Tag: GST

Online gaming industry hopes GST Council will reconsider decision to levy 28% tax

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s online gaming industry is sticking to its demands on GST. The gaming federation head, Roland Landers, indicates that while the government exchequer has benefited under the new GST laws for online gaming, industry interests also play a role. Landers is hopeful the issue will be reconsidered by the GST Council in its next meeting, which he says could be sometime in June. He added the industry is fully compliant with the new GST rules which rolled out last year from October 1.

“We’ve made representations in the past on seeking a win-win where the tax revenues to the exchequer also increase and at the same time industry also gains so that in the long term we survive and continue contributing to the exchequer,” Landers told CNBCTV-18. “We believe and are hopeful that when the GST Council review happens in the next one, which should be towards the end of June, and where online skill gaming is scheduled to be reviewed and are hopeful they will look at what we have been proposing.”

Under the new GST regime, the government levies 28% on the amount deposited against the 18% charged on revenues earlier. The industry claims this has led to a 450% jump in the effective GST on online gaming and most of the industry is currently absorbing the jump in the tax liability. Industry reports also claim the government’s monthly GST collections from online gaming have shot up to ₹1000-₹1200 crore from the earlier ₹200 odd crores with online gaming platforms now contributing 1-2% of the overall GST collections for the government. “We have made representations for a moderation in the 28% GST on online gaming,” industry officials say.

Roland Landers, head of AIGF says, “Prior to October 1, 2023, by the government estimates alone, there were close to 900 or so online gaming companies and definitely there’s been an impact, and you know some have gone through certain measures to take a re-look at their businesses, to cope with the changed scenario. Our only request is that if there could be a solution that while generating enough tax increase for the exchequer from what it was in the earlier regime, also allows the industry to exist and grow.”

The industry is also waiting for clarity in the GamesKraft case which deals with the retrospective application of GST by terming online gaming with money as gambling and betting instead of a game of skill. The Centre had served a ₹21,000 crore tax demand which was dismissed by the Karnataka High Court. However, the Centre has appealed against the case in the Supreme Court and the matter along with multiple other petitions which was recently clubbed, may come up for a final hearing in early May.

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Kerala High Court rules Malabar ‘Parota’ to be treated as bread at 5% GST

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In another unique case stemming from GST classification challenges, the Kerala High Court ruled that Malabar ‘Parota’ is akin to ‘bread’ and should thus be categorised under Heading 1905 for taxation purposes. The decision contradicts the previous rulings of the Authority for Advance Ruling (AAR) and  Appellate Authority for Advance Ruling (AAAR).

The Kerala High Court determined that both ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota’ products should be taxed at the GST rate of 5% rather than 18%, as they share similarities with items listed under HSN code 1905, such as bread.

The high court ruled that products “are eligible at the rate of 5% GST (2.5 % CGST + 2.5 % SGST) and not 18% as was being pleaded by the government, which was citing orders of the Advance Ruling Authority and the Advance Ruling Appellate Authority,” where the treatment was decided to be 18%.

The ruling was delivered by Justice Dinesh Kumar Singh at the Kerala High Court.

Advocates M. Gopikrishnan Nambiar, K John Mathai, Joson Manavalan, Kuryan Thomas, Paulose C Abraham, Raja Kannan, R Chethan Krishna and S Parvathi appeared on behalf of the assesee, whereas Advocate P G Jayashankar and Special Government Pleader (Taxes) Muhammed Rafiq were representing the government.

The assessee, Modern Food Enterprises Pvt. Ltd, is engaged in the manufacturing and supply of food products ‘Classic Malabar Parota’ and ‘Whole Wheat Malabar Parota’ (products). The assessee had sought clarity from the authority for advance ruling on classification, rate of GST, and whether the product can be treated as ‘bread’ under GST or not.

The assessee had filed a writ, which was allowed by the Kerala High Court via observations that according to Rule 4 of the General Rules of Interpretation of the Harmonized System (GRI), the goods that cannot be classified in accordance with Rules I to III shall be classified under the Heading appropriate to the goods to which they are akin. Thus, paving the way for the product to be treated under 5%.

The high court also elaborated on the explanatory notes to HSN sub-heading 1905, which provide that the most common ingredients of the products in this heading are cereal flours, leaves, and salt but they may also contain other ingredients that facilitate fermentation and improve characteristics and appearances of the products.

The Kerala High Court further noted that the products of this heading may also be obtained from dough based on the flour of any cereal, whereas Chapter Heading 21, particularly HSN 2106, prescribes food preparation not elsewhere specified or included and assessee products or not akin to any of the products which are mentioned in Chapter Heading 2106.

The court observed that the assessee’s products are to be included in Chapter Heading 1905 as the petitioner’s products are akin to the products mentioned in the said Chapter Heading 19 and will be eligible to be taxed at the rate of 5% GST and not 18%.

Meanwhile, experts say that the ruling will help several other cases that are under litigation and are similar in nature. However, the government continues to hold the view that the Kerala High Court decision is not fair and would need more clarity.

Sandeep Sehgal, Partner-Tax, AKM Global, a tax and consulting firm, states, “This decision highlights the importance of accurate classification in tax matters, ensuring fair treatment for businesses and consumers alike. The ruling marks a victory for the petitioner in this case, and serves as a precedent for similar disputes in the future.”

“The classification rule is that the specific entry will prevail over the general entry and hence from that perspective, this is a very welcome decision. This will not only help this sector but several other sectors based on the principles formulated by this court” said Abhishek A Rastogi, founder of Rastogi Chambers, who is arguing before different Courts on classification issues.

“The intent of the GST Council was always to keep the basic necessary supplies under a lesser category of rate and this decision tilts the balance in that flavour as well,” added Rastogi.

However, rate rationalisation remains the key, and the industry will closely watch how this is done in the months ahead, Rastogi said.

Yogesh Kale, Executive Director, Nangia Andersen India said, “The Karnataka AAR had also ruled in 2020 that Whole Wheat Parota and Malabar Parota were classifiable under HSN code 2106 (the AAR ruling was held to be void-ab-initio by the AAAR due to suppression of facts by the taxpayer). The Kerala High Court ruling puts an end to the controversy over classification of Malabar Parotas, highlighting time and again the need for accurate classification, importance of the Explanatory Notes to the headings and that in case of doubt, the products must be classified under the heading to which they are most akin. The principle would also serve as a guidance in classification of other products.”

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Explained: Here’s what you should know about GST evasion and DGGI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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You might have often come across instances of the Directorate General of GST Intelligence (DGGI), issuing notices and alleging tax evasion. You may have even asked yourself what this organisation is all about? How does it function? How does it uncover instances of tax evasion?

At CNBC-TV18, we’ve curated a bundle of questions to shed light on DDGGI and its operations.

What is DGGI?

The DGGI is primarily concerned with curbing the evasion of GST. Before the introduction of GST in 2017, the organisation was known as the Directorate General of Central Excise Intelligence (DGCEI). It is the apex intelligence organisation functioning under the CBIC, entrusted with the task of collecting intelligence relating to the evasion of GST.

What’s the role of the DGGI?

The charter of DGGI focuses on the collection, collation and dissemination of intelligence on all matters relating to GST, Central Excise (CE) & Service Tax (ST) which have all India repercussions, to unearth modus operandi and alert field formations, alert other law enforcement agencies about the trends of evasion and investigate offences involving evasion of GST, CE or ST which have multi-commissionerate ramifications, and also suggest policy changes.

How widespread is the presence of DGGI?

The DGGI has its headquarters in New Delhi, with four sub-national units (North at Delhi, South at Bengaluru, East at Kolkata, and West at Mumbai) headed by Director-Generals, 26 zonal units, and 40 regional units. It is a relatively slim organisation with a working strength of about 1500.

How does DGGI operate?

The process of collecting intelligence is complex. It involves the analysis of data using the latest data analytical tools, of revenue, of the performance of sectors or industries, of specific companies in those sectors or industries, and of differences or mismatches in submissions made by a company to different statutory authorities—all of these are from various open sources. There is also close interaction with the state GST enforcement wings for the sharing of intelligence and modus operandi. It also involves the collection of intelligence/information from individuals who could be disgruntled employees or any public-spirited individual.

Does DGGI have informers? Do they get rewarded?

Yes. There is a robust reward scheme to encourage such informers. Informers are eligible for rewards of up to 20% of the net sale proceeds of the contraband goods seized and/or the amount of duties or service tax evaded, along with the amount of penalty levied and recovered. A similar reward scheme is available to the officers who have detected the case, including handling the investigation to its successful and logical conclusion when the case has achieved finality.

How does DGGI ensure the assessment of information?

Having collected the intelligence, it is examined to confirm its veracity. And if found actionable, action is initiated. An investigation can commence with a simple letter seeking data from the entity concerned, invoking the provisions of the GST law. Section 70 of the CGST Act provides for summoning evidence or a person who the DGGI believes has the documents concerned. An enquiry initiated under summons is deemed to be a judicial proceeding under sections 193 and 228 of the IPC. The summons has to be honoured unless sufficient reasons are given for not honouring it.

What are the powers and function of DGGI?

Actionable intelligence can also lead to inspection, search and seizure. Section 67 of the CGST Act emphasises that where the Joint Commissioner has reason to believe that a taxable person has suppressed any transaction relating to the supply of goods or services or both, or has claimed input credit not due, or indulged in contravention of the law, he can authorise an officer to inspect, search premises, and seize documents. The provisions of the CrPC would apply to such searches and seizures. The critical element here is ‘ reason to believe’. The courts have emphasised that the reason to believe cannot be a whim, has to be recorded in writing and the evidence has to be such leading to the officer concluding that the only way forward in the investigation is to search the premises.

What happens to information gathered during a raid or ‘search operation’?

Having conducted a search or obtained documents, the DGGI can thereafter summon all persons concerned to explain the issue. Statements are recorded under Section 70 of the CGST Act. Where the Commissioner has reason to believe that the evidence collected suggests that the person has committed any offence that is linked with supplying goods without an invoice, issuing an invoice without the supply of goods, availing input tax credit incorrectly, collecting tax but not paying it to the government, falsifying documents, obstructing officers in the discharge of their duties, or tampering with evidence, then such a person can be arrested. Section 69 has given such powers of arrest-reason to believe is again a critical element. The provisions of CrPC will govern the procedure to be adopted-meaning thereby that the grounds of arrest have to be informed and the person has to be produced before a magistrate within 24 hours of the arrest.

When is a showcase notice issued?

After all evidence has been collected, a charge of evasion of GST in the form of a Show Cause Notice (SCN) is formulated. The SCN has to give the details of the alleged evasion, the evidence relied upon in arriving at this conclusion, and the quantum of such evasion. The party is given time, typically 30 days, extendable on request, to furnish their defence against the allegations. An opportunity for a personal hearing is granted as well as for cross-examining by the investigating officers. The case is adjudicated by the authority concerned; an opportunity for appeal is available both for the department and the party.

Why should taxpayers or companies beware of DGGI?

Companies should realise that, thanks to advanced analytics and the huge availability of data in the public domain, any attempt at evasion will be detected; they must adhere to the requirements of the law. Evasion does not pay–either in the short run or the long run. They should engage competent compliance officers, get a robust audit of their processes done by competent auditors, keep themselves abreast of legal developments, engage closely with the department whenever the local office holds interaction sessions with the industry. They should aim to steadfastly comply with the law and where they believe that the law is unreasonable engage with the CBIC through industry forums.

A new SOP for the function of DGGI?

There was a need to issue the recent SOP by the CBIC; this would suggest that on occasions the DGGI has been over-enthusiastic. Investigative agencies should avoid cases based on the interpretation of law/intent. That should be left to the policymakers. Such matters should be referred to CBIC so that an all-India call can be taken. The CGST field formations should actively engage with industry and address concerns that everybody wants to deliberately evade the law.

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India official sees monthly GST collection jumping 7% on average

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s monthly goods and services tax collection is expected to expand at more than 7% on average in the new fiscal year on robust economic growth and more people paying taxes for what they consume, a top official from the Finance Ministry said.

Revenue from the consumption tax is expected to clock in at over 1.80 trillion rupees ($21.6 billion) on an average monthly basis from the fiscal year starting April, according to Sanjay Kumar Agarwal, chairman of the Central Board of Indirect Taxes and Customs. The collection averaged 1.68 trillion rupees a month in the last fiscal year and 1.51 trillion in 2022-23.

A barometer for economic activities, the GST tax collection should hit a record of more than 2 trillion rupees this month alone, Agarwal said. The revenue boost this year can help the government cut back its fiscal deficit while allowing for more spending to fuel growth in Asia’s third largest economy.

“India’s economy is growing robustly and is getting more formalized,” Agarwal told Bloomberg in an interview. “With more digital payments, increases in online sales and better compliance, we expect the tax collections to go up in a very healthy manner this year.”

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One of the world’s fastest-growing major economies, India is estimated to have expanded 8% or higher in the last fiscal year ended March 31. The South Asian nation is poised to grow over 7% in the current year.

Agarwal said the indirect tax department is looking to cut down the time taken for cargo clearance at seaports, potentially bringing down the logistics costs.

The customs department, which also comes under Agarwal, is working on this initiative as the government looks to boost the ease of doing business in India, which is courting investors and companies diversifying away from China.

“We want to reduce the average clearance time for imports to 48 hours from the current 80 hours in the next five years,” Agarwal said.

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GST evasion: DGGI detects 99% surge in FY24, unearths ₹2.01 lakh crore worth of tax fraud

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a major push to curb GST evasion, the Directorate General of GST Intelligence (DGGI) claims to have detected 6,074 cases involving evasion of duty amounting to ₹2,01,931 crore, top sources told CNBC-TV18. This marks a staggering 99% surge in the year-on-year (YoY) detection of tax evasion compared to the amount of duty evasion detected by the investigation arm of the tax authority.

Upon detection of evasion, taxpayers voluntarily paid ₹26,598 crore, marking a 28.4% increase in these payments compared to the previous year, sources said. In the fiscal year 2023–24, DGGI arrested 147 individuals considered masterminds behind tax evasion, they added.

In the preceding fiscal year 2022-2023, DGGI had detected 4,872 cases, involving duty evasion amounting to ₹1,01,354 crore, with taxpayers voluntarily paying ₹20,713 crore and 92 arrests made, sources added, sharing the last year’s report card of DGGI.

Sources suggest that the tax evasion of over ₹2 lakh crore detected represents approximately 10% of the total GST collections in the previous financial year.

They further indicated that out of the total evasion detected, taxpayers voluntarily contributed ₹26,598 crore, which accounts for about 1.4% of the total GST collections for FY 2023–24.

“The Directorate General of GST Intelligence (DGGI), which is the premier investigating agency for GST matters, in FY24, investigated matters on diverse sectors, post which the internal analysis highlighted that the top sectors where maximum evasion was recorded included— banking, financial services and insurance, pharmaceuticals, e-commerce operators, secondment (import of manpower services), online gaming, and casinos, among others,” sources added.

To curb the claims of fake input tax credits (ITC) during FY24, DGGI continued its special drives against ITC fraudsters to plug the revenue leakages through the system.

“DGGI’s annual performance report card highlights that it detected 2,197 cases involving ITC fraud of ₹21,089 crore and during the investigation, the taxpayers caught with the offence decided to voluntarily pay ₹2,577 crore. As many as 113 masterminds were arrested to check the menace of fake invoicing,” sources added.

This marks a more than 60 % increase on a YoY basis. In FY23, DGGI unearthed 1,940 cases leading to detection of ₹13,175 crore, resulting in voluntary payment of ₹1597 crore and arrested 68 masterminds, on fake invoicing cases, sources said.

Sectoral detection

“According to the yearly analysis, major sectors where GST evasion was the highest and got detected were the online gaming and casino industry, which according to DGGI, evaded ₹83,588 crore followed by co-insurance or re-insurance sector, where government detected ₹16,305 crore of evasion. Other sectors where DGGI claims to have identified evasion are from secondment (import of manpower services) with ₹1,064 crore of detection,” sources said.

The future course of action

“For the coming fiscal year, DGGI has asked all the field formations and jurisdictions to undertake efforts and continue investigations within the country and also focus on initiating investigations with respect to offshore online gaming entities, wherein entities that do not comply with GST law will be identified and scrutinised,” sources told CNBC TV18.

“Exploiting emerging technologies like ‘Big Data Analytics’ and ‘Artificial Intelligence’ has helped DGGI ramp up its technical capabilities apart from its existing infrastructure in cyber forensics. DGGI is also setting up five digital forensic laboratories in Gandhinagar, New Delhi, Kolkata, Mumbai and Chennai which will help strengthen technical resources. This is aimed at further enhancing the agency’s efforts in curbing tax leakage,” sources added.

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CBIC issues guidelines for GST investigation; officers must take prior approval for big firms

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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GST field officers will now have to seek the approval of their zonal principal chief commissioners to initiate an investigation against any big industrial houses or major MNCs and levy duty on goods/services for the first time.

The Central Board of Indirect Taxes and Customs (CBIC) has issued guidelines for Central GST (CGST) officers.

According to the guidelines, when a taxpayer is simultaneously being investigated by the state GST and DGGI officers on different subject matters, the principal commissioner will “consider the feasibility” of only one of the offices pursuing all the cases with respect to the taxpayer.

The guidelines have also set a deadline for tax officers to conclude an investigation within one year of their initiation.

CBIC further said that in initiating an investigation with respect to a listed company or PSU or seeking details from them, the CGST officers should issue “official letters instead of summons” to the designated officer of the entity, detailing the reasons for investigation and seeking submission of documents within a “reasonable time period”.

“In such a letter issued for seeking information/documents from the regular taxpayer, the reference can be to inquiry “with respect to” or “in connection with” that entity. Further, the letter/summons should disclose the specific nature of the inquiry being initiated/undertaken. The vague (or general) expressions such as that the officer is making inquiry in connection with “GST enquiry” or “evasion of GST” or “GST evasion” etc. must not be mentioned,” CBIC said.

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It further said tax officers should not seek that information from the taxpayer, which is already available online on the GST portal.

“Addressing letter/summons with context or content akin to a fishing inquiry is not acceptable,” CBIC noted.

The guidelines also said that each investigation must be initiated only after the approval of the principal commissioner, except in the specified four categories where the prior written approval of the zonal Principal Chief Commissioner shall be required if the investigation is to be initiated and action to be taken in a case.

These four cases include matters of interpretation seeking to levy tax/duty on any sector/commodity/service for the first time; big industrial houses and major multinational corporations; sensitive matters or matters with national implications; or matters which are already before the GST Council.

In all these four categories of cases, the concerned CGST field formation should also collect details regarding the prevalent trade practices and nature of transactions carried out by the stakeholders.

“The implications/impact of such matter should be studied so as to have adequate justification for initiating investigation and taking action,” the guidelines said.

It also said that in a situation where it comes to the Commissionerate’s notice that either the DGGI or the state GST department is also simultaneously undertaking record-based investigation of the same taxpayer on different subject matters, the Principal Commissioner must engage in dialogue with the other investigating offices to consider the feasibility of only one of the offices pursuing all these subject matters with respect to the taxpayer, and the other offices consolidating their material with that office.

“If this outcome is not feasible, the reasons therefore should be confirmed on file by the Principal Commissioner,” the guidelines added.

An investigation initiated must reach the earliest conclusion, which is not more than one year. It is not necessary to keep an investigation pending till limitation in law approaches, it said.

Show cause notice should not be delayed after the conclusion of the investigation. The closure report consequent to the appropriate payment of government dues by the person concerned should also not be delayed and should have a brief self-explanatory narration of the issue and the period involved, as per the guidelines.

“Conclusion of investigation may also take the form of recording that investigation is not being pursued further as nothing objectionable was found in terms of the matter investigated,” it added.

Moore Singhi Executive Director Rajat Mohan said these instructions are a significant step towards fostering a tax environment that is conducive to business growth while ensuring compliance and fairness in the taxation system.

Abhishek Jain, National Head & Partner, Indirect Tax, KPMG, said the implementation will be key to its success, and if followed, it could contribute towards tax certainty and stability in our country’s business landscape.

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DGGI initiates action on ITC, Prataap Snacks, others for alleged tax evasion | Exclusive

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a significant move targeting several major players in the fast-moving consumer goods (FMCG) sector, the Directorate General of GST Intelligence (DGGI) has initiated actions against FMCG companies including ITC, Prataap Snacks, PepsiCo, Balaji Wafers, RP Sanjiv Goenka Group, and others for alleged tax evasion.

Sources told CNBC-TV18 that the DGGI has escalated its crackdown on nearly 10-12 FMCG companies, citing issues related to classification leading to alleged tax evasion. “The DGGI has sent notices and investigation intimation letters to FMCG companies for paying a lower rate of Goods and Services Tax (GST) on products coming under the head of — extruded snacks and fried pellet snacks,” sources said.

The government had, in 2023, clarified that any snacks that have been prepared by extrusion process should attract 18% and not 12% as is being paid by the industry currently. Extrusion is a technique to create ready-to-eat puffed snacks.

DGGI’s preliminary estimates suggest significant revenue losses due to the alleged GST evasion. “The DGGI has alleged ₹500 crore GST evasion by ITC Ltd, ₹300 crore by Prataap Snacks Ltd, ₹175.89 crore by PepsiCo India, ₹19 crore by Balaji Wafers, ₹39.14 crore by RP Sanjiv Goenka Group’s Guiltfree Industries Ltd, and ₹68 crore by Sarveshwar Foods Pvt. Ltd,” the sources said.

The company, Sarveshwar Foods Pvt. Ltd, mentioned above is an unlisted Kanpur-based entity.

“We are unable to comment as industry-wide enquiries are ongoing,” an ITC spokesperson stated in response to CNBC-TV18’s query.

Responses from the other companies are awaited as the investigation unfolds.

Noting these investigations and communications from the government, the industry has made a detailed representation to the Finance Ministry seeking clarity on the matter so that future payments of GST can be made accurately to avoid any such future action by DGGI.

Experts say that the issue needs urgent clarification as the government’s view via the August 2023 circular is creating confusion for the sector and industry players.

“The entire controversy is an aftermath of the August 2023 circular, issued after the GST Council meeting, which divides the same food product into different rates based on whether such goods have been manufactured through the process of extrusion,” said Abhishek A Rastogi, founder of Rastogi Chambers.

He has been arguing on rate classification issues for diverse sectors. Rastogi said: “The higher rate clarified through a circular will have to cross the test of Constitution validity as arbitrariness and vagueness creep in rather than any valid clarification. Secondly, what amounts to extrusion has not been defined anywhere and, hence, to tax the same product at a higher rate when there is some mechanical process would lead to unwarranted results of a higher tax burden on the consumers.”

He said a higher rate of tax on these products would defeat the objectives of the GST Council, which always wanted to keep the rates on basic necessary products in the lower tax category groups.

Abhishek Jain, Indirect Tax Head & Partner, KPMG says, “Classification discrepancies under indirect tax laws have been one of the most common matters of litigation historically.  This trend has been continuing under GST specifically on account of multiple rate slabs.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

PSP Projects aims to end FY24 with revenue of ₹2,500-2,600 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Ahmedabad-based PSP Projects is confident to end the current financial year (FY24) with revenue of ₹2,500-2,600 crore. Next year (FY25), the company is targeting ₹3,000 crore in revenue, said PS Patel, CMD & CEO of PSP Projects in an interview with CNBC-TV18.

The construction firm is also confident of crossing ₹3,000 crore of order inflow target for FY24 and expects ₹3,600 crore of order inflow for FY25.

PSP reported a 41% year-on-year (YoY) rise in consolidated net profit to ₹31 crore for the third quarter (Q3FY24). Revenue grew 41% to ₹705 crore. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) was up 13% YoY at ₹69 crore. However, EBITDA margin compressed to 9.8% from 12.2% YoY.

On January 17, the company announced that it emerged as the lowest bidder for a project worth ₹630.9 crore from Rail Vikas Nigam Ltd (RVNL).

In a filing to the stock exchanges, the construction company said that it has secured the lowest bidder status (L1 bidder) for the project titled ‘Construction of Gati Shakti Vishwavidyalaya’ for Rail Vikas Nigam in Vadodara, Gujarat.

Patel also stated that the total value of projects for which the company stands as the lowest bidder amounts to ₹1,853.37 crore in the current financial year 2023–24, excluding goods and services tax (GST).

This was the second such project after it became the lowest bidder for a project worth ₹158.61 crore from the Gujarat government. The project was awarded by Gandhinagar Municipal Corporation for the ‘Civil, MEP, and Finishing Work for Development of Street’.

PSP Projects is a multi-disciplinary construction company offering a diversified range of construction and allied services across industrial, institutional, and residential projects in India.

When asked if the Code of Conduct will impact business ahead of the General Elections of 2024, he said, “There will be a slowdown of 40-45 days.”

The market capitalisation of the company is ₹2,575 crore.

For more, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

DGGI summons 10 foreign airlines operating in India over alleged GST evasion

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a major crackdown to curb Goods and Services Tax (GST) leakage by foreign airlines operating in India, the Directorate General of GST Intelligence (DGGI) is understood to have issued summons to the Indian offices of these airlines.

According to sources, “DGGI has summoned Indian offices of all foreign airlines for alleged tax evasion on account of import of services from head office by Indian branch offices. And detailed clarifications have been sought, and DGGI is in talks with all foreign airlines.”

DGGI, the investigative arm under the GST regime, alleges that foreign airlines, headquartered abroad have branch offices in India that are permitted by RBI to remit forex related to passenger sales and cargo sales, however, other air services are offered by the head office abroad which include rental, maintenance of aircraft, crew salary, etc. Thus, these services coming from abroad were liable to GST under the reverse charge mechanism, which these airlines have not paid.

The airlines that have received summons include, “Indian offices of British Airways, Lufthansa (German Airlines), Singapore Airlines, Etihad Airways, Thai Airways, Qatar Airways, Saudi Arabia Airlines, Emirates, Oman Airlines, Air Arabia,” sources added. The investigations have been carried out by DGGI Meerut and Mumbai zones, sources said. All these airlines have been under scanner since October 2023.

CNBC-TV18, quoting sources had first reported on October 18 last year that DGGI was then conducting search operations at Indian offices of foreign airlines, including Etihad, Emirates, Saudi Airlines, Qatar Airways, Air Arabia, Oman Air, and Kuwait Airways.

Alleging, “Tax evasion is on account of import of services from head office by Indian branch offices,” sources had indicated that the Indian offices of these foreign airlines were not complying with GST rules.

Meanwhile, sources said, “Indian offices of British Airways, Lufthansa (German Airlines), Singapore Airlines, Etihad Airways, Thai Airways, Qatar Airways, Saudi Arabia Airlines, Emirates, Oman Airlines, and Air Arabia are yet to come back to DGGI with clarifications and they have been seeking more time to respond to the summons,” sources added. However, tax experts have their perspectives on the matter.

SIA spokesperson in an email response to a query sent by CNBCTV18 said, “Singapore Airlines (SIA) has been in regular correspondence with the Directorate General of GST Intelligence (DGGI) following the latter’s initial summons. SIA has since been cooperating with them on all matters related to the ongoing investigation.”

Abhishek A Rastogi, founder of Rastogi Chambers, who is arguing before writ courts on the import of such services for different sectors, explained, “Every penny paid by the Indian branch office would not be subject to tax merely because there is a remittance from India. The taxability depends on the nature of the transaction and the place of provision for such services.

For instance, the remittances made by the Indian branch office to the overseas head office with respect to crew salaries may not be taxable and will depend on the nature of the employment contract. Similarly, the remittances which were made for hotel accommodation, used by the Indian staff outside of India, may again not qualify as import of services as the place of provision of the actual rental accommodation is outside of India.”

“There are various costs which could be for more than one jurisdiction and hence allocation of such expenses will remain a challenge. It may not be possible to determine the value of the import of services on an actual basis and in such a case, the ratio of the Indian revenue and the global revenue could be a determinant to derive the proportional Indian cost of import of services,” Rastogi added.

Rajat Mohan, executive director at MOORE Singhi, said, “The Directorate General of GST Intelligence (DGGI) is honing in on specific sectors that are implicated in widespread issues potentially leading to tax evasion risks for a broad spectrum of taxpayers. This focused scrutiny by DGGI, might not be well-received in the aviation sector and could be viewed as unfavorable targeting.

Adding to the complexity, the Central Board of Indirect Taxes and Customs (CBIC) issued a circular in 2023, which provides guidance on the interpretation of a key judgment related to the Northern operating system case. The CBIC emphasizes that the judgment’s application should not be generalized across all cases of employee secondment. Instead, it insists that each case warrants a thorough examination of its unique facts and circumstances, underscoring the need for a tailored approach to ensure fairness and accuracy in tax assessments.

The method adopted by DGGI, particularly the issuance of summons in this context, raises concerns regarding its adherence to established norms and constitutional principles. Typically, the procedural protocol involves the issuance of formal notices, followed by an in-depth collection and analysis of pertinent information, culminating in a reasoned adjudication based on the intrinsic merits and facts of each case. This deviation from standard procedural conduct suggests a need for a more structured and principled approach in handling tax matters.”

CNBC-TV18 has reached out to other foreign airlines as well and comments are awaited.

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Bombay HC grants interim-stay of order demanding GST on expat-salary payment by Mercedez-Benz

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a relief for the auto major Mercedez-Benz, Bombay High court has granted an interim-stay of order demanding GST dues on expat-salary payment by the company. The Bombay High Court’s Division Bench, consisting of Justices G.S. Kulkarni and Firdosh Phiroze Pooniwalla, granted this interim stay on the demand for IGST on salaries paid by Mercedes-Benz to expatriates under the Reverse Charge Mechanism (RCM), aligning with the precedent set by the Supreme Court in the Northern Operating Systems Private Limited (NOS) case.

The stay remains in effect until the next hearing, and in the meantime the High Court has directed the Revenue department to file a counter affidavit within two weeks.

The grounds for the stay included the CBIC’s instruction dated December 13, 2023, which emphasised the need for a thorough examination of circumstances before applying the NOS ratio and the presence of differentiating factors between the present case and the NOS case.

In the NOS case, the Supreme Court deliberated on the issue of determining the employer of seconded employees from overseas group companies to Indian entities. The Court emphasised the substance over form principle and considered various factors to conclude that the overseas entity remained the employer, thereby rejecting arguments regarding tax liability and revenue neutrality.

The Court also dismissed the reliance on previous judgments lacking reasoned analysis. Thus, the decisions in both cases have significant implications for the taxation of cross-border transactions and the determination of employer-employee relationships in such contexts.

Sandeep Sehgal, Partner- Tax, AKM Global, a tax and consulting firm states, “The Hon’ble Bombay High Court’s interim stay on the IGST demand for Mercedes-Benz’s expatriate salaries aligns with the relaxation already granted to other companies facing similar circumstances, including BMW, Mitsubishi, Renault, and others. This relaxation is in accordance with the intent of the CBIC instruction, emphasising the importance of meticulous examination of each fact and circumstance. The decisions in these cases will profoundly impact the taxation of cross-border transactions and the determination of employer-employee relationships.”

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