Photo of Shivam Garg

Senior Associate in the Tax Practice at the Delhi NCR office of Cyril Amarchand Mangaldas. Shivam specialises in indirect tax advisory as well as litigation, and is also actively involved in analysing the impact of the Goods and Service Tax in India. He can be reached at shivam.garg@cyrilshroff.com

Unfolding tax tools to invigorate resolution of companies under IBC

The Insolvency and Bankruptcy Code (IBC), introduced in 2016, was conceived as a game-changer, a potent tool to expedite debt recovery from insolvent companies within a stipulated timeframe. Eight years into its existence, the IBC has witnessed a mixed track record. While it has successfully revitalised some companies grappling with financial turmoil, it has also faced criticism. The aim of the IBC was not only to aid the revival of struggling companies, but also to enhance the quality of lenders’ balance sheets and empower distressed asset buyers.Continue Reading Unfolding tax tools to invigorate resolution of companies under IBC

The Goods and Services Tax (“GST”) legislation has recently completed its sixth anniversary. The 50th GST Council meeting conducted on July 11, 2023 was marked by tax rate changes, availability of exemptions, procedural amendments, etc. It is noteworthy that the GST Council is proactively considering representations and feedback from all quarters of the industry. While the Government has been persistent in its efforts to iron out all creases, bottlenecks continue to exist. It was also expected that several sectors, including online gaming, would get relaxation – that the GST authorities would simplify the law, avoid unnecessary ambiguities, but in reality, it appears that on certain fronts, it has merely focussed on increasing sources of tax collection.Continue Reading GST Council’s half century meeting & the inning ahead!

GST

English language and technical proficiency, coupled with the highly skilled workforce that India has to offer, has made the country a darling of most multinational companies (MNCs). For a while now, these MNCs have been outsourcing their routine as well as technical and complex business processes to their subsidiaries or third-party service providers in low-cost and efficient jurisdictions, including India. Indian entities, in turn, offer their expertise in customer care, follow ups for regular payables like credit card, life and healthcare insurance premiums, routine troubleshooting services, assisting internal departments like finance, accounting, human resources departments, etc., as well as supporting various complicated and complex issues like sophisticated high-end research and technology services, analytical and computational support services, etc. The Government has taken several steps to encourage the service sector and has come up with many benefits and incentives. However, there appears to be a new set of challenges that this sector must deal with, arising in the context of Goods and Service Tax (“GST”).Continue Reading Refund of Unutilised ITC cannot be Denied to Supplier of Subcontracted Services

Karnataka High Court’s decision on GST levy provides a comfort to highway projects

The concessionaire or contractors/ sub-contractors of the national/ state highways face a possible levy of Goods and Services Tax (“GST”) on their supplies. However, GST is exempted for services when toll is paid to access the roads or bridges.[1] The exemption is also applicable on payment of annuity for access to roads.[2] A contract in relation to highways may deal with several aspects such as construction of a highway, shops, operation of highways, maintenance of highways, collection of toll or separate charges like overhead charges, etc. Further, with different models of highway projects, it becomes essential to analyse the nature of supply, party rendering such supply to determine if any exemption or concessional rate is available.Continue Reading Karnataka High Court’s decision on GST levy provides a comfort to highway projects

SC Decision on Levy of GST on Ocean Freight May Act as Gamechanger

India witnessed tax revolution in 2017 when Goods and Services Tax (“GST“) was implemented to subsume existing indirect taxes on production, provision of services, sale of goods, entry, etc. The intent clearly has been to provide seamless flow of credit and avoid multiple levies on same transaction. Unfortunately, due to Integrated GST (“IGST“) payable on import of good at the transaction value, (including transport value), as well as on the procurement of transportation services as a separate supply of service, there have been instances of GST being levied twice.Continue Reading SC Decision on Levy of GST on Ocean Freight May Act as Gamechanger

GST

Since its implementation, the levy of the Goods and Services Tax (GST) on online games has been a point of contention due to potential revenue leakage. The first question is to determine whether online game  is actually a game of skill or a kind of gambling, whilst the second issue concerns the value of services and, as a result, the amount of GST that is required to be paid. The conundrum is exacerbated by the range of games and the possible income structures that are available. The GST Council had set up a group of ministers (“GOM”) to address the corresponding disputes and uncertainties. According to the publicly available information, a decision on the rate applicable to online games and how to value the supplies is scheduled to be published soon. The Government aims to raise the applicable rate of GST on such online games to 28 % to discourage gambling-style operandi while leaving the GST rate on learning games unchanged.Continue Reading ONLINE GAMES- The battle of applicable GST rate and valuation continues

Customs Act

In a recent decision involving Canon India, the Hon’ble Supreme Court (“SC”) had adjudicated about the authority of the officers of Directorate of Revenue Intelligence (“DRI”) to issue a show cause notice (“SCN”) under Section 28 of the Customs Act, 1962 (“Customs Act”) for the recovery of short payment of customs duty.[1] The Hon’ble SC held that a DRI officer does not have the authority to initiate proceedings through SCN issuances, since such an officer was not the person to clear the goods initially.Continue Reading Who is proper officer for customs? The argument continues!

GST obligations of employer on services rendered to its own employees

With re-opening of offices post the second wave of COVID-19, various employers have re-initiated providing canteen, cab, health insurance and many other services to their employees as part of welfare programme as well as obligations under various labour law regulations. The employer may choose to recover the cost of providing such services in full or offer a concession or deduct it from the concerned employees’ salaries or supply them free of cost. Surprisingly, the Goods and Services Tax (“GST”) legislation neither provides for any exemption nor declares that services rendered by the employer to its employees would not be in the nature of goods or services.Continue Reading GST obligations of employer on services rendered to its own employees

The conundrum created by AAR regarding GST on damages

With the ongoing pandemic, the odds of invocation of clauses such as liquidated damages, price variation clause, compensation clause or forfeiture of deposits for the delay in adhering to contractual timelines, etc. have become very high. Such additional payments could also bring out an exposure on account of taxability under Goods and Services Tax (“GST”) legislations.Continue Reading The conundrum created by AAR regarding GST on damages

Parties entering into contractual arrangements usually insist on including a clause for liquidated damages to pre-emptively agree upon the amount of reparation that would be payable by either Party on failure to meet its commitment. Generally, such commitments are in the nature of adhering to timelines, fulfillment of conditions, quality of products, etc.

The levy of an indirect tax on the amount of liquidated damages, has faced a series of challenges under the erstwhile service tax regime. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act was deemed to be service under the service tax regime[1] . Where liquidated damages were in the nature of accidental damages caused due to unforeseen actions and not relatable to the provision of service, these were not included in the value of the service, and hence not to be taxed[2] .Continue Reading GST Aftermath of Liquidated Damages