Weekly Round-up on Tax and Corporate Laws | 26th to 31st December 2022

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 26th to 31st December 2022, namely:

(a) CBIC notifies CGST (Fifth Amendment) Rules, 2022;

(b) Now technical glitches wouldn’t hinder the trading sessions as the SEBI launches ‘IRRA’ platform;

(c) Cash receipt by ‘Co-op. Society’ from dealer across multiple days not to be aggregated for Section 269ST: CBDT;

(d) CBIC issues clarification to deal with the difference in ITC availed in GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19; and

(e) Issuance of safety certificate to be considered a condition necessary for recognising the cost of asset: EAC.

1. CBIC notifies CGST (Fifth Amendment) Rules, 2022

The CBIC has issued CGST (Fifth Amendment) Rules, 2022 to notify changes recommended by the GST Council in its 48th meeting. The key changes announced are as under:

(a) Form GSTR-1 has been amended to change the manner of reporting details relating to supplies made through the e-commerce operator (‘ECO’);

(b) The procedure is prescribed for filing an application for refund by the unregistered buyers where the contract/ agreement for the supply of services, like construction of flat/house and long-term insurance policy, is cancelled;

(c) Rule 37A is inserted to provide for the mechanism and time limit of reversal of ITC by the recipient where the supplier does not pay the tax to the Government;

(d) New Rule 88C and Form GST DRC-01B introduced for issuing intimation to the taxpayer for the differences between liability reported in Form GSTR-1 and Form GSTR-3B, where such difference exceeds a specified amount and/or percentage;

(e) Rule 37(1) is amended w.e.f. 01-10-2022 to provide for the reversal of input tax credit only proportionate to the amount not paid to the supplier vis-a-vis the value of the supply, including tax payable;

(f) Rule 108 and Rule 109 are amended to provide clarity on the requirement of submission of the certified copy of the order appealed against and the issuance of final acknowledgement by the appellate authority; and

(g) New Rule 109C and Form GST APL-01/03W are introduced to provide the facility for withdrawal of an application of appeal up to a certain specified stage.

Read the Notification

2. Now technical glitches wouldn’t hinder the trading sessions as the SEBI launches ‘IRRA’ platform

Ever faced a situation wherein you couldn’t square off your positions due to a technical glitch at the end of the services provided by the trading member? Now, to address this issue, the SEBI has decided to put in place the Investor Risk Reduction Access (IRRA) platform by October 2023 to help investors if there is a disruption of services from the trading members’ end.

As the use of technology in the securities market has increased, there have been more instances of issues with the systems used by trading members, which have caused disruptions in trading and complaints from investors. When this happens, investors who have bought or sold stocks but have not yet closed their positions are at risk of not having a way to finish the trade, especially if the market is unstable. This can be a problem because it leaves investors uncertain about the status of their investments.

‘Investor Risk Reduction Access’ platform

The SEBI has introduced the Investor Risk Reduction Access (IRRA) platform in case of disruption of trading services provided by the Trading Member (TM). Where a trading member’s business continuity plan cannot prevent disruption, such as the inability to move to a disaster recovery site within a certain time frame or a cyber attack, the stock exchanges will provide a contingency service to handle the situation. This service is being implemented because of the potential risks that disruptions can pose to investors.

IRRA provides the investors with an opportunity to square off/close the open positions or cancel pending orders in case of disruption of trading services offered by the Trading Member.

How would IRRA be activated?

The IRRA would be activated in the following scenarios:

(a) On the request of trading members

(b) Suo-moto activation by stock exchanges

Trading members who experience technical problems that lead to trading services disruption can ask the stock exchanges to activate the IRRA service by following the prescribed procedures. The stock exchanges will activate the IRRA service if there is a disruption of trading services for the trading member across all exchanges where they are a member. If there is a disruption at just one or some exchanges where the trading member is a member, they can request the activation of the service and will be required to use it for all exchanges.

How can Investors access IRRA?

Once the service is enabled, the investors shall be informed of the availability of the service through email/SMS and public notice on the exchange’s website. Investors can log in to the service using either the Unique Client Code (UCC) or the PAN number, and they shall be authorised by a One Time Password (OTP).

How will Investors be benefited from IRRA?

The IRRA will help investors in the following ways:

(a) The investors can square off/close the open positions across segments and exchanges;

(b) Investors can cancel the orders across segments that are pending at the exchanges;

(c) The IRRA service shall not permit any action that increases the risk to the investor;

(d) IRRA service shall also provide the TM with access to an Admin Terminal, through which the TM can monitor the actions of investors and carry out the necessary actions as mentioned above.

Read the Circular

3. Cash receipt by ‘Co-op. Society’ from dealer across multiple days not to be aggregated for Section 269ST: CBDT

Section 269ST provides that no person is allowed to receive a sum of Rs. 2,00,000 or more from a person in a day or in respect of a single transaction or one event or occasion, in cash or an impermissible mode. Any contravention of this provision attracts a penalty under Section 271DA.

The CBDT was asked to clarify whether the receipt of cash by the co-op. societies from a distributor for the sale of milk on a day the bank is closed is considered a single transaction. Further, whether all cash receipts from the distributor in the previous year be treated as a single event or occasion under Section 269ST.

The Board clarified that in respect of co-op. societies, a dealership/distributorship contract by itself may not constitute an event or occasion for the purposes of Section 269ST. Thus, all such receipts by societies from dealers should not be aggregated across multiple days for the purposes of Section 269ST.

Read the Circular

Check out Taxmann's Yearly Tax Digest & Referencer | Set of 2 Volumes which is a Section-wise Case Book of Judgements of Supreme Court/High Courts/Income-tax Appellate Tribunal reported in 2021. It also includes Circulars & Notifications issued by the Dept. along with Words & Phrases taken from the reported case laws. 

Here is a Sample Read for your Reference.

4. CBIC issues clarification to deal with the difference in ITC availed in GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19

During the initial period of implementation of GST, certain suppliers have failed to furnish the correct details of outward supplies in Form GSTR-1, which has led to certain deficiencies or discrepancies in Form GSTR-2A of their recipients. However, the concerned recipients may have availed input tax credit on the said supplies in their returns in Form GSTR-3B. The discrepancies between the amount of ITC availed by the registered persons in Form GSTR-3B and the amount available in Form GSTR-2A are noticed by the tax officers during the proceedings. The tax officers consider such discrepancies as representing ineligible ITC availed by the registered persons.

Now, the CBIC has issued a clarification to deal with the difference in ITC availed in GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19. Since GSTR-2A could not be made available to the taxpayers on the common portal during the initial stages of the implementation of GST and a detailed procedure is prescribed to ensure uniformity in the implementation. In this regard, Circular No. 183/15/2022-GST, dated 27th December 2022, has been issued.

Read the Circular

5. Issuance of safety certificate to be considered a condition necessary for recognising the cost of asset: EAC

As per Para 20 of Ind AS 16 (Property, Plant and Equipment), “recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Therefore, costs incurred in using or redeploying an item are not included in the carrying amount of that item. For example, the following costs are not included in the carrying amount of an item of property, plant and equipment: (a) costs incurred while an item capable of operating in the manner intended by management has yet to be brought into use or is operated at less than full capacity; (b) … ”

Therefore, the cost incurred after an item is capable of operating in the manner intended by the management is not to be included in the carrying amount of PPE. Here confusion arises regarding the event or activity to be considered for the cessation of cost. Whether the date of successful commissioning of a train for carriage of passengers or the date on which safety clearance from the commissioner for coaches is issued is considered an event or activity necessary for it to be capable of operating in a manner intended by management.

In this regard, the Expert Advisory Committee (EAC) of ICAI has noted that when an item is in the location and condition necessary for it to be capable of operating in the manner intended by management, recognition of costs in the carrying amount of such item should cease, even though there is a possibility of the item operating at less than full capacity. Further, it is clear from the facts that the event or activity that characterises the point at which an asset’s physical construction or installation is complete is the event when the Commissioner of Metro Railway Safety (CMRS), after inspection and approval of the corridor, gives clearance for operation of trains. The Committee is of the view that such a clearance implies that coaches are in the location and condition necessary for it to be capable of operating in the manner intended by the management as per the requirements of Ind AS 16. Accordingly, the cost incurred till the issuance of safety clearance from the CMRS will be capitalised to the cost of coaches.

Read the Story