GST
A. Material question raised before the Hon'ble High Court was whether audit/verification contemplated under Rule 5A of the Service Tax Rules, 1994 (the Service Tax Rules) is saved despite repeal of Chapter V of the Finance Act, 1994 (Finance Act)?
The Hon'ble High Court held that Section 174(2)(e) of CGST Act specifically empowers authorities to institute any investigation, inquiry, verification, assessment proceedings, adjudication, etc. including service tax. Therefore, it has been held that Rule 5A of the Service Tax Rules framed under the repealed/omitted Finance Act, is saved.
Takeaway: Service Tax Audit can also be conducted in GST regime.
[Vianaar Homes (P.) Ltd. Vs AC, CGST WP (C) No. 2245 of 2020 & CM Application No. 7832 of 2020 dated November 3, 2020 (Delhi High Court)]
B. The Petitioner did not file GST TRAN-1 on or before the due date i.e. December 27, 2017 and therefore, applied for manual filing of Form GST TRAN-1 in terms of Circular No. 39/13/2018-GST dated April 3, 2018. The application was rejected on the basis that the Petitioner has not tried to save or submit or file TRAN-1 before the due date.
The Petitioner filed Writ Petition (WP) for allowing filing of Form GST TRAN-1 electronically or physically and carry forward the eligible input tax credit (ITC) in the electronic credit ledger.
The Hon'ble High Court held that mere technicality cannot come in the way of substantial justice. Therefore, denial of ITC merely on technical grounds is not justified when the Petitioner is eligible to claim ITC otherwise. Accordingly, the Petition was allowed.
Takeaway: Transition of ITC cannot be denied merely on technical grounds.
[Heritage Lifestyles and Developers and Pvt. Ltd. vs UOI - WP (ST.) No.3705 of 2020 dated November 5, 2020 (Bombay High Court)]
C. The Applicant sought advance ruling whether leasing of pathway to an individual's dwelling unit is taxable under GST?
The Hon'ble Authority of Advance Rulings (AAR) observed that the Applicant has given right to use the pathway to the individual so as to access the main road from residential property. Such pathway although is owned by the Applicant but is used by both the Applicant and the individual.
The Hon'ble AAR further observed that this right of use of 'pathway' granted for a fixed period for an amount qualifies the definition of 'Easement' in terms of Section 4 of the Indian Easement Act, 1882. Thus, it is not only a lease of pathway but also grant of easement rights to the individual by the Applicant. Therefore, such services are not covered under heading 9972 (renting or leasing of property).
Accordingly, the Hon'ble AAR held that act of agreeing to grant easement rights is a service of agreeing to tolerate an act and, thus classifiable under heading 999794 (Miscellaneous services/agreeing to tolerate an act) and taxable under GST.
Takeaway: Right to use of pathway to a person granted for a fixed period is taxable @18%
[Chennai Metro Rail Ltd. Order No. 26/ARA/2020 dated May 12, 2020 (Tamil Nadu AAR)]
SERVICE TAX
D. The Appellant entered into an agreement with a Distributor for grant of theatrical exhibition rights in return for a share in the Net Box Office Collection with the Distributor for the same. Department raised demand of Service Tax classifying the transaction under 'Renting of Immovable Property' service.
The Hon'ble CESTAT held that the Appellant had used and occupied the theatre in its own right to screen films and at no point was the theatre used by the Distributor. In addition to this, it is the Appellant who makes payment to the Distributor. Thus, no service tax can be levied on the Appellant.
Takeaway: Service tax not leviable under renting on immovable for exhibition of films in theatres.
[Golcha Properties Pvt. Ltd vs. CST Final Order No. 51572 / 2020 dated November 2, 2020]
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
