Advance RulingsCase Briefs

Rajasthan Appellate Authority for Advance Ruling: The Bench of Pramod Kumar Singh, Member (Central Tax) and Ravi Jain, Member (State Tax) while addressing a matter held that hostel seat should be considered as a unit of accommodation.

Factual Background

Appellant had filed an appeal against the ruling issued by Authority for Advance Ruling Rajasthan.

Appellant was registered as a Public Charitable Trust under Section 12AA of the Income Tax Act, 1961. It was stated that the appellant was also the sponsoring body of Mody University of Science and Technology (MUST).

Further, it was added that the appellant was considering a proposal to allow the students of MUST to use the ‘Hostel Accommodation’ in its surplus infrastructure which includes Hostel Seat for the students along with serving meals including breakfast, lunch and dinner.

The ‘Boarding and Lodging Charges’ will directly be charged from the students and shall be based on the type of the ‘HOSTEL SEAT’ opted by the students.

The application was filed before the Rajasthan Authority for Advance Ruling to seek an Advance Ruling on the following:

Whether Hostel facility which includes Lodging and Boarding service provided by appellant to the students of MUST having value service upto Rs 1000 per day would be eligible for exemption under entry 14 of the notification 12/2017 CTR Dt. 28-06-2017?

Rajasthan Authority for Advance Ruling held that the applicant would not be eligible for exemption under entry no 14 of the Notification No. 12/2017 Central Tax (Rate), dated 28-6-2017.

Aggrieved with the above, the present appeal was filed.

Analysis and Decision

Rajasthan Appellate Authority for Advance Ruling expressed that, the Hostel Accommodation Service is at par with the “Service by a hotel, Inn, guest house, club or campsite, by whatever name called, for residential or lodging purpose” which falls under Service Accounting Code – 9963.

The Bench noted that as per Section 2(74) of the CGST Act the term “mixed supply” means two or more individual supplies of goods or services, or any combination made in conjunction with each other day by a taxable person for a single price where such supply does not constitute a composite supply.

In the present matter, the Authority observed that the appellant was supplying services of food along with Hostel Accommodation service.

“The supply of food with Hostel Accommodation service is not naturally bundled in normal course of business.”

Authority added that, a person can live in the hostel without availing other services like food but to make ones stay more comfortable, the said ancillary services are availed him.

Bench found that other services being provided by the appellant were not naturally bundled or ancillary to Hostel service as the inhabitants of Hostel seats can avail the said services from any other source. In fact, the inhabitants have been restricted from sourcing these other services from any other person and have to avail the same from the appellant.

“…supply of hostel accommodation along with food is not a composite supply but it is a mixed supply.”

As per Section 8 (b) of the CGST Act, 2017 in case of the mixed supply of accommodation and food, the highest rate of both will be applicable.

In view of the above, the appeal was disposed of. [Mody Education Foundation, In Re., RAJ/AAAR/01/2021-22, decided on 27-10-2021]

Advance RulingsCase Briefs

Appellate Authority for Advance Rulings, State of Uttarakhand GST: The Coram of P.K. Goel (CGST Member) and Dr Ahmed Iqbal (SGST Member) stated that a resort running the service of Naturopathy as an additional service would not be exempted from GST.

An appeal was filed under Section 100 of the Central Goods & Service Tax Act, 2017 and Uttarakhand Goods & Service Tax Act, 2017 by M/s Corbett Nature Reserves (Applicant) against the Advance Ruling Order passed by AAR of Uttarakhand.

Factual Background

Advance Ruling on the following Question was sought:

Whether “The Centre” of the applicant was eligible to get the benefit of entry 74 of exemption Notification No. 12/2017-Central Tax (Rate) classified under SAC Heading 9993?

The applicant was running a resort namely “Aahana – The Corbett Wilderness” and it was stated that the same runs an independent unit namely “Aahana Naturopathy Centre” wherein services in the form of Nature cure and Yoga therapies were provided, which were not restricted to the in-house customers, but open to all.

The Authority for Advance Ruling, Uttarakhand observed that the supply of services provided by the applicant, was a composite supply, rightly classifiable under sub-heading No. 996311 as ‘Room or unit accommodation services provided by Hotels, Inn, Guest House, Club and the like’, whereas the exemption at Entry 74 was applicable to services falling under SAC 9993. Therefore, the AAR held that the applicant was not eligible to get the benefit of Entry 74 of Exemption Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017.

On being aggrieved with the above, the present appeal was filed.

Analysis and Decision

In the instant matter, the applicant had advertised and marketed their accommodation service as their main service and Naturopathy as an additional service.

Hence, the accommodation service and other services including Naturopathy rendered during the course of said service would be covered under the composite service and the accommodation service constituted the predominant element and therefore, the principal supply and other services including Naturopathy shall form the part of that composite supply.

Therefore, all the services provided in relation to or in addition to accommodation service were liable to GST applicable to ‘Accommodation Service’.[Corbett Nature Reserve, In Re., 2022 SCC OnLine Utt AAAR-GST 1, decided on 10-3-2022]

Case BriefsHigh Courts

Madras High Court: Dr Anita Sumanth, J., expressed that with the inception of Section 74(5)of GST Act, it is the case of the revenue that the collection of amounts in advance has attained statutory sanction, provided the same are voluntary in Form GST-DR03.

Merely because an assessee has, under stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment.

In the present matter, mandamus was sought to restrain the first respondent from harassing the petitioner baselessly without addressing its grievance petition and refund claim pending before the respondents.

The petitioner was registered as a Small-Scale Industry under the MSME Act and was an assesseee under the provisions of all the Goods and Service Tax Act, 2017. An investigation was conducted on the premises of the petitioner and various documents and registers were seized. Further, during the investigation, a statement was recorded from one S.A Kumar, who also deposed to the affidavit filed in support of the present petition, to the effect that the petitioner had not discharged its GST liability correctly.

The Managing Director had signed the undertaking and in line with the same, the petitioner remitted a sum of Rs 1 crore.

Petitioner stated that it had no liability to tax, that the MD and Officials were forced to accept liability to tax and the admission was by no means, voluntary.

Further, the petitioner had made serious allegations about the high handedness of the authorities during the conduct of search and the scant regard expressed for the sentiments of the family of the MD and employees of the petitioner.

Whether the collection of any amount during the process of investigation is statutorily permitted?

Whether the products sold are branded or unbranded?

If unbranded then there is no liability to GST.

Whether the petitioner is entitled to the refund of the amounts paid during investigation and the revenue relies upon the provisions of Section 74(5) of the Act?

Section 74 provides for a determination of tax not paid or short paid or erroneously refunded or the wrongful availment or utilization of Input Tax Credit by reason or fraud, willful misstatement or suppression of facts.

The remittance under Section 74(5) is in terms of Rule 142 of the Central Goods and Services Tax Rules, 2017 and has to be made in Form GST DRC-03.

It was noted that the payment was ‘voluntary’ and the same procedure had been followed in regard to the second instalment as well.

“Prior to the inception of the GST Act, instances were rife when officials of DRI and Customs Department were infamous for collecting advance payments of tax from assesses, many a time under coercion, and in the course of investigation itself.”

Thus, according to the revenue, the remittances made by the petitioner during the investigation in terms of Section 74(5) amount to ‘self-ascertainment’. Having remitted two instalments of tax as per is own ascertainment, it cannot pray for a mandamus seeking a refund of the amount.

“No collection can be insisted upon prior to a final determination of liability being made.”

Further, the Bench added that, what Section 74(5) provides is the first opportunity for an assessee to pay tax, interest and penalty liability even prior to the issuance of a show-cause notice and such acceptance will have to be in the form of either self-ascertainment or an ascertainment by the proper officer.

In the present matter, the enquiry and investigation were on-going, personal hearings had been afforded and both the parties were fully geared towards issuing/receiving a show-cause notice and taking matters forward.

Hence, the understanding and application of Section 74(5) was wholly misconceived.

Therefore, the mandamus as sought for by the petitioner was issued and the amount collected of Rs Two Crores shall be refunded to the petitioner within a period of four weeks.[Shri NandhiDhall Mills India (P) Ltd. v. Senior Intelligence Office, WP No. 5192 of 2020, decided on 7-4-2022]

Advocates before the Court:

For Petitioner: Mr.Hari Radhakrishnan

For Respondents: Mr.V.Sundareshwaran (for R1 to R3 & R5)

Senior Panel Counsel R4 – Given up

Case BriefsHigh Courts

Delhi High Court: Prateek Jalan, J., grants bail to a person who was alleged to cause fraudulent transactions and loss to the government.

An applicant sought bail for offences registered under Sections 420, 468 and 471 of the Penal Code, 1860.

The only accused named in the FIR was Sanjay Garg, son of Deep Chand Garg. The FIR alleged cheating and fraud by Saraswati Enterprises, of which Sanjay Garg was the proprietor, causing a loss to the government for the sum of Rs 9.97 crores.

The allegations in the FIR were with regard to the unauthorized and fraudulent claim of input tax credit in respect of Goods and Services Tax [GST] by Saraswati.

The allegation against the applicant was that he and a co-accused had set up a number of fictitious companies, which were being used for the purposes of defrauding the government. It was contended that the accused persons had opened banks accounts in fictitious names and provided their telephone numbers and email addresses in this respect.

Analysis and Decision

In Court’s opinion, the applicant was entitled to bail.

From the status reported, it appeared that the main link of the present applicant with the transactions in question was on the basis of the use of the mobile No. and his email address.

High Court expressed that the applicant in conspiracy with co-accused had registered various bogus firms and opened fictitious bank accounts.

Further, as per the status report, the applicant neither has prior criminal antecedents nor is there any material to suggest that he is a flight risk.

The evidence in the present case was largely documentary and had already been placed before the trial court. Hence, the chances of the applicant tampering with the evidence was therefore unlikely.

Seriousness of the offences alone is not conclusive of the applicant’s entitlement to bail, as held by the Supreme Court inter alia in Sanjay Chandra v. Central Bureau of Investigation (2012) 1 SCC 40.

Concluding the matter, the applicant was granted bail subject to the following conditions:

  1. The applicant will furnish a personal bond in the sum of ₹1,00,000/- with two sureties of the like amount, one of which will be from a blood relative of the applicant, to the satisfaction of the Trial Court.
  2. The applicant will remain resident at the address mentioned in the memo of parties
  3. The applicant will inform the Investigating Officer and the Trial Court in advance of any change in his residential address.
  4. The applicant will appear on each and every date fixed before the Trial Court.
  5. The applicant will give his mobile numbers to the IO and ensure that the mobile numbers are kept operational and reachable at all times.
  6. The applicant will not directly or indirectly tamper with evidence or try to influence any of the prosecution witness in the case. In case the same is established, the bail granted to the applicant shall stand cancelled forthwith.

In view of the above, application stood disposed of. [Pulkit v. State (NCT of Delhi), 2022 SCC OnLine Del 1074, decided on 12-4-2022]

Advocates before the Court:

For the Petitioner:

Sunil Dalal, Senior Advocate with Kapil Madan, Gurmukh Singh Arora, Ramya Verma, Pulkit Pandey, Advocates

For the Respondent:

Amit Chadha, APP for the State with Insp. J.S. Mishra, PS EOW

Op EdsOP. ED.


As we all know that the goods and service tax (hereinafter referred to as “GST”) was passed by the Lok Sabha and Rajya Sabha in the year 2017 with a motive of “one nation, one tax”. During the initial stage, the Finance Ministry’s draft proposed to keep crude oil, petrol, diesel, aviation turbine fuel (ATF), and gas outside the scope of the GST. However, simultaneously, they had an aim to bring all of them under the GST regime after its complete and successful implementation in the country. State’s revenue is mostly dependent upon the petrol and diesel to meet their budgetary expectations and expense, seeing which petrol and diesel were not included in the GST. India imports around 80% to 85% petrol and diesel to satisfy the day-to-day oil needs of the country, therefore, the retail prices depend upon the prices in the international market. Prices of oil products are decided out of the demand supply formula. Prices of petrol and diesel have a direct relation to every product we consume/use and majorly, it used in a supply chain. Therefore, if the prices of petrol or diesel rise, it will lead to an increase in the prices of other daily usage commodities impacting the lives of the common people.

Under the current tax structure, the consumers are required to pay three major taxes on petrol and diesel which include excise duty (charged by the Centre), value added tax (charged by respective States), and the dealer’s commission/margin. The pandemic times have led the Central and State Governments to increase excise duty and VAT to fund the government schemes, vaccination drive, etc., to satisfy/manage the country’s economy. Talking in a general sense, the combined price of per litre petrol and diesel include around 45% to 53% of the taxes; whereas, if petrol and diesel get included in the GST, the same would constitute around a maximum of 28% of the taxes. The difference is very much clear as to that why the public is demanding the inclusion of petrol and diesel in GST.

The reason why some States are opposing the inclusion of petrol and diesel under the ambit of GST

Revenue of some States like Rajasthan, Madhya Pradesh, Maharashtra, etc. is mostly dependent upon the revenue generated through VAT on petrol and diesel, so if petrol and diesel are included in the GST, then their revenue might fall heavily. Fearing this, some States are opposing the move of inclusion of petrol and diesel under the ambit of GST. In Kerala Pradesh Gandhi Darshanvedhi v. Union of India[1], the Kerala High Court ordered the GST Council to consider the inclusion of petrol and diesel under GST. In the 45th GST Council meet at Lucknow, Uttar Pradesh on 17-9-2021, all States unanimously opposed the idea with a thought that it would disrupt the State’s revenue. Since 2017, it is the States who are opposing the inclusion of petrol and diesel under the GST regime. Few States are demanding that if petrol and diesel are brought under the GST, then the Central Government must compensate all the States of their deficit revenue. The Central Government showed their incapability to compensate the States of their deficit revenue which has hindered this process overall. It is because of “revenue implication” the Central Government and State Government is fearing the inclusion of petrol and diesel under the GST.

So, this fear of revenue considerations must be jointly addressed and resolved by the Central and State Government to solve this problem. Otherwise, it is the common citizens who will suffer the most due to the rising prices of petroleum products. We should understand that it is the GST Council who in consultation, discussion and approval with the State Governments can only bring this urgent amendment.

Will the inclusion of petrol and diesel under the GST solve the problem?

Now, the important point for consideration is here that whether the inclusion of petrol and diesel in the GST will solve the problem of their rising prices? The answer is yes, it would substantially lower the prices of petrol and diesel, ultimately benefiting the end consumer. But we must also examine its overall effect and impact on the country’s overall future. Petroleum products are derived out of fossil fuels which are getting exhausted and at some point, of time shortly, we will have to limit their usage in daily lives. In the short run, lowering the prices of petrol and diesel will prove helpful but ultimately, all the consumers will have to start shifting towards renewable energy sources for sustainable growth and development. Rather than focusing on the inclusion of petrol and diesel in GST, what if we as a country do some strict and deep research on the topic of finding out serious methods to promote the shifting towards renewable energy immediately. History has been evident that even if the prices of oil barrel has fallen down the Government has not decided to lower the prices but let them remain stagnant. We are just focusing on part only but the inclusion of petrol and diesel under the ambit of GST might bring some sort of other discrepancies that the Governments might use to keep their prices higher to fulfil revenue needs. The aftermath of its inclusion must be drawn beforehand to be ready with the upcoming challenges or problems which might be faced by the general public because everything has its pros and cons, the same would happen with the inclusion of petrol and diesel in the GST. All around the country, we are even witnessing the dire need for further upgradation and amendment in the tax regime under GST, and micro, small and medium enterprise (MSME) sectors are also demanding to resolve the complexities attached with the GST. This point has been mentioned here to take the complexities of GST into cognizance, so that if petrol and diesel are included in the GST, then we are ready with the strategies to cope with them. The aspect of politics in this process cannot be ignored because the spirit of cooperative federalism is losing its spirit in the country which makes policy implementation much harder these days.

BBA LLB (X Semester), New Law College, Bharati Vidyapeeth (Deemed To Be) University, Pune and Legal Trainee, Mehta Chambers Law Office, Jodhpur (Rajasthan). Author can be reached at

[1] 2021 SCC OnLine Ker 2674.

Case BriefsHigh Courts

Calcutta High Court: The Division Bench of T. S. Sivagnanam and Hiranmay Bhattacharyya, JJ., dismissed an appeal and connected application which was filed by the State against  the order of detention passed by the authority detaining two trucks containing consignment of steel and other products in WPA 17611 of 2021 dated: 07-12-2021 wherein petitioner was the wife of late Mohit Madhogoria, who was a registered dealer under the provisions of the W.B.V.A.T. Act presently under the GST Act.

The Single Judge in the impugned order had directed the release of the goods along with vehicle taking note of the fact that the appellant who was the wife of the deceased dealer had paid 100% of the disputed tax and further 10% of the disputed tax. The Single Judge had concluded that the fact that as of now the GST Tribunal was not functional and had the avenue of appeal been available to the appellant, the appellant would have been required to pay 100% of the admitted tax and 10% of the disputed tax for her appeal to be entertained.

Counsel for the State strenuously contended that in terms of Section 129 of the CGST Act, 2017, the penalty would be 200% of the tax and since the appellant was not a registered dealer, the revenue could not take steps to recover the balance and, therefore, the appellant should be put on further terms by directing her to execute a bond and also other means to secure the interest of revenue.

Counsel for the respondent submitted that the respondent’s husband was a registered dealer under the GST Act and he had an untimely death and the respondent was taking steps to register herself as a dealer in the place of her husband and as on date she has stepped into the shoes of her husband drawing attention of the Court to Section 93 of the W.B.GST Act, 2017 which speaks of the liability of the legal representatives of the other persons in the case of death of a registered dealer.

Court was of the view that technical objection raised by the appellant had to be agitated before the Single Judge as the appellant has been given an opportunity to file an affidavit-in-opposition.

The Court had to decide whether the interest of revenue had been reasonably safeguarded to which the Court opined that the respondent having paid the 100% of the admitted tax and further 10% of the disputed tax, the interest of revenue has been safeguarded, for the present. The court however clarified that this order shall not be treated as laying down a legal principle or treated as a precedent as this court had not interpreted the provisions of Section 129 of the Act and rendered this decision but it was based on the fact that respondent was the wife of the deceased dealer and also that she was yet to be formally recognized as a dealer by substituting her name in the Registration Certificate for which specified procedure had to be followed.

The instant appeal and the connected application was dismissed.[Deputy Commissioner v. Nidhi Madhogaria, MAT 1332 of 2021, decided on 18-02-2022]

Mr A. Ray, G.P., Mr T. M. Siddiqui, Mr Debasish Ghosh… for the appellant State

Ms Rita Mukherjee, Mr Rowsan Kumar Jha, Mr Abhijat Das… for the respondent

Suchita Shukla, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Rajasthan High Court: Narendra Singh Dhaddha rejected bail and dismissed the petition being devoid of merits.

The present bail application has been filed under Section 439 Criminal Procedure Code i.e. Cr.P.C. relating to offence punishable under Sections 132 (1)(A), (F),(H),(I),(L) of Central Goods and Services Tax Act, 2017 i.e. CGST Act.

Counsel for the petitioner submitted that in initial complaint, allegation was against the Vinaykant Ameta not against the petitioner and the respondent’s department does not have adequate data for evasion of tax of Rs.869 Crores. It was further submitted that the case against the petitioner is on surmises and conjectures and that the maximum punishment in this case is 5 years and case against the petitioner is triable by Magistrate. It was further submitted that offence against the petitioner is compoundable and the provision of Section 173(8) Cr.P.C. is not applicable in this case and Department had not taken leave from concerned Court for further investigation. Hence, the petitioner be enlarged on bail.

Counsel for respondent submitted that the petitioner and Vinay Kant Ameta were working as Director in M/s Miraj Products Private Limited and is responsible for the tax evasion. It was further submitted that as per Investigation, total tax evasion of Rs.869 Crores wherein M/s Miraj Products Private Limited had created the fake firm for tax evasion. It was also brought forth that the Supreme Court granted the bail of Vinay Kant Ameta on depositing of Rs.200 crores and if the petitioner is ready to deposit evasion of tax with penalty then he has no objection in granting the bail. However it was submitted that department had summoned the various persons of the M/s Miraj Products Private Limited Group for investigation but they had not turned up for investigation till today. So, on account of gravity of offence, bail be dismissed.

The Court observed that the petitioner and Vinaykant Ameta were Director in M/s Miraj Products Private Limited. As per the prosecution story, they had evaded tax of Rs. 869 Crores. GST department had seized one truck which was being unloaded at their premises. The Supreme Court in various pronouncement held that the economic offender should not be dealt as general offender because economic offenders run parallel economy and they are serious threat to the national economy.

The Court thus held “in the facts and circumstances of the present case and also looking to the seriousness of the offence(s) alleged against the petitioner without expressing any opinion on the merits of the case, I do not consider it a fit case to enlarge the petitioner on bail under Section 439 Cr.P.C.”[Sohan Singh Rao v. Union of India, S.B. Criminal Miscellaneous Bail Application No. 2555/2022, decided on 24-03-2022]


For Petitioner(s): Mr. V. R. Bajwa, Senior Adv. With Mr. Rishabh Sancheti, Adv. & Mr. Snehdeep Khyaliya, Adv.

For Respondent(s): Mr. Kinshuk Jain for DGGI

Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsTribunals/Commissions/Regulatory Bodies

West Bengal Taxation Tribunal: The Coram of Justice Malay Marut Banerjee (Chairman) and Suranjan Kundu (Judicial Member) and Chanchalmal Bachhawat (Technical Member), expressed that, Article 304(a) frowns upon discrimination (of a hostile nature in the protectionist sense) and not on mere differentiation.

In order to implement a uniform tax structure effectively, both Union and States had to surrender some of their erstwhile exclusive fields of taxation and there was a realignment of the legislative power of the Union and the States.


The petitioners have challenged the vires of the West Bengal Finance Act 2017 on grounds such as lack of legislative competency, discrimination, the impossibility of its successful implementation and so on.

Various petitions were filed before the Calcutta High Court seeking instructions on various situations so arose after the verdict of the Single Bench declaring the Entry Tax ultra vires was passed on 24-6-2013.


(a) Is there any stay of the Judgment date 24-6-2013 by which the Entry Tax Act 2012 was declared void and unconstitutional? And if not, then can such Act be amended during the period when the appeal challenging the said Judgment is pending and is not yet reversed?

(b) (i) After deletion of Entry No. 52 from the State list of 7th schedule of the Constitution, has the State Legislature absolutely lost its legislative competency to amend the Entry Tax Act with a view to making it non- discriminatory with retrospective effect?

(ii) If not then whether Section 19 of the C.A. Act 2016 has conferred the said power to the State Legislature?

(c) Do Sections 5 & 6 of the Amending Act 2017 withstand the test of Article 304(a) of the Constitution?

(d) Is the retrospective imposition of Entry Tax with effect from 01-04-12 by Sections 5 & 6 of the Amending Act 2017 permissible in law?

(e) Is the Amending Act 2017 violative of Article 14 and Article 19(i)(g) of the Constitution?


Issue 14 (a)

“Once a provision has been declared ultra vires, the State cannot invoke that the said ultra vires proceedings against the citizen of the country, simply because interim order has been passed in an appeal.”

Adding to the above observation, the tribunal stated that during the period of appeal an Act already declared void can at best be considered voidable, but the said Act cannot be revived in a detour way.

Bench stated that in the present case State Legislature increased the tax liability of the existing assesses, by creating new class of assesses with the ostensible reason to make it non-discriminatory and all that happened when the verdict declared it unconstitutional and existed unreversed by the higher forum.

Tribunal opined that the State Legislature should not have amended the Entry Tax Act 2012 which was declared unconstitutional, and which is not yet reversed.

“…this amendment is premature and smacks of mis-adventure despite the fact that interim order was granted with some conditions.”

Issue 4(b)(i)

Bench stated that as to how the State Legislature obtained power to amend in the field of Entry Tax when the same was deleted, AG did not enlighten the Court any further except Section 19 of the C.A Act 2016.

In order to promote GST both the Centre and State Governments had to surrender some of their filed of taxation.

Bench noted that Entry 52 was dropped permanently so that the State Legislature cannot make any law in the field of entry of goods into local area for consumption, use and sale therein.

Further, the Tribunal remarked that,

Entry 52 having been omitted there is no vestige of power left with State Legislature to legislate or amend the law in Entry tax matter and this loss is absolute and final. 

Issue 4(b)(ii)

On bare reading of Section 19 of the C.A Act 2016 the following characteristics can be noted:

(a) it deals with those provisions which relates to tax on goods or services or both.

(b) which are in force in any State on 16.09.16,

(c) which are also inconsistent with the purpose / goal for which C.A Act 2016 was enacted.

(d) which will continue to be in force for one year up to 15.09.17

Or (e) until amended or repealed which ever is earlier.

(f) by competent Legislature or competent Authority.

Bench laid down its observation that, once a law was declared void and its appeal was pending, the State legislature, however laudable the purpose may be, without legislative competency cannot amend the same with retrospective effect.

Hence, the Tribunal found that Entry 52 of list II was a spoilsport, the presence of which would have obviously marred the successful implementation of GST.

In the present case, State Legislature had nothing left for amendment of Entry Tax Matter and it had no option.

Moving further, it was expressed that Entry 54 of the State list was not entirely deleted but was substituted and therefore, the power to frame legislation under Entry 54 was retained albeit in a truncated form.

The State Legislature lost some of their erstwhile fields of taxation for ever and retained some in changed form. Section 19 has conferred limited legislative power within a prescribed period to amend those entries of State list which were substituted / truncated / partially changed.

Sections 5 and 6 of Amending Act 2017 (West Bengal Finance Act 2017 enacted on 06.03.2017) is unconstitutional and non est in the eyes of law, having no legal effect being beyond the Legislative competence of the State of West Bengal.

Tribunal held that the State of West Bengal had no legislative competency to introduce Sections 5 and 6 of West Bengal Finance Act 2017 and the said provisions are hereby declared ultra vires and unconstitutional.

State of West Bengal had no legislative competency to introduce sec. 5 and 6 of West Bengal Finance Act, 2017 with effect from 1st July, 2017 and therefore the said provisions are ultra vires and unconstitutional,

“…advocates for the petitioners that such an attempt is a sham and futile because in view of the provision of limitation in the old Act of 2012 such new classes of assesses could never be assessed to Entry Tax.”

Lastly, the Bench held that,

Even assuming for a moment that the West Bengal Entry Tax Act was not struck down by any judgment of the High Court can it be said that the amendment introduced retrospectively and validation of the Act by way of introducing Finance Act of 2017 is within the legislative competence of the State Government?

Having regard to the deletion of Entry 52 of the State List and bearing in mind the provision contained in Article 265 of the Constitution we are impelled to hold that the State Legislature did not have the legislative competence to bring in such amendment insofar as it relates to the West Bengal Tax on Entry of Goods into Local Areas Act, 2012 

Therefore, Section 5 & Section 6 of the West Bengal Finance Act, 2017 are ultra-vires and unconstitutional. [Tata Steel Ltd. v. State of W.B., Case No. RN-08 of 2018, decided on 25-3-2022]

For Applicant(s) : Mr. Kavin Gulati, Ld. Advocate, Mr. Ajay Aggarwal, Ld. Advocate, Mr. Sumeet Gadodia, Ld. Advocate, Mr. Avra Mazumder, Ld. Advocate, Mr. Ananda Sen, Ld. Advocate,

Mr. Boudhayan Bhattacharyya, Ld. Advocate, Mr. Jaweid Ahmed Khan, Ld. Advocate,
Mr. Puneet Agarawal, Ld. Advocate,
Mr. Sandip Choraria, Ld. Advocate,

Mr. Anil Kumar Dugar, Ld. Advocate, Mr. Somak Basu, Ld. Advocate,
Dr Samir Chakraborty, Ld. Advocate, Mr. Sujit Ghosh, Ld.Advocate,

Mr. Atish Chakroborty, Ld.Advocate, Mr. Pujon Chatterjee, Ld. Advocate Mr. Piyal Gupta, Ld. Advocate.

For Respondent(s):Mr. Soumendra Nath Mookerjee, Ld. Advocate General, Government of West Bengal, with
Mr. Soumitra Mukherjee, Ld. Advocate,
Mrs. Maitree Sen,

Mrs. Pampa Sur,
Md. Zafarullah,
Mr. Debashis Ghosh, State Representative(s)

Case BriefsHigh Courts

Karnataka High Court: The Division Bench of Alok Aradhe and M.I. Arun, JJ., addressed whether GST exemption can be claimed for leasing of residential premises as a hostel to students and working professionals.

A petition was filed raising the question, whether the service provided by the petitioner i.e., leasing of residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No. 9/2017 namely ‘service by way of renting of residential dwelling for use as residence’ issued under Integrated Goods and Services Tax Act, 2017.

Factual Trajectory

The petitioner along with other co-owners executed a lease deed in favour of the lessee. The residential property was leased out as Hostel for providing long term accommodation to the students and working professionals with the duration of stay ranging from 3 months to 12 months.

The petitioner with a view to seek clarification with regard to his eligibility to seek exemption on the rent received by him from the lessee by letting the property filed an Advance Ruling application.

Further, the AAR held that benefit of exemption notification was not available to the petitioner.

On being aggrieved with the above order, the petitioner filed an appeal before the Appellate Authority for Advance Ruling, Karnataka (AAAR Karnataka), which held that the property rented out by the petitioner was a hostel building which was more akin to sociable accommodation rather than what was commonly understood as residential accommodation.

Hence the said property could not be termed as a residential dwelling. Adding to this, the Court stated that the benefit of exemption notification is available only if the residential dwelling is used as a residence by the person who has taken the same on rent / lease.

Analysis, Law and Decision

Entry 13 in the said exemption notification provided for exemption from payment of Integrated Goods and Service Tax in respect of ‘services by way of renting of residential dwelling by way of use as residence’.

In view of the above, the burden is on the petitioner to show that his case comes within the parameters of the exemption notification.

Elaborating further, the Bench referred to the decision of Supreme Court in Kishore Chandra Singh v. Babu Ganesh Prasad Bhagat, AIR 1954 SC 316, wherein it was held that the expression residence only connotes that a person eats, drinks and sleeps at that place and it is not necessary that he should own it.

“The hostel is used by the students for the purposes of residence. The students use the hostel for sleeping, eating and for the purpose of studies for a period ranging between 3 months to 12 months. In the hostels, the duration of stay is more as compared to hotel in guest house, club etc.”

In Court’s opinion, the expression ‘residence’ and ‘dwelling’ have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression ‘residential dwelling’ and it cannot be held that the same does not include hostel which is used for residential purposes by students or working women.

Questions to be considered in order to ascertain whether the service provided by the petitioner was covered under the exemption notification:

  • What is being rented?
  • The purpose for which the residence is used for.

The notification does not require the lessee to use the premises as residence, hence the benefit of exemption notification cannot be denied to the petitioner on the ground that the lessee is not using the premises.

High Court remarked,

The finding recorded by AAAR Karnataka that the hostel accommodation is more akin to ‘sociable accommodation’ is unintelligible and is not relevant for the purposes of determining the eligibility of the petitioner to claim the benefit under the exemption notification.

The Bench held that the order of AAAR Karnataka is quashed, and the service provided by the petitioner i.e., leasing out residential premises as hostel to students and working professionals is covered under Entry 13 of Notification No.9/2017 dated 28.09.2017 namely ‘Services by way of renting of residential dwelling for use as residence’ issued under the Act.

In view of the above discussion, the petition was allowed. [Taghar Vasudeva Ambrish v. Appellate Authority For Advance Ruling, Karnataka, 2022 SCC OnLine Kar 88, decided on 7-2-2022]

Advocates before the Court:

For the Petitioner:


For the Respondents:


Op EdsOP. ED.


India is the first country to implement corporate social responsibility (in short referred to as “CSR”) mandated under the Companies Act, 20131. As per Section 135 of the said Act,

“Every company having a net worth of rupees five hundred crores or more, or turnover ofrupees one thousand crore or more or a net profit of rupees five crores or more during the  immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director”.2

The basis will be an average net profit made during three immediately preceding financial years. CSR is a sense of responsibility of voluntary contribution by various companies towards a better society and a cleaner environment where a company operates in the form of projects or programmes aiming the same. The company qualifying the abovementioned requirement for CSR has to spend at least 2% of its average net profit earned during the immediately preceding three financial years on CSR activities; which could be carried out in different forms. For example, providing education, promoting gender equality, healthcare or sanitation activities, projects related to rural development, contribution towards the protection of environment or to PM Cares Fund, relief activities during some disaster, etc. A specific example could be a contribution by way of cash donations towards the corpus of a charitable trust or undertaking any project activity through its unit or group entity or may undertake such activity through non-governmental organisations (NGOs).3

The Companies (Corporate Social Responsibility Policy) Amendment Rules, 20214 w.e.f. 22-1-2021 has implemented provisions of the 2019 Amendment to the Companies Act, 20135, to study an interplay between the Companies Act, 2013 as amended Central Goods and Services (CGST) Act, 20176 7 which will show that CSR is mandatory and failure to which can attract the wrath of penalties. Mainly the changes include the mandatory requirement to disclose CSR projects and activities and CSR Committee’s composition on their website and if failed to spend 2% in CSR then it should be disclosed in the report with the appropriate reason and in a scenario where the unspent amount if not related to “ongoing project” then it should be transferred to government’s notified fund. The penal action against the company could be to pay twice the amount which has to be transferred by the company to the fund specified in Schedule 78 or the unspent CSR Account, as the case may be, or 1 crore rupees, whichever is less; and, every officer in default shall be liable to a penalty of ⅒ of the amount required to be transferred by the company to such fund specified in Schedule 7, or the unspent CSR account, as the case may be, or two lakh rupees, whichever is less.

The input tax credit (in short referred to as “ITC”) is available to the supplier for the inputs, input services, and capital goods used to supply goods or services or both as part of such offers. The provision for availing of ITC is provided under Section 16 of the CGST Act, 2017 which provides that one would be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used “in the course or furtherance of his business”.9 The eligibility is provided under various limbs of Section 16 of the Act, per se, however a concept of blocked credit is provided simultaneously in Section 17(5)(h) of the Act,10 that ITC shall not be available in respect of goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples. Further, Section 17(5)(g) forbids ITC on goods or services procured for personal consumption.

Applicability of CSR and ITC

Provision of GST law does not specifically provide any provision for the taxability of goods or services provided by the companies as part of CSR activity. Cash donations, for example, donations given by cash, cheque or through electronic transfer of money or even the donations in kind (giving away goods or services) made voluntarily or gratuitously, cannot be construed as supply under GST as it is an activity without any quid pro quo. The contributions so made without any benefit in return cannot be treated as a consideration against any supply (in case of cash donations) or supply for consideration (in case of donations in kind) since there is no consideration received for giving such in-kind donations. Further, money is excluded from the definition of goods and services and hence, cash donations are not subject to GST.

In the case of corporate social responsibility activities, a company is providing outputs/output services free of cost. Thus, by taking into consideration the definition of taxable supplies and provisions of Section 17(2), input credit cannot be availed on CSR activities. Additionally, even according to Section 37 of the Income Tax Act, 196111, any expenditure incurred by the assessee with regards to CSR activities cannot be deemed by the assessee for business or profession.12 Thus, it cannot be claimed as business expenditure. If this is not a business expenditure, then ITC cannot be claimed on such spending and thus resultant in tantamount to an additional cost on account of CSR.

About this, two schools of thought prevail, first advocates that since CSR is a responsibility that is mandatory under the Companies Act, and therefore, any non-compliance of such provisions would necessarily have implications in furtherance of business. Therefore, CSR expenses must be treated as expenses incurred for inward supply in course of or furtherance of businesses. While on the other hand, the second theory explicates that the principle of GST shall be made applicable only if outward supplies are taxable. Since, CSR is made free of cost, and not with the intention of profitability but to foster its commitments towards the society, environment, and other measures, and hence, expenses incurred shall not be treated in course of or furtherance of business.

In Polycab Wires (P.) Ltd., In re,13 where the applicant, who is a dealer in electrical goods, had supplied electrical items to Kerala State Electricity Board (KSEB) through its distributors spread across the State in connection with reinstating connectivity in the flood-ridden areas as part of the “mission reconnect” “free of cost”. In addition to this supply to KSEB, the applicant had distributed electrical items like switches, fans, cables, etc. to flood-affected people under CSR expenses on a free basis without collecting any money. In the invoice so issued, the distributor had valued the goods for tax and the value was shown as 100% discount. Advance ruling sought that “determination of GST liability for goods provided free of any cost by the distributors of the applicant to KSEB for reinstating connectivity in flood-ridden areas; and admissibility of input tax credit concerning such goods. Thus, according to the applicability of Section 17(5)(h) of the KSGST Act, and CGST Act on CSR expenses, ITC cannot be claimed as a matter of entitlement”.

As evident from the interpretation of GST provisions, the expenses incurred in place of CSR shall not be considered in “furtherance of business”. However, there is an ample number of research studies that advocate that CSR increases business profitability, and increase corporate financial performance. Thus, it can be implied that CSR expenses are “in furtherance of business”. However. As derived from the Government’s intentions, CSR expenses are still treated as a noble concept and not seen from, the lens of business profitability.

The second school of thought advocates that the ITC is available on CSR activities because they are incurred in the course or furtherance of business. CSR activities have a high impact on the image of the company and are also mandatory as per the provisions of the Companies Act, 2013. It enhances the reputation of the company and thus, forms the goodwill of the company. Therefore, it can be ascertained that corporate social responsibility activities are incurred in the course or furtherance of business. So, ITC can be claimed for such events

In Essel Propack Ltd. v. Commr. of CGST14, where Essel Propack Ltd. manufactures multilayer plastic laminates and is subjected to Central Value Added Tax (CENVAT). An audit was shown in the factory and it was found that the CENVAT credit of service tax is amounting to Rs 12,12,772 which was availed towards such company’s commitment to corporate social responsibility  and the audit stated the same to be inadmissible. The appellant had made payment to a charitable trust for imparting training to students of an underprivileged section of society in the discharge of corporate social responsibility. It treated this payment towards CSR under the definition of input services. According to Rule 2(l) of the Cenvat Credit Rules, 2004 which has defined input services and that is for the manufacture of an assessee final product. The appellant argued that the said expenditure was incurred by the company within the definition of the concerned rule. Because through this training program students learnt the nature of the job that made them eligible to become future workers in factories. The appellant contends that it had engaged youth from the lower strata of the society in its factory to provide them on the floor exposure to the production activities of the company and in so doing, it has engaged them in preparation of data sheet, updating production logbook, preventive maintenance of the machine and assistance in the production operation as well as the transfer of raw materials, etc. So the same is counted within the manufacturing activities besides the fact that the purpose was to discharge CSR obligations.

A representation has been received seeking clarification as to whether donations and grants-in-aid received from different sources by a charitable foundation imparting free livelihood training to the poor and marginalised youth, will be treated as “consideration” received for such training and subjected to service tax under “Commercial Training or Coaching Service”. The important point here is regarding the presence or absence of a link between “consideration” and taxable service. It is a settled legal position that unless the link or nexus between the amount and the taxable activity can be established, the amount cannot be subjected to service tax.15 Between the provider of donation/grant and the trainee, there is no relationship other than universal humanitarian interest. In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to a specific trainee or training.

The appellant argued that the concept of business is not stagnant and “over the period”, the expression consists of complete care and concern for the society at large and the people of the locality in which business is located in particular for which the term activities relating to business is of wider ramification and corporate social responsibility is within its ambit that would cover Rule 2(1) of the Cenvat Credit Rules for which he prays for purposive interpretation to be imported to the rule governing Cenvat credit. Whereas the Department argued that there was no correlation of input services with the business activity of the appellant since CSR activities are welfare activities and not pertinent to business/production-related activities. That the service of imparting training has been provided by the trust to the students of the weaker section of society and not by the appellant company itself and therefore there was no service provided by the Trust against which Cenvat credit is claimed by the appellant.

It was held that:

6.4. … CSR is not a charity anymore since it has got a direct bearing on the manufacturing activity of the company which is largely dependent on the smooth supply of raw materials even from a remote location or tribal belts (that requires no resistance in the supply chain from the community) and the same also augments the credit rating of the company as well as its standing in the corporate world.16

Section 7 of the CGST Act17 defines the scope of “supply”, which contains the transactions undertaken without consideration. It should be argued that CSR is an activity that indulges the supply of goods and services without any consideration, and in furtherance of business as observed from the above, and thus, must not be made eligible under the GST regime and ITC shall be made available. Moreover, on the judicial frontier, the Tribunal has also supported this position and reiterated that CSR is eligible to GST, as it is furtherance of business, and therefore, ITC should be made available. In Indian Institute of Corporate Affairs, In re AAR-Delhi18, the Court reiterated that:

“the amount paid by the companies to external agencies for CSR activities to undertake specified projects, would be considered as “consideration”, and activities undertaken on company’s instruction or direction shall be deemed to supply within the GST Act.”

Further, the Court held that:

CSR cannot be treated as a gift, as the delivery of the gift is made voluntarily, and therefore, cannot assume the character of gifts. As may be noticed from the Gift Tax Act19, the definition of gift necessarily includes any transfer made voluntarily and without consideration. Since the activity is mandated on companies, and therefore, any CSR activities cannot be termed as a gift.”

Thus accordingly, CSR is not falling under the purview of Section 17(5) of the Act, thus ITC can be availed in CSR cases.

There is no empirical evidence that shows that expenses on CSR would necessarily increase the performance of a company. As the term “furtherance of businesses” is interpreted that an activity must be undertaken for business stability and profitability, however, it is not clear, whether CSR shall be treated in furtherance of business.

Applicability of ITC on Covid-19 supplies

Now, as the country is facing unprecedented circumstances set by Covid-19 Pandemic and in such time, we have encountered an end number of companies which have been providing Covid-19 related equipments like oximeters, PPE kits, sanitisers, medicines, oxygen canisters, etc. to the employees who are working at their home to ensure their well-being as they were workforce which was working from home. As these goods are not procured for use in office premises of taxpayers, it may be comprehended by the tax officers that taxpayers are not eligible to avail ITC on such procurements under Section 17(5)(g) as these are used for personal consumption of employees. Thus, an exemption from customs under Notification No. 32/2021-Customs dated 31-5-2021,20 or Ad hoc Exemption Order No. 4/2021-Customs dated 3-5-2021,21 for extending exemption from integrated goods and services tax (IGST) on import of Covid-19 related equipment on payment of considerations but based on a certain situation, certain taxpayers may not be able to fulfil the said procedural conditions and end up paying IGST on such procurements.

Afterwards reply was sought from key GST Officials and Group of Ministers through the representation made by National Association of Software and Service Companies (NASSCOM) to clarify the eligibility of ITC on Covid-19 related procurements. Thus in the further notification, the clarification was sought that “all amount spend by taxpayers on Covid 19-related gear like PPE kits, oximeters, medicines towards ensuring the well-being of employees/their family should not be construed as personal consumption under Section 17(5)(g) of the CGST Act, rather it would be eligible for credit in terms of Section 16 of the CGST Act, as the amount as CSR was spent for providing relief to people suffering from Covid-19 Pandemic or giveaways provided to employees to ensure their safety”.22

The mechanism of ITC and blocked credit concerning CSR can be understood from the standpoint of business. The expression business requires no discussion as it is already defined under Section 2(17)(b) of the CGST Act23 and it has to be seen from the framework of supply as defined under Section 7 of the Act. The three-way test for ITC on CSR can be summarised that firstly, the moment the test of business of rending taxable supply is passed, one needs to see the eligibility and compliances under Section 16 of the Act, per se. Secondly, on having crossed the first barrier, the second test would be passing the blocked credit under Section 17(5)(h) of the Act. Thirdly, to get rid of the clutches of blocked credit, one needs to see if any activity say CSR is mandated by law, if the answer is yes, then it will be said to have passed the third test to make the ITC as an accrued and vested right under the ecosystem of GST.

The outbreak of the deadly Covid-19 pandemic created an abnormal situation in the entire world. The need for medical and health resources increased exponentially and in such circumstances, even the Government witnessed shortages in supplying resources to normalise the health situations. In such crucial times, many corporate houses and companies entered into the realm and extended their support by providing medical resources and monetary contributions. By extending such support, many companies fulfilled their social responsibility of CSR. However, the legal position regarding the eligibility of companies to avail ITC for such activities is still ambiguous and the confusion lies between the fact that whether these companies have the option to avail ITC or bear the additional burden created thereof.

As per the current GST Rules, the key requirement to avail ITC on goods or services is that it should be utilised “in the course or furtherance of business”. Courts in some instances have interpreted this as “anything done towards assisting or promoting the interests of a business”. Thus, any activity done towards the purpose of earning profit shall be in the ambit of “in the course or furtherance of business”. Considering the voluntary and philanthropic activities of the companies, Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai allowed the companies to avail CENVAT credit of service tax paid for carrying out CSR. It opined that CSR being a mandatory social obligation for both public and private companies, must be deemed as a business activity. Thus, the view that companies may avail ITC on goods supplied as an act of fulfilling their CSR obligations and is in the course or furtherance of business can be considered valid. However, the GST Rules allow ITC on the supply of goods that are used in the course or furtherance of business and provide cases where such credit cannot be availed. One such case where the credit cannot be availed is on goods that are disposed of as “gift” or “free samples”.

Here the conundrum lies, the difficulty faced by companies in availing credit on goods supplies donated during the dire need of pandemic times. The question here arises that whether such donations should be ascertained as “voluntary” or “gift” when distributed under CSR obligations. Whether the companies can argue that this benefaction should not be barred from availing  ITC, considering its nature is “mandatory” as opposed to “voluntary”. The Haryana and Gujarat State Governments introduced certain policies to avoid this ambiguity from becoming a challenge for the companies disposing of their CSR duties. As per the notifications issued, the applicable State GST (SGST) and Integrated GST (IGST) will be reimbursed to the companies engaged in distributing essentials. However, despite such incentivisation by the State Government, the interplay between goods and services provided to fight the outbreak and their eligibility for ITC remains an ambiguous aspect on broader terms and needs an urgent if not a permanent address.

*4th year student, BA LLB (Hons.), National Academy of Legal Studies and Research, University of Law, Hyderabad.

**3rd year  student, BA LLB (Hons.), Maharashtra National Law University (MNLU), Nagpur.

1 Companies Act, 2013.

2Companies Act, 2013, S. 135.

3Nilesh Vasa and Anindita Sarkar, A taxing “Corporate Social Responsibility for Companies under GST?” dated 14-5-2018 published in LSI LawStreetIndia.

4 Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

5Companies (Amendment) Act, 2019.

6 Central Goods and Services Tax Act, 2017.

7Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 to the second proviso to S. 135.

8 Companies Act, 2013, Schedule 7.

9CGST Act, 2017, S. 16, as amended by Act 31 of 2018 and brought into force w.e.f. February 2019.

10CGST Act, 2017, S. 17(5), as amended by Act 31 of 2018 and brought into force w.e.f. February 2019.

11 Income Tax Act, 1961, S. 37.

12 Income Tax Act, 1961, S. 17(2).

13Polycab Wires (P.) Ltd., In re,2019 SCC OnLine Ker AAR-GST 1

142018 SCC OnLine CESTAT 7175.

15Circular No. 127/9/2010-ST, dated 16-8-2010.

16Essel Propack Ltd. v. Commr. of CGST, 2018 SCC OnLine CESTAT 7175.

17 CGST Act, S. 17.

18Indian Institute of Corporate Affairs, In re, (Advance Ruling No. 08/DAAR/2018 dated 28-06-2019), AAR-Delhi (2019) 107 413.

19Gift Tax Act, 1958.

20Notification of Customs, No. 32/2021-Customs, New Delhi dated 31-5-2021.

21Ad hoc Exemption from IGST, Order No. 4/2021-Customs dated 3-5-2021.

22GST: Representation to Address Concern of Input Tax Credit on Procurement of Covid-19 Related Goods, NASSCOM Community, The Official Community of Indian IT Industry.

23CGST Act, 2017, S.2(17)(b).

Advance RulingsCase Briefs

Kerala Authority for Advance Ruling: S. Anilkumar, Additional Commissioner of Central Tax & B.S. Thyagarajababu, Joint Commissioner of State Tax decided whether there will be any input tax credit on goods provided free of cost i.e as under CSR activity for flood-affected people.


In the present matter, the applicant was a dealer in electrical goods, cables of all kinds including winding wires, pipes, etc. Applicant had supplied electrical items to Kerala State Electricity Board through their distributors in connection with reinstating connectivity in the flood ridden areas as part of the “mission reconnect”.

The above-stated materials were supplied free of cost as a CSR activity. To ascertain the impact of GST on the stated goods supplied free of cost, the applicant required advance ruling on the following:

  • Determination of GST liability with respect to goods provided free of cost by the distributors and admissibility of input tax credit
  • Applicability of Section 17(5) of the CGST Act, 2018 on CSR expenses.


KSEB requested from the distributors of the applicant to supply electrical goods for the restoration of power supply at flood ridden areas. The said materials were supplied by the distributors free of cost being CSR activity for reinstating connectivity in flood ridden areas. Applicant also distributed items like switches, fan, cables, etc. to flood-affected people under CSR expenses on a free basis without collecting any money.

Further, it was noted that the distributors raised bill to M/S Polycab Wires Private Limited in relation to the materials supplied free of cost to KSEB. The tax invoices were issued to KSEB showing sale value, GST and total amount with 100% discount. However, the GST liability was paid to the Government.

Applicant stated that, since the GST liability was completely paid on free supply, they were eligible to avail full claim of input tax credit on the supplied items. M/s Polycab Wires Private Limited reimbursed the total amount to the distributors and account the same as donation in kind towards CSR Expenses for Kerala Flood Relief, 2018.

In the present case, after availing input tax credit, the applicant disposed of goods as a free supply for CSR activities. Hence, the applicant was liable to reverse the input tax credit already availed.

As per Rule 27 of GST Rules where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall be the open market value of such goods. In case the open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply.

If the value of supply is not determinable, the value of supply of goods or service or both of like kind and quality.


  • Determination of GST liability with respect to goods provided free of cost by the distributors to KSEB for reinstating connectivity in flood ridden areas; and admissibility of input tax credit in relation to such goods.

To operationalize the commitment of the applicant to provide goods at free of cost to KSEB for flood renovation work, the applicant instructed its distributors to provide the goods. The distributors billed the goods to KSEB and paid GST to Government. In the invoice so issued, the distributor had valued the goods for the purpose of tax and value was shown as discount.

In the above-stated supply, since the consideration was not wholly in money, Rule 27 of the CGST/KSGST Rules would apply for valuation. Once the Goods were supplied to KSEB, the distributor would raise the claim to the applicant who would reimburse the value to the distributor.

In view of the above, the distributor would be entitled to input tax credit on the goods supplied to KSEB.

  • Applicability of Section 17(5) of the CGST Act, 2018 on CSR expenses

For the items like cables, fans, switches, etc. to flood-affected people under CSR expenses on free basis, input tax credit will not be available as per Section 17(5)(h) of the KSGST and CGST Act.[Polycab Wires (P) Ltd., In Re., 32AAACP6474E1ZM, decided on 2-3-2019]

Authorised Representative: P.J. Jhoney, FCA

Experts CornerKhaitan & Co

As global discussions on climate change and the pressing need to reduce dependency on fossil fuels take centre stage, India too is taking steps to embrace and promote green energy. The Indian Government recently announced plans to formulate a “green tariff policy” with a view to incentivise consumption of renewable energy over non-renewable energy. Under this policy, power distribution companies (DISCOMS) will supply power generated from renewable sources to consumers at a tariff that is lower than that of conventional energy.


The principal idea behind the proposal of green tariff policy is that this will encourage more consumers to opt for cleaner green energy, thereby pushing DISCOMS to contract more renewable power, even beyond their renewable purchase obligations (RPOs), as there will be sufficient demand in the market for clean energy.


This is a welcome move. However, while it is agreed that Governments across the globe should take steps to incentivise consumers opting for clean energy, the announcement of India’s green tariff policy has raised some concern regarding certain gaps that will need to be addressed.


Let us discuss some of these gaps that will require urgent attention as we move towards implementing this new policy.

Rising construction costs for solar projects

This proposal of introducing a green tariff policy floated because around that time, the tariffs, which were being determined through competitive bidding processes, had gone down as low as INR 1.99 per unit and INR 2.43 per unit for solar and wind projects respectively. However, recently Ministry of Finance through its Notification dated 30-9-2021 [Ref. No. 8/2021 – Central Tax (Rate)] has revised the Central Goods and Services Tax (CGST) rates on “solar power-based devices” from 2.5% to 6% thereby revising the GST rates on “solar power-based devices” from 5% to 12% [CGST plus State Goods and Services Tax (SGST)]. With this revision in the GST rates, the cost of construction for the solar projects will substantially increase which will be reflected accordingly in the determined tariff rates. Thus, the tariff rates for solar projects will not remain this low for upcoming projects.


Deviation in renewable power generation

The biggest obstacle for the proper implementation of green tariff policy would be that renewable power is infirm in nature i.e. it is dependent upon variable natural factors, such as wind speed and solar irradiation, thereby causing the actual generation to vary from the scheduled generation which eventually create grid insecurity issues. So, if the DISCOMS start increasing their contracted renewable capacities in light of its growing demand among the consumers, then they would also be needing sufficient conventional power to absorb the deviations happening in green energy generation in order to maintain grid stability. The same can further be corroborated by Central Electricity Authority’s (CEA) Report on Optimal Generation Capacity Mix for 2029-2030 which states that India’s projected peak demand value in October 2029 will be approximately 340 GW, and a thermal installed capacity of approximately 267 GW will be required to meet such demand.


Issues pertaining to “banking” of power

One way to tackle the issue of deviation of actual renewable power generation from the scheduled generation by the renewable power developers is through banking the surplus power with the DISCOM concerned. However, the banking regime/regulations are not consistent across the States in India. All the State Electricity Regulatory Commissions have formulated their respective banking regulations for renewable power generators on the basis of numerous factors including load requirement in the State concerned, commercial status of the consumers and the respective State targets for green power integration to the grid. There are some States which do not encourage the provision of facility of banking to renewable power developers citing commercial reasons (adverse impact on the viability of the State DISCOMS, etc.) and impose restrictions on the facility of banking including imposing time of day (TOD) restriction for withdrawal of banked power, levy of heavy banking charges and allowing facility of banking only on seasonal basis.


On-site battery storage – A solution?

Considering the issues pertaining to the facility of banking, one of the prospective ways of implementing the green tariff policy would be to align this with the requirement of on-site battery storage facility for renewable power plants. Government has been planning to create a robust regulatory framework for developing energy storage systems in India. Ministry of New and Renewable Energy (MNRE) had also constituted an expert committee to draft policy to establish a National Energy Storage Mission. Also, a policy framework is being prepared to introduce on-site battery storage systems for wind and solar projects. Recently, in December 2020, Solar Energy Corporation of India (SECI) had issued a tender for a 20 MW solar project along with an on-site 50 MWh battery energy storage system to be set up at Phyang, Leh, Union Territory of Ladakh. In past two years, SECI had issued other tenders as well for setting up of solar projects along with on-site battery storage systems. Apart from this, SECI has also issued a tender for 2000 MWh of standalone energy storage systems.


A robust battery storage mechanism can play a pivotal role in ensuring grid security vis-à-vis increasing green power integration to the grid. However, battery storage facilities/systems have not been introduced in India yet on a commercial level and are still at a very nascent stage. Therefore, the associated costs for creating such an infrastructure would be much higher which will eventually be reflected in the corresponding tariff rates as well. So, even if the green tariff policy is introduced after ensuring that there is on-site storage facility for renewable power projects, the tariff determined/adopted will still be significantly high and cannot be less than that of thermal power tariff rates.

Green tariff policy: The road ahead

One may say that this is the classic case of “putting the cart before the horse”. If incentivising the consumers would create an unwarranted demand to shift to green energy, then there is a clear challenge with respect to the grid coming under extreme pressure. The Government must be mindful of this, as they cannot introduce the policy without taking into consideration the aforementioned issues. Incentivising and boosting demand disproportionately, without creating the necessary infrastructure to support the increased demand could lead to a major challenge. One could say that going forward with the green tariff policy without addressing the above issues will be somewhat of a hasty move.


In order for it to be efficacious, it is imperative that sufficient cost-effective infrastructure for on-site battery storage is created first at the national and State level. Only a robust battery storage infrastructure could minimise the deviation related risks in renewable power generation, which will thereby propel green energy’s market share.


For now, all eyes are on the Government as they deliberate on what would be the best possible way to take into account all stakeholders’ interests, including the pressures that could adversely impact DISCOMS in the future.


† Shivanshu Thaplyal, Partner in the Energy, Infrastructure & Resources team at Khaitan & Co. Shivanshu regularly advises on corporate/commercial matters and policy and regulatory issues.

†† Rishabh Sharma, Associate in the Energy, Infrastructure & Resources team at Khaitan & Co.

Op EdsOP. ED.

Salman Khan, Amitabh Bachchan, Sunil Gavaskar, Manish Malhotra and Kamal Hassan are only some of the big names in India who are hopping on to the NFT bandwagon. But what is NFT that is increasingly becoming the hot topic of discussion across platforms and industries?

While the legislature is yet to clear the air on various regulatory aspects of virtual currencies such as bitcoin and the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 (Crypto Bill) is yet to be introduced before the Lok Sabha, investor(s) are inching to another kind of crypto asset which are “non-fungible tokens” (NFT).

With NFT gaining popularity, some of the often-asked questions are about the nature and classification of the same. Is NFT different from bitcoin? Is NFT just another cryptocurrency? How is NFT classified? These are some of the questions that this article seeks to answer. With this background, the authors attempt to analyse the indirect tax implications of NFT in the Indian context.

What are NFTs

In economics, a fungible asset is something with units that can be easily and readily interchanged with similar or identical object. Example: Money, it is fungible because we can exchange Rs 10 for another Rs 10 and both will still have the same value. In fact, this is what makes money a medium of exchange. Non-fungible assets on the other hand, are something that cannot be interchanged. For example, a masterpiece painting cannot be interchanged with something else. If it is bartered or exchanged, the value will not be the same and thus there can be only one of that original masterpiece painting which is unique.

NFTs are digital blockchain tokens that represent ownership of such unique items which could be digital or physical. Since digital works of art are prone to easy duplication and copying, the need arose to “tokenise” such digital files to create a certificate of ownership. NFTs can represent a wide array of things such as art, music, literature, real estate and even bizarre items such as iconic tweets, etc.

How is NFT different from cryptocurrency like bitcoin

Blockchain is the technology used for creating NFTs. Although blockchain was initially devised for fungible assets like cryptocurrencies such as bitcoin, it has evolved to enable users to create a unique crypto asset which unlike bitcoin is non-fungible and therefore, cannot be used as a “currency” of any kind.

While NFT itself is not a medium of exchange, one requires some other medium of exchange such as fiat currency (Government sanctioned currency) or cryptocurrency to acquire an NFT. Paying for NFT essentially means paying for the ownership and right to transfer the token to one’s digital wallet. The token proves that the item that one purchases is original. A key value proposition of NFTs is also the fact they are programmable thereby enabling automation of secondary transactions thereby allowing exploitation of underlying asset. For instance, artists can automatically get paid a programmed percentage of royalty each time a secondary sale of their original work takes place. In the physical or rather traditional world, the artist would have had to go through a lengthy legal process to recover/collect such a royalty.

Thus, NFTs make trading of digital art easier thereby offering ways to make money. For example, companies like Taco Bell have auctioned their themed art work to raise funds.

NFT— Use cases, classification and implications under GST law

Over the course of time not only the popularity but also the uses of NFT have increased. As discussed supra, NFT itself is merely a digital token that showcases the ownership of different assets. Different items, digital as well as physical, can be created and sold as NFT. It appears that, NFT’s classification would depend on the underlying asset it represents. In other words, classification of NFT would depend on what it corresponds to. To understand the tax implications under GST law of popular use cases of NFTs, it is to be determined whether they fall within the ambit of either goods, services, securities or actionable claims. Accordingly, we have analysed each use case independently to determine the classification.

i) Artwork

One of the most popular use cases of NFT is artwork (paintings– physical/digital/designs) and even India has taken to its market relatively well. Several Indian artists have sold their artwork as NFT. In fact, as per the founder of homegrown crypto platform WazirX, art makes 90% of the NFT in India.[1] By the logic of NFTs representing the underlying asset as explained above, when an artist sells his artwork as NFT then the classification of the NFT will be the artwork getting tokenised. In this case, if the seller is a registered supplier under the Central Goods and Service Tax Act, 20172 (the CGST Act) then the sale of such NFT will be classified as supply of goods and will be exigible to CGST. This is because the underlying asset being an artwork such as a painting is covered under the definition of goods under Section 2(52)3 of the CGST Act and accordingly sale of such goods will qualify to be a “supply” under Section 7 of the Act4. The intangible nature of NFT will not be factor excluding it from the definition of goods as it is now settled by various decisions of the Supreme Court that “goods” may be a tangible property or an intangible one.

The point to be analysed in such cases is transfer of ownership, possession and right to use. In sale of NFTs while there is always a transfer of ownership, transfer or right to use goods and transfer of possession is disputed as the underlying asset is always in digital form. Thus, while the definition of goods includes intangible movable property, one can question the nature of supply when NFTs are being sold.

Furthermore, individuals who are not registered in terms of the provisions of the CGST Act, may sell their artwork as NFT and in such cases the transactions may not be subjected to CGST (subject to the turnover meeting the monetary threshold for registration). The income tax implications will however be something that should be kept in mind even in such cases. For example: Cricketer Dinesh Karthik immortalising his 2018 winning moment’s artwork as an NFT may not be subjected to GST as the cricketer is not a registered supplier under the CGST Act. But a similar supply of NFT by a registered company will be subjected to GST as supply of goods.

ii) Fashion and lifestyle

Designers selling their collections as NFTs is not unheard of. Recently, Indian celebrity fashion designer, Manish Malhotra launched his fashion themed NFTs. One of the items of this collection was sold for a whopping 3,000 WRX (which is the native token of WazirX) that, as of today, amounts to $3753 (roughly Rs 2.8 lakhs).5 In this case, the underlying asset being a good makes the transaction a supply of goods (as discussed in the use case pertaining to artwork) exigible to tax under the CGST Act.

iii) Music

Indian music artists have also joined the fad and have released albums as NFT.6 Supplying music NFT means that ownership transfers to the purchaser meaning thereby that depending on the arrangement, the artist as well as the purchaser will earn share of royalties the music will make on streaming platforms. With no third parties being involved, sale of music as NFT make it more lucrative for the artists.

Based on the transaction it needs be examined whether the IP in the music is given or the music is transferred as it is.

Where the artist transfers the copyright in the said music to say another individual, then the activity would be classifiable as an intellectual property right service on which GST is payable at the applicable rate on royalty being charged subject to provisions on reverse charge mechanism.

In cases where the music is transferred electronically, the underlying asset being a digital content viz. music, the supply will be in the nature of Online Information Database Access and Retrieval Services (OIDAR) service and taxable subject to the supplier being within the threshold to discharge GST.

The Integrated Goods and Services Tax Act, 20177 (‘the IGST Act’) defines OIDAR to mean services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as advertising on the internet, online supplies of digital content (movies, television shows, music and the like), etc. Further, in case of transfer of part ownership or subsequent sale of same music which would attract royalty will arguably make the transactions a case of supply of IP right service.

Open issues and the way forward

NFTs are gradually becoming a widely talked about development in the field of blockchain technology and individuals as well companies are increasingly trading in the same. With its fast gaining popularity, regulatory bodies are also taking this up for consideration. The tax research unit of Central Board of Indirect Taxes and Customs (CBIC) has recently been quoted to be working on a proposal to tax the use of blockchain for commercial purposes even before legislation on cryptocurrencies is brought in.8 Thus, the issue of determining the tax implications becomes even more pertinent.

While some of the use cases have been analysed above, there can be a plethora of cases where each NFT and its tax implication will require independent assessment of each kind of use cases. For instance, some experts opine that NFTs are derivatives as defined under the Securities Contract (Regulation) Act, 19569.10 Derivatives include a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security and its value is derived from that volatility to which it is linked. Transactions of NFT can be classified as derivatives only when the transaction in question resembles a risk instrument or a contract for differences. Therefore, in cases where the NFT is not being sold as a collectible or artwork but as a speculative trading instrument, can it qualify as a derivative? In that case what will be the tax implications? Further, can NFTs fall within the ambit of actionable claims? These are only few of the many questions that remain open to assessment.

As discussed above, while on one hand the case that can be set up for taxing NFTs is by classifying it as per its underlying asset, it can also be argued that in view of the absence of any classification provided in law for “NFT” itself, the same cannot be taxed under the law as it exists today. However, each use case of NFT will have to be independently examined to assess the arguments in this regard.

It is high time that the Government provides clarity on this issue to ensure that there is certainty on taxation and to avoid endless and long-drawn litigation. It will be interesting to see if the tabling of the Crypto Bill will throw some light on this issue.

*Principal Associate, Lakshmikumaran & Sridharan.

**Joint Partner, Lakshmikumaran & Sridharan.

[1]NFT | 90% Art, 10% Music: WazirX on Top NFT Categories in India, The Hindu, 16-7-2021 at<>.


3Goods are defined under S. 2(52) to mean every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

4S. 7, Central Goods and Services Tax Act, 2017.

5Designer Manish Malhotra Drops First Fashion NFT Collection, Records Fastest Sale, Gadgets360°, 8-10-2021, <>.

6Indian Rock Band Euphoria set to Launch its Next Album as an NFT, Business Insider, 10-9-2021 at


8Investing in Cryptocurrencies, NFT? Soon, You May have to Pay 18% GST, Business Standard, 10-11-2021, <>.


10Non-fungible Tokens are Now in India, but mind the Legal Pitfalls, Mint, 8-2-2021, <>.

Op EdsOP. ED.

Among the many epiphanies one has had owing to the COVID-19 Pandemic, the spike in the knowledge or awareness of the amount of data pertaining to citizens that a Government has the ability to handle has been a common one. Though citizens are often willing participants in efforts aimed at better governance, they are also increasingly becoming wary of how they share their data. For better citizen engagement and collaboration, the Government must strive to build trustworthy, transparent and accessible models that enable the citizen to place their trust – and thereby their data in the hands of the Government.


Considering the increasing penetration of digital services in India, the Personal Data Protection Bill, 2019 is a well-intentioned and timely intervention on the part of the Government. Pertaining to building the trust of citizens and enhancing their engagement with the Government this framework requires work in two areas.  Firstly, in areas that deal with the Government’s ability and right to access data from citizens or businesses. Secondly, in promoting the accessibility of institutions within the framework to be accessible to all sections of the Indian society and overcome the vast digital divide present in our society. Though, the intention of the Government is to ensure better delivery of services and evidence based policy-making, an attempt to gain carte-blanche access to data from businesses would further promote an environment of mistrust between the Government and the industry. The wide exemptions provided to the Government and its agencies from this framework also add to a citizen’s skepticism and mistrust in the system. The Government being among the largest data fiduciaries in our society holds onto a treasure-trove of personal data of its citizens. In such a situation, citizens must be assured that whether it is the Government or a private entity that is handling their data, it is equally protected in the event of misuse.


Though trust in the Government is important, the framework will truly be able to exercise its functions and purpose based on the level of inclusion and involvement of the community. Considering India’s vast demographic profile, ensuring accessibility efficiently for all sections of society is going to be a challenge. The digital divide that presently exists in India, especially between rural and urban areas, owing to asymmetry in digital infrastructure and education will only amplify implementational challenges. India has already suffered from roadblocks in this regard while implementing the revamped GST framework and should use that as a cautionary tale while formulating the personal data protection framework.


Any proposed authority, institution or platform that is designed under this framework must strive to understand and cater to the cultural and regional sensitivities of the people. It is suggested that a more multilingual, less text-based approach is taken. One that is not overly dependent on literacy – both conventional and digital. The Committee of Experts, under the chairmanship of Justice Sri Krishna, had suggested the formulation of a “data protection awareness fund” that would utilise penalties generated under the framework for the purpose of generating awareness regarding data protection and rights. Unfortunately, this has been done away with in the new Bill introduced in December 2019. It is yet to be seen, however, if the latest draft which is expected to be tabled in the winter session of the Parliament will have this incorporated. It is imperative that the framework facilitates the enhancement of digital literacy and awareness in addition to ensuring last mile connectivity to truly achieve its objectives.


For Governments, winning the trust and confidence of the people is not an easy task. It is a long drawn process, however with the Personal Data Protection Bill, the Government has been given an opportunity to begin this process. They must work to ensure that the framework achieves its true objective by ensuring that the rights of every individual receive equal protection against the exploitation and misuse of their information by any entity.

Shefali Mehta, Programme Manager, The Dialogue. She has a degree in Business and Law from Gujarat National Law University. She has also worked in short engagements in the areas of gender and caste. Her focus areas at the Dialogue include policy analysis and outreach with Parliamentarians and civil society organisations.

Case BriefsSupreme Court

Supreme Court: In a major setback to Bharti Airtel Ltd., the Division Bench comprising of A.M. Khanwilkar* and Dinesh Maheshwari, JJ., overturned the decision of the Delhi High Court and barred the company from rectifying its form GSTR-3B to claim GST refund of approx  Rs.923 crores. Finding no merit in the grievance raised by the company, the Bench remarked,

The factum of non-operability of Form GSTR-2A, is flimsy plea. Indeed, if the stated form was operational, the same would have come handy to the respondent for self-assessment regarding eligibility of ITC, but it is a feeble excuse given by the respondent to assail the impugned Circular.

Findings of the High Court

The High Court of Delhi, by the impugned judgment had read down paragraph 4 of the Circular No. 26/26/2017GST dated 29-12-2017 issued by the Commissioner (GST), Central Board of Excise and Customs, to the extent it restricted the rectification of Form GSTR-3B in respect of the period in which the error had occurred. The High Court also allowed the company-respondent to rectify Form GSTR-3B for the period in which error had occurred, i.e., from July to September 2017.

Grievance of the Respondent

The respondent contended that due to repeated technical glitches in the electronic common portal introduced by the Department, during the transition phase from the erstwhile regime to the GST regime, he had submitted its monthly Form GSTR-3B based on estimates, for the relevant period of July to September 2017. The respondent submitted that there had been an excess payment of Rs.923 crores in cash for discharging OTL (Outward Tax Liability). In other words, despite the fact that a bona fide error had occurred for reasons beyond the control of respondent, yet he was unable to correct the mistake in Form GSTR3B for the relevant period due to the restriction imposed by paragraph 4 of the Circular dated 29-12-2017.

Factual Analysis

The Bench observed that the Circular in question was issued by the Board after considering various representations received seeking clarifications on various aspects of return filing such as return filing dates, applicability of quantum of late fee, amendment of errors in submitting/filing of Form GSTR3B and other related queries to ensure uniformity in implementation across field formations. Therefore, the said Circular was not the direction issued by the Commissioner (GST) as such, but it was notifying the decision(s) of the Board taken in exercise of its powers conferred under Section 168(1) of the 2017 Act.

Rejecting the contention of the respondent that due to the failure of the Department he had make payment in cash which had resulted in payment of double tax, thereby offered unfair advantage to the tax authorities, the Bench stated that the High Court had failed to enquire into the cardinal question as to whether the respondent was required to be fully or wholly dependent on the auto generated information in the electronic common platform for discharging its obligation to pay OTL for the relevant period between July and September 2017. Answering the aforesaid question in negative, the Bench stated that, the respondent being a registered person was under a legal obligation to maintain books of accounts and records as per the provisions of the 2017 Act and Chapter VII of the 2017 Rules regarding the transactions in respect of which the OTL would occur. The Bench added,

“The common portal is only a facilitator to feed or retrieve such information and need not be the primary source for doing self-assessment. The primary source is in the form of agreements, invoices/challans, receipts of the goods and services and books of accounts which are maintained by the assessee manually/electronically.”

Whether the Impugned Circular was inconsistent with Statutory Mandate?

While ascertaining the legality of the impugned circular, the Bench observed the express provision in the form of Section 39(9) clearly posits that omission or incorrect particulars furnished in the return in Form GSTR3B can be corrected in the return to be furnished in the month or quarter during which such omission or incorrect particulars are noticed. This very position had been restated in the impugned Circular. Therefore, it was held that the impugned circular was not contrary to the statutory dispensation specified in Section 39(9) of the Act and the High Court had noted that there was no such provision in the Act, which restricts such rectification of the return in the period in which the error is noticed.

Findings of the Court

The aspect of statutory obligation fastened upon the registered person to maintain books of accounts and record within the meaning of Chapter VII of the 2017 Rules, are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC (Input Tax Credit) and of OTL. Form GSTR2A is only a facilitator for taking an informed decision while doing such self-assessment.

Noticing that during the pre-GST regime, the respondent (being registered person/assessee) had been maintaining such books of accounts and records and submitting returns on its own, the Bench stated that non-operability of Form GSTR2A or for that matter, other forms, would be of no avail for the respondent 1 because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessment in Form GSTR3B manually on electronic platform. Further, the Bench opined,

“Payment for discharge of OTL by cash or by way of availing of ITC, is a matter of option, which having been exercised by the assessee, cannot be reversed unless the Act and the Rules permit such reversal or swapping of the entries.”

Significantly, the registered person is not denied of the opportunity to rectify omission or incorrect particulars, which he could do in the return to be furnished for the month or quarter in which such omission or incorrect particulars are noticed. Thus, it was not a case of denial of availment of ITC as such, rather it was only a postponement of availment of ITC as the ITC amount remains intact in the electronic credit ledger, which can be availed in the subsequent returns including the next financial year.


In the backdrop of above, the Bench held that the assessee-respondent could not be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records.

Further, the challenge to the impugned Circular was declared unsustainable, and the Bench held that stipulations in the Circular including in paragraph 4 were consistent with the provisions of the Act, 2017. The appeal was allowed. The impugned judgment and order was set aside.

[Union of India v. Bharti Airtel Ltd., 2021 SCC OnLine SC 1006, decided on 28-10-2021]

Kamini Sharma, Editorial Assistant has put this report together

*Judgment by: Justice A.M. Khanwilkar

Know Thy Judge| Justice AM Khanwilkar

Case Briefs

Maharashtra Authority for Advance Ruling: The Bench of Rajiv Magoo, Additional Commissioner of Central Tax (Member) and T.R. Ramnani, Joint Commissioner of State Tax, decided whether GST will be payable on services provided by Club to its Members against monthly contribution?

Instant application was filed by the applicant seeking an advance ruling in respect of the following questions:

  1. Whether the activity of the applicant i.e. collecting contributions and spending towards meeting and administrative expenditures only, is ‘business’ as envisaged under Section 2(17) of the CGST Act, 2017?
  2. Whether contributions from the members in the Administration Account, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments, amounts to or results in a supply, within the meaning of supply?

Factual Background

Applicant arranges meetings for its members and in order to defray its expenditure for such meetings, communications and administration, fees are collected from members. No facilities/benefits are provided such as recreation, etc. by the applicant. The applicant also sends fees to International Institution at USA for service activities and international administration.

Applicant further sends fees to its District Clubs.

It was stated that a separate administration account is maintained by the club, wherein sum recovered from all members for using the same for meetings and other petty administrative expenses and also include expenses for location and light refreshments.

The admin account is managed as if it is purely an agent of the members and no actual service if extended to the members.

Applicant maintains two separate bank accounts, one for administrative expenses and other for donations/charity. The receipts in donations/charity account are used exclusively for the purpose of donation/charity and no amount is utilized for administration purposes.

Advance ruling is sought about taxability or otherwise under the Act, of contributions received from the members in the Administration Account for expending the same for the weekly and other meetings and other petty administrative expenses.

Observations and Findings

Bench stated that in view of Section 7 of the CGST Act, 2017, the applicant society and its members were distinct persons and the fees received by the applicant, from its members was nothing but consideration received for supply of goods/services as a separate entity. Therefore, the applicant has to pay GST on the said amounts received from its members.

Contributions from the members, recovered for expending the same for the weekly and other meetings and other petty administrative expenses incurred including the expenses for the location and light refreshments, amounts to or results in a supply.

Authority expressed that the impugned activities performed by the applicant for the welfare activities of its members which includes meetings with food and refreshments, etc. is a service rendered by the applicant to its members as per the definition of term ‘services under Section 2(102) of the CGST Act.

Clause (e) of Section 2(17) of the CGST makes it clear that the activity of providing facilities or benefits by an association to its members for a subscription is a business under GST Act. Hence the transactions between the association and its members is a service.

“Member and Club are two distinct persons and hence, any activities and transactions between them will be supply between separate/distinct persons.”

 In view of the above discussion, it was held that the amount collected as membership subscription and admission fees from members is liable to GST as supply of services.[Rotary Club of Bombay Queen City, In Re., GST-ARA-19/2020-21/B-96, decided on 22-11-2021]

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

Case BriefsHigh Courts

Karnataka High Court: S. Sunil Dutt Yadav J. disposed off the petition and reinstated an observation “If any money is due to the Government, the Government should take steps but not take extra steps or maneuver…”

Factual Background

The facts of the case are such that the petitioner operates an e commerce platform under the name ‘Swiggy’ and is registered under the Central Goods and Services tax Act, 2017. Due to spike in food orders during holidays and festive season, third party service providers i.e. Greenfich in the present case, are engaged who charge consideration for the same along with GST which is paid by the petitioner as Input Tax Credit. An investigation was conducted by the respondent Department on the ground that Greenfich was a non existent entity and ITC availed are fraudulent. The petitioner alleged that a sum of Rs. 27 crores was illegally collected from the petitioner during the investigation proceedings under threat of arrest and coercion. Hence the instant petition was filed seeking a writ of mandamus directing the respondents to refund the amount illegally collected.


Counsel for the petitioners Mr. Lakshmikumaran and Mr. Ravi Raghavan submitted that payment has been collected under duress and coercion which is clear from a letter presented before the Court dated 30-11-2019. It was further submitted that the manner in which the investigation was conducted and payments were made reflects an unfair and arbitrary treatment of a bonafide tax payer as petitioner’s credibility as tax payer could never have been doubt by presenting documents for the same.

Counsel for the respondents Mr. M B Naragund and Mr. Amit Despande submitted that according to letter dated 30-11-2019 it is clear that the payments were made as a goodwill gesture and are to be construed as payment of tax in furtherance of self ascertainment as contemplated under section 74(5) of the CGST Act. It was further submitted that the petitioner has exercised its statutory right of refund and is bound to follow the procedure to its logical end by invoking the remedies available under the statutory scheme of the Act, thus invoking writ jurisdiction is impermissible.


The Court observed that the mere fact that application has been made for refund does not in anyway take away the right of the petitioner to seek for appropriate direction in the present proceedings, as the application for refund has merely been deferred and in effect no decision is taken, even otherwise, the question of alternate remedy is of no significance, when the eventual direction in the present writ is only for consideration of the refund application.

The Court further observed that the letter dated 30-11-2019 is clear and unambiguous wherein it is stated that the amount is made in furtherance of their goodwill conduct and bonafide during the pendency of the inspection proceedings and seeking necessary refund should not be regarded as an admission of liability.

The Court observed that the scheme of self ascertainment as contained in sub sections (5) (6) (7) (8) of Section 74 of CGST Act does not call for making of payment and continuance of investigation. “Upon payment of tax after collection of the same with penalty, if the same is accepted even before the issuance of notice under Section 74 (1) during investigation, there ends the matter and there is nothing further to be proceeded with.”

The Court observed that while considering the time at which the amount was deposited and the date of the deposit, it would indicate that amounts were paid during times when there was no legal obligation to make payment. It was further observed that the matter regarding wrongful availment of input tax credit was pending investigation and the Department acted in undue haste to ensure that taxes are paid during the process of investigation instead of allowing the investigation to proceed and conclude in accordance with law.

The Court relied on judgment Dabur India Limited v. State of Uttar Pradesh, (1990) 4 SCC 113 and observed that This is unfortunate. We would not like to hear from a litigant in this country that the Government is coercing citizens of this country to make payment of duties which the litigant is contending not to be leviable. Government, of course, is entitled to enforce payment and for that purpose to take all legal steps but the Government, Central or State, cannot be permitted to play dirty games with the citizens of this country to coerce them in making payments which the citizens were not legally obliged to make.”

The Court further observed that it does not desire to place any sort of fetter on the power of investigation and it would be unwise to impose any kind of time limit, for it is the authority which should be permitted to complete its investigation in a manner as may be desired by it as is permissible.

The Court thus held “the consideration of right of refund in the present factual matrix would be independent of the process of investigation and two cannot be linked together”

“Accordingly refund applications are to be considered and suitable orders be passed within a period of four weeks from the date of the release of the order.

[Bundl Technologies Private Limited v. Union of India, 2021 SCC OnLine Kar 14702, decided on 14-09-2021]

Arunima Bose, Editorial Assistant has reported this brief.

Legislation UpdatesRules & Regulations

On October 06, 2021, the Department of Finance, Goa has issued the Goa Goods and Services Tax (Eighth Amendment) Rules, 2021 to further amend the Goa Goods and Services Tax Rules, 2017.

Key amendments:

  • In Rule 10A which specifies “Composition levy”, the following proviso has been 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”.

  • In Rule 10B which specifies “Aadhaar authentication for registered person”, has been inserted.

The registered person, other than a person notified under sub-section (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 case of proprietorship firm, or of any partner, in case of any partnership firm, or of the Karta, in case of any undivided family, or of the Karta, in case of any Hindu undivided family, or of the Managing Director or any whole time director  in case of any company, or of any members of Managing Committee of an Association of Persons or body of individuals or a Society or of the Trustees in the Board of Trustees, in case of a Trust and of the authorised signatory in order to eligible.

  • Rule 89(1A) has been inserted.

“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 intra-State supply, which is subsequently held to be an inter-State 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 RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner”.

  • Rule 96(c) has been inserted.

“the applicant has undergone Aadhaar authentication in the manner provided in rule 10B”.

  • In Rule 96C which specifies “Bank Account for credit of refund”, has been inserted.

Bank Account for credit of refund: For the purposes of sub-rule (3)  of rule 91, sub rule (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 proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhar Number of the proprietor.

Advance RulingsCase Briefs

Rajasthan Authority for Advance Ruling, GST: Bench of J.P. Meena (Member Central Tax) and M.S. Kavia (State Tax)  determined whether supplying of coaching services along with supply of goods/printed material/test papers, uniforms, bags and other goods to students shall be considered a supply of goods or supply of services.

Questions for consideration:

  • Applicant supplied services of coaching to students which also included along with coaching, supply of goods/printed material/test papers, uniform, bags and other goods to students. Such supplies were not charged separately but a consolidated amount was charged. The major component of which was imparting of coaching. In such circumstances, whether such supply shall be considered, a supply goods or a supply of services?
  • If the answer to the aforementioned first question is supply of service, whether such supply shall be considered as composite supply? If yes, what shall be the principal supply?
  • Applicant provides coaching service under a business model through Network Partners as per sample agreement attached, containing obligations of Applicant and Network partners. Accordingly, the network partner provides the services to the students on behalf of Applicant. In such a case, who shall be considered as supplier of service and recipient of service under the agreement?
  • Subject to the above question, what shall be the value of service provided by Applicant to students and by network partner to Applicant?
  • Whether both, Applicant and network partner can avail eligible ITC for their respective supplies?

Findings, Analysis & Conclusion

In the instant case, the applicant was providing coaching service to its enrolled students for consideration which will be a lump sum amount for both goods and services.

Therefore, transaction of supply of coaching service for consideration falls under the ambit of “Supply of Service”.

As the supply involves multiple services and goods, the issue has to be examined whether the said supply is s Composite Supply or a Mixed Supply.

In the present case there is a principal supply of goods or services which constitutes the predominant element of a composite supply. Classification of this composite supply as goods or service would depend on which Supply is the principal supply which is also to be determined on the basis of facts and circumstances of the present case.

Therefore, in the instant case, the applicant along with coaching services provided goods in the form of uniforms, bags, study material etc.

Supply of goods is a part of supply of service shall qualify as composite supply’. The principal supply being the supply of coaching service to the students, tax on such supply shall be levied accordingly.

Further, the AAR also observed that where services are provided by the applicant to the students. students shall be regarded as recipient as consideration is payable for the supply of goods or services or both by the students to the applicant. Similarly. Network partner will be regarded as a provider of service to the applicant

Bench also noted that, the values of goods are part of the value of services provided by the applicant and charged a consolidated amount to the students. Therefore, the consolidated value for which tax invoice is issued shall be the taxable value.

As per Section 16(1) of the CGST Act, Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, been titled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

Hence, in the present matter, applicant was a registered person and could avail eligible ITC as per provisions of GST Act.


Pointwise conclusion:

  • Supply by the applicant will be considered “Supply of Service”.
  • The ‘supply’ stated above shall be considered as Composite Supply, and Coaching Service shall be principal supply.
  • Applicant will be service provider to the students and Network partner will be service provider to the applicant.
  • Total consolidated amount charged for which Tax invoice generated by the applicant will be the value of service supply by the applicant.
  • Applicant can avail eligible ITC as per provisions of GST Act, 2017.

[Symmetric Infrastructure (P) Ltd., In re.; Raj/AAR/2021-22/09; decided on 2-09-2021]

Advocate before the AAR:

Present for the applicant: Sanjiv Agrawal