RSA Legal Solutions

A continuing saga of ‘Whether goods or services or both’

admin — Thu, 18 May 2023 14:24:54 +0000

APRIL 29, 2023 [TIOL]

By Shweta Jain Gupta, Partner, RSA Legal Solutions

IN the case of M/s Suzlon Energy Ltd. – 2023-TIOL-35-SC-ST, Supreme Court held that drawings and designs imported on paper would fall under the category of “design services” under Section 65(35b) read with Section 65(105)(zzzzd) of the Finance Act, 1994 and accordingly would be subject to the levy of service tax.

Supreme Court upheld the principle that the same activity can be taxed as ‘goods’ as well as ‘service’, and the latter would attract the levy of service tax, provided the contract between the parties stands to be indivisible.

The Supreme Court further observed that merely because the designs and drawings imported were shown as ‘goods’ under the Customs Act and in the bill of entry, it would not preclude such services from also falling under the ambit of “design services” under the Finance Act, 1994.

The Hon’ble Apex Court relied on its decision in BSNL and upheld that there can be two different taxes/levies under different heads by applying the aspect theory.

The aim of this article is to examine the implications of this judgment under the GST regime.

Blurring lines

GST law has made a clear distinction between ‘goods’ and ‘services’ by clearly defining the scope of both. While Section 2(52) of the Central Goods and Services Tax Act, 2017 defines ‘goods’ to include every kind of movable property, other than money and securities, ‘services’ have been defined under Section 2(102) of the CGST Act as anything other than goods, money and securities. Further, to amplify the said distinction, the GST law has within Schedule II of the CGST Act also delineated certain activities that will be treated as either supply of goods or a supply of services.

However, when the decision of the Supreme Court in the M/s Suzlon Energy Ltd case, is examined in light of the GST regime, this line of distinction gets blurred.

In this regard it is pertinent to discuss Sr. No. 5(c) of Schedule II of the CGST Act which classifies “temporary transfer or permitting the use or enjoyment of any intellectual property right” as a supply of service. Since intellectual property is a intangible creation of the human intellect and drawings and designs are a product of such intellect, they are appropriately classifiable under the aforementioned entry as ‘supply of service’.

Further, Section 8(a) of the CGST Act defines ‘composite supply’ as a supply comprising of two or more goods or services, which in the ordinary course of business are naturally bundled and supplied in conjunction with each other. Further, tax liability in such a transaction will be the tax imposed on the principal supply, which is defined under Section 2(90) of the CGST Act as that supply of goods or services which forms the predominant element of such a composite supply and to which the other supplies are only ancillary. Therefore, the supply of the service of design and drawings on paper forms a composite supply.

Since the “goods” supplied has no use other than displaying the printed matter and the underlying transaction is actually the supply of intellect, the principal supply is the supply of service of drawings and designs.

In view of the above, even though the service of drawings and designs forms a ‘supply of service’ under the purview of GST, when reduced on paper and made to cross the customs frontier, the said goods become subject to levy of customs duty.

Sword of double taxation

Double taxation is a phenomenon leading to considerable increase in the tax liability of an individual or a corporation due to the imposition of taxes more than once, on the same asset, financial transaction or income. The High Court of Karnataka in the case of Hubballi Dharwad Advertisers Association – 2022-TIOL-662-HC-KAR-MISC held that when there are two independent transactions and the incidence of tax on both are different, it would not amount to imposition of double taxation.

Since, in the instant case, customs duty and GST would be levied on a single transaction of import of designs and drawings on paper, the said transaction could fall within the ambit of double taxation.

However, one may argue that the taxability under both the laws is based on different criteria and, hence levying of customs duty, considering it as “goods” and GST considering it as “service” would not amount to double taxation.

It would be prudent if CBIC comes up with a clarification in this regard.

[The views expressed are strictly personal.]

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn’t necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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EPR under E-Waste Management Rules 2022

admin — Thu, 18 May 2023 12:04:48 +0000

May 18, 2023 [Taxguru.com]

By Anshul Mittal, Partner at RSA Legal Solutions

Introduction:

With the increasing use of electrical and electronic equipment (EEE), the proper management of electronic waste (e-waste) has become a pressing concern. In response to this challenge, the Ministry of Environment, Forest, and Climate Change (MoEF&CC) in India has introduced the E-Waste (Management) Rules, 2022. These rules, which came into effect on April 1, 2023, aim to promote environmentally sound e-waste management and encourage a circular economy through Extended Producer Responsibility (EPR). This article provides an overview of the E-Waste (M) Rules 2022 and highlights the key aspects of the extended producer responsibility framework and the registration process.

Extended Producer Responsibility (EPR) Framework:

The E-Waste (M) Rules 2022 establish an EPR framework for the implementation of these rules. The framework includes four types of entities: manufacturers, producers, refurbishers, and recyclers. These entities are required to register on the online portal developed by the Central Pollution Control Board (CPCB) specifically for these rules. Each entity must register under the appropriate category, and conducting business without registration is strictly prohibited. Furthermore, registered entities must not engage with unregistered manufacturers, producers, recyclers, or refurbishers.

Producer’s Registration and EPR Obligation:

According to Rule 3 (t) of the E-Waste (M) Rules 2022, producers are defined as individuals or entities involved in the manufacturing, selling, or importing of electrical and electronic equipment. Producers can be manufacturers selling their own branded products, entities selling products assembled by other manufacturers or suppliers under their own brand, importers of electrical and electronic equipment, or importers of used electrical and electronic equipment. Producers of the specified electrical and electronic equipment must register themselves on the portal established by the CPCB. They are also required to obtain extended producer responsibility targets through the portal as applicable to them.

Registration Applicability:

All producers falling within the scope of the E-Waste (Management) Rules 2022 must register themselves on the designated portal. Even producers who have already obtained EPR authorization under the previous E-Waste (M) Rules 2016, whether through offline or online mode, must re-register on the portal. However, producers who have already applied through the existing portal are exempt from registration and will be issued a registration certificate by the CPCB.

Registration Process for Producers on the Portal:

1. The registration process for producers is exclusively online, and physical applications are not be accepted.

2. Producers must submit their applications, along with the required information, data, and documents very carefully to avoid any notices.

3. The registration certificate issued to producers will be valid for five years from the date of issuance.

4. Producers seeking to renew their registration certificate must apply on the portal 120 days before the expiry date.

5. During the registration process, producers must provide their basic information and details of the electrical and electronic equipment placed in the market, categorized by weight and financial year. This information is very crucial in determining the EPR obligations.

6. Producers must also submit self-declarations regarding compliance with the Restriction of Hazardous Substances (RoHS) provisions and the availability of documents as per EN 50581. Additionally, they must provide details of the awareness plan they intend to carry out as per Rule 6(3) of the rules.

7. Upon receipt of the application on the portal, officials from the concerned division of the CPCB will review and verify the information, data, documents, and declarations. If the application is complete, it will be processed and submitted to the Competent Authority, CPCB, for the grant of registration.

8. Once the Competent Authority approves the grant of registration, the Registration Certificate will be issued to the producer through the portal. The certificate will contain the Registration Number and a list of the electrical and electronic equipment along with their corresponding EPR obligations.

9. The Registration Certificate will be communicated to the producer through the portal.

In case of an incomplete application, the producer will be notified of the shortcomings within 25 working days of the application submission. The producer is then required to respond within 7 working days through the portal. Once the reply is received, the application will be processed accordingly.

The registration process consists of two parts: Part A and Part B. Part A involves the submission of basic information and details of the electrical and electronic equipment placed in the market, while Part B focuses on self-declarations, compliance with RoHS provisions, availability of documents, and the awareness plan.

Conclusion:

The implementation of the E-Waste (Management) Rules 2022 in India signifies a significant step towards the proper management of e-waste and the promotion of a circular economy. The introduction of the extended producer responsibility framework emphasizes the accountability of manufacturers, producers, refurbishers, and recyclers in managing the life cycle of electrical and electronic equipment. The registration process, carried out through the designated portal, ensures that all relevant entities comply with the rules and actively contribute to sustainable e-waste management practices.

By enforcing these regulations and promoting environmentally sound practices, India is taking a proactive approach to tackle the growing challenge of e-waste. It is essential for all stakeholders, including producers, manufacturers, refurbishers, recyclers, and consumers, to actively participate in the effective implementation of the E-Waste (Management) Rules 2022 to create a sustainable and responsible approach towards e-waste management in the country.

*****

For more information on the subject the author can be contacted at anshul@rsalegalsolutions.com

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AAR Locus Standi: Victory for Applicants or Pandora’s Box for Litigation?

admin — Thu, 18 May 2023 12:02:30 +0000

May 17, 2023 [Taxguru.com]

By Anshul Mittal, Partner at RSA Legal Solutions

The recent legal dispute regarding Anmol Industries Ltd’s application for an advance ruling on the applicability of an exemption notification issued under the GST Act, and the subsequent rejection of the application by the West Bengal Authority for Advance Ruling (AAR) due to lack of locus standi, followed by the reversal of the ruling by the Calcutta High Court, underscores the importance of a comprehensive understanding of relevant laws and provisions when interpreting legal disputes.

Brief facts

The applicant had entered into a leasing agreement with Shyama Prasad Mookerjee Port, Kolkata, and had agreed to pay an upfront lease premium, which they believed was exempt from GST under entry No. 41 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. However, the AAR rejected the application on the grounds that the applicant was a recipient of services and therefore did not have the locus standi to file the application for advance ruling.

Applicants’ argument

The applicant’s representative argued that the definition of the word “applicant” as defined in section 95(c) of the GST Act provides that any person registered or desirous of obtaining registration under the Act can apply for an advance ruling. Therefore, the applicant contended that the provisions nowhere state that the applicant has to be a service provider to seek an advance ruling on the questions as stated above.

AAR Decision

The AAR rejected the applicant’s argument and observed that in the subject application, the applicant cannot seek an advance ruling in relation to the supply where they are a recipient of services.

Calcutta High Court

However, in an intra-Court appeal filed by the applicant in The High Court of Calcutta, through writ petition against the order passed by the AAR, the Court observed that under Section 95(c) of the Central Goods and Services Tax Act, 2017, the term “applicant” has been defined to mean any person registered or desirous of obtaining registration under the Act. Since the appellants were registered under the provisions of the Act, they clearly fell within the definition of “applicant”. Therefore, the Court held that the AAR should have considered the application on merits rather than rejecting it on the ground of lack of locus standi.

The Court also referred to a previous case where it had held that the definition of “applicant” under Section 95(c) of the Act was wide enough to include any person registered or desirous of obtaining registration under the Act. Therefore, in light of this precedent, the Court allowed the appeal and set aside the order passed in the writ petition. The Court also remanded the matter back to the AAR to decide the application on merits and in accordance with law.

Our Observation

This case underscores the importance of interpreting legal disputes in accordance with the relevant laws’ definitions and provisions. It also reinforces the fundamental principle that all parties should be given a fair chance to present their case and have it decided on its merits.

It is crucial to comprehend the scope of definitions such as “applicant” and other relevant provisions in determining who has the right to file an application and seek an advance ruling. The Court’s ruling in this case highlights the significance of interpreting such definitions in a manner that does not limit the parties’ access to legal remedies. Therefore, it is essential to carefully analyze and understand the provisions of the law while interpreting and deciding legal disputes.

Unintended fall out of the Decision

While the recent court order is a welcoming decision for parties seeking advance ruling, it is likely to open gates for a lot of litigation and result in an increasing number of applications for advance ruling. It is important to note that an advance ruling is only applicable to the party who applies for it, and not to any other parties who may be affected by the ruling.

If a recipient applies for an advance ruling and the ruling is against the practice followed by the supplier, it may be difficult to enforce the ruling on the supplier. In case the advance ruling comes opposite to the correct GST practice, and the supplier changes their practice based on the ruling, it is unclear whether the advance ruling would be able to rescue the supplier who actually did not apply for the ruling and is practicing according to the ruling.

Therefore, while seeking advance ruling is a viable option to avoid any confusion and legal disputes, parties must also consider the potential consequences and ensure that they are following the correct GST practices

2023-TIOL-26-AAR-GST, Anmol Industries Ltd and Anr v/s The West Bengal Authority for Advance Ruling, Goods And Services Tax and Ors. 2023-TIOL-526-HC-KOL-GST, M/s. Gayatri Projects Limited & anr. vs. The Assistant Commissioner of State Tax, Durgapur Charge & Ors. 2023-TIOL-52-HC-KOL-GST

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Impact of recent SC decision in Cosmos Films case

admin — Sat, 06 May 2023 07:07:00 +0000

MAY 05, 2023 [Tax India Online]

By S C Jain, Managing Partner-Advocate, RSA Legal Solutions

RECENTLY, the Supreme Court has pronounced the verdict in the case of Union of India Vs Cosmos Films & Ors in Civil Appeal No.290/2023 – 2023-TIOL-45-SC-CUS on the aspect of legality of pre-import condition inserted by No.79/2017-Cus dated 13.10.2017 in Customs Notification No.18/2015-Cus dated 01.04.2015. By this Order, the Hon’ble Supreme Court has set aside the verdict of the Hon’ble Gujarat High Court wherein it was held by the Gujarat High Court that the pre-import condition inserted by Notification NO. No.79/2017-Cus dated 13.10.2017 is arbitrary and illegal since it is contrary to the Advance Authorization Scheme. Now, by the said Judgment, the Hon’ble Supreme Court has held that the pre-import condition inserted in Notification No.18/2015-Cus dated 01.04.2015 vide Notification No.79/2017-Cus dated 13.10.2017 is legal and cannot be said to be arbitrary. This decision of the Hon’ble Supreme Court is bound to create enormous litigation/ correspondence/ investigations in respect of the various exporters who have imported and exported the goods under the Advance Authorization during the period from 13 th October 2017 (when the pre-import condition was inserted) to 10 th January 2019 (when the pre-import condition was deleted).

Background:

2. Historically, Advance Authorization Scheme under the Foreign Trade Policy conferred exemption from various duties like Basic Customs Duty, Surcharge, Cess, CVD, SAD, Anti-Dumping duty etc. against the import of inputs subject to the condition that the goods manufactured as per norms are eventually exported out of India. This is why all types of customs duties on import of inputs were exempted under the Advance Authorization Scheme. There has always been a provision in the Foreign Trade Policy (currently paragraph 4.27/4.28 of Handbook) providing that the exports made prior to the import are also permissible under the Scheme to provide flexibility to the exporters so that they can fulfil their export commitment in time without waiting for the import of inputs. In such a situation, the exporter used to import the inputs as replenishment of the inputs used in the manufacture of the export goods. The Advance Authorization Scheme in the aforesaid manner was working smoothly throughout the length and breadth of the country.

3. However, on introduction of the GST w.e.f. 1.7.2017, no exemption was provided on the IGST on the inputs imported under the Advance Authorization Scheme, even though rest of the duties continued to be exempted as earlier. Consequently, the inputs could be imported on payment of IGST even under the Advance Authorization Scheme w.e.f 1.7.2017. This resulted in working capital outflow and blockage of credit for a long period which created the liquidity issue for the exporters. After a lot of representations by the exporters and their associations, export promotion councils, Notification No.79/2017-Cus dated 13.10.2017 amending Notification No.18/2015 dated 01.04.2015 providing the exemption from IGST was issued. However, two additional conditions were inserted by the said Notification No.79/2017-Cus dated 13.10.2017 viz.

(i) pre-import condition and;

(ii) the export obligation shall be fulfilled only through physical exports.

4. As soon as this Notification No.79/2017-Cus dated 13.10.2017 was issued, I had written an article which was published in TIOL on dated 15.12.2017 titled as the “Pre- Import Condition-cure is worse than the disease“. The exemption was meant to provide relief to the exporters but obviously it was likely to create multiple problems before the exporters as it was issued without analyzing its pros and cons. The said apprehension came to be true.

5. Several Advance Authorization holders imported goods under the Advance Authorization Scheme by availing the exemption from IGST without knowing/taking care of the pre-import condition. As a matter of fact, some of the exporters had already exported the goods and had imported subsequently as replenishment materials in accordance with the prevailing practice for the Advance Authorization Scheme. After analyzing the contravention of the said pre-import condition, the DRI and other Customs authorities at various places started investigations in the matter. A few Advance Authorization holders approached the Hon’ble Gujarat High Court. The Hon’ble Gujarat High Court while disposing of the bunch of petitions, held that the pre-import condition inserted vide No.79/2017-Cus dated 13.10.2017 is arbitrary and struck it down.

6. However, in an identical matter, the Hon’ble Madras High Court in the case of Vedanta Ltd Vs Union of India reported in – 2018-TIOL-2893-HC-MAD-GST held that the pre-import condition is legal, and it is in no way arbitrary. Thus, there were conflicting decisions of the two High Courts in the subject matter. Union of India filed an SLP before the Supreme Court against the decision of the Gujarat High Court. Now, by the aforesaid decision, the Hon’ble Supreme Court has set aside the decision of the Gujarat High Court and upheld the validity of pre-import condition.

7. In the meanwhile, looking into the genuine problems of the exporters, the CBIC issued another Notification No.01/2019-Cus dated 10.01.2019 whereby the pre-import condition was removed/deleted. Now, the legal position would be that there was no pre-import condition in respect of the goods imported and exported prior to 13.10.2017 (before the introduction of Notification No.79/2017) and after 10.01.2019 (after deletion of pre-import condition). Thus, there remains a legal issue only for the intervening period of about 15 months.

8. The effect would be that for the limited period of about 15 months, the condition of pre-import will apply for the rest of the period this condition of pre-import would not apply.

Problems likely to be created by this decision:

9. Since the Supreme Court has upheld the validity of pre-import condition and there is no retrospective application of Notification No.01/2019-Cus dated 10.01.2019, hence the DRI and other Customs formations throughout the country would again start investigations against all the exporters who have exported the goods under the Advance Authorization Scheme. In case, it is observed that they have contravened the pre-import condition, the Customs authorities will cajole the exporters to pay the IGST along with interest. In some cases, the Customs authorities may propose penalties for violation of the condition of the Notification etc. It is quite likely that some customs formation/DRI also write to the DGFT office in the regard asking the DGFT office to take action under the Policy against the erring exporters. In such scenario, the exporters would get the notices from the offices of DGFT as well.

10. The exporters, without gaining a single penny out of the said exemption for pre-import condition would face the music which will continue for years together, both at the hands of the Customs/DRI and at the level of DGFT office. It is totally incomprehensible as to why this pre-import condition was inserted at the first instance particularly in the light of the fact that previously, all the duties have been exempted under the Advance Authorization Scheme. Further, once the Government realized the absurdity, the Notification No.01/2019-Cus dated 10.01.2019 was issued by deleting the pre-import condition. In order to provide the permanent burial to the unwarranted problem, the Government should have amended it retrospectively (may be through Parliament route) so that the entire unwarranted litigation could be avoided.

Way Forward:

The various options available to the Advance Authorization holders can be summed up as under: –

(i) They should make detailed representations themselves and through their Associations/Export Promotion Councils to DGFT and also CBIC to amend the Notification No.01/2019-Cus dated 10.01.2019 retrospectively i.e. from 13.10.2017.

(ii) In our considered view after the multiple representations, the Government would realize the fallacy of the pre-import condition and would take steps for its withdrawal from its inception i.e.13.10.2017. There is no reason as to why the Government cannot provide retrospective application to this Notification in order to address the genuine grievance of the exporters. This will provide relief not only to the exporters but also to the Government itself.

(iii) In case the amount of IGST involved is small, then the Advance Authorization holder can take a call to pay the same along with interest @ 15% and then take credit of the IGST paid on the strength of the Challan/Re-assessed BE. In such a situation, the interest portion would be the net loss to the Advance Authorization holder.

(iv) In cases where the Advance Authorization holder chooses to pay the IGST with interest, through a Challan and then intends to take the credit on the strength of such Challan, then such credit, in our considered view, would be admissible as per Section 16 of the CGST Act read with Rule 36 of the CGST Rules. However, the Department may dispute the availment of credit on the grounds that the Challan is not the document prescribed for taking the credit. In order to obviate the litigation on this aspect, we would suggest that the advance authorization holders should request the Assessing Officers from where the inputs were imported to do the re-assessment of the Bills of Entry charging the IGST thereon in terms of Section 149 of the Customs Act, 1962.

(v) In our view, Customs should agree to the re-assessment as all the requirements of Section 149 of the Customs Act, 1962 are satisfied. Once the re-assessment is done, then the fresh Bill of Entry would be generated and there would be payment of IGST and interest on the said Bill of Entry and consequently there would not be any difficulty for availing the credit of IGST as per the GST law.

[The views expressed are strictly personal.]

The post Impact of recent SC decision in Cosmos Films case appeared first on RSA Legal Solutions.

Why the Haste to Enforce E-Waste Rules: Producers Struggle to Comply Amidst Lack of Clarity and Infrastructure

admin — Wed, 19 Apr 2023 04:14:18 +0000

APRIL 19, 2023 [Tax India Online]

By Anshul Mittal, Partner at RSA Legal Solutions

THE E-Waste (Management) Rules, 2022, which came into effect from 1st April 2023, require producers of electronic and electrical equipment (EEE) to register with CPCB on the EPR (Extended Producer Responsibility) Portal. However, the portal is under upgradation and is expected to be operationalized only by 30th April 2023.

The CPCB has issued a letter to the Joint Secretary of the Custom department dated 13th April, 2023, requesting the release of imported consignments of producers of 85 EEE items (ITEW 17 to ITEW 27, CEEW 6 to CEEW 19, LSEEW 1 to LSEEW 34, EETW 1 to EETW 8, TLSEW 1 to TLSEW 6, MDW 1 to MDW 10 and LIW 1 to LIW 2) after taking an undertaking from the Producers (which includes Importers) as defined in the E-Waste (Management) Rules, 2022. The undertaking should be submitted at the email id (ewaste2.cpcb@gov.in) and the producers should also submit the computerized and online generated EPR Registration Certificate from the online portal concerned of CPCB not later than one month from the date of submission of the undertaking.

Despite the government’s best efforts, the system is not yet online and neither is there any clarity on how the portal will work nor have any guidelines been issued. The government has not even provided a Q&A session to address the concerns of the industry. Despite all these limitations, the government is asking for compliance from the industry within one month of undertaking. The haste in implementing these rules without providing adequate infrastructure and guidelines is questionable.

The government should have provided more time and clarity to the producers before enforcing the rules. This would have given the industry time to prepare and would have enabled them to comply with the rules without any difficulties. The government should also provide detailed guidelines and FAQs to assist the producers in complying with the rules. Without such guidelines, the producers may find it challenging to comply with the rules, which could lead to delays and confusion.

While the E-Waste (Management) Rules, 2022, are essential in regulating the import and disposal of electronic waste in India, the short notice to the producers has caused confusion and stress. The government has failed to provide the online system on time, leaving producers with no option to comply with the regulations. This has put a burden on the producers who are already dealing with challenges related to supply chain disruptions and rising costs.

It is essential for the government to provide a reasonable timeline for the implementation of new regulations and ensure that the necessary infrastructure is in place before imposing new requirements on the industry. This will help to avoid disruptions in the supply chain and ensure that businesses can comply with regulations in a timely and efficient manner.

Moreover, the lack of clarity on the E-Waste (Management) Rules, 2022, has caused confusion among producers, especially small and medium-sized enterprises (SMEs) who may not have the resources to navigate the complex requirements. SMEs may struggle to comply with the regulations due to their limited resources, and this could lead to non-compliance and penalties, further affecting their business operations.

Additionally, the E-Waste (Management) Rules, 2022, require producers to collect and recycle a specific percentage of electronic waste generated by their products. However, there is no clarity on how this will be implemented or how the cost of recycling will be shared among producers. This could lead to higher costs for producers, which may ultimately be passed on to consumers.

Furthermore, the lack of infrastructure to manage electronic waste in India is a significant challenge, and the government needs to invest in developing a robust e-waste management system. This would require significant investment in waste collection, recycling, and disposal infrastructure, as well as building awareness and education programs to encourage individuals and businesses to recycle their electronic waste responsibly.

In conclusion, while the E-Waste (Management) Rules, 2022, are a step in the right direction to address the growing problem of electronic waste in India, the government needs to ensure that the regulations are implemented in a way that does not cause undue hardship to producers. The government must provide adequate support and infrastructure to help producers comply with the rules and this must be done in a way that does not negatively impact their business operations. Only then can we ensure that electronic waste is managed responsibly and sustain ably, protecting both the environment and human health.

[The views expressed are strictly personal.]

The post Why the Haste to Enforce E-Waste Rules: Producers Struggle to Comply Amidst Lack of Clarity and Infrastructure appeared first on RSA Legal Solutions.

IGST & Compensation Cess benefit withdrawn: MOOWR SCHEME

admin — Thu, 13 Apr 2023 09:07:59 +0000

MARCH 31, 2023 [Tax India Online]

By Rajat Dosi, Partner RSA Legal Solutions

THE Finance Minister has proposed certain changes in the Customs Act, 1962, by making last minute addition in the Finance Bill, 2023. Incidentally, these changes were not a part of the Union Budget 2023 introduced in the Parliament in the month of February 2023. These changes / additions have been passed by both the Houses of the Parliament and would become a part of the law very soon, on its assent by the Hon’ble President of India.

As mentioned, certain crucial amendments have been made in the Customs Bonded Warehousing Scheme. This article seeks to highlight such changes and some issues wherein there is lack of clarity.

IGST and GST Compensation Exemption Withdrawn

A new provision, Section 65A, has been inserted in the Customs Act, which will be applicable once the said provision is notified by the Central Government. This provision inter alia seeks to withdraw IGST and GST Compensation Cess exemption currently made available to all imports made in a customs bonded warehouse undertaking manufacturing and other operations therein.

It is noteworthy that this exemption has been withdrawn only in respect of customs bonded warehouse which are undertaking manufacturing and other operations therein by taking permission to this effect under section 65 of the Customs Act including units registered under the MOOWRs Scheme (Manufacture and Other Operations in Warehouse (No. 2) Regulations, 2019). However, the said exemption will continue to be applicable in respect of other public and private customs bonded warehouses registered under Section 57, 58 or 58A of the Customs Act, who have not obtained any permission under section 65 of the Customs Act for undertaking manufacturing and other operations therein.

In simple words, once this provision is notified, all customs bonded warehouses undertaking manufacturing and other operations therein including units registered under the MOOWRs Scheme will not be eligible to avail the exemption from IGST and GST Compensation Cess on its import into India. They will only be eligible to avail the benefit of exemption from payment of other types of customs duty and cesses (such as BCD, anti-dumping duty, etc). Of this GST and Compensation payment, these units will, however, be eligible to avail input tax credit (ITC), if otherwise available, under the GST law.

Bill of entry for home consumption in place of warehousing bill of entry

This provision further provides that at the time of import, such units will have to file a bill of entry for home consumption for making imports into India, in place of existing mechanism of filing a warehousing bill of entry.

Transition Mechanism

It has also been stipulated that this provision or withdrawal of IGST and compensation cess will not be applicable to any goods which have already been imported into India by such customs bonded warehouse prior to the notification of this provision.

Lack of Clarity on certain issues

In view of these changes, the following questions emerge for which as of now there is no clarity:

a. Whether any document is required to be issued on clearance of finished goods from such customs bonded warehouse (as earlier bill of entry for home consumption was required to be filed)?

b. Whether interest is payable on customs duty to be paid at the time of clearance of finished goods from such customs bonded warehouse (as earlier no interest was payable)?

Hopefully, at the time of notification of this new provision, the aforementioned issues will be clarified, by way of a circular, by the CBIC.

[The views expressed are strictly personal.]

The post IGST & Compensation Cess benefit withdrawn: MOOWR SCHEME appeared first on RSA Legal Solutions.

Battery Waste Management Rules, 2022: A Comprehensive Approach

admin — Mon, 27 Mar 2023 04:50:42 +0000

Battery Waste Management Rules, 2022: A Comprehensive Approach

MARCH 27, 2023 [Tax India Online]

By Anshul Mittal, Partner, RSA Legal Solutions

BATTERY waste management is a significant concern in India due to the increasing use of batteries in various applications. To manage this issue, the Indian government introduced the Battery Management and Handling Rules of 2001, which primarily focused on lead-acid batteries.

Scope and Key Features of the 2001 Battery Management Rules:

The 2001 Rules applied to a broad range of parties involved in the manufacture, processing, sale, purchase, and use of lead-acid batteries or their components. The key features of the 2001 rules included:

– Restrictions on the use of lead in batteries

– Obligation on manufacturers to provide detailed information on the composition and disposal of batteries

– Authorization and registration requirements for battery manufacturers, re-furbishers, recyclers, and dealers

– Obligation on consumers to return used batteries to authorized dealers for proper disposal

Scope and Key Features of the 2022 Battery Waste Management Rules:

The Ministry of Environment, Forest, and Climate Change in India implemented the Battery Waste Management Rules in 2022 to replace the 2001 Battery Management and Handling Rules. The new rules apply to all types of batteries regardless of their chemistry, shape, volume, weight, material composition, and use. The key features of the 2022 rules include:

– Extended producer responsibility (EPR) on battery producers

– Centralized online portal for the authorization process

– Obligation on producers, dealers, consumers, entities involved in the collection, segregation, transportation, refurbishment, and recycling of waste batteries

– EPR plan submission by producers to CPCB in Form 1C by 30th June of every year

– EPR targets for different batteries used across various applications

Implementation of Extended Producer Responsibility (EPR) in the Battery Waste Management Rules, 2022:

The main highlight of the Battery Waste Management Rules 2022 is extended producer responsibility, which was previously limited to e-waste and plastic waste management. The producers will have to file for authorization through the centralized online portal of the Central Pollution Control Board (CPCB) and fulfill their EPR responsibility through the policy of buyback, deposit refund schemes or any other model. The producers can delegate the responsibility to other entities for proper and environmentally sustainable collection, segregation, recycling, or refurbishing of waste batteries. The EPR plan, which contains the details of the weight, quantity, and other information about the batteries, should be submitted by the producers to CPCB in Form 1C by 30th June of every year through the centralized online portal.

The newly amended rules introduce many provisions, including new key definitions, more responsibilities, EPR authorization, and a centralized online portal for the authorization process. The rules expand the responsibilities of the producers, manufacturers, and authorities involved in the management of waste batteries. The key stakeholders in the rules are producers, recyclers, re-furbishers, other entities, and the CPCB, which defines the fee of handling, application for registration, and registration process.

EPR Plan and Targets for Waste Battery Management

The EPR plan for 2022 and 2023 is also required to be submitted under Form 1C to the CPCB. The plan includes EPR targets for different batteries used across various applications. Failure to comply with EPR responsibilities can result in penalties for stakeholders such as manufacturers, recyclers, and re-furbishers, among others. Non-compliance includes activities carried out without obtaining the necessary authorization or registration or providing false information in documents.

Penalties and Consequences for Non-Compliance with EPR Responsibilities

The penalties for non-compliance with EPR responsibilities are specified under Section 15 of the Environmental Protection Act of 1986. The stakeholders in violation of the EPR rule will be fined and required to pay environmental compensation. The amount of compensation will be decided by the CPCB or State Pollution Control Board (SPCB).

Conclusion

The Battery Waste Management Rules, 2022 represent a more comprehensive and updated approach to managing the increasing amount of battery waste in India. It is crucial for producers to take responsibility for the products they manufacture, ensuring their safe and sustainable disposal. EPR plans provide a framework for producers to manage the environmental impacts of their products effectively. By complying with EPR regulations, producers can contribute to creating a sustainable future while avoiding penalties and negative impacts on the environment.

[The views expressed are strictly personal.]

The post Battery Waste Management Rules, 2022: A Comprehensive Approach appeared first on RSA Legal Solutions.

Plastic Waste Management – GST E-invoice for EPR Compliance

admin — Thu, 23 Mar 2023 15:08:39 +0000

Plastic Waste Management – GST E-invoice for EPR Compliance

MARCH 20, 2023 [Tax India Online]

By Anshul Mittal, Partner RSA Legal Solutions

Introduction:

INDIA generates a massive amount of plastic waste, with an estimated 9.46 million tonnes produced annually. Unfortunately, a significant portion of this plastic waste is not properly collected or disposed of, resulting in serious environmental and health problems. To address this issue, India introduced the Extended Producer Responsibility (EPR) Guidelines.

On February 16, 2022, the Ministry of Environment, Forest and Climate Change (MoEF&CC) notified Guidelines on Extended Producer Responsibility (EPR) for Plastic Packaging, which were included in Schedule-II of the 4th amendment of the Plastic Waste Management Rules, 2018. These guidelines were further amended later in July 2022. The EPR Guidelines have provided clarity on the obligations of various entities involved in plastic packaging and waste management. This article will explore the provisions of the EPR Guidelines related to Producers/ Importers/ Brand owners (PIBOS) and Plastic Waste Processors (PWPs).

The EPR Guidelines require producers, brand owners, and importers of certain plastic products to be responsible for managing the waste generated by their products, from collection to disposal. The aim of the EPR Guidelines is to shift the burden of managing plastic waste from municipalities and local governments to the producers, thereby incentivizing them to reduce their use of plastic and promote sustainable alternatives.

The EPR Guidelines are part of a larger framework of environmental regulations and policies in India aimed at reducing plastic waste and promoting sustainable practices. In 2014, India launched the Swachh Bharat Abhiyan campaign which aimed at making India a clean and litter-free country by 2019. Additionally, India has implemented a nationwide ban on single-use plastic products, including plastic bags, cups, and straws.

Coverage under EPR Guidelines:

The EPR Guidelines state that producers, importers, brand owners, and waste processors are responsible for managing plastic waste. This includes those who produce plastic packaging, import plastic packaging or products with plastic packaging, and own brands that use plastic packaging. Waste processors are also responsible for managing plastic waste.

Registration of entities:

Entities involved in recycling, waste to energy, waste to oil, and industrial composting, such as Producers, Importers, Brand Owners, and Plastic Waste Processors, need to register on a centralized portal developed by the Central Pollution Control Board. During registration, they must provide various details, including PAN Number, GST Number, CIN Number of the company, Aadhar Number, PAN Number of authorized person or representative, and any other necessary information required.

Once registered, the entities will be required to submit an annual report to the Pollution Control Board, online. The report will detail the amount of plastic waste generated, collected, and recycled during the previous year. It will also include information on the systems and processes put in place to manage plastic waste and any challenges faced during the process. Entities failing to comply with the reporting requirements may face penalties and other consequences as per the EPR Guidelines. The reporting requirements aim to ensure transparency and accountability in the management of plastic waste and to help track progress towards achieving India’s environmental goals.

Calculation of EPR Targets:

Section 7 of the EPR Guidelines provides further details for calculation of Extended Producer Responsibility (EPR) Targets to be fulfilled by the Registered PIBOS. To calculate the Extended Producer Responsibility (EPR) Targets, the quantity of plastic waste generated by a Producer, Importer, Brand Owner or Plastic Waste Processor must be determined. Then, the percentage of plastic waste collected by the entity must also be determined. Using these figures, the EPR Target can be calculated according to the guidelines.

Record Maintenance:

According to the EPR Guidelines, Brand Owners must provide details of plastic packaging purchased from Producers and/or Importers separately, and the quantities will be deducted from the obligation of Producers and Importers. Records of such purchases must be maintained separately by the Brand Owner. Producers and importers must also maintain records of the quantity of plastic packaging material made available to Brand Owners, or else they will have to fulfill their complete EPR obligation. The online platform will cross-check the transactions among Producers, Importers, and Brand Owners.

Registration of Plastic Waste Processors:

All plastic waste processors must register with their respective State Pollution Control Board or Pollution Control Committee and the centralized portal developed by the Central Pollution Control Board. The registration process should follow the provisions of the Plastic Waste Management Rules, 2016.

Certificate for Plastic Waste Processing:

The EPR Guidelines require registered plastic waste processors to provide certificates for plastic waste processing, as stated in Section 11.5. These certificates are crucial for fulfilling Extended Producer Responsibility obligations, and only certificates provided by registered plastic waste processors will be accepted.

The certificate format will be developed by the Central Pollution Control Board and include important details such as the registered plastic waste processor’s name and address, the date of processing, quantity of plastic waste processed, and destination of the processed plastic waste. This certificate serves as evidence that the plastic waste generated by the producer has been managed correctly by a registered plastic waste processor, and the producer has fulfilled their Extended Producer Responsibility obligations.

Producers are advised to obtain these certificates as they can be asked to provide evidence of compliance with EPR obligations during regulatory audits or inspections. This certificate can also demonstrate a producer’s commitment to sustainability and responsible waste management practices to their customers, shareholders, and other stakeholders.

Standard Operating Procedure for EPR Registration

The EPR Guidelines in Section 12.1 state that the Central Pollution Control Plastic Board will prescribe the standard operating procedure for registration of Producers, Importers & Brand-Owners under Waste Management Rules, 2016. It is observed that verified details of all plastic waste/packaging transactions between PIBOs & PWPs are required for foolproof calculation of EPR targets of PIBOs, cross-checking of transactions, and generation of EPR certificates. Section 9 of the EPR Guidelines states that Environment Compensation (EC) will be levied by CPCB/SPCB/PCC on PIBOs for non-fulfilment of their EPR targets, responsibilities, and obligations, and EC of Rs.5000/- per ton will be levied for shortfall in EPR target on defaulting PIBOs. Non-fulfilment of EPR targets by PIBOs can have huge financial implications and severe adverse environmental impact.

Importance of GST E-invoice for EPR Compliance

GST invoice provides verified details of all transactions, including those related to plastic waste/packaging transactions, and PIBOs are mandated to provide details of sales & procurement of plastic packaging. The EPR portal developed by CPCB has provisions for cross-validation of transactions between PIBOs/PWPs and auto-generation of EPR targets based on real-time capture of procurement/sales of plastic packaging. The portal also allows for the generation of EPR certificates based on actual sales figures of PWPs/PIBOs and transfer of certificates between PWPs/PIBOs.

Compliance Requirements for PIBOs and PWPs

Under the Plastic Waste Management Rules, 2016, all PIBOs and PWPs are directed to upload GST E-invoice details of all transactions related to plastic packaging and waste on the centralized EPR portal to ensure compliance with the provisions contained in the Guidelines on Extended Producer Responsibility for Plastic Packaging. Non-compliance with these directions may result in action being taken against the PIBOs/PWPs.

Conclusion

In conclusion, the implementation of Extended Producer Responsibility (EPR) for plastic packaging is an important step towards sustainable waste management. The guidelines laid out by the Central Pollution Control Board and the Ministry of Environment, Forest & Climate Change provide a framework for Producers, Importers & Brand-Owners (PIBOs) and Plastic Waste Processors (PWPs) to take responsibility for the end-of-life management of their products. The use of GST E-invoice details and the centralized EPR Portal for registration and reporting of plastic waste and packaging transactions will enable effective monitoring, cross-checking and enforcement of EPR targets, and help minimize the environmental impact of plastic waste. It is essential for all PIBOs and PWPs to comply with these guidelines and take necessary actions towards sustainable waste management, failing which strict action will be initiated against the defaulting parties. It is the collective responsibility of all stakeholders to work towards a cleaner and greener environment for present and future generations.

Way forward

In addition to the EPR Guidelines, there may be other solutions worth considering for reducing plastic waste. It may be valuable to explore alternative approaches. Here are some examples for the same:

– Reducing plastic consumption: One of the most effective ways to reduce plastic waste is to reduce plastic consumption altogether. This can be done by using reusable bags, water bottles, and containers, and avoiding single-use plastic products like straws and cutlery which has been banned by the govt.

– Promoting the use of sustainable alternatives: There are many sustainable alternatives to plastic, such as bamboo, paper, and biodegradable plastics. Governments and businesses can promote the use of these alternatives by providing incentives, such as tax breaks, and investing in research and development.

– Implementing a deposit-return system: A deposit-return system involves paying a deposit on a product, which is refunded when the product is returned for recycling. This system has been successful in reducing plastic waste in countries like Germany and Denmark.

– Implementing a plastic tax: A plastic tax is a tax on plastic products, which can provide an incentive for producers to reduce their plastic use and develop more sustainable alternatives.

– Investing in recycling infrastructure: Investing in recycling infrastructure can help to increase the recycling rates of plastic waste, reducing the amount that ends up in landfills or the environment. This could include investing in new technology to improve the efficiency of recycling processes and expanding the capacity of recycling facilities.

[The views expressed are strictly personal.]

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Authorized Economic Operator (AEO) Program

admin — Fri, 17 Mar 2023 17:35:19 +0000

MARCH 16, 2023 [Tax India Online]

By Abhishek Jain, Partner at RSA Legal Solutions

Introduction

THE Authorized Economic Operator (AEO) Program is a voluntary program established by the Government of India to promote the safe and secure facilitation of trade. The program is open to importers, exporters, warehouse operators, custodians, logistics service providers, and customs brokers who have fulfilled all the compliances with the customs laws and the World Customs Organization (WCO) SAFE Framework of Standards.

Background and Purpose

The AEO program was established in 2005 as part of the global effort to enhance supply chain security after the 9/11 attacks. It is a business-to-customs partnership for the secure facilitation of trade. The program is based on the principle of mutual recognition of customs controls and security measures between countries, which means that an AEO certified in one country is recognized and given benefits in another country. It is a certification program developed by the WCO to enhance international supply chain security and facilitate trade.

Categories and Validity of AEO Certification in India

In India, the AEO program was first implemented in the year 2016. The program for importers and exporters is classified into three categories – AEO T1, AEO T2, and AEO T3. For logistics service providers, warehouse operators, customs brokers, and terminal operators, there is the AEO-LO program.

AEO T1 and T2 certifications are valid for 3 years, while AEO T3 and AEO-LO certifications are valid for 5 years. Any importer or exporter can apply for AEO T1 or T2 directly. However, to apply for AEO T3 status, they need to have and maintain the AEO T2 status for at least two years.

Eligibility Criteria for the Indian AEO Program

To be eligible for the Indian AEO program, a company should have been established in India and be engaged in custom-related activities. They should have filed at least 25 custom shipments in the previous financial year and fulfilled certain compliances, including general compliances, legal compliances, financial compliances, business partner security details, safety and security of the entity, transport and commercial records, security plans, and process maps.

Benefits of the AEO Program for Importers, Exporters, and Logistics Service Providers

There are several benefits of the AEO program for importers, exporters, and logistics service providers. Some of these benefits include a deduction in the bank guarantee, direct port delivery, deferred payment of duty, and higher priority for goods clearance. Additionally, AEO-certified companies receive the security that their goods will be facilitated at a much better rate than non-AEO-certified companies.

Reduction in Compliance for MSMEs in the AEO Program

Recently, the Government of India announced a reduction in compliance for Micro, Small, and Medium Enterprises (MSME) importers and exporters who are part of the AEO program. This means that MSMEs will be facilitated at a faster rate than non-MSMEs to provide them with higher opportunities for facilitating and securing global trade.

Nature of the AEO Program and Assistance Available

It is important to note that the AEO program is not mandatory but voluntary. However, companies that opt for the program are likely to benefit from the advantages that come with it. Companies can seek assistance from experts knowing the field to expedite their application process and achieve their goal of obtaining AEO certification.

Conclusion

In conclusion, the AEO program is a voluntary program established by the Government of India to promote the safe and secure facilitation of trade. The program is open to importers, exporters, warehouse operators, custodians, logistics service providers, and customs brokers who have fulfilled all the compliances with the customs laws and the WCO SAFE Framework of Standards. Companies can seek assistance from experts to expedite their application process and achieve their goal of obtaining AEO certification.

(The views expressed are strictly personal.)

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Export Proceeds in INR now eligible for export benefits

admin — Thu, 02 Mar 2023 17:20:17 +0000

NOVEMBER 22, 2022

By Rajat Dosi, Partner, RSA Legal Solutions

1. THIS article seeks to briefly capture the new mechanism put in place by the Reserve Bank of India (“RBI“) which allows Indian import and export transactions to be settled in Indian Rupees (“INR“). It further captures the recent changes made in the Foreign Trade Policy, 2015-22 (“FTP“) and the Handbook of Procedures, 2015-22 (“HBP“) to allow export benefits in respect of such exports settled in INR.

2. The RBI, vide its A.P. (DIR Series) Circular No.10 dated 11.07.2022, has introduced a new mechanism for settlement of international trade (import and export) in INR. This new mechanism permits invoicing, payment and settlement of Indian import and export transactions in INR. For enabling such settlement, the RBI has permitted authorized Indian Banks (AD category banks) to open and operate Special Rupee Vostro Accounts of banks of other countries in India. In simple words, this new mechanism permits international trade transactions in INR in the following ways:

a. Indian importer can make payment to the overseas supplier in INR by crediting payment in INR in the Special Rupee Vostro Account of the overseas supplier’s bank in India;

b. Similarly, in case of payment to be received by the Indian Exporter, the overseas buyer can make payment in INR, through the Special Rupee Vostro Account of the overseas buyer’s bank held by an AD category bank in India; in which case the payment will be received by the Indian Exporter in INR.

3. Prior to the above new mechanism, export invoices could be denominated in free foreign exchange or in INR, however, payment and settlement was required to be done in free foreign exchange only, as per the FEMA laws (except for special arrangements such as the one made for transactions with Iran, which were permitted in INR).

4. The above new mechanism for settlement of international transactions in INR was also incorporated in the FTP in Para 2.52(d) vide the DGFT Notification No. 33/2015-2020 dated 16.09.2022. Even though the exporters were permitted to settle transactions in INR, via this new mechanism, however, such export transactions settled in INR were not eligible to avail certain export benefits provided under the FTP. Para 4.21 of the FTP (which pertains to the advance authorization scheme) and Para 5.11 of the HBP (which pertains to the EPCG scheme) allowed exports to be counted towards fulfilment of export obligation arising thereunder, only if the export proceeds are realized in free foreign exchange.

5. Given the above, now the following changes have been made in the FTP (vide the DGFT Notification No. 43/2015-20 dated 09.11.2022) and HBP (vide the DGFT Public Notice No. 35/2015-20 dated 09.11.2022) to extend the export benefits under the FTP to even such exports (settled in INR):

a. Para 2.53 of the FTP has been amended to provide that export proceeds realized in INR, in terms of above RBI circular dated 11.07.2022, will be eligible for all export benefits under the FTP and such exports will also be eligible to be counted towards fulfilment of export obligation arising under the FTP;

b. Para 3.20 of the FTP, which deals with the Status Holder Certificate, has been amended to provide that for calculation of export performance (for current and previous three financial years) even such exports realized in INR, in terms of above RBI circular dated 11.07.2022, will be considered.

c. Para 4.21 of the FTP has been amended to provide that such exports realized in INR, in terms of above RBI circular dated 11.07.2022, will be counted towards fulfilment of export obligation arising under the advance authorization scheme; and

d. Para 5.11 of the HBP has been amended to provide that such exports realized in INR, in terms of above RBI circular dated 11.07.2022, will be counted towards fulfilment of export obligation arising under the EPCG scheme.

6. In simple words, vide the above amendments, the benefit of the advance authorization scheme, EPCG scheme and Status Holder Scheme, has been extended to even such exports realized in INR, in terms of above RBI circular dated 11.07.2022.

7. However, interestingly, no such corresponding changes have been made in the Export Oriented Unit (EOU) scheme in the FTP. Such exports realized in INR, in terms of above RBI circular dated 11.07.2022, have not been considered towards fulfilment of positive NFE requirement of the EOU scheme. Either the same has been missed out or may be in days to come a similar addition will be made even in the EOU Scheme to this effect.

[The views expressed are strictly personal.]

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