19 April 2019

Developments in indirect tax - Offline tool for GSTR-9C, digitization of duty credit scrips, service tax on employees deputed by parent company

Release of offline tool for GSTR-9C
With the upcoming GST audit due date of 30 June 2019 for the financial year 2017-18, the government has released the offline Excel-based utility for GSTR-9C. Key functionalities of the offline tool and their uses are as follows:
Generate JSON file to upload
To generate a JSON file with data entered in the different section(s) to upload on GST online portal.
Validate sheet
To perform validation of the data entered in various sections of the offline tool.
Open downloaded error JSON files
To open error files downloaded from GST portal to correct the invoice data rejected by the GST system.
Issuance of physical duty credit scrips discontinued
The Directorate General of Foreign Trade (DGFT) vide Trade Notice No. 3/2015-2020 dated 3 April 2019 has discontinued the issue of a physical copy of duty credit scrips for EDI ports under Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS). This decision has been made applicable with effect from 10 April 2019. Key points to note are as follows:
The application process for obtaining duty credit scrips remains the same;
On approval, the applicant will receive a message on the registered mobile number;
Soft copy of the duty credit scrip can be viewed and saved by login on DGFT portal;
Basis the soft copy, applicant/scrip holder can approach Customs authorities at EDI port for a debit of the scrip;
No simultaneous transfer of scrip to more than one firm will be allowed.
Salary paid to an employee on deputation not liable to service tax - C.C.E and S.T. Jaipur I versus Nissin Brake India Pvt. Ltd.
The matter pertains to pre-negative list regime under the erstwhile service tax law.
The taxpayer had entered into an agreement with its foreign parent company whereby the employees of such parent company were deputed to the taxpayer The taxpayer was paying the salary of these employees.
The department contended that the services of the parent company should be classifiable under ‘manpower recruitment or supply agency service.’
Earlier, the Customs Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi had held that salary paid to employees on deputation from foreign parent company could not be said to be liable to service tax. The CESTAT in its order rejected the contention of the department that there is an agency-client relationship between the parent company and the appellant. 
Now, the Hon’ble Supreme Court of India has dismissed the appeal filed by the Department against the decision of the CESTAT, citing that the appeal lacks merit. As a result, the decision of the CESTAT has achieved finality and therefore merely sending employees on deputation should not result in an agency-client relationship in the absence of any direct or indirect consideration towards such deputation.
SKP's Comments
The release of the offline tool for GSTR-9C should help the auditors to finalize their audit plans and strategies by analyzing the functionalities and the demands of the audit form utility.
Online issuance of duty credit scrips is another step towards the ongoing plan of DGFT to digitize processes in relation to export benefits. Earlier, in January 2019 the DGFT had announced that every transfer of duty credit scrips would have to be registered online on the DGFT portal.
The decision of the CESTAT in Nissin Brake’s case was specific to the facts of that particular case, and taxability in case of employees on deputation would have to be determined based on the facts and circumstances of each case. The taxability of such transactions under GST has to be also analyzed in light of the provisions of deemed supply between related persons under Schedule I of the CGST Act.
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