GST Compensation to States gets a Four-Year ExtensionRead More: https://www.taxscan.in/gst-compens

The Central Government has notified a four-year extension to the GST compensation cess till June, 2026. The notification issued on Friday stated that “the period for levy and collection of cess under sub-section (1) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 shall be upto the March, 2026. ”

In June, 2022, the Union Finance Minister Ms. Nirmala Sitharam hinted about giving a five-year extension to the compensation to the States.

“If there is a need for borrowings to meet compensation to states, who are going to borrow. How we are going to pay for it…,” she said before meeting of the Council, hinting that fall in revenues has become a big cause of concern for the Centre to meet its liability towards the states as per GST legislation.

Under GST law, states are guaranteed full compensation for any revenue loss for the first five years after the introduction of the goods and services tax (GST) in July 2017. The compensation is the gap between the actual revenue collected and projected revenue. The projected revenue is revenue growth of 14 per cent for states per year over the base year 2015-16. As per the GST Act, full compensation to the states has to be paid for a period of five years till FY22 only through the compensation fund that gets its funds through the levy of GST compensation cess on few items. However, with the fund not getting enough collections since August 2019, GST compensation to states have been delayed with Centre now looking at getting GST Council nod for a mechanism to finance the compensation.

TDS Credit cannot be denied due to Wrong Mentioning of PAN by Deductors: ITAT

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the TDS credit cannot be denied to the assessee due to mentioning of wrong/new PAN by the deductors.

The assessee, Dilip B Desai, a Sole Proprietor approached the Tribunal challenging the order denying TDS credit. The assessee claimed that the business was shifted to the partnership firm from 01.04.2010 all the relevant information including the PAN of the newly incorporated partnership firm was informed to the clients/deductors of tax at source. On perusal of the Form-16A placed in the paper book and Form-26AS it is revealed that inadvertently some of the deductors while filing the quarterly return for January to March, 2010 in place of the PAN of the assessee for the work done during FY 2009- 10, mentioned the PAN of the new partnership firm and as a result of which the credit of tax deducted at source reflected in the PAN of the partnership firm and not under the PAN of the individual.

The AO refused to grant credit of TDS. However, the assessee received a partial relief from the CIT(A).

A division bench of the Tribunal comprising of Sri Manish Borad, Accountant Member & Sri Sonjoy Sarma, Judicial Member observed that “therefore, under the given facts and circumstances of the case, direct the ld. AO to examine the facts and veracity of the claim of credit of TDS at Rs. 13,88,073/- and if the assessee is able to demonstrate that the gross amount on which the tax has been deducted at source has been reflected in the regular books of account and audited financial statement of the individual assesee as a revenue then the credit of the TDS amounting to Rs. 13,88,073/- should be granted to the assessee. We direct the assessee to provide details of the tax deducted at source at Rs. 13,88,073/- and the details of tax deductors, bills raised by the assessee for such deductions and the same being incorporated in regular books of account. Needless to mention that proper opportunity of being heard should be provided to the assessee.”

Manufacturers in International Market, has little scope for utilization of CENVAT for Discharge

Manufacturers in international market, has little scope for utilization of CENVAT for discharge of duty liability, so was held by Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai while upholding the claim of the assessee.

The appellant, Raychem RPG Pvt Ltd is a ‘hundred percent export-oriented unit (EOU)’ holding ‘letter of permission (LoP)’ from the competent authority under the Foreign Trade Policy and exports the bulk of its manufacture owing to which substantial amounts of credit of tax/duty paid on input service/inputs accumulates in CENVAT credit account with no opportunity for utilization. Such credit is permissible to be released, as refund, under the authority of rule 5 of CENVAT Credit Rules, 2004 in accordance with the procedures prescribed by Central Board of Excise & Customs (CBEC).

It may be stated at the outset that rejection of the whole or any part thereof is to be contemplated only to the extent that export has not occurred or to the extent of being in excess of the computation in accordance with the formula prescribed therein. The formula is intended to ensure that such monetization of credit of taxes/duties paid is limited to deployment in export goods. Credit is a pooling of taxes/duties paid on input service/input used in manufacture of output or rendering of output service and the impossibility of segregation for one-to-one correlation requires such computation of attribution.

C J Mathew, Technical Member held that “An assessee such as the appellant, manufacturing primarily for the international market, has little scope for utilization of CENVAT credit in the normal course of discharge of duty liability. It is not the case of Revenue that the appellant had cleared goods domestically on payment of duty and was, through the refund route, attempting to recover the same; there is a certain lack of logic too in that.

Any remnant by application of formula, and its precise intendment, can trace its origin to input lying unutilized or input service yet to be utilized for manufacture. Its utilization in some subsequent period can be reflected only by restoration of the rejected portion of a claim for refund. The restoration is permitted by law and the availment suffices to entitle inclusion for apportionment towards export of a subsequent quarter. The claim of the appellant has been wrongly discarded by the lower authorities.”