Tag: gst

Recommendations of GST Council

by Pushkar Mer

Following key recommendations have been made in the 54th GST Council meeting:

  • Import of services by an establishment of a foreign airline company from a related person or any of its establishment outside India, when made without consideration, to be exempted. Further, past period to be regularised on ‘as is where is’ basis.
  • Renting of commercial property by an unregistered person to a registered person to be brought under Reverse Charge Mechanism (RCM).
  • Ancillary/intermediate services provided by Goods Transport Agency (‘GTA’) in the course of transportation of goods to constitute a composite supply.
  • Rules and forms to be inserted for providing the procedure and conditions for availment of amnesty scheme announced recently. Further, March 31, 2025, to be date before which the payment of tax to be made, to avail said benefits.
  • Special procedure to be notified for rectification of Orders, which are to be followed by the taxpayers against whom demand has been confirmed for wrong availment of ITC on account of contravention of time period of availment of ITC as per Section 16(4), but where such ITC is now available as per new timelines as provided under subsection (5) and (6) of the Section 16 of the CGST Act.
  • E-invoicing to be rolled out for B2C transactions. The pilot to be rolled out on voluntary basis in selected sectors and States.
  • Changes to be made in the rates of few goods and services.

Press release dated September 09, 2024       

*Disallowances of expenses due to non-payment to MSMEs [Section 43B(h)]

by Pushkar Mer

Section 43B(h) is introduced by the Finance Act, 2023 and applicable from FY 2023-2024. The Government wants to ensure timely payments to Micro & Small Enterprises. As per MSMED Act, 2006, the definition of MSME enterprises is as under:

*Particulars*                                    *Micro*     *Small*   *Medium*

Turnover                                         <=5 crore <=50 crore <=250 crore

Investment in Plant & Machinery <=1 crore <=10 crore <=50 crore

As per MSMED Act, 2006, *the time limit for making payments* is as under:

(a) Where written agreement does not exist – within 15 days from the date of acceptance

(b) Where written agreement exist – Agreed date or within 45 days from the date of acceptance, whichever is earlier

Section 43B(h) says that if payment is not made to MSME enterprises within the specified time limit, then the expenses will not be allowed as deduction under Income Tax Act and shall be added back to the total income. 

Thus, if the payment is made in subsequent year or payment is made before the due date of income tax return or filing of income tax return in the subsequent year, then the same shall not be allowed as expense in the previous financial year, however the same shall be allowed as expense in the financial year in which the payment has been made.

*Key points of Section 43B(h):*

(a) This Clause is not applicable to Medium category enterprises. It is applicable only on Micro and Small category enterprises.

(b) This Clause is not applicable on Capital expenditure (CAPEX) items, it is applicable on goods & services.

(c) This Clause is not applicable on Traders, it is applicable on manufacturing & services sector

(d) This Clause is not applicable on buyers who are filing their income tax return u/s 44AD/44ADA/44AE of the Income Tax Act;

(e) This Clause is not applicable on those vendors who are not registered under MSMED Act, 2006

(f) This Clause is not applicable on those payables for invoices dated on or before 31/03/2023

Mercedes-Benz get stay order against demand for GST on Expat Salary

by Pushkar Mer

In a relief for the auto major Mercedes-Benz, Bombay High court has granted an interim-stay of order demanding GST dues on expat-salary payment by the company. Last year, honorable Supreme Court has held that the salary of overseas employees (deputed to Indian company) that is reimbursement to the overseas entities will be subject to service tax. This decision shakes companies. Based on this decision GST department aggressively started issuing notices to companies demanding GST on reimbursement of expat salary. Directorate General of GST Intelligence (DGGI) recovers INR 2,500 Crores GST dues not paid on expat salaries. Many companies deposited GST on reimbursement of expat salaries. Some companies decided to challenge GST notices. However, rules are not yet clarified and companies are advices to analyze Supreme Court (SC) decision made in case of Northern operating Systems Pvt Ltd and check facts. If facts are matching with NOS arrangements, then GST need to be deposited, if company can differentiate facts, it can decide to challenge GST demand notice in court. This decision will be huge impact on company’s cash flow because GST demand will be calculated w.e.f. 01.07.2027 and interest and penalty will also be required to be deposited under section 73/74 of CGST Act.