Advance RulingsCase Briefs


Gujarat Authority for Advance Ruling: In an application sought for advance ruling on the question that whether Goods and Services Tax (GST) rate of 5 percent under entry No. 252 of Schedule 1 of Notification No. 1/2017 of Central Tax Rate and a corresponding notification issued by Gujarat State and Notification No. 1/2017 of Income Tax Rate is applicable in the case of “Combined Wire Rope” used as a part of a Fishing Vessel, the two-member bench of Milind Kavatkar and Amit Kumar Mishra has ruled that the combine wire rope has no use in the fishing vessel, but it is used to tie the fishing net, thus, it is not covered under entry No. 252 of Schedule 1 of Notification No. L/20l7 of Central Tax (Rate) and is not eligible for GST at 5 percent.


The main issue is to decide whether the combined wire rope is a part of a fishing vessel.


The Authority observed that wire rope is used in various fields such as mines, haulage, engineering, lift & escalators and shipping depending upon the requirement and usage of the field. Further, wire rope is used in shipping but in the manual use of wire rope in fishing vessel has not been mentioned. Thus, wire rope has no specific or general use in fishing vessels.

It was further observed that as the fishing net is tied and hooked with fishing vessels with the help of combined wire rope,thus, the rope is not a part of fishing vessel but it’s one side is used to tie the fishing net and other side is tied on the vessel, and the main use of combine wire rope in fishing is to tie the fishing net with vessel. Therefore, fishermen required such wire rope for fishing purpose and the applicant supply such combine wire rope to them.

The Authority, while referring to the decision in Star Paper Mills v. Collector of Central Excise(1989) 4 SCC 724 , wherein it was held that “‘Parts’ are used in the manufacturing of the final product and is an integral part of it, and it is must to complete the whole article and without it the final product will not be completed” and observed that the applicant’s cornbined wire rope is not an essential part of fishing vessel and it is not used in the manufacture of fishing vessels. Therefore, it is not eligible for the GST rate at 5 percent.

[Shakti Marine Electric Corporation, In re, 2022 SCC OnLine Guj AAR-GST 21, decided on 28.09.2022]

Advocate who appeared in this case:

R. S. Parmar, Advocate, Present for the Applicant.

Advance RulingsCase Briefs


Authority of Advanced Ruling (Karnataka): The two-member bench of M.P Ravi Prasad and T. Kiran Reddy has ruled that works contract services executed to Public Works Department, for construction of Airport Terminal Building and for development of Greenfield airport is liable to tax at 9 percent GST. Further, the works contract services executed to Karnataka State Police Housing and Infrastructure Corporation Ltd. for construction of High Security prison; Kudala Sangama Development Board (KSDB) for construction of Basava International Center and Museum; Karnataka Residential Educational Institutions Society (KREIS) for Constructions of Residential School Complex are all liable to 9 percent tax.

In this case, the Authority examined whether the Karnataka State Police Housing and Infrastructure Corporation Limited, KSDB and KREIS, to whom the applicant is providing the services, constitute a government authority or entity.

The Authority took note of the notification No. 11/2017 of Central Tax rate that defines Governmental authority as an authority or a board or any other body that is set up by an Act of Parliament or a State Legislature; or established by any government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a Municipality or to a Panchayat, and also defines government entity as an authority or a board or any other body including society, trust, corporation set up by an Act of Parliament or State Legislature or established by any Government with 90 percent or more participation by way of equity or control, to carry out a function entrusted by the central Government, State Government, Union Territory or a Local authority.

The Authority observed that Karnataka State Police Housing and Infrastructure Corporation Limited is a company of the Government of Karnataka incorporated under the Companies Act, 1956 and all the shares of the Company are held by the Government of Karnataka, thus, it qualifies to be considered as a government entity. Further, KSDB was established under the KSDB Act, 1994 to develop and maintain Kudala Sangama Kshetra in Bagalkot district, and more than 90 percent of the board members are from the State Government and all the administrative expenses of the board are covered by the grants given by the State Government. Thus, KSDB qualifies to be considered as a Government Entity.

Moreover, KRIES was formed under the Societies Registration Act to establish, maintain, control and manage residential institutions for the talented and meritorious children belonging to the scheduled caste, scheduled tribes and other backward classes. Further, the Karnataka Government may appoint persons to review the progress of the society and can hold enquiries and give directions, also KRIES has 13 members, and all are from State Government, thus, KRIES qualifies to be considered as a government entity.

The Authority also viewed that the works of construction of Airport Terminal Building /facilities and the work of Development of Airport are the works supplied to State Government. However, the said works for construction of airport terminal building or greenfield airport are predominantly meant for commerce and hence are covered under Entry 3(xii) of notification no.11/2017 of the Central Tax Rate.

[KMV Projects Limited, In re, 2022 SCC OnLine Kar AAR-GST 16, decided on 16.09.2022]

Represented by: Assistant General Manager A. Bhaskar Reddy.

Advance RulingsCase Briefs


Authority for Advance Ruling (Karnataka): In an application filed to sought advance ruling regarding the classification of the applicant’s product, the two-member bench of M.P Ravi Prasad and T. Kiran Reddy has ruled that the bus air-conditioning system inclusive of rooftop unit, compressor and installation kit for one consolidated price to a single customer merits classification under heading 84152010; and when sold to single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit then under heading 84152010; and when rooftop unit, compressor and installation kit sold individually or in combination then under heading 8415.90.00.

In the present case, the applicant manufactures and supplies Bus Rooftop air conditioning systems which include Rooftop Unit, Compressor and Installation kit; undertakes installation and servicing of air conditioning system as per the requirement of customers through dealer network, and specially caters exclusively to the needs of passenger buses.

The applicant sought advance ruling on the following questions:

  1. Classification of bus air-conditioning system inclusive of rooftop unit, compressor and installation kit for one consolidated price to a single customer

  2. Classification of rooftop unit, compressor and installation kit sold to single customer for a single fitting at customer end, but price negotiated and agreed separately for each unit

  3. Classification of rooftop unit, compressor and installation kit sold as mentioned below:

    • Roftop unit alone

    • Rooftop unit and compressor

    • Compressor

    • Installation kit

    • Compressor and installation kit

    • Rooftop unit and installation kit

    • Rooftop unit and compressor

The Authority took note of the explanation (iii) and (iv) given in Notification No. 1/2017 of the Central Tax Rate that is relevant to the classification of the goods under GST and observed that Chapter 84 of the Customs Tariff Act covers machinery and mechanical appliance and parts thereof, and heading 8415 covers Air conditioning machines, comprising a motor driven fan and elements for changing the temperature and humidity, including those machines in which the humidity can’t be separately regulated. Further, heading 841520 covers air conditioning machines of a kind used for persons in motor vehicles and the heading 84152010 covers the said machines for buses.

The Authority viewed that in the present case, the applicant supplies air conditioning system, comprising rooftop unit, compressor and installation kit, as a single product for a consolidated price for a single customer, exclusively for buses. Thus, the said air conditioning system for buses merits classification under heading 84152010 as the same is specifically classified under the said heading.

The Authority concerning the second question noted that the applicant is supplying bus air condition system, only comprised of all the three major components, but the price of individual components has been negotiated and agreed separately for each of the units and these parts are meant for a single fitting at customer end. Further, the Authority referred to Notes 2 to 5 of Section XVI of the Customs Tariff Act, 1975, and observed that Note 3 provides that parts of composite machines consisting of two or more machines fitted together to form a whole are to be classified as if consisting only of that component or as being that machine, which performs the principal function. Further, as per Note 4, where a machine consisting of individual components intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function. Thus, the product of the applicant amounts to supply of a composite machine designed for the purpose of performing the principal function of a bus air conditioning system, and hence such supply is classifiable under tariff heading 84152010 and attracts GST accordingly.

The Authority regarding the third question observed that the Rooftop unit and installation kits are not classified individually under the Customs Tariff Act, 1975, but are identifies /recognised as parts of the composite machine i.e., air conditioning system for a bus. Thus, they merit classification under parts of air conditioning machines. Further, the gas compressor of the kind used in the air conditioning equipment is classified under tariff heading 84148011.

[Eberspaecher Suetrak Bus Climate Control System India Pvt. Ltd., In re, Advance ruling no. KAR ADRG 34/2022]

Advocate who appeared in this case :

Represented by: CA Anant Nyamannavar

Advance RulingsCase Briefs

Authority for Advance Ruling (Karnataka): In a case relating to whether Karnataka Textbook Society(‘KTBS’) can be classified as an “educational institution” or “State Government” for the purpose of applicability of Goods and Services Tax (GST) on printing services provided to it by the Applicant, and whether the 12 percent tax rate charged by the printers for printing textbooks supplied to KTBS is correct or needs to be changed; the two-member bench of M.P Ravi Prasad and T. Kiran Reddy has observed that the society registered under the Karnataka Societies Act,1960, and receiving grants from the Karnataka Government for the supply of free textbooks to students enrolled in government and aided schools and by sales to Private schools cannot be considered as “State Government”.

The authority observed that KTBS does not have any specific notification for its exemption under the GST Act, further, it sells tenders for printing and supply of books on contract basis, and there is consideration of value of goods and services supplied by contractor to KTBS, hence, the event is taxable under the GST Act.

It was observed that KTBS is not an educational institution as it neither manages or runs an educational institution nor does it directly impart any education to students and is only facilitating the educational services by providing the required textbooks. Due to the similar reasons, it was further observed that KTBS cannot be classified as a “State Government”, however, it can be classified as a “Government Authority” as defined in Para 2(zf) of the Central Tax rate Notification No. 12/2017.

The authority further increased the tax rate charged by printers from KTBS for the printing of textbooks from 12 percent to 18 percent, according to the Central Tax rate notification No.6/2021, in the case of printing books where the content is provided by the recipient and the physical inputs including paper belongs to the printer, 18 percent tax rate will be charged.

[Bhagyam Binding Works, In re 2022 SCC OnLine Kar AAR-GST 11, decided on 12-08-2022]

Advocates who appeared in this case :

Sankari V. Krishnan, Advocate, Counsel for the Applicant.

Case BriefsTribunals/Commissions/Regulatory Bodies

Tamil Nadu Authority for Advance Ruling: T.G. Venkatesh, Additional Commissioner, and K. Latha, Joint Commissioner held that concerning vessel support services provided to foreign vessels, the service provided falls under export of services as per provisions of the Integrated Goods and Services Tax Act, 2017 (IGST Act) as the place of supply is outside India.

Facts of the case

The applicant is engaged in providing support services related to vessel management to its group company, New Shipping Kaisha Ltd. (Japan).

An application was filed by the applicant, under Section 97 of the Central Goods and Services Tax Act, 2017 before the Tamil Nadu Authority for Advance Ruling to seek an Advance Ruling on the following:

  • Whether the vessel support services provided by the applicant to its group company outside India qualify as “Export of Services” under GST?

Analysis and Decision

The Bench stated that supply of services under Section 2(6) of the IGST Act includes the supply of any service which is provided outside India, the payment received by the supplier is in foreign currency, and the supplier and recipient are not merely the establishment of a distinct person. Therefore, the Bench opined that to determine whether the supply amounts to the export of service, the place of supply is to be determined.

Further, on a joint reading of Sections 13(3) and 13(6) of the IGST Act, the Bench observed that the statutes prescribe the location in the taxable territory where any support services requiring the physical availability of the vessel under management is supplied, then the place of supply is the location in the taxable territory in respect of that voyage of the vessel.

Therefore, the Bench held the following:

  • The vessel support services provided about foreign vessels sailing to other countries outside India, fall under export of services as per Section 2(6) of the IGST Act, as the place of supply in such cases is entirely outside India.
  • Vessels calling out at Port of India, then the place of supply in respect of that vessel is in India as per Section 13(6) of the IGST Act and the services rendered are not export of services.

[NSK Ship Management Pvt Ltd, 2022 SCC OnLine TN AAR-GST 7, decided on 30.06.2022]

Legislation UpdatesNotifications

On 18-07-2022, SEBI has issued a circular for all the Market Infrastructure Institutions, Companies who have listed / are intending list their securities, other intermediaries and persons who are dealing in the securities market, that the fees and other charges payable to SEBI shall be subject to GST at the rate of 18%.


The GST Council in its meeting held on 28-06-2022 and 29-06-2022 recommended inter-alia to withdraw the exemption granted to services by SEBI and the same has been notified vide Notification No.4/2022 dated 13th July, 2022.
Madras High Court
Case BriefsHigh Courts


Madras High Court: Anita Sumanth, J. set aside the impugned order which rejected a registration application filed under Section 22 read with Section 25 of Central Goods and Service Tax (‘CGST Act') and Rule 8 of CGST Rules, without assigning proper reasons and adhering to proper procedure.

The petitioner filed an application seeking registration in accordance with Section 22 read with Section 25 of the CGST Act, 2017 and Rule 8 of the CGST Rules, 2017 in respect of a rice mandi which was duly acknowledged, and physical verification was also duly undertaken. A notice was issued by the respondent officer seeking clarification as the application did not enclose the details of the principal place of business of the petitioner. Pursuant to which, a copy of the rental / lease deed was uploaded however, registration was refused by way of a monosyllabic order simply mentioning ‘rejected’ without assigning any reasons or explanation for rejection. Aggrieved by this, the present petition was filed.

Rule 9(4) of the Central Goods and Services Tax Rules, 2017 states:

‘9. Verification of the application and approval

………….(4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2) or where the proper officer is not satisfied with the clarification, information or documents furnished, he [may], for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05.’

The Court noted that the word ‘may’ only refers to the discretion to reject and not to blatantly violate the principles of natural justice. If the assessing authority is inclined to reject the application, which he is entitled to, he must assign reasons for such objection and adhere to proper procedure, including due process.

Thus, the Court allowed the petition and set aside the impugned order.

[B C Mohankumar v. Superintendant of Central Goods and Service Tax, WP No. 13272 of 2022, decided on 16-06-2022]

Advocates who appeared in this case :

Adithya Reddy, Advocate, for the Petitioner;

Prakash for Mr. Rajendran Raghavan Senior Standing Counsel, Advocates, for the Respondent.

*Arunima Bose, Editorial Assistant has reported this brief.

by Tarun Jain
Experts CornerTarun Jain (Tax Practitioner)


Under the incumbent regulations, obligation to pay Goods and Services Tax (GST) presupposes that the activity carried out by one is a supply liable to GST. The determination of this question rests upon satisfaction of the various conditions under the GST laws which inter alia involve determining the “classification” of supply. This in turn requires one to characterise the supply. In other words, characterisation of supply forms the bedrock of GST, or any transaction tax for that matter. A recent decision of the Calcutta High Court raises an interesting issue which forces one to revisit the principles governing characterisation of services and thus, in turn, the classification of supply of services.

Calcutta High Court decision

The decision of the Calcutta High Court in Ramesh Kumar Patodia v. Citi Bank NA2 is on relatively simple facts. In this case the petitioner held a credit card with a bank which offered instant loan above the credit limit. Upon his acceptance the bank issue a loan which was repayable in EMIs. The bank levied GST on the interest component of EMI. The levy of GST on this interest component was challenged before the High Court. It was pleaded by the petitioner that the GST law exempted “services by way of extending deposits, loans or advances insofar as the consideration is represented by way of interest or discount (other than interest involved in credit card services)” and accordingly the levy of GST was unlawful.

For the petitioner, it was contended before the High Court that the transaction was one of “loan” and thus GST was exempt. Per contra, the levy of GST was defended by the respondents contending that the exemption was not available as the loan in this case was intrinsically connected to the credit card services which were carved out from the exemption. In a short fact based conclusion the High Court agreed that the transaction was taxable inter alia observing as under:

26. It is evident from the offer of loan that the same was not an offer to all intending borrowers but was restricted to a particular category of persons holding the Citi Bank credit card. The criteria for processing the loan, the manner in which the EMI of loan is reflected in the credit card statements and the charging of interest in case there is a shortfall in the payment of the amount due as well as the mode of payment all goes to prove that the service rendered by the bank in extending the loan in question is nothing but a service pertaining to the said credit card.

27. Petitioner has accepted the offer made by the bank contained in the aforesaid communications dated 21-2-2019 and 28-2-2019. Thus, the terms and conditions mentioned in the said communications are also accepted by the petitioner. In view thereof this Court is unable to accept the contention of the learned advocate of the petitioner that the services by way of extending loans by the bank in the instant case does not amount to credit card services.

The decision of the High Court may well have concluded the controversy in this case, but as it is evident from the aforesaid reasoning, it is difficult to gauge the legal principle flowing therefrom. The rationale for this state of affairs is the conspicuous absence of objective and principle-driven rules for classification of services under the GST laws. This also prompts a larger question, whether every transaction require similar fact-intensive dissection in order to ascertain the intrinsic characterisation of supply or are there any objective rules to this end in the GST law? Thus one is compelled to review the legal position.

Rules governing classification under erstwhile services tax law

Before adverting the classification principles under the GST law, it is expedient to take note of the statutory provisions governing the levy of service tax law which has been replaced by GST. This is because specific principles for classification of services were engrafted in the Finance Act, 1994 which provided for levy of service tax. There were two different provisions in the law. Section 65-A3 applied for the period up to June 2012 and Section 66-F4 governed the law from July 2012 until June 2017 when service tax was subsumed in GST.

Both these provisions emphasised on the dominant nature of the service insofar as it was provided that the classification shall be inter alia determined basis “most specific description” and the “essential character” test. These tests were akin to a widely accepted principle of statutory interpretation that a special provision prevails over a general one. Accordingly, a large number of classification disputes in the service tax context stood resolved through this principle.5 Nonetheless, the fact remained that there was no objective principles for classification of services in the service tax law.

Scheme governing classification of services under GST laws

With the advent of GST, the provisions governing levy of service tax were replaced by the GST laws. However, the GST laws did not improve upon the position prevailing in the service tax law vis-à-vis the principles governing classification of services. Indeed the GST laws provide for rules governing classification to address instances of simultaneous multiple supplies, referred to as “composite supply”6 and “mixed supply”7 under the GST law.8 In addition, there are also certain tie-breaker provisions in the GST laws whereby a classification conflict between “goods” versus “services” is resolved.9 However, there is no statutory provision in the GST laws which determine classification of services.

The void in the GST law is addressed by way of subordinate legislation. The Government is inter alia empowered under the GST law to notify the rate of GST on supply of services.10 Acting on such empowerment, the Government issues statutory notifications enumerating the rate of tax qua specific services.11 As a part of these notifications, the Government has issued a “scheme of classification of service” which houses all services under “Chapter 99” which is comprised of various “sections”, “headings”, “groups”, etc.12 In order to explain this “scheme”, the GST Council has issued “explanatory notes” which “indicate the scope and coverage of the heading, groups and service codes of the scheme of classification of services”. To ward-off doubts on the relevance and legality of these notes, it is clarified that “[t]hese may be used by the assessee and the tax administration as a guiding tool for classification of services”. The most crucial part in these notes it the clarification that “where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description”.

The aforesaid reveals that the “most specific description” test in the service tax law has been continued in the GST law for the purposes of classification except the technical change that the test which had statutory mandate under the service tax law instead finds place by way of an administrative instruction under the GST legal framework.

Illustration of service classification disputes under GST laws

It is unarguable that the “most specific description” test inherently carries a great deal of subjectivity. The lack of rule-based principles governing classification of services under the GST law has therefore, expectedly, resulted in disputes. A larger number of advance rulings have addressed such disputes, which serve as illustrations to the grim situation and exemplify the need for more pronounced principles governing the classification of services. To this end, it is expedient to note certain examples of the disputes pertaining to service classification under the GST laws.

(A) Yulu Bikes (P) Ltd., In re13

In this case an interesting issue came up regarding the classification of services. The company was engaged in renting of e-bikes/bicycles through a technology driven mobility platform. They would enter into an agreement with customer permitting of the e-bikes/bicycles and charge based on the time of usage. The issue was whether this activity would be classified under SAC14 9966 as rental services of transport vehicles or under SAC 9973 as leasing or rental services without operator. It was argued for the company that e-bikes/bicycles rented out by it to the customers were essentially “goods” which are movable property and are goods included in SAC 9973, therefore, supplying renting services in respect of e-bikes/bicycles without operators is appropriately classifiable under SAC 9973.

The appellate authority for advance ruling disagreed with the principle canvassed by the company and yet accepted the proposed classification. It pointed out that earlier the scope of SAC 9966 covered rental services of transport vehicles with our without operator. However, after its amendment SAC 9966 only covered rental services of transport vehicles with operator. Accordingly, the scope of SAC 9966 had been statutorily limited and thus despite it being the most specific description, it had to be ignored for classification purposes. The authority explained the consequential legal position in the following terms:

“Although Heading 9966 is specific to renting of transport vehicles, we cannot ignore the fact that the heading is specific only to renting of transport vehicles with an operator. Classifying the appellant’s activity under Heading 9966 especially when their vehicles are rented without an operator, would not be correct. The more specific heading would be renting of goods without operator. Therefore, we hold that the service of renting of e-bikes and bicycles by the appellant without an operator is classifiable under Heading 9973.”

Thus, on a technical construct of the competing classification headings, the authority opined that even though “renting of transport vehicles” was the most specific classification, this classification was to be rejected in view of its technical construct which limited its scope and the classification of service was to be under a general classification which covered all classes of leasing activity qua all goods. This case also highlights the limitation of the most specific description test and its ability to holistically address classification of services.

(B) Oswal Industries Ltd., In re15

In this case the company operated naturopathy centers which offered physical, psychological and spiritual health overhaul. It also offered for corporate clients wellness facilities for diverse types of diseases. It claimed, “that such wellness facilities are provided with the help of highly qualified professionals’ doctors in the field of naturopathy, researchers, and support staff”. The company claimed exemption from GST on the ground that “services by way of health care services by a clinical establishment, an authorised medical practitioner or para­medics” were notified as exempt and the expression “clinical establishment”16 was also widely defined which covered them. The authority, however, rejected this submission which was based on the intrinsic elements of the services provided by the company and thus was arguably based upon the “most specific description” principle itself.

Having a close look at the business model of the company, the authority opined that the company was providing a bundle of services wherein “the principal supply would be the accommodation services since the therapy can in no way be administered without accommodation. In fact, there is no option available for the customer to avail the wellness package without opting for the accommodation”. For this reason, the authority refused to extend the exemption to health care services and instead classified the activities as “accommodation services”.

The aforesaid reveals that, notwithstanding the core activity of the company as being health care, owing to the manner in which the services were rendered to the customers, the classification was not made under health care services under the GST law. Thus, the most specific description test and the extensive explanation as to the business model of the company (and the fact that its core activities were indeed health care services as contrasted from hotels and other accommodation services) were overridden by the structure of the transaction between the company and its customers. In other words, this case represents yet another failure of the most specific description test to classify services.

(C) Complete Solutions Service Apartment (P) Ltd., In re17

This case presents a contemporary business model which is colloquially referred as “furnished tenancy”. The applicant took on lease residential dwelling units on lease, aggregated them and thereafter sub-leased these units to various individual/corporates for residential purposes. The applicant also provided various amenities which were essentially in nature of housekeeping services. These comprised of room cleaning, cleaning of utensils, changing of linen, cable/DTH connection, gas pipeline or cylinder, broadband connection with dedicated telephones, electricity supply, water supplies, pest control, AC servicing, security guard, etc.

The applicant charged separately towards the sub-lease and the amenities. The applicant maintained that GST was leviable only on the amenities and not on the rent towards the sub-lease in view of the exemption from GST to “services by way of renting of residential dwelling for use as residence”. The authority agreed with the view of the applicant and opined that the first agreement towards sub-letting was indeed entitled for exemption and GST was rightly charged upon the second agreement qua amenities. Intriguingly however, the authority went beyond to declare that the original lease agreement required recharacterisation as the lease “between the owner and the applicant, at the most can be termed as property management services”. The authority did not extend any reason for such effect but perhaps it was guided by the fact that the original lease agreement by itself did not result into the residential lease. Nonetheless, the authority concluded that the original lease was subject to GST.

The view of the authority on the services provided by the applicant appears reasonable. However, the recharacterisation of the original lease implies rewording of the exemption to “services by way of renting of residential dwelling for use as residence”. The authority appears to have concluded that “for use as residence” in the exemption has a limited nuance and it instead means “services by way of renting of residential dwelling for actual use as residence”. This is because the fact remains that the property was indeed used as residence (in view of the affirmation of the exemption on the sub-lease by the applicant). In other words, the recharacterisation of the transaction between the owner and the applicant was based on the end-use test (i.e. whether the property was actually used for residence) irrespective of the most specific description test (i.e. whether the property was leased for use as residence) as a consequence of the transaction.


Upon an appraisal of the statutory provisions, the lack of objective principles or a rule-base regime for classification of services in the GST laws is evident. The “most specific description” test appears to be neither sufficient nor exhaustive to categorically address the myriad commercial transactions involving supply of services. It is thus not surprising to find that classification of services is largely dictated by subjective appreciation of activities/transactions. The decision of the Calcutta High Court, therefore, is neither the first nor would be the last illustration of judiciary being pressed upon to evolve reasons (and hopefully principles) to settled service classification controversies. One would hope that the legislature takes note and interjects to introduce objective rules which obviate disputes on classification of services under the GST law. Until then, classification of services in GST laws remains a vexed question.

† Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics.

2. 2022 SCC OnLine Cal 1786.

3. “S. 65-A. Classification of taxable services … (2) When for any reason, a taxable service is, prima facie, classifiable under two or more sub-clauses of clause (105) of S. 65, classification shall be effected as follows: (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable; and (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merit consideration.”

4. “S. 66-F. Principles of interpretation of specified descriptions of services or bundled services … (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.”

5. For illustration, see Electronics Technology Parks v. Commr. of Customs, (2022) 56 GSTL 182 (Tribunal); Ess Gee Real Estate Developers (P) Ltd. v. CCE, (2020) 34 GSTL 486 (Tribunal); Airport Retail (P) Ltd. v. Union of India, 2014 SCC OnLine Del 3858 : (2014) 35 STR 659; Atwood Oceanics Pacific Ltd. v. CST, 2012 SCC OnLine CESTAT 2457 : (2013) 32 STR 756; United Enterprises v. CCE and Service Tax, 2012 SCC OnLine CESTAT 2654 : (2013) 29 STR 605; Hardy Exploration & Production (India) Inc., (2012) 28 STR 513, etc.

6. Central Goods and Services Tax Act, 2017, S. 2(30) states, “composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply”.

7. Central Goods and Services Tax Act, 2017, S. 2(73) states “mixed supply means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply”.

8. Central Goods and Services Tax Act, 2017, S. 8 addresses “tax liability on composite and mixed supplies”.

9. For illustration, see, Central Goods and Services Tax Act, 2017, Sch. II which enlists “activities or transactions to be treated as supply of goods or supply of services”. See also, Central Goods and Services Tax Act, 2017, S. 7(3).

10. For illustration, see, Central Goods and Services Tax Act, 2017, S. 9(1).

11. For illustration, see Notification No. 11 of 2017-Central Tax (Rate), dated 28-6-2017.

12. See, Tarun Jain, “Appraising the Classification of Goods and Services under GST Laws”, <https://www.scconline.com/blog/post/2019/08/13/appraising-the-classification-of-goods-and-services-under-gst-laws/> for detailed explanation of the scheme.

13. (2021) 48 GSTL 187 (AAAR-GST-Kar).

14. SAC represents “Services Accounting Code”.

15. 2020 SCC OnLine Guj AAR-GST 1 : (2020) 41 GSTL 226.

16. Defined in Notification No. 12 of 2017-Central Tax (Rate) dated 28-6-2017 to state, “clinical establishment means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases”.

17. (2021) 47 GSTL 402 (AAR-Har).

Orissa High Court
Case BriefsHigh Courts

Orissa High Court: A Division Bench of Krushna Ram Mohapatra and Murahari Sri Raman, JJ. in a case where due to pandemic certified copy was not available on time while filing appeal , enclosure of impugned order copy available on GST portal as opposed to procedural requirement of certified copy must not result in compromising the matter to be decided on merits.

The present appeal arises from the rejection of the petitioner’s prior appeal against the order of the Joint Commissioner of CT & GST, dated 23-05-2022. The petitioner, Atlas PVC Pipes Ltd., claims to have filed an appeal against an order of the CT & GST Officer for a rise in demand, and it is further asserted that apart from adhering to the procedure for filing of the appeal, the petitioner could not submit the certified copy of the impugned order along with the appeal memo in time.

The petitioners contended the hyper-technical approach of the Appellate Authority left it remediless and that the Authority should have been more practical in its approach, by taking into consideration the pandemic situation.

While the defendants claimed that the Authority had sufficiently followed the principles of natural justice as it gave the petitioners the opportunity to adhere to the impugned procedure by specifying dates for compliance.

Reliance was placed on the judgment, In Re: Cognizance for Extension of Limitation, 2022 SCC OnLine SC 27, the Court held that the petitioner was entitled to the benefit of the exclusion of 7-day limitation as per Rule 108(3) of the OGST Rules, 2017. The Bench further made the observation that a mere delay in attaching a certified copy of the impugned order appealed against, should be treated a mere technical defect and the merit of the matter must not be disregarded in this respect.

The Court allowed the appeal accordingly and directed the petitioner to appear before the Joint Commissioner of State Tax (Appeal),so that the Appellate Authority may proceed to decide the present appeal on the basis of its merits.

[Atlas PVC Pipes Limited v. the State of Odisha, 2022 SCC OnLine Ori 2182, decided on 29-06-2022]

Advocates who appeared in this case :

Sudeepta Kumar Singh, Advocate, for the Appellant;

Sunil Mishra, Advocate, for the Respondents.

Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: Suraj Govindaraj, J. dismissed the petition as being devoid of merits.

The facts of the case are such that petitioner 1 is a registered association of the advertising agencies, in the business of advertisement on the advertisement hoardings licensed by respondent 2 Hubballi Dharwad Mahanagara Palike and are also registered as dealers under S. 22 of the Karnataka Value Added Taxes Act. The petitioners 2 to 6 are the members of the petitioner 1. A demand notice was issued upon the petitioners to make payment of advertisement tax as regards advertisement hoardings used by them. The instant petition was filed under A 226 and 227 of the Constitution of India seeking issuance of writ to set aside the demand notice and writ of prohibition to the respondents not to meddle with the advertisement displays and hoardings of the petitioners.

Counsel for petitioners submitted that on the enactment of Goods and Services Tax Act the authority of the respondents to either levy or collect advertisement tax is ousted. The respondents have collected the advertisement tax in terms of Section 134 of the Karnataka Municipal Corporations Act, 1976. The power under Section 134 of the KMC Act flows from Entry 54, List II of Schedule VII of the Constitution of India. The entry 54 having been deleted the said power is divested. Thus, there could be no demand for advertisement tax post the enactment of GST Act and deletion of Entry 54.

Counsel for respondents Mr GI Gachchinmath submitted that the power of respondent 2 to collect the advertisement tax continues under Section 134 of KMC Act. In the decision relied upon by the counsel for the petitioner, said power had been deleted, whereas no such deletion has occurred in the KMC Act.

The Court observed that in the entire transaction of GST, the petitioners are only a collecting agency who collects the GST payable on the service rendered and deposits the same with the authorities, the incidence of tax, i.e., GST being on the services rendered or goods supplied, the obligation of payment being on the person availing the service and or receiving the goods. The incidence of GST is on the service rendered by the petitioner to its clients and has nothing to do with respondent 2-HDMC. The transaction with HDMC is the permission and or license granted by the HDMC to put up hoarding and or use a hoarding either on the land belonging to the HDMC and or on land belonging to a private party.

The Court further observed that there are two distinct transactions. The incidence of tax on both transactions are different. The first transaction is the permission by respondent No.2-HDMC to put up a hoarding or advertisement to use their hoarding for the purpose of advertisement, as regards which respondent No.1-HDMC charges the fee or advertisement tax. The second transaction is on the petitioners making use of the hoarding to display advertisements of its clients towards which the petitioners charge their client which is a supply of services or goods as regards which the GST is liable to be paid. Both the transactions being independent and distinct the incidence of both the GST and advertisement fee being on two distinct transactions inasmuch as the GST not being charged by the respondent 1- HDMC and advertisement free not being charged by the GST authorities.

The Court thus held “there is no conflict between the power to levy GST under GST Act and power of Municipal Corporation to levy advertisement fee or advertisement tax under Section 134 of the Karnataka Municipal Corporations Act.” [Hubballi Dharwad Advertisers Association v. State of Karnataka, Writ Petition No. 104172 of 2021, decided on 21-04-2022]

Arunima Bose, Editorial Assistant has reported this brief.

Jharkhand High Court
Case BriefsHigh Courts

Jharkhand High Court: A Division Bench of Aparesh Kumar Singh and Anubha Rawat Choudhary, JJ., allowed the petition and directed the respondents to initiate fresh proceedings from the same stage in accordance with law.

The present petition was filed challenging the show-cause notice under Section 74 of the JGST Act, 2017 dated 7-06-2021 for the tax period July 2020 -September 2020 issued by the Deputy Commissioner of State Taxes (respondent 3) along with the summary of show-cause notice issued in exercise of power under Rule 142(1)(a) of the Jharkhand Goods and Services Tax Rules, 2017 on the ground being vague, without jurisidiction and void ab initio.

Counsel for the petitioner submitted that the impugned show-cause notice is vague and does not disclose the offence and a contravention as it is a mere mechanical reproduction of the provisions of Section 74 without striking of the irrelevant portions. It is thus incapable of any reply and does not fulfill the ingredients of a notice in the eyes of law. Petitioner would be denied the opportunity to properly defend itself. It is, therefore, in violation of the principles of natural justice. It was further is submitted that what is not alleged in the show-cause notice under Section 74 cannot be part of such summary of show-cause notice. As per Section 73(1)/74(1) the requirement is of ‘notice’ and not ‘knowledge’. Section 75(7) of the Act contemplates that no demand shall be confirmed on grounds other than the grounds specified in the notice.

Counsel for respondents submitted that the petitioner has an efficacious alternative remedy of appeal after the proceeding is concluded and the order in original is passed. He also reiterated the well recognized exceptions to the invocation of writ jurisdiction in the presence of an alternative remedy. It is further submitted that a notice ought not to be struck down, even if strictly not in the format, but if it contains in substance of the matter which a notice must contain.

A bare perusal of Section 74(1) of the JGST Act, 2017A indicates that in a case where it appears to a proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax, which has not been paid or has been short paid or to whom refund has been erroneously made or who has wrongly availed or utilized input tax credit requiring him to show cause as to why he should not pay the amount specified in the notice along with the interest payable thereupon under Section 50 and a penalty equivalent to the tax specified in the notice. “

In contradistinction to the provision under Section 73 of the Act under the same Chapter-XIV relating to ‘Demands and Recovery’, the ingredients of Section 74 of the Act require either of the following ingredients to be satisfied for proceeding there under i.e. that the tax in question has not been paid or short paid or erroneously refunded or the ITC has been wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts to evade tax.”

The Court observed that a bare perusal of the impugned show-case notice creates a clear impression that it is a notice issued in a format without even striking out any irrelevant portions and without stating the contraventions committed by the petitioner i.e. whether its actuated by reason of fraud or any willful misstatement or suppression of facts in order to evade tax. Needless to say that the proceedings under Section 74 have a serious connotation as they allege punitive consequences on account of fraud or any willful misstatement or suppression of facts employed by the person chargeable with tax. In absence of clear charges which the person so alleged is required to answer; the noticee is bound to be denied proper opportunity to defend itself. This would entail violation of principles of natural justice which is a well-recognized exception for invocation of writ jurisdiction despite availability of alternative remedy.

The Court thus held “…the impugned notice completely lacks in fulfilling the ingredients of a proper show-cause notice under Section 74 of the Act. Proceedings under Section 74 of the Act have to be preceded by a proper show-cause notice. A summary of show-cause notice as issued in Form GST DRC-01 in terms of Rule 142(1) of the JGST Rules, 2017…” 

The Court further held “…the impugned show-cause notice as contained in Annexure-1 does not fulfill the ingredients of a proper show-cause notice and thus amounts to violation of principles of natural justice, the challenge is entertainable in exercise of writ jurisdiction of this Court. Accordingly, the impugned notice at Annexure-1 and the summary of show-cause notice at Annexure-2 in Form GSTDRC-01 are quashed.”

[Nkas Services Pvt. Ltd. v. State of Jharkhand, WP (T) No.2444 of 2021, decided on 08-10-2021]

Arunima Bose, Editorial Assistant has reported this brief.


For the Petitioner: Adv. Kartik Kurmy and Nitin Kr. Pasari Sidhi Jalan

For the State: Adv. Salona Mittal

Legislation UpdatesRules & Regulations

On September 24, 2021, the Central Government on the recommendations of the Council, makes the Central Goods and Services Tax (Eighth Amendment) Rules, 2021 to amend the Central Goods and Services Tax Rules, 2017.

Key Amendments:

(a) after the words ―details of bank account, the words ―which is in name of the registered person and obtained on Permanent Account Number of the registered person‖ shall be inserted;

After a certificate of registration in FORM GST REG-06 has been made available on the common portal and a Goods and Services Tax Identification Number has been assigned, the registered person, except those who have been granted registration under Rule 12 or, as the case may be Rule 16, shall as soon as may be, but not later than forty five days from the date of grant of registration or the date on which the return required under Section 39 is due to be furnished, whichever is earlier, furnish information with respect to details of bank account which is in name of the registered person and obtained on Permanent Account Number of the registered person, or any other information, as may be required on the common portal in order to comply with any other provision.

(b) the following proviso shall be inserted, namely:
Provided that in case of a proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhaar number of the proprietor;

  • Rule 10B shall be inserted:

10B. Aadhaar authentication for registered person . The registered person, other than a person notified under subsection (6D) of section 25, who has been issued a certificate of registration under rule 10 shall, undergo authentication of the Aadhaar number of the proprietor, in the case of proprietorship firm, or of any partner, in the case of a partnership firm, or of the karta, in the case of a Hindu undivided family, or of the Managing Director or any whole time Director, in the case of a company, or of any of the Members of the Managing Committee of an Association of persons or body of individuals or a Society, or of the Trustee in the Board of Trustees, in the case of a Trust and of the authorized signatory, in order to be eligible for the purposes as specified in column (2) of the Table.

  • In rule 45 of the said rules relating to Conditions and restrictions in respect of inputs and capital goods sent to the job worker, in subrule (3), with effect from the 1st day of October, 2021,  
    (i) for the words ―during a quarter, the words ―during a specified period shall be substituted;

    (ii) for the words ―the said quarter, the words ―the said period shall be substituted;

(iii) after the proviso, the following explanation shall be inserted, namely:

Explanation. For the purposes of this subrule, the expression ―specified period‖ shall mean

(a) the period of six consecutive months commencing on the 1st day of April and the 1st day of October in respect of a principal whose aggregate turnover during the immediately preceding financial year exceeds five crore rupees; and
(b) a financial year in any other case.

  • In rule 89 of the said rules relating to Application for refund of tax, interest, penalty, fees or any other amount:
    after subrule (1), the following subrule shall be inserted, namely:

(1A) Any person, claiming refund under section 77 of the Act of any tax paid by him, in respect of a transaction considered by him to be an intraState supply, which is subsequently held to be an interState supply, may, before the expiry of a period of two years from the date of payment of the tax on the interState supply, file an application electronically in FORM GST RFD01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner: Provided that the said application may, as regard to any payment of tax on interState
supply before coming into force of this subrule, be filed before the expiry of a period of two years from the date on which this subrule comes into force.

  • Following rule shall be inserted:

96C. Bank Account for credit of refund. For the purposes of subrule (3) of rule 91, subrule (4) of rule 92 and rule 94, bank account shall mean such bank account of the applicant which is in the name of applicant and obtained on his Permanent Account Number:

Provided that in case of a proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhaar number of the proprietor.

Experts CornerTarun Jain (Tax Practitioner)


  1. Immediate Context

A tax issue is currently being the subject-matter of strenuous discussion in the mainstream discourse. It relates to levy of goods and services tax (GST) on Covid-related medicines and equipment. Given the havoc created by the pandemic and the impelling need to make life-saving equipment accessible, the levy of GST upon them is being extensively debated. One suggestion is to exempt these supplies, thereby reducing the tax burden. However, the Government does not appear keen on this suggestion. Then there is another suggestion to make these supplies as zero rated, which has its own dimensions. Given the life-saving value of these equipment, the arguments against levy of tax on them are overwhelmingly emotive, and understandably so. However, to put the debate in proper perspective, a conceptual appreciation of the relevant variables is necessary. In this context, this article attempts to enunciate the significance and consequences of exemption and zero rating in the paradigm of GST laws.


  1. Introduction: Appreciating the nuances of a VAT

Conceptually, GST is a value-added tax (VAT). In simplest of terms, when a tax is described a VAT, it implies that the tax is on the value addition. In other words, a person subject to VAT is taxed on the incremental value added by that person. In the context of a manufacturer, the incremental value would be determined by computing the difference between the value of the manufactured output vis-à-vis the value of the inputs used for manufacturing such output. For illustration, where the value of manufactured output is 150 whereas the value of inputs is 100, the value addition is 50 and therefore the VAT would be on 50. In order to ensure that the VAT system remains a tax on value addition, the VAT laws make allowance for taxes on inputs. One of the usual methods to achieve this principle is by allowing “credit” of taxes suffered on inputs. In other words, the VAT paid on the input of 100 would be allowed to the manufacturer as credit towards discharging the VAT on 150. Through this mechanism the manufacturer is kept insulated of the tax liability on inputs.


Another variant of the credit mechanism is the “right to deduct” input VAT. Conceptually, in the context of European VAT, it is illustrated by the “fiscal neutrality” principle. This implies that the manufacturer (or any supplier in the value chain) remains “neutral” to the VAT suffered by the inputs and the supplier is called upon to discharge VAT only on the value addition made by it. This principle, apparently simple, is required to be scrupulously observed in order to maintain the sanctity of VAT system. The reason is, inter alia, because (i) the supplier is neutral as regards the VAT suffered on inputs; and (ii) higher VAT on inputs implies higher credit to discharge the VAT on outputs, there is an encouragement to fully report the business dealings and lesser propensity to engage in off-market transactions. This pragmatic aspect assumes significance given that the VAT is generally implemented by way of self-assessment mechanism instead of an officer-led assessment i.e. the determination of the VAT liability is computed by the supplier itself and therefore the collection of appropriate VAT requires a diligent participation of the supplier in the assessment process.


  1. Issues with VAT exemption and need for zero rating

A logical corollary of the aforesaid discussion is that where the outputs of a supplier are exempt from VAT, the neutrality is affected in the event the inputs continue to be subject to VAT. This disturbs the equilibrium insofar as ensuring the fullest participation of the supplier in the VAT assessment process is concerned. This is because the supplier continues to pay VAT on the inputs but, because the output is exempt from VAT, the supplier is left stranded with the credit of such VAT paid on inputs. In economic terms, the input VAT becomes “dead cost” to the seller. This situation can brood unwarranted scenarios, such as off-market purchase of inputs (i.e. from the grey economy, which would not require GST) by the supplier. In fact, law reports are replete with instances wherein businesses have superimposed artificial corporate structures in order to minimise the loss of input VAT. The decision[1] of the Grand Chamber (i.e. the Full Court) of the European Court of Justice in Halifax is one of the most celebrated decision which addresses this aspect in great detail from a variety of perspectives, in particular the fact that exemption pushes businesses towards tax avoidance manoeuvres.


The essence of the aforesaid discussion is that, for the supplier, exempt supply is an anomaly which increases the cost of the supply. The increase in the cost is equivalent to the VAT suffered on the inputs for making such exempt supply. Let us understand this by way of an illustration. Keeping the numbers same as in earlier example, the value of manufactured output is 150 and the value of inputs is 100. Assuming a consistent 20% VAT rate, the manufacturer would have paid 20 as input VAT (on inputs of 100) and would ordinarily have collected 180 (i.e. 150+20% VAT) from the customer. In this transaction, were VAT payable on the output supply, the manufacturer would have taken credit of 20 and only paid incremental 10 (i.e. 30-20) as VAT to the Government. However, the situation is different as the manufactured output is exempt from VAT. This implies that there is no VAT on 150 to be collected by the manufacturer but simultaneously, the manufacturer is left with a credit of 20 input VAT, which will turn out to be a cost. In other words, the cost of manufacturing increases by 20 in this case. Given that this affects the profitability margin of the manufacturer, pragmatically the manufacturer is likely to increase the price to recover the cost of unutilised input VAT. This implies that the manufactured output may no longer be sold at a price of 150 and instead may be sold at a higher price. Thus, VAT exemption becomes a direct cost for the supplier and an indirect cost to the consumer.


The situation of exemption generally arises in case of such goods and services where the public interest element overwhelms the need for revenue collection. For illustration, products which are human necessities, are generally not subjected to VAT. In such situations, VAT exemption may turn counter-productive given that it may lead to increase in the prices. Thus, the very purpose of granting VAT exemption for such supplies may get defeated owing to the innate consequences of such exemption. Zero rating is one method to obviate such a situation.


Put simply, zero rating implies a situation wherein the output continues to remain VAT exempt without the supplier losing its right to deduct input VAT. In our example, it would mean that the manufacturer would sell the manufactured output at 150 without charging VAT and will also retain the right to claim deduction of 20 as input VAT. Given that there is no practical way of exercising this right of deduction, the 20 can be recouped to the manufacturer by way of refund, etc. By way of zero rating, therefore, there is no prejudice caused to the supplier or the consumer. However, the Government loses in this process because it is deprived of VAT revenues at two levels. Firstly, it does not collect VAT at the output level (which is exempt) and secondly it refunds back the VAT at the input level (owing to zero rating). Thus, which is natural, Government extends zero-rating benefit to limited situations and it is not as frequent as instances of VAT exemption.


  1. Legal framework of zero-rated supplies under GST

With these conceptual dimensions, let us traverse the legal provisions relating to zero rating in India. This is provided for in the Integrated Goods and Services Tax Act, 2017 (IGST Act). Section 16 of the IGST Act provides for “zero-rated supply”.


Declaration of zero rating: Sub-section (2) of Section 16 declares the conceptual foundation of zero rating. It provides that “credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply”. Thus, the declaration of zero rating under the GST laws is in line with the commonly understood concept i.e. allowance for credit of input VAT even though the output is exempt.


Scope of zero-rated supplies: Sub-section (1) of Section 16 lays down that zero rating under GST laws covers only two classes of supplies, namely, “(a) export of goods or services or both; or (b) supply of goods or services or both to a special economic zone developer or a special economic zone unit”. From this provision it is evident that the zero-rating benefit under the GST laws is not vis-à-vis the nature of the goods or services supplied. Instead, it is tied down to the status of the recipient because the zero-rating benefit is available only for those exempt supplies where the supplier is exporting the supply or making the supply to a SEZ developer/unit. It is noteworthy that under the Special Economic Zones Act, 2005 [Section 2(m)], supply of goods or services within India to a SEZ developer/unit is considered as “export”. Thus, the GST laws grant zero-rating benefit to actual exports and deemed exports by way of supply to SEZ.


Effectuating benefit of zero rating: Sub-section (3) of Section 16 gives two options to the supplier to claim benefit of zero rating. In both options, the benefit is granted by way of refund. The difference is only vis-à-vis the stage at which the benefit is availed. In the first option, the supplier can make output supply “without payment of [GST] and claim refund of unutilised input tax credit”. In the second option, the supplier can make the output supply “on payment of [GST] and claim refund of such tax paid on” such output supply. The detailed working of both these options are subject to “conditions, safeguards and procedure as may be prescribed” by way of rules under the GST laws.


  1. Significance and Conclusion


Zero rating of exports appears to be in line with the avowed policy of the Government that at the time of exports from India taxes should not be exported. Thus, by way of zero rating, the suppliers are recouped with the GST paid by them on the inputs and thereby the cost of the exported supplies does not get affected despite the fact that the exports are not subject to GST and the supplier cannot claim credit of input VAT.


At the same time, however, the limited scope of zero rating under GST laws must be realised. Unless the GST laws are amended, no supply made within India (obviously other than one made to SEZ developer/unit) can claim the zero-rating benefit. Thus, lowering GST rates or exemption from GST appear to be the limited option with the policymakers. However, GST exemption presents a vivid possibility that the consumer may face increased prices on account of increase in cost of supplier due to unutilised GST. This becomes a real possibility in most cases except where their inputs are also exempt from GST. In other words, even though the possible permutations and combinations are endless, exemption from GST is invariably not necessarily a good situation for a consumer and instead, in certain cases, a taxable supply may turn out to be a better bargain for a consumer than an exempt supply.


To conclude, it is undeniable that zero rating (or the lack of it) has a significant influence on pricing decisions of suppliers and has a direct bearing on the prices consumers pay. Furthermore, it is notable that the consumer cannot know the situation of the supplier because in neither case (i.e. exemption or zero rating) GST is not charged upon the supply received by the consumer. Nonetheless, even though the consumer cannot directly perceive the effects of zero rating upon the supplier, the indirect impact of zero rating is significant on the consumer as it is very likely that in case of an exemption (unlike zero rating) the impact of unutilised input VAT may be built in the price by the supplier.


Coming back to the immediate context, under the current GST framework, zero rating of domestically sold medicines and equipment is not legally permitted. Thus, exemption versus taxability appear to be the only binary choices. Given that the effect of exemption and the building up of input VAT in the price is each supplier’s decision, conceptually there are relative merits in both policy choices (i.e. exemption or taxability) but the net impact to the consumer would depend upon the decision of the supplier whether (or not) to absorb the cost of unutilised input.


†Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics.

[1] Halifax plc v. Customs and Excise Commrs. (C-255/02) ECLI:EU:C:2006:121, 2006 Ch 387 : (2006) 2 WLR 905, available at <HERE>.

Advance RulingsCase Briefs

West Bengal Authority for Advance Ruling, GST (WB AAR): A Division Bench of Susmita Bhattacharya and Parthasarathi Dey (Members) while addressing the present application with regard to the applicability of GST on “assignment of leasehold right” held that,

The activity of assignment is in the nature of agreeing to transfer one’s leasehold rights. It does not amount to further sub-leasing, as the applicant’s rights as per the Deed of sub-lease stands extinguished after assignment. Neither does it create fresh benefit from the land. It is in the nature of compensation for agreeing to do the transfer of the applicant’s rights in favour of the assignee. It is a service classifiable under “Other miscellaneous service‟ (SAC 999792) and taxable @ 18%.

National Company Law Tribunal, Kolkata Bench admitted the applicant as the corporate debtor and passed an order under Section 33 of the Insolvency and Bankruptcy Code, 2016 to start the process of liquidating the corporate debtor.

One of the assets under liquidation is the leasehold property unit along with care parking space (Demised Premises). West Bengal Industrial Development Corporation Ltd. granted the applicant possession of the Demised Premised for 99 years under a registered deed.

Applicant submitted that according to clause 12.28 of the deed, applicant, after the expiry of at least five years from the date of the Deed coming into force, is entitled to assign to another person the unexpired residual period of the sub-lease after taking written approval of the sub-lessor and on payment of transfer fee, being 10% of the prevailing market value of the property as assessed by the Registering Authority of the State Government.

Question for consideration:

Liquidator raised the question as to whether GST is payable on the consideration receivable on such assignment. If so, what should be the SAC and the rate applicable? He also seeks clarity on whether he can claim input tax credit for the GST paid on the transfer fee.

Officer Concerned from the Revenue submitted that the assigning of the sub-lease is a service classifiable under the heading “Other Miscellaneous Services‟ (SAC 99979) and taxed accordingly.

Observations of the Authority

Scope of supply under Section 7 (1) of the GST Act includes all forms of supply of goods and services, including a sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made.

Bench noted that the benefits arising from land in the forms specified in paragraph 2 of Schedule II are not to be treated as transactions in immovable property but as the supply of service for the purpose of the GST Act.

Deed | Service Contract of Lease

Authority stated that the Deed confers upon the applicant no better title to the Demised Premises other than a service contract of lease.

Applicant can only transfer to the assignee his right to receive the service of the lease for the unexpired period after obtaining prior approval of the Sub-lessor on payment of the transfer fee.

Conditional Possession

Hence, it is clear that the applicant, apart from the conditional possession of the Demised Premises, enjoys no title or ownership, which is central to the sale of any immovable property within the meaning of Section 54 of the Transfer of Property Act, 1882.

Therefore, the assignment does not amount to transfer of any benefit other than leasehold rights in terms of the Deed for the unexpired period of the lease and is no transfer of any immovable property in the context of the GST Act.

Thus, the activity of assignment of leasehold right is a service classifiable under ‘Other miscellaneous service‟ (SAC 999792) and taxable @ 18% under Sl No. 35 of Notification No. 11/2017 – CT (Rate) dated 28/06/2017 (State Notification No. 1135- FT dated 28/06/2017), as amended from time to time.

Further, the transfer fee charged by the Sub-lessor is in the nature of a consideration for tolerating an act that the applicant is otherwise refrained from doing in terms of clause 12.28 of the Deed. It is also a service classifiable under “Other miscellaneous service‟ (SAC 999794) and taxable @ 18% under Sl No. 35 of the Rate Notification.[Enfield Apparels Ltd. In Re., 2020 SCC OnLine WB AAR-GST 7, decided on 10-08-2020]

New releasesNews

Milind Kumars Goods and Services Tax: Law and Practice is a crisp introduction on the implementation of GST which heralded a simplified indirect taxation regime in the country. This book gives an overview of the road to GST and the pre-GST era explaining why the change was needed. This follows a chapter on the constitutional amendment which brought the law into force.

The author has compared the GST regime of India with the rest of the world. Chapters on understanding GST and GST slab rates have been included. GST Council, GSTN, DGGSTI, GSPs have their own dedicated chapters. The various sections and their corresponding rules have been discussed together in this book.

The notable features of this book are:

  • Short, accessible chapters so that you can navigate through the book with ease.
  • Fully updated with latest legislative and case law developments.
  • Relevant and interesting facts and information are provided in each chapter.
  • Includes a companion  web  resource  EBC  ExplorerTM (www.ebcexplorer.com), providing access to important statutes related  to  GST,  indicated  by  Book  ResourcesTM

This book will be useful to entrepreneurs, managers, students, academicians as well as to judges and lawyers.

Table of Contents

1. Road to GST

2. Indirect Taxation — Pre-GST

3. Constitution (101st Amendment) Act, 2016

4. Goods and Services Tax Council (GST Council)

5. GST Around the World

6. Understanding GST

7. GST Rate Slabs and Compensation Cess Rates

8. Goods and Services Tax Network (GSTN)

9. Directorate General of Goods and Service Tax Intelligence (DGGSTI)

10. GST Suvidha Providers (GSPs)/GST Seva Kendra

11. Central Goods and Services Tax Act, 2017

12. E-way Rules

13. Integrated Goods and Services Tax Act, 2017

14. Union Territory Goods and Services Tax Act, 2017

15. Goods and Services Tax (Compensation to States) Act, 2017

Subject Index

Get Your Copy soon!

Here is the link to buy: Goods and Services Tax: Law and Practice by Milind Kumar

Cabinet DecisionsLegislation Updates

Union Cabinet has approved amendments/extension/repeal in the following Acts and Regulations dealing with Goods and Services Tax (GST), Value Added Tax (VAT) and State Excise, and for designation of Daman as Headquarter:

  1. the Central Goods and Service Tax Act, 2017 (No.12 of 2017) to be amended as Central Goods and Service Tax (Amendments) Regulation, 2020;
  2. the Union Territory Goods and Service Tax Act, 2017 (No. 14 of 2017) to be amended as Union Territory Goods and Service Tax (Amendments) Regulation, 2020;
  3. the Dadra and Nagar Haveli Value Added Tax Regulation, 2005 (No.2 of 2005) to be amended as Dadra and Nagar Haveli and Daman and Diu Value Added Tax (Amendments) Regulation, 2020;
  4. the Daman and Diu Value Added Tax Regulation, 2005 (No.1 of 2005) to be repealed as Daman and Diu Value Added Tax (Repeal) Regulation, 2020;
  5. the Goa, Daman and Diu Excise Duty Act, 1964 (No.5 of 1964) to be amended as Dadra and Nagar Haveli and Daman and Diu Excise Duty (Amendment) Regulation, 2020;
  6. the Dadra and Nagar Haveli Excise Duty Regulation, 2012 (No.1 of 2012) to be repealed as Dadra and Nagar Haveli Excise Duty (Repeal) Regulation, 2020;
  7. Designation of Daman as Headquarter of Union Territory of Dadra and Nagar Haveli and Daman and Diu.

These amendments will lead to “Minimum Government, Maximum Governance” by way of having common taxation authorities: better delivery of services to the citizens by reducing duplication of work and improving administrative efficiency, will help in bringing more uniformity in Laws relating to GST, VAT and STATE EXCISE and it will also help to avoid any legal complications in the levy and collection of GST Tax, VAT, State Excise, including recovery of arrears Moreover, the said amendments not only bring uniformity in taxation laws but also strengthen the system of laws.

The U.T. Administration of Dadra & Nagar Haveli and Daman & Diu have taken a big step to realize the vision of “Minimum Government, Maximum Governance” for the people of the two UTs, besides saving to the government exchequer and ensuring uniformity, stability and consistency in day to day functioning of taxation authorities.

This is achieved by making Amendments/extension/repeal in Acts dealing with Goods and Services Tax (GST), Value Added Tax (VAT) and Excise, and by designation of Daman as Headquarters of UT of Dadra and Nagar Haveli and Daman and Diu in view of merger of Dadra and Nagar Haveli and Daman and Diu on appointed date of 26.01.2020.

Ministry of Home Affairs

[Source: PIB]

[Press Release dt. 22-01-2020]

Legislation UpdatesNotifications

Order under Section 119 of the Income-Tax Act, 1961

Section 44 AB of the Income-Tax Act, 1961 (‘the Act’) read with Rule 6G of the Income-tax Rules, 1962 (‘the Rules’) requires specified persons to furnish the Tax Audit Report along with the prescribed particulars in Form No. 3CD. The existing Form No.
3CD was amended vide notification no. GSR 666(E) dated 20th July, 2018 with effect from 20th August, 2018. However, the reporting under clause 30C and clause 44 of the Tax Audit Report was kept in abeyance till 31st March, 2019 vide Circular No. 6/2018 dated 17.08.2018.

Representations were received by the Soard that the implementation of reporting requirements under clause 30C (pertaining to General Anti-Avoidance Rules (GAAR)) and clause 44 (pertaining to Goods and Services Tax (GST) compliance) of the Form No. 3CD may be deferred further.

The matter has been examined and it has been decided by the Board that the reporting under clause 30C and clause 44 of the Tax Audit Report shall be kept in abeyance till 31st March, 2020.

[Notification dt. 14-05-2019]

Ministry of Finance