Update on issues raised by NASSCOM during second meeting of Karnataka Grievance Redressal Committee
Blog: NASSCOM Official Blog
As you may be aware, the second meeting of Karnataka State Grievance Redressal Committee (GRC) was held on 15 th September 2020 wherein NASSCOM raised some key issues highlighted by member companies. Pursuant to the meeting, GRC has shared its response with NASSCOM on the recommendations. Given below are the recommendations which NASSCOM made and GRC’s response against each of them:
A. Enable the option to mention negative value in Table-3 and Table-4 of the GSTR-3B.
GRC’s response: The entries move from theGSTR-3B into the Electronic Liability Ledger, Electronic Credit Ledger and Electronic Cash Ledger. It means the negative values have to be carried to Liability Ledger, Credit Ledger and Cash Ledger and this will have an adverse effect on the Refunds, etc. Since it is a policy issue, at present it is not allowed.
B. Enable option to tag multiple invoice numbers for single Credit Note
GRC’s response: The same cannot be implemented in the portal. Few days back this change was implemented. At present both the Return and Refund Modules have been amended accordingly and at present stand-alone Credit Notes and Debit Notes are allowed.
C. Increase attachment size in GST portal for filing refund application to 10 MB instead of 5MB
GRC’s response: It was clarified that, now 20 MB document is allowed for attachment. Tax payers are advised to scan the documents with low DPI in the scanner which is pretty visible and 4 documents of 5 MB each totalling to 20 MB can be uploaded.
D. Option to download Electronic Credit Ledger and consolidated GSTR-1 and GSTR-2A report from GSTN portal for 12 months
GRC’s response: These issues will be taken up with GSTN for necessary action.
E. Extension in date of filing GST annual return
GRC’s response: Since, this is a policy matter, it will be escalated to the GST Policy Wing
Further, we had also submitted a detailed representation to the GRC on key policy issues being faced by IT-BPM industry. Given below are the recommendations which NASSCOM made and GRC’s response against each of them:
A. Disputes on classification of services of IT-BPM sector as “Intermediary”
GRC’s response: It has been clarified that this issue was raised in the 1st GRC and it was explained that there is no one single solution to the issue of intermediary. Every contract between the contracting parties will decide whether it is on a principal-to principal basis or principal to agent basis.
B. Taxability of import of FoC software from related party:
GRC’s response: It has been clarified that access to software provided by overseas affiliates to Indian companies are for the limited purpose of enabling provision of services back to the overseas affiliate. Indian companies access the software only for provision of service under the contract with the affiliate.
Further, agreements entered into between the parties clearly specify that the Indian affiliate would need to provide services using the software/
tools that would be given by the overseas affiliate. Indian companies cannot access or use such interfaces, software technology or any other confidential information for any purpose other than for provision of IT/ ITeS services to overseas entity.
The Indian companies will be unable to perform their services back to the overseas entity without these software technology being made available by the overseas entity, given the interdependency of the service and access provided with such software. The software/ interfaces/ tools are generally accessed on internal websites/ web-links of overseas entity. In most occasions, the said technology is not downloaded onto servers in India, but are remotely accessed.
In terms of Schedule II of the CGST Act 2017, development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services. In terms of entry 4 of Schedule I of the CGST Act, the import of services by a taxable person from a related person or any of his establishments outside India, in the course or furtherance of business constitutes a “supply” even if it made without consideration.
In view of the above, the import of FoC software is liable to GST. DGGI Delhi Zonal Unit has also registered a case on the same issue of import of FoC software by a software firm from its sister concern located outside India.
C. Treatment of overseas group entity as ‘establishment of distinct person’ leading to denial of export benefits
GRC’s response: It has been clarified that the refund sanctioning authority has to examine whether there is an “export of service” as defined in Section 2(6) of the IGST Act at the time of processing the refund claim on export of services. Every export transaction with the overseas client has to be examined to determine that the pre-requisites of service not being provided to the establishment of distinct person is met. The refund sanctioning authority has to examine this aspect keeping in mind the guidelines given by the CBIC in its FAQs on exports.
D. Guidance on aspects related to implementation of e-invoicing and provide sufficient time to industry to effectively implement e-invoicing system
GRC’s response: It has been clarified that E-invoice provisions will be implemented with effect from 1st October 2020 and the threshold limit for taxpayers to come under the mandatory e-invoice requirements has been increased to Rs 500 Crores turnover instead of the earlier Rs 100 crores turnover. Further, the new scheme for the e-invoice has also been notified vide Notf No 60/2020 GST dated 30.07.2020.
E. Extension of IGST exemption on certain services consumed in SEZ
GRC’s response: It has been clarified that the said issue of providing exemption for services consumed in the SEZ has to be recommeded by the GST Council. This is a Policy issue and the same will be taken up with the GST Policy Wing.
We will continue to engage with the Government to ensure that GST policies are in line with the needs of the industry.
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