant filed a writ application before the Gujarat High Court on the grounds that Paragraph 2 of Notification No.11/2017 – Central Tax dated 28th June 2017 was ultra vires the provisions of the Goods and Services Tax Act, 2017. Paragraph 2 of Notification No.11/2017 states that the value of supply, in case of transfer of property in land or an undivided share in the land, would be the total amount charged for such supply reduced by the value of the land. The value of land is deemed to be one-third of the total amount of supply. 
 
The Appellant contended that the deeming provision of the value of land to be calculated as one-third of the total amount of supply was ultra vires the statutory provisions of the law when the actual value of land was ascertainable. The High Court held that the application of such a mandatory uniform rate of deduction was discriminatory, arbitrary, and violative of Article 14 of the Constitution of India which stated that all of the rights and freedoms set out in the Act must be protected and applied without discrimination.  Where the value of land was clearly ascertainable or where the value of construction can be derived with the prescribed valuation rules, such deduction can be permitted at the option of a taxable person. The High Court held that the deeming fiction prescribed under the said notification was ultra vires and not mandatory.
 

Example

Let’s assume that the value of land is Rs.5,00,000/- and after construction, the apartment constructed on top of the land is Rs.10,00,000/-. Applying the provisions of Notification No.11/2017, the value of supply for the transfer of the apartment would be Rs.6,66,667/- (Rs.10,00,000 – 1/3rd of 10,00,00).
 
However, if the said notification was not applied and the value of land which was ascertainable was used for the calculation of the value of supply then the value of supply would be Rs. 5,00,000 /-(Rs.10,00,000 – Rs.5,00,000).
 
The aforesaid judgement by the High Court has held that deeming fiction of reducing 1/3rd of the value of land was unnecessary and arbitrary. The High Court held that “when the value of land was ascertainable then the same could be used for calculating the value of supply.

News

AAAR-Gujarat Clarifies GST Exemption to ‘Healthcare Services.’

The Gujarat Appellate Authority for Advance Ruling (AAAR) in reference to ‘Healthcare Services’ has confirmed that a health-related service supplied by a clinical establishment irrespective of whether provided inside or outside a clinical institution is exempt from GST; also, when provided to its organization staff.

BMPL a speciality hospital running under the brand name “Sunshine Global Hospitals” approached the Gujarat Authority for Advance Ruling (AAR) to obtain clarity on whether the supply of medicines, surgical items, implants, consumables, and other allied services & items provided by its hospital through their in-house pharmacy, as well as food, room rent, other services to the in-patients, is part of composite supply of healthcare treatment exempted from levy of GST.

The query further sought clarification as to whether the supply of operational health checkup (OHC) services by the hospital i.e., nursing staff, Doctors, Paramedical staff on the hospital’s payroll, providing health check-up services, ambulance facilities, and allied medical services to hospital employees and also the camps conducted for health check-ups outside the hospitals, will qualify for exemption under the scope of Health Care service.

The AAR on examining the relevant sections and rules pronounced that the supply of services to in-patients was part of the healthcare services defined in the exemption notification. Hence exempted from the levy of GST. Regarding the applicability of taxes for OHC services, the AAR classified it as ‘Human Health and Social Care Services and confirmed a tax rate @ 18% (CGST+SGST).

Consequently, BMPL preferred an appeal before the Gujarat Appellate Authority for Advance Ruling (AAAR).

 

Submission made by the Applicant

 

BMPL submitted that OHC services are offered by their Nursing staff, Doctors and Paramedical staff by way of health check-ups in cases of medical emergencies and medical treatment required by its employees. It was further submitted that the major goal of service was to provide timely health check-ups, medical treatments, and other allied medical services to the organization’s employees as and when needed.

BMPL referred to the scheme of tax under the erstwhile Service Tax regime and places reliance on Notification No.30/2011 – Service Tax dated 25/04/2011, which fully exempted the services provided or to be provided by any hospital, nursing home or multi-speciality clinic to an employee of a business entity or to a person covered by a health insurance scheme subject to certain conditions.

 

Observations by AAAR

 

The AAAR observed that the definition of “health care services” as given under the exemption notification included diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy in any recognized system of medicines in India and admitted that the lower authority had erred in holding that Health Care Services do not include the services of Occupational Health Check-ups or preventive care.

 

Held

 

AAAR confirmed that the activity of providing operational health checkup services by BMPL to its employees and also the camps conducted for health check-ups outside the hospitals qualifies as Health Care services and are exempted from the levy of GST.

 

FM Comment

 

The above ruling clarifies the services which come under the purview of healthcare services. The Ruling will have persuasive value on Clinical establishments supporting rural healthcare by way of medical camps and will encourage employers in the Health Care sector to take steps to improve worker health and safety.

News

CBDT Notifies Income Tax Amendment (Thirteenth Amendment) Rules, 2022

On 6th May 2022, The Central Board of Direct Taxes notified Income Tax Amendment (Thirteenth Amendment) Rules, 2022, set to come into force on the date of their publication in the Official Gazette.

The amendment Rules lay down the formula for computing infrastructure investments of sovereign wealth funds (SWFs) and pension funds that are eligible for income tax incentives, and the scheme of computation of tax-exempt income attributable to these investments. Rule 2DCA has been inserted to this effect. 

Further, the Rules also state that, for the purpose of valuation, Section 10 of the Income Tax Act, 1961 identifies incomes that are exempted from such valuation. Where any income is not included in the specified person’s (Section 10(23FE) income, and where after any previous year if a person fails to meet any of the listed provisions for the valuation of that income that has to be excluded, it will be taxed as personal income.

The Rules also place the following responsibilities on The Principal Director General of Income-tax (Systems) or the Director-General of Income-tax (Systems) to: 

(i) specify the procedure, formats and standards for ensuring secure capture and transmission of the data in Form No. 10BBD. 

(ii) Specify the procedure, format, data structure, standards and manner of generation of electronic
verification code, referred to in sub-rule (9), for verification of the person furnishing the said Form. 

(ii) Be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to the Form No 10BBD so furnished. 

The following modifications have also been introduced vide amendments to Rule 3: 

  1. Intimation Form (10BBB) has been substituted by the Pension Fund of investment under Section 10(23FE).
  2. Form 10BBC- Certificate of accountant in respect of compliance to the provisions is substituted by the notified Pension Fund.
  3. New Form 10BBD- Statement of eligible investment received has been inserted.