Direct Tax

Extension Of Time Limits Of Certain Compliances To Provide Relief To Taxpayers In View Of Difficulties Reported By Taxpayers

[Circular No. 16, 29 August 2021]

The due date for filing of Equalization Levy statement for FY 2020-21, statement of Foreign Remittances to be filed by authorized dealers for Q1 of FY 2021-22 have been extended to 30 November 2021. The due date for Pension Funds and Sovereign Wealth Funds for intimation of investment made in India for Q1 for FY 2021-22 have been extended to 30 November 2021.

Central Board of Direct Taxes (CBDT) extends due date under Section 3 of Vivad se Vishwas Act (VSV Act)

[Press Release dated 29 August 2021]

Considering the difficulties being faced in issuing Form 3, which is a pre-requisite for making payment of disputed tax, the due date for payment of disputed tax under the VSV Act (without any additional amount) has been extended from 31 August 2021 to 30 September 2021.

The CBDT further clarified that there is no proposal to change the last date for payment (with additional amount) under VSV Act, and it remains as 31 October 2021.

CBDT notifies new rule for computation of taxable interest on employees contribution to the provident fund in excess of a prescribed threshold

[Notification No. 95/2021, 31 August 2021]

The Finance Act, 2021 had amended the provisions exempting payments from recognized provident funds to withdraw exemption on interest on employee's contribution in excess of the INR 0.25 million. The computation of taxable interest on excess employees' contributions has now been prescribed by inserting a new Rule 9D. The new rule requires the individual to maintain separate accounts for taxable contribution and non-taxable contribution within the provident fund accounts from FY 2021-22 onwards. It further states that the interest accrued on the taxable contribution account shall not qualify for an exemption.

CBDT provides a procedure for handling assessment/penalty proceedings by Jurisdictional AO transferred out of Faceless Assessment

[Circular No. F. No. 225/97/2021/ ITA-II dated 6 September 2021]

Jurisdictional AO shall complete the assessment/penalty following broad contours:

  • Conduct proceedings electronically, except in certain specified cases.
  • The request for personal hearings (through video conference) shall generally be allowed to the taxpayers, mainly after the taxpayers have filed written submission to the show cause notice. If video conference is not technically feasible, personal hearings may be conducted in a designated area in Income-tax Offices.
  • Jurisdictional AO may use faceless processes, such as verification units for online verification or specialized units for technical inputs, etc. while conducting the proceedings.
  • The superior authority to Jurisdictional AO is compulsorily required to finalize the assessment or penalty.

CBDT extends timelines for filing income-tax returns and various audit reports for AY 2021-22

[Circular No. 17, 17 September 2021]

On consideration of the various difficulties faced by taxpayers and other stakeholders, the circular provides an extension of the following due dates:

Particulars Original Due Date Revised Due Date
Taxpayers who are required to furnish transfer pricing report 30 November 2021 28 February 2022
Taxpayers who are required to get their accounts audited and not covered in Sr. No. 1 above 31 October 2021 15 February 2022
Other taxpayers not covered in Sr. No. 1 or 2 above 31 July 2021 31 December 2021
Belated/revised tax returns 31 December 2021 31 March 2022
Tax Audit Report 30 September 2021 15 January 2022
Transfer pricing report in respect of international/ specified domestic transactions 31 October 2021 31 January 2022

Indirect Tax

Clarification issued on the scope of 'intermediary'

[Circular No. 159/15/2021 dated 20 September 2021]

The government has issued much-awaited clarifications on the scope of 'intermediary' under the GST law. It has laid down certain pre-requisites/conditions, which are summarized as follows:

  • There should be a minimum of three parties, two of them transacting in the supply of goods or services or securities and one arranging or facilitating the said main supply.
  • There are two distinct supplies in the case of intermediary services;
    1. Main Supply - between the two principals, which can be a supply of goods or services or securities; and
    2. Ancillary Supply - which is the service of facilitating or arranging the main supply between the two principals.
  • The intermediary service provider should have the character of an agent, broker, or any other similar person. The use of the expression ‘arranges or facilitates’ in the definition of ‘intermediary’ suggests a subsidiary role for the intermediary.
  • A person involved in the main supply on principal to principal basis to another person cannot be considered a supplier of intermediary service.
  • Sub-contracting for a service is not an intermediary service. In such services, the sub-contractor provides the main supply, either fully or partly, and does not merely arrange or facilitate the main supply between the principal supplier and his customers.

Clarification relating to the export of services

[Circular No. 161/17/2021 dated the 20 September 2021]

The government has clarified that any supply of services by a subsidiary/sister concern/group concern of a foreign company in India to establishments of the said foreign company incorporated outside India will not be barred by condition (v) of Section 2(6) of the IGST Act. It would not be treated as a supply between mere establishments of distinct persons under Explanation 1 of Section 8 of the IGST Act. Such supplies, therefore, would qualify as 'export of services, subject to fulfillment of other conditions as provided under Section 2(6) of the IGST Act.

Key recommendations in the 45th GST Council Meeting

The 45th GST Council meeting was held on 17 September 2021. Apart from the rate changes on various goods and services, the following key decisions were taken in the meeting:

  • Relaxation in requirement of filing GST ITC-04 (job-work details) from quarterly to six monthly for taxpayers having turnover above INR 50 million and annual for taxpayers having turnover below INR 50 million.
  • Ability to transfer unutilized balance in GST cash ledger on the GST portal between 'distinct persons' without going through the refund procedure.
  • Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
  • From 1 January 2022, the taxpayer who has not furnished Form GSTR-3B for the preceding month would be restricted from the furnishing of Form GSTR-1.
  • Late fee for delayed filing of GSTR-1 to be auto-populated and collected in next GSTR-3B return.
  • Rule 36(4) of CGST Rules to be amended once the proposed clause (aa) to Section 16(2) to restrict availment of ITC in respect of invoices/debit notes to the extent the details thereof are furnished by the supplier in GSTR-1/IFF and communicated to the recipient in Form GSTR-2B, is notified.
  • From 1 January 2022, e-commerce operators shall be made liable to pay tax on the following services provided through them:
    1. Transport of passengers through any type of motor vehicle, and
    2. Restaurant services are provided with some exceptions.

Extension of Foreign Trade Policy

[Notification no. 33/2015-2020 dated 28 September 2021]

In view of the pandemic, the government had previously extended the Foreign Trade Policy 2015-20 till 30 September 2021. Now, the policy has been further extended up to 31 March 2022.

Extension in the Export Obligation period of specified Advance and EPCG Authorisations

[Notification no. 28/2015-2020 dated 23 September 2021]

The Directorate General of Foreign Trade (DGFT) has notified the following:

  • The Export Obligations period of specified Advance and Export Promotion Capital Goods (EPCG) Authorizations, where original or extended Export Obligation is expiring during the period 1 August 2020 to 31 July 2021, has been extended till 31 December 2021. However, this extension is subject to 5% additional Export Obligation on the balance of original or extended Export Obligation.
  • The option to avail Export Obligation extension with payment of composition fees would remain available.
  • Where AA Holder or EPCG Holder has already obtained Export Obligation extension upon payment of composition fee, the refund of composition fee will not be permitted.