Scheme for budgetary support under Goods and Service Tax Regime to the units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim.

Government of India (MINISTRY OF COMMERCE & INDUSTRY; DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION through notification dated 05/10/2017 issued from   F. No. 10(1)/2017-DBA-II/NER  has formalised the scheme for budgetary support under Goods and Service Tax Regime to the units located in States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North East including Sikkim.

The details of the notification is as under:

To provide budgetary support to the existing eligible manufacturing units operating in the States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North Eastern States including under different Industrial Promotion Schemes of the Government of India, for a residual period for which each of the units is eligible, a new scheme is being introduced. The new scheme is offered, as a measure of goodwill, only to the units which were eligible for drawing benefits under the earlier excise duty exemption/refund schemes but has otherwise no relation to the erstwhile schemes.

1.2 Units which were eligible under the erstwhile Schemes and were in operation through exemption notifications issued by the Department of Revenue in the Ministry of Finance, as listed under para 2 below would be considered eligible under this scheme. All such notifications have ceased to apply w.e.f. 01.07.2017 and stands rescinded on 18.07.2017 vide notification no. 21/2017 dated 18.07.2017. The scheme shall be limited to the tax which accrues to the Central Government under Central Goods and Service Act, 2017 and Integrated Goods and Services Act, 2017, after devolution of the Central tax or the Integrated tax to the States, in terms of Article 270 of the Constitution.

  1. The erstwhile Schemes which were in operation on 18.07.2017 were as follows:

2.1 Jammu & Kashmir- Notification nos. 56/2002-CE dated 14.11.2002, 57/2002-CE dated  14.11.2002 and 01/2010-CE dated 06.02.2010 as amended from time to time;

2.2 Himachal Pradesh & Uttarakhand- Notification nos. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10.06.2003 as amended from time to time;

2.3 North East States including Sikkim- Notification no 20/2007-CE dated 25.04.2007 as amended from time to time.

  1. SHORT TITLE AND COMMENCEMENT

3.1 The scheme shall be called Scheme of Budgetary Support under Goods and Services Tax (GST) Regime to the units located in State of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North Eastern States including Sikkim. The said Scheme shall come into operation w.e.f. 01.07.2017 for an eligible unit (as defined in para 4.1) and shall remain in operation for residual period (as defined in para 4.3 ) for each of the eligible unit in respect of specified goods (as defined in para 4.2 ). The overall scheme shall be valid upto 30.06.2027.

3.2 OBJECTIVE:

The GST Council in its meeting held on 30.09.2016 had noted that exemption from payment of indirect tax under any existing tax incentive scheme of Central or State Governments shall not continue under the GST regime and the concerned units shall be required to pay tax in the GST regime. The Council left it to the discretion of Central and State Governments to notify schemes of budgetary support to such units. Accordingly, the Central Government in recognition of the hardships arising due to withdrawal of above exemption notifications has decided that it would provide budgetary support to the eligible units for the residual period by way of part reimbursement of the Goods and Services Tax, paid by the unit limited to the Central Government’s share of CGST and/or IGST retained after devolution of a part of these taxes to the States.

  1. DEFINITIONS

4.1 ‘Eligible unit’ means a unit which was eligible before 1st  day of July, 2017 to avail the benefit of ab-initio exemption or exemption by way of refund from payment of central excise duty under notifications, as the case may be, issued in this regard, listed in para 2 above and was availing the said exemption immediately before 1st day of July, 2017. The eligibility of the unit shall be on the basis of application filed for budgetary support under this scheme with reference

to:(a) Central Excise registration number, for the premises of the eligible manufacturing unit, as it existed prior to migration to GST; or (b) GST registration for the premises as a place of business, where manufacturing activity under exemption notification no. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10.06.2003 were being carried prior to 01.07.2017 and the unit was not registered under Central Excise.

4.2 ‘Specified goods’ means the goods specified under exemption notifications, listed in paragraph 2, which were eligible for exemption under the said notifications, and which were being manufactured and cleared by the eligible unit by availing the benefit of excise duty exemption, from:

(a) The premises under Central Excise with a registration number, as it existed prior to migration to GST; or

(b) The manufacturing premises registered in GST as a place of business from where the said goods under exemption notification no. 49/2003-CE dated 10.06.2003 and 50/2003-CE dated 10.06.2003 were being cleared

4.3 ‘Residual period’ means the remaining period out of the total period not exceeding ten years, from the date of commencement of commercial production, as specified under the relevant notification listed in paragraph 2, during which the eligible unit would have been eligible to avail exemption for the specified goods. The documentary evidence regarding date of commercial production shall be submitted in terms of para 5.7.

  1. DETERMINATION OF THE AMOUNT OF BUDGETARY SUPPORT

5.1 The amount of budgetary support under the scheme for specified goods manufactured by the eligible unit shall be sum total of –

(i) 58% of the Central tax paid through debit in the cash ledger account maintained by the unit in terms of sub-section(1) of section 49 the Central Goods and Services Act, 2017 after utilization of the Input tax credit of the Central Tax and Integrated Tax.

(ii) 29% of the integrated tax paid through debit in the cash ledger account maintained by the unit in terms of section 20 of the Integrated Goods and Services Act, 2017 after utilization of the Input tax credit Tax of the Central Tax and Integrated Tax. Provided where inputs are procured from a registered person operating under the Composition Scheme under Section 10 of the Central Goods and Services Act, 2017 the amount i.e. sum total of (i) & (ii) above shall be reduced by the same percentage as is the percentage value of inputs procured under Composition scheme out of total value of inputs procured.

Explanation:-

Explanation-I

a Sum total worked out under clause (i) & (ii) (a) Rs.200

b Percentage value of inputs procured under Composition Scheme out of total value of inputs procured 20%

 

c Admissible amount out of (a) above (a) Rs(200-20% of 200) = Rs.160

Explanation- II

(a) Calculation of (ii) shall be followed by calculation of (i)

(b) To avail benefit of this scheme, eligible unit shall first utilize input tax credit of Central tax and Integrated tax and balance of liability, if any, shall be paid in cash and where this condition is not fulfilled, the reimbursement sanctioning officer shall reduce the amount of budgetary support payable to the extent credit of Central tax and integrated tax, is not utilized for payment of tax.

5.2 The above 58% has been fixed taking into consideration that at present Central Government devolves 42% of the taxes on goods and services to the States as per the recommendation of the 14th Finance Commission.

5.3 Notwithstanding, the rescinding of the exemption notifications listed under para 2 above, the limitations, conditions and prohibitions under the respective notifications issued by Department of Revenue as they existed immediately before 01.07.2017 would continue to be applicable under this scheme. However, the provisions relating to facility of determination of special rate under the respective exemption notifications would not apply under this scheme.

5.4 Budgetary support under this scheme shall be worked out on quarterly basis for which claims shall be filed on a quarterly basis namely for January to March, April to June, July to September & October to December.

5.5 Any unit which is found on investigation to over-state its production or make any mis declaration to claim budgetary support would be made in-eligible for the residual period and be liable to recovery of excess budgetary support paid. Activity relating to concealment of input tax credit, purchase of inputs from unregistered suppliers (unless specifically exempt from GST registration) or routing of third party production or other activities aimed at enhancing the amount of budgetary support by mis-declaration would be treated as fraudulent activity and, without prejudice to any other action under law may invite denial of benefit under the scheme ab-initio. The units will have to declare total procurement of inputs from unregistered suppliers and from suppliers working under Composition Scheme under CGST Act, 2017.

5.6 The grant of budgetary support under the scheme shall be subject to compliance of provisions relating to any other law in force.

5.7 The manufacturer applying for benefit under this scheme for the first time shall also file the following documents:

 

(a) the copy of the option filed by the manufacturer with the jurisdictional Deputy Commissioner/ Assistant Commissioner of Central Excise officer at the relevant point of time, for availing the exemption notification issued by the Department of Revenue;

(b) document issued by the concerned Director of Industries evidencing the commencement of commercial production

(c) the copy of last monthly/quarterly return for production and removal of goods under exemption notification of the Department of Revenue.

(d) An Affidavit-cum-indemnity bond, as per Annexure A, to be submitted on one time basis, binding itself to pay the amount repayable under para 9 below.

Any other document evidencing the details required in clause (a) to (c) may be accepted with the approval of the Commissioner.

5.8 For the purpose of this Scheme, “manufacture” means any change(s) in the physical object resulting in transformation of the object into a distinct article with a different name or bringing a new object into existence with a different chemical composition or integral structure. Where the Central Tax or Integrated Tax paid on value addition is higher than the Central Tax or Integrated Tax worked out on the value addition shown in column (4) of the table below, the unit may be taken up for verification of the value addition:

Explanation: For calculation of the value addition the procedure specified in notification no 01/2010-CE dated 06.02.2010 of the Department of Revenue as amended from time to time shall apply mutatis-mutandis.

5.9.1 In cases where an entity is carrying out its operations in a State from multiple business premises, in addition to manufacture of specified goods by the eligible unit, under the same GST Identification Number (GSTIN) as that of the eligible unit, the eligible unit shall submit application for reimbursement of budgetary support alongwith additional information, duly certified by a Chartered Accountant, relating to receipt of inputs, input tax credit involved on the inputs or capital goods received by the eligible unit and quantity of specified goods manufactured by the eligible unit vis-a-vis the inputs, input tax credit availed by the registrant under the given GSTIN.

5.9.2 Under GST, one business entity having multiple business premises would generally have one registration in a State and it may so happen that only one of them (eligible unit) was operating under Area Based Exemption Scheme. In such situations where inputs are received from another business premises of (supplying unit) of the same registrant (GSTIN) by, the details of input tax credit of Central Tax or Integrated Tax availed by the supplying unit for supplies to the eligible unit shall also be submitted duly certified by the Chartered Accountant.

7

The jurisdictional Deputy/Assistant Commissioner in such cases shall sanction the reimbursement of the budgetary support after reducing input tax credit relatable to inputs used by the supplying unit.

  1. INSPECTION OF THE ELIGIBLE UNIT

6.1 The Budgetary Support under the Scheme shall be allowed to an eligible unit subject to an inspection by a team constituted by DIPP for every State to scrutinize in detail the implementation of the previous schemes. The inspection report shall be uploaded by the inspection team on ACES-GST portal of the Central Board of Excise & Customs (CBEC) and shall be made available to the jurisdictional Deputy/Assistant Commissioner of the Central Tax on the portal before sanction of the budgetary support. Budgetary support will be released only after the findings to these teams are available. Provided that where delay is expected in such findings of the inspection, the Deputy/ Assistant Commissioner of Central Taxes may sanction provisional reimbursement to the eligible unit. Such provisional reimbursement shall not continue beyond a period of six months.

  1. MANNER OF BUDGETARY SUPPORT

7.1 The manufacturer shall file an application for payment of budgetary support for the Tax paid in cash, other than the amount of Tax paid by utilization of Input Tax credit under the Input Tax Credit Rules, 2017, to the Assistant Commissioner or Deputy Commissioner of Central Taxes, as the case may be, by the 15th day of the succeeding month after end of quarter after payment of tax relating to the quarter to which the claim relates.

7.2 The Assistant Commissioner or Deputy Commissioner of Central Taxes, as the case may be, after such examination of the application as may be necessary, shall sanction reimbursement of the budgetary support. The sanctioned amount shall be conveyed to the applicant electronically. The PAO, CBEC will sanction and disburse the recommended reimbursement of budgetary support.

  1. BUDGETARY PROVISION AND PAYMENT OF AMOUNT OF BUDGETARY SUPPORT

8.1 The budgetary support shall be disbursed from budgetary allocation of Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry. DIPP shall keep such budgetary allocation on the disposal of PAO, CBEC. The eligible units shall obtain one time registration on the ACES-GST portal and obtain a unique ID which is to be used for all processing of claims under the scheme. The application by the eligible unit for reimbursement of budgetary support shall be filed on the ACES-GST portal with reference to unique ID obtained and shall be processed by the Deputy Commissioner or Assistant Commissioner of the Central Tax for sanction of the admissible amount of budgetary support.

8.2 The application for imbursement of budgetary support shall be made by the eligible unit after the payment of CGST/IGST has been made for the quarter to which the claim relates, in cash in respect of specified goods after utilization of Input Tax credit, if any.

8.3 The sanctioning authority (AC/DC) with the approval of the Commissioner may call for additional information (inclusive but not limited to past data on trends of production and removal of goods) to verify the correctness of various factors of production such as consumption of principal inputs, consumption of electricity and decide on the basis of the same, if the quantum of supply have been correctly declared.

8.4 Special audit by the Chartered Accountant/Cost Accountant may be undertaken for units selected based on the risk parameters identified by CBEC in order to verify correctness of declared production capacity and production or overvaluation of supplies. Such special audit shall be undertaken only with the approval of the Commissioner, CGST.

8.5 The list of sanctions for payment, on the basis of amount sanctioned by the jurisdictional Deputy Commissioner or Assistant Commissioner of the Central Tax shall be forwarded by the authorised officer of the jurisdictional Commissionerate of the Central Tax through the ACESGST portal to e-PAO, CBEC for disbursal directly into the bank accounts of the eligible units.

  1. REPAYMENT BY CLAIMANT/ RECOVERY AND DISPUTE RESOLUTION

9.1 The budgetary support allowed is subject to the conditions specified under the scheme and in case of contravention of any provision of the scheme/ notification, the budgetary support shall be deemed to have never been allowed and any inadmissible budgetary support reimbursed including the budgetary support paid for the past period under this scheme shall be recovered alongwith an interest @15% per annum thereon. In case of recovery or voluntary adjustment of excess payment, repayment, recovery or return, interest shall also be paid by unit at the rate of fifteen per cent per annum calculated from the date of payment of refund till the date of repayment, recovery or return.

9.2 When any amount under the scheme is availed by wrong declaration of particulars regarding meeting the eligibility conditions in this scheme or as specified under respective exemption notification issued by the Department of Revenue, necessary action would be initiated and concluded in the individual case by the Office of concerned Assistant Commissioner or Deputy Commissioner of Central Taxes, as the case may be.

9.3 The procedure for recovery: Where any amount is recoverable from a unit, the Assistant Commissioner or Deputy Commissioner of Central Tax, as the case may be, shall  issue a demand note to the unit (i) intimating the amount recoverable from the unit and the date from which interest thereon is due and (ii) directing the manufacturer to deposit the full sum within 30 days of the issue of the demand note in the account head of DIPP and submit proof of deposit to him/her

9.4 Where the amount is not paid by the beneficiary within the time specified as above, action for recovery shall be taken in terms of the affidavit –cum- indemnity bond submitted by the applicant at the time of submission of the application, in addition to other modes of recovery.

9.5 Where any amount of budgetary support and/or interest remains due from the unit, based on the report sent by the Assistant Commissioner or Deputy Commissioner of Central Tax as the case may be, the authorized officer of DIPP shall, after the lapse of 60 days from the date of issue of the said demand note take required legal action and send a certificate specifying the amount due from the unit to the concerned District Magistrate/ Deputy Commissioner of the district to recover that amount, as if it were arrears of land revenue

10 Residual issues related to the Scheme arising subsequently shall be considered by DIPP, Ministry of Commerce & Industry whose decision shall be final and binding.

  1. SAVING CLAUSE

11.1 Upon cessation of the Scheme, the unpaid claims shall be settled in accordance with the provisions of the Scheme while the recovery and dispute resolution mechanisms shall continue to be in force.

Annexure A

AFFIDAVIT – CUM – INDEMNITY BOND

I / We Shri__________________ s/o________________(add names) in my/our capacity of_____________(designation) of________________ (Company/Unit Name) hereby solemnly affirm and declare for and on behalf of_____________(company/unit name) that an application for registration for reimbursement of budgetary support has been filed on__________ under the Scheme of Budgetary Support notified by Department of Industrial Policy and Promotion (DIPP).

I/We confirm that the eligible unit is manufacturing and supplying specified goods on payment of Central GST/ Integrated GST and the claim will not include any other activity being carried out under the same GSTIN.

I /We further affirm and declare, as stated above, goods other than specified goods manufactured by the eligible unit will not be taken into account while filing the application under the scheme. The input tax credit on the goods availed by the eligible manufacturing unit or the supplying unit under the same GSTIN will be taken into account while calculating the input tax credit of the eligible manufacturing unit. No amount of budgetary support which is not due as per the conditions of the scheme notified by DIPP shall be claimed by the eligible unit and where any mis-declaration is detected, the amount paid by the Government shall be paid back by me/us with interest as prescribed in the scheme.

I/We solemnly affirm and declare that whatever is stated above is true to the best of my / our knowledge and record. I/We further indemnify the Government of India to recover the amount, if any for any revenue loss which may occur (might have occurred) due to the above submission made by me / us.

DATE : NAME: PLACE: SIGNATURE:  DESIGNATION ADDRESS:

Note:

  1. This indemnity bond should be submitted on Rs.150/- Stamp Paper.
  2. The bond is required to notorised.
  3. Proprietors /Partners / Directors / Authorised Signatory has to sign the bond alongwith their name and residential address. In case the bond is signed by authorized signatory, copy of power of attorney in favour of authorized signatory needs to be enclosed.

 

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Due Diligence Framework under the Insolvency and Bankruptcy Code 2016

 

The Insolvency and Bankruptcy Code, 2016  is an Act to consolidate the laws relating to insolvency and bankruptcy of corporate persons, partnership firms and individuals. It has been mentioned in the Statement of Objects and Reasons of the Code that the objective of the Act is to ensure resolution of such proceedings in a time-bound manner and maximization of the value of assets of such persons in order to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues. Suitable amendments have been done in the existing laws to make all insolvency and bankruptcy proceedings subject to the provisions of the Insolvency and Bankruptcy Code, 2016. The Code would have an overriding effect on all other laws relating to insolvency and bankruptcy. To this effect, Sections 245 to 255 of the Code amend a plethora of existing laws, viz. the Indian Partnership Act, 1932, the Central Excise Act, 1944, the Income Tax Act, 1961, the Customs Act, 1962, the Recovery of Debts due to banks and Financial Institutions Act, 1993, the Finance Act, 1994, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Sick Industrial (Special Provision) Repeal Act, 2003, the Payment and Settlement Systems Act, 2007, the Limited Liability Partnership Act, 2008 and the Companies Act, 2013.

Insolvency and Bankruptcy Board of India (IBBI) has strengthened  its Due Diligence Framework under the Insolvency and Bankruptcy Code, 2016

Now prior to approval of a Resolution Plan, the Resolution Applicants, including promoters, will be put to a stringent test with respect to their credit worthiness and credibility; Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 impose a greater responsibility on the Resolution Professionals  and the Committee of Creditors in discharging their duties.

Insolvency and Bankruptcy Board of India (IBBI) has amended its Corporate Insolvency Resolution Process Regulations to ensure that as part of due diligence, prior to approval of a Resolution Plan, the antecedents, credit worthiness and credibility of a Resolution Applicant, including promoters, are taken into account by the Committee of Creditors.

With a view to ensure that the Corporate Insolvency Resolution Process results in a credible and viable Resolution Plan, the Insolvency and Bankruptcy Board of India (IBBI) has carried-out amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 (CIRP Regulations).

The Revised Regulations make it incumbent upon the Resolution Professional to ensure that the Resolution Plan presented to the Committee of Creditors contains relevant details to assess the credibility of the Resolution Applicants.  The details to be provided would include details with respect to the Resolution Applicant in terms of convictions, disqualifications, criminal proceedings, categorization as willful defaulter as per RBI guidelines, debarment imposed by SEBI, if any, and  transaction, if any, with the Corporate Debtor in the last two years.

Apart from the above, the Resolution Professional has to also submit details in respect of transactions observed or determined, if any, covered under Section 43 (Preferential Transactions); Section 45(Undervalued Transactions); Section 50 (Extortionate Credit Transactions); Section 66 (Fraudulent Transactions) under Insolvency and Bankruptcy Code, 2016.

By virtue of the above mentioned changes in the Regulations, the Resolution Applicants, including promoters, are put to a stringent test with respect to their credit worthiness and credibility. Further, it also imposes greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.

LEVERAGING FREE TRADE AGREEMENTS FOR COMPETITIVE ADVANTAGE;IDENTIFYING THE ROAD BLOCKS

 

 

 

With the proliferation of FTAs globally in its various avatars covering trade in goods, services, and investments. It is imperative for every industry exposed to global production and supply chains management networks to include FTAs as a key component in its growth/survival strategy. The quality and depth of commitments under FTAs is typically WTO plus i.e. surpassing the commitments offered under the WTO commitments. Hence, factoring the FTA landscape by the industries would be a worthwhile endeavor, as it can lead to significant reductions in import duties thus enhancing the cost competitiveness . Further, Exporting Industries can use FTA’s to enhance their competitiveness in terms of smart pricing.

 

India is party to various FTAs which include the Asia-Pacific Trade Agreement with Bangladesh, Korea, Sri Lanka and China (‘APTA’), the Global System of Trade Preferences with 48 countries (‘GSTP’) the Comprehensive Economic Cooperation Agreement with Singapore (‘CECA’), the Agreement on South Asian Free Trade Area with Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka, Maldives (‘SAFTA), the India-Thailand FTA, Preferential Trade Agreements with the Association of South East Asian Nations (‘ASEAN’) and South Korea etc. As of 2015, India has notified the WTO of 15 trade agreements and is currently negotiating another 11 agreements in various forms.

 

Trade agreements are a means to promote trade but Indian Industry  appears to have underutilised these trade agreements. The percentage of India’s international trade  through the preferential route/FTAs is very low. According to the Asian Development Bank, the utilization rate of India’s FTAs varies between 5% and 25%, which is one of the lowest in Asia.

 

A major reason consistently pointed out in  various  studies across developing countries for low utilization rates of FTAs remains the lack of information and education campaigns focused on FTAs. Compliance and administration costs related to ROO (rules of origin) requirements also  represent a major hurdle in the decision of firms to utilise an FTA. All too often, firms, are severely discouraged by the administrative costs of securing COO certificate . Preparing the origin documents entails work that creates fixed expenditure, thus only those firms(one can safely exclude SMEs from this category) who can absorb this cost are inclined to use an FTA scheme. In order to qualify for preferential duty rates, a company must comply with the rules of origin for that particular FTA. These rules have varied criteria (e.g. regional value content or shift in tariff classification) which apply differently to products depending on the FTA. Complex rules of origin criteria, lack of information on FTAs, higher compliance costs and administrative delays dissuade exporters from using preferential routes. Failure to properly track the country of origin of imported goods can jeopardize eligibility for FTAs and other preferential trade programs. Incorrect or false country of origin claims can also result in severe customs penalties or violations of civil and criminal statutes. When applying for a certificate of origin, firms also have to submit documents with specific information on source, components, and raw materials to prove origin.  Firms rightly perceive this process as requiring the disclosure of confidential information, concern about the continued confidentiality of the information so submitted ,is also a major dampener.

 

 

Industries are already facing difficulties comprehending and utilising existing FTAs, this has implications for India’s negotiation of RCEP/FTA with EU, Australia etc., as it  would imply as yet another trade agreement for industries to comprehend. The RCEP, along with other mega RTAs – the TPP(Trans Pacific Partnership) etc, are expected to alter the framework and standards for trade relations among nations. These agreements /negotiations are also focused on compliance of technical ,intellectual property and environmental standards. In these circumstances Industries have no option to ignore the emerging web of trade agreements,  a very concerted effort is required to enhance their capacity to understand and utilize these trade agreements. This won’t be possible especially in context to the SME segment, without government support. The utilisation rate of FTAs would certainly improve as the government steps up its efforts in information and education campaign.

 

In its Foreign Trade Policy statement, issued in March 2015, the Commerce Ministry (GOI) has talked of a relative lack of awareness about the potential benefits from free trade agreements (FTAs). A web portal on FTAs has been developed and can be accessed at http://indiantradeportal.in. However, The data available in the portal require  interpretation and enhanced levels of understanding which is certainly beyond mid-sized & small firms .In any case this effort can at the most qualify as baby step in the right direction.

 

 

In this scenario merely focusing at the policy level of FTAs wont resolve the issue of low utilization and survival of the Industries effected by the global supply chain. A  concerted effort focusing at the administrative issues , especially in ROO administration is required, in terms of creating a Binding Origin Information (BOI) Authority ; enhancing the capacity of the Industry to comply with technical standards, leverage their intellectual property which remaining vigil for not violating the agreed upon IPR regime. What is essentially required is a comprehensive outreach programme, which not only educates but also enhances the capacity of industries to avail the benefits of FTAs .

 

 

 

 

GST TREATMENT IN INDIA OF CROSS BORDER B2C DIGITAL PRODUCTS TRANSACTIONS

 

GST Treatment in India of Cross Border B2C Digital Products Transaction is covered under the OIDAR taxation framework under GST. Online Information Database Access and Retrieval services (OIDAR) is a category of cross border digital products/ services provided through the medium of internet and received by the recipient online without having any physical interface with the supplier of such services. E.g. download of an e-book online for a payment would amount to receipt of OIDAR services by the consumer.

The Integrated Goods and Service Act 2017, defines OIDAR as services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated involving minimal human intervention. These include electronic services such as:

(i) Advertising on the internet

(ii) Providing cloud services

(iii) Provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet

(iv) Providing data or information, retrievable or otherwise, to any person in electronic form through a computer network

(v) Online supplies of digital content (movies, television shows, music and the like)

(vi) Digital data storage

(vii) Online gaming

 

The nature of OIDAR services/digital products are such that it can be provided online from a remote location outside the taxable territory. A similar service/digital provided by an Indian entity, from within the taxable territory, to recipients in India would be taxable.

In cases where the supplier of such service is located outside India and the recipient is a business entity (registered person) located in India, the reverse charge mechanism would get triggered and the recipient in India (registered entity under GST) will be liable to pay GST under reverse charge and undertake necessary compliances.

If the supplier is located outside India and the recipient in India is an individual consumer in such cases also, the place of supply would be India and the transaction is amenable to levy of GST.

For such cases the IGST Act provides that on supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient, the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.

Now if an intermediary located outside India arranges or facilitates supply of such service to a non-taxable online recipient in India, the intermediary would be treated as the supplier of the said service, except when the intermediary satisfies the following conditions:

(a) The invoice or customer’s bill or receipt issued by

such intermediary taking part in the supply clearly identifies the service in question and its supplier in

non-taxable territory

(b) The intermediary involved in the supply does not authorise the charge to the customer or take part in its charge. This means that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services

(c) The intermediary involved in the supply does not authorise delivery

(d)  The general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services

The supplier (or intermediary) of online information and database access or retrieval services shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme in Form GST REG-10. The supplier shall take registration at Principal Commissioner of Central Tax, Bengaluru West(India) who has been the designated for grant registration in such cases.

In case there is a person in the taxable territory (India) representing such overseas supplier in the taxable territory for any purpose, such person (representative in India) shall get registered and pay integrated tax on behalf of the supplier.

In case the overseas supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

“Non-Taxable Online Recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

 

Indicative List of OIDAR Services

  1. Website supply, web-hosting, distance maintenance of programmers and equipment

(a) Website hosting and webpage hosting

(b) Automated, online and distance maintenance of   programmers

(c) Remote systems administration

(d) Online data warehousing where specific data is stored and retrieved electronically

(e) Online supply of on-demand disc space

  1. Supply of software and updating thereof

(a) Accessing or downloading software (including procurement/accountancy programmers and

 anti-virus software) plus updates

(b) Software to block banner adverts, otherwise known as Banner blockers

(c) Download drivers, such as software that interfaces computers with peripheral equipment

 (such as printers)

(d) Online automated installation of filters on websites

(e) Online automated installation of firewalls

  1. Supply of images, text and information and making available of databases

(a) Accessing or downloading desktop themes

(b) Accessing or downloading photographic or pictorial images or screensavers

(c) The digitised content of books and other electronic publications

(d) Subscription to online newspapers and journals

(e) Weblogs and website statistics

(f)  Online news, traffic information and weather reports

(g) Online information generated automatically by software from specific data input by the customer, such as legal and financial data, (in particular, data such as continually updated stock market data, in real time)

(h) The provision of advertising space including banner ads on a website/web page

(i) Use of search engines and Internet directories

  1. Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events

(a) Accessing or downloading of music on to computers and mobile phones

(b) Accessing or downloading of jingles, excerpts, ringtones, or other sounds

(c) Accessing or downloading of films

(d) Downloading of games on to computers and

 mobile phones

(e) Accessing automated online games which are dependent on the Internet, or other similar electronic networks, where players are geographically remote from one another

  1. Supply of distance teaching

(a) Automated distance teaching dependent on the Internet or similar electronic network to function and the supply of which requires limited or no human intervention. These include virtual classrooms, except where the Internet or similar electronic network is used as a tool simply for communication between the teacher and student

(b) Workbooks completed by pupils online and marked automatically, without human intervention

The place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

 

 

First blog post

This is the post excerpt.

Hello readers !! I have started this blog to track matters related to the ever shifting  regulatory scenario effecting primarily trade and business in the Indian as well as the global context. My experience  suggests that there is tremendous gap in the industry about regulatory challenges confronting them and more often than not they are ill informed or mis-informed. This is a free wheeling blog and it wont be confined to just regulatory matters alone, anything which would enhance the competitiveness of commerce,institutions ,government etc interests me and through this medium I wish to share with fellow travelers.This blog is meant to keep you better informed , so that you can make more considered choices and decisions.  However , a word of caution, before effecting any decision having an financial or legal implication after reading this blog, you are strongly recommended to seek professional advice and consult official sources. So happy reading !!

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