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336th Issue: 6th February 2022- 12th February 2022

The Hon’ble Finance Minister Smt. Nirmala Sitharaman on 01st February 2022 presented the Union Budget 2022. The budget is a vision document and has given ample scope for the youth to turn into entrepreneurs and in turn, become employment generators.

Recently, there has been a phenomenal increase in transactions in virtual digital assets. Further, a market is emerging where payment for the transfer of a virtual digital asset can be made through another such asset. Accordingly, for the taxation of virtual digital assets, a new tax scheme is proposed to be inserted. The new provision to tax cryptocurrency gains at 30% will come into force from April 1, 2022. Additionally, all transfers of such assets will attract 1 percent Tax Deducted at Source (TDS). Further, no deduction will be allowed while computing income except the cost of acquisition. Loss cannot be set off from any other income. Gift of cryptocurrencies to be taxed at receiver’s end. It is to be noted that Crypto is a form of asset that can be monetised, but it is not a currency while on the other hand, digital currency that the Hon’ble Finance spoke about is going to be a currency, which will be issued by the Reserve Bank of India (RBI).

Government vows a stable and predictable tax regime. The Budget highlights in the Income Tax regime are:

  1. Government to provide a one-time window to correct omissions in ITRs filed, updated returns to be filed within 2 years.
  2. Any Cess or surcharge on income is not allowed as business expenditure.
  3. Alternate Minimum Tax for cooperative societies to be cut to 15%.
  4. The proposal will Reduce the surcharge on cooperative societies to 7%, for those whose income is between Rs 1 crore and Rs 10 crore.
  5. Tax deduction limit increased to 14% on employers’ contribution to NPS account of state govt employees.
  6. Condition for claiming deduction under section 80DD liberalized.

TDS on higher of actual consideration or stamp duty value under section 194-IA.

SYNOPSIS

S.NO. TOPICS PAGE NO.
1] TAX CALENDAR 4
2] INCOME TAX 5
NOTIFICATION Central Government notifieD, ‘West Bengal Electricity Regulatory Commission’, in respect of the specified income arising to that Commission.
3] GST 6
CASE LAW NOTICE FOR CANCELLATION OF PETITIONER’S GST REGISTRATION BEREFT OF ANY REASON OR FACT IS QUASHED: DELHI HIGH COURT
4] FEMA 7
DISCUSSION MARGIN FOR DERIVATIVE CONTRACTS
5] CUSTOMS 8
NOTIFICATION amendMENT OF Notification Nos. 104/2010-Customs, 38/96-Customs, 40/2017-Customs, 60/2011-Customs, 148/94-Customs to exempt AIDC/Health cess/RIC on goods imported under the said notifications.
6] DGFT 9
NOTIFICATION EXTENSION OF LAST DATE FOR SUBMITTING APPLICATIONS FOR SCRIP BASED FTP SCHEMES
7] UNION BUDGET 2022-23 10
8] GST PLEADING AND PRACTICE: WITH SECTION-WISE GST CASES & GST NOTICES AND THEIR REPLIES 11
9] LET’S DISCUSS THIS FURTHER 12

 

TAX CALENDAR

Due Date Form/Return/Challan Reporting Period Description
7h February Challan-281 January 2022 Depositing of TDS/ TCS for Jan 2022
10th February GSTR-7 January 2022 Filing of GSTR-7 (TDS Deductor) for the month of Jan 2022
10th February GSTR-8 January 2022 Filing of GSTR-8 (TCS Collector) for the month of Jan 2022
10th February GSTR-1 December 2021 Filing of GSTR-1 (other than QRMP) for Jan 2022

 

INCOME TAX

NOTIFICATION

Central Government notifieD, ‘West Bengal Electricity Regulatory Commission’, in respect of the specified income arising to that Commission.

OUR COMMENTS: The Central Government vide notification 11/2022 dated 27.01.2022 hereby notified for the purposes of the said clause, ‘West Bengal Electricity Regulatory Commission’, Kolkata (PAN: AAAGW0011J), a Commission constituted by the State Government of West Bengal, in respect of the following specified income arising to that Commission, namely:-

(a) Income from the fund maintained in accordance with the provisions of the West Bengal Electricity Regulatory Commission (Manner of application of Fund) Rules, 2006; and

(b) Income from the fees collected in accordance with the provisions of the West Bengal Electricity (fees for application for grant of license) Rules, 2005, notified by the Government of West Bengal.

This notification shall be effective subject to the conditions that West Bengal Electricity Regulatory Commission, Kolkata –

(a) shall not engage in any commercial activity;

(b) activities and the nature of the specified income shall remain unchanged throughout the financial years; and

(c) shall file a return of income in accordance with the provision of clause (g) of sub-section (4C) of section 139 of the Income-tax Act, 1961.

This notification shall be applicable for the financial years 2021-2022, 2022-2023, 2023-2024, 2024-2025, and 2025-2026.

GST

CASE LAW

Notice for cancellation of petitioner’s GST registration bereft of any reason or fact is quashed: Delhi high court.

Our Comments: Since in the present case, the petitioner’s registration has been lying suspended for more than two months on the basis of a show-cause notice which is bereft of any reason or fact, this Court quashes the impugned show cause notice dated 11th November 2021 and directs the respondents to restore the petitioner’s registration forthwith.

However, the respondents are permitted to issue a fresh show-cause notice mentioning all the relevant facts and reasons within a week. The same shall be responded to by the petitioner within a period of seven working days from the date of the service of such notice (Rule 22, DGST).

The Commissioner, Delhi, GST, is also directed to issue a practice direction so that in the future if any show-cause notice for cancellation of GST registration is issued, the same is not bereft of any material particulars or reasons.

The Commissioner, Delhi GST admitted that the impugned show-cause notice dated 11th November 2021 contains no fact or reason. He also agreed that the impugned show-cause notice is not supported by any document/form on the basis of which the petitioner’s GST registration has been suspended.

Since in the present case, the petitioner’s registration has been lying suspended for more than two months on the basis of a show-cause notice which is bereft of any reason or fact, this Court quashes the impugned show cause notice dated 11th November 2021 and directs the respondents to restore the petitioner’s registration forthwith.

However, the respondents are permitted to issue a fresh show-cause notice mentioning all the relevant facts and reasons within a week. The same shall be responded to by the petitioner within a period of seven working days from the date of the service of such notice (Rule 22, DGST). The respondents shall thereafter decide the same in accordance with law within two weeks.

 FEMA

DISCUSSION

MARGIN FOR DERIVATIVE CONTRACTS

OUR COMMENTS: The ‘Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020’ allows margin to be posted and collected against permitted derivative contracts.

Derivative

Regulation 2(da) of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 defines the term ‘derivative’ as a financial contract, to be settled at a future date, whose value is derived from one or more financial, or non-financial variables.

Margin

.The term ‘margin’ is defined under Regulation 2(iv) of Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020 as the collateral that the parties to a derivative contract post with or collect from each other (whether directly or through a third party) to cover some or all of the credit risk that the provider of the collateral poses for the receiver of the collateral.

Permitted derivative contract

The expression ‘permitted derivative contract’ is defined under Regulation 2(v) as-

  • Foreign Exchange Derivative Contract undertaken in terms of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000and Master Direction–Risk Management and Inter-bank Dealings, as amended from time to time,
  • Interest Rate Derivative Contract undertaken in terms of the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 (Notification No. FMRD.DIRD.20/2019 dated June 26, 2019), as amended from time to time,
  • Credit Derivative Contract is undertaken in terms of Notification No. IDMD.PCD. No.10/14.03.04/2012-13 dated January 7, 2013, as amended from time to time, and
  • Any other derivative contract as may be specified by the Reserve Bank.

Foreign Exchange derivative contract

Section 2(v) of Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 defines the expression ‘foreign exchange derivative contract’ as a financial contract which derives its value from the change in the exchange rate of two currencies at least one of which is not Indian Rupee or which derives its value from the change in the interest rate of a foreign currency and which is for settlement at a future date, i.e. any date later than the spot settlement date, provided that contracts involving currencies of Nepal and Bhutan shall not qualify under this definition.

Interest Rate derivative contract

An interest rate derivative is a financial instrument with a value that is linked to the movements of an interest rate or rates. These may include futures, options, or swaps contracts. Interest rate derivatives are often used as hedges by institutional investors, banks, companies, and individuals to protect themselves against changes in market interest rates, but they can also be used to increase or refine the holder’s risk profile or to speculate on rate moves.

Interest rate derivative transactions carried out on exchanges shall be subject to the following directions:

  • Exchanges are permitted to offer any standardized Interest Rate Derivatives product.
  • The product design, eligible participants, and other details of the IRD product may be finalized by the exchanges.
  • Exchanges shall obtain prior approval of the Reserve Bank before introducing any new IRD product or before carrying out modifications to an existing product.

CUSTOMS

NOTIFICATION

Amendment of notification nos. 104/2010-customs, 38/96-customs, 40/2017-customs, 60/2011-customs, 148/94-customs to exempt aidc/health cess/ric on goods imported under the said notifications.

OUR COMMENTS: The Central Government, vide notification non 8/2022 dated 1.2.2022, on being satisfied that it is necessary to do, hereby further amends the following notifications of the Government of India :

.No. Notification number and Date Amendments
1. Notification No. 104/2010-Customs, dated the 1st October 2010, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 805(E), dated the 1st October 2010. In the said notification, in the preamble, after the words, figures and brackets “from the whole of the duty of Customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)”, the words, figures, and brackets “and from the whole of Agriculture Infrastructure and Development Cess, leviable under section 124 of the Finance Act, 2021 (13 of 2021)” shall be inserted.
2. Notification No.38/96-Customs, dated the 23rd July 1996, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 290(E), dated the 23rd July 1996. In the said notification, in the TABLE, against S.No. 1, for the entry in column 3, the following shall be substituted, namely: -“Duty of Customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), Agriculture Infrastructure and Development Cess, leviable under section 124 of the Finance Act, 2021 (13 of 2021), Health Cess, leviable under section 141 of the Finance Act, 2020 (12 of 2020), Road and Infrastructure Cess, leviable under section 111 of the Finance Act, 2018 (13 of 2018) and integrated tax and goods and services tax compensation cess leviable thereon respectively under sub-sections (7) and (9) of section 3 of the said Act.”
3. Notification 40/2017-Customs, dated the 30th June 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 775(E), dated the 30th June 2017. In the said notification, in the preamble, after the words, “from the whole of the duty of Customs leviable thereon which is specified in the said First Schedule”, the words, figures and brackets “, the whole of Agriculture Infrastructure and Development Cess, leviable under section 124 of the Finance Act, 2021 (13 of 2021), the whole of Health Cess, leviable under section 141 of the Finance Act, 2020 (12 of 2020) and the whole of Road and Infrastructure Cess, leviable under section 111 of the Finance Act, 2018 (13 of 2018)” shall be inserted.
4. Notification 60/2011-Customs, dated the 14th July 2011, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 536(E), dated the 14th July 2011 In the said notification, in the preamble, after the words, figures and brackets “from the whole of the duty of Customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975)”, the words, figures, and brackets “and from the whole of Agriculture Infrastructure and Development Cess, leviable under section 124 of the Finance Act, 2021 (13 of 2021)” shall be inserted.
5. Notification 148/94-CUSTOMS, dated the 13th July 1994, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 577(E), dated the 13th July 1994. In the said notification, in the preamble, after the words “from the whole of the duty of Customs leviable thereon under the said First Schedule”, the words, figures and brackets “, the whole of Agriculture Infrastructure and Development Cess, leviable under section 124 of the Finance Act, 2021 (13 of 2021), the whole of Health Cess, leviable under section 141 of the Finance Act, 2020 (12 of 2020), the whole of Road and Infrastructure Cess, leviable under section 111 of the Finance Act, 2018 (13 of 2018)” shall be inserted

 

DGFT

NOTIFICATION

Extension of the last date for submitting applications for scrip-based FTP schemes.

OUR COMMENTS: The Central Government vide notification 53/2015-2020 dated 1.2.2022, hereby amended the para 3.13A of the FTP 2015-20 (as notified vide Notification no. 26 dated 16th September 2021 and amended vide Notification No.48 dated 31.12.2021) with immediate effect.

The para 3.13A shall now read as below:

3.13A: Last Date of Submitting Applications for Scrip based Schemes

  1. In supersession of the existing laid down provisions in the Hand Book of Procedures, 2015-20 with regard to the last date for submitting online applications for scrip based claims, the last date for submitting online applications stands revised to 28th February 2022for the following schemes i.e.
  2. for MEIS (for exports made in the period (s) 01.07.2018 to 31.03.2019, 01.04.2019 to 31.03.2020 and 01.04.2020 to 31.12.2020),
  3. for SEIS (for service exports rendered for FY 18-19 and FY 2019-20),

iii. for 2 % additional ad hoc incentive (under para 3.25 of the FTP for exports made in the period 01.01.2020 to 31.03.2020 only)

  1. for ROSCTL (for exports made from 07.03.2019 to 31.12.2020) and
  2. for ROSL (for exports made up to 06.03.2019 for which claims have not yet been disbursed under scrip mechanism).

After 28.02.2022. no further applications would be allowed to be submitted and they would become time-barred. Late cut provisions shall also not be available for submitting claims at a later date.

  1. In supersession of the laid down provisions on the applicable late cut as in para 9.02 of the HBP, the new late cut for applications submitted up to 28.02.2022as indicated above shall be:
Sl No. Scheme Period of Exports (Let Export Date in the period) / Services rendered in the period Late Cut (as % age of entitlement under the Scheme)
1. MEIS FY 2018-19 (01.07.2018 to 31.03.2019 10%
2 MEIS FY 2019-20  and FY 2020-21 (up to 31.12.2020) Nil
3. SEIS FY 2018-19 5%
4. SEIS FY 2019-20 Nil
5. ROSCTL 07.03.2019 to 31.12.2020 Nil
6. ROSL Up to 06.03.2019 Nil

Effect of this Notification: The last date of submitting applications under MEIS, SEIS. ROSCTL, ROSL and 2% additional ad hoc incentive (under para 3.25 of FTP) which was earlier notified to be 31.01.2022 have been extended to 28.02.2022.

 

Profile photo of CA Vivek Jalan CA Vivek Jalan

Vivek Jalan, from Tax Connect, is a Chartered Accountant & a qualified L.LM & LL.B. He is The Chairman of The Ease of Doing Business Committee therein. He is a member of The Confederation of Indian Industries (CII)- Economic Affairs & Taxation Committee. He is the Member of The Consultative Committee of The Commissioner of SGST. He is also The Member of The Regional Advisory Committee of The Chief Commissioner of CGST. He is advising Large MNCs, PSUs & PAN India Organizations in GST & Income Tax and has offices in Kolkata, Delhi, Bangalore, Mumbai & now Surat. He is a regular Columnist and guest expert in Economic Times, Times of India, Dalal Street Journal, Money Control, Live mint, CNBC, Hindustan Times, Zee Business, Financial Express, other dailies, and business magazines like Business Today, etc. He is also a guest expert on Taxation matters in All India Radio and other media platforms. He is the Editor of Weekly Bulletin TAX CONNECT, a publication on Indirect Taxes and Direct Taxes which reaches more than 70000 professionals.

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