MM TAX CLUB

The officers of CGST Thane Commissionerate acting on specific intelligence developed by CIU, Mumbai CGST Zone, booked an anti-evasion case and arrested the Proprietor of M/s. Star Scrap Steel. The firm is involved in trading of Ferrous Waste and Scrap; remelting scraps ingots of Iron or Steel. The investigation has revealed that firm was indulged in fraudulent availment and utilization of Input Tax Credit (ITC) to the tune of Rs 12 crores without receiving the goods or services in violation of the provisions of CGST Act 2017.

The firm was getting Input Tax Credit from many trading companies and was further passing it on to Rolling Mills. This was done by getting inadmissible Input Tax Credit on the basis of invoices issued by fraudulent entities without receipt and supply of goods.

Searches were carried out at various premises of taxpayers located across Thane, Mumbai, Navi-Mumbai and Raigad, which were involved in issuing fake credit to M/s. Star Scrap Steel without actual supply of goods. The Proprietor of M/s. Star Scrap Steel was arrested under provision of CGST Act 2017 and produced before the Hon’ble Judicial First-Class Magistrate Court, Thane on 3^rd December,2021 and was remanded to 14 days judicial custody. Further investigation in the matter to identify others involved in tax fraud is under progress.

Department of Commerce Directorate General of Foreign Trade Udyog Bhawan, New Delhi,  issued Trade Notice No.  26 /2021-22 dated 26^th November, 2021 for Safe Custody of digital tokens, documents, scrips etc. Members  of  trade  and  industry  are  aware  that  various  digital  initiatives  have  been Initiated   by this Directorate   recently with an objective to provide   transparent, paperless, contactless,  online  services  to  the  Trade  Community.  Under the revamped online Systems, an exporter/importer’s identity  is  established  by  a  Digital  Signature  Certificate (DSC)  Issued by Controller of Certifying Authorities (CCA) licensed Certifying Agencies (CAs)  or through Aadhaar based e-sign.

In this context, Members of Trade & Industry are requested to take note of the following best practices to ensure safe and secure online transactions :-

1. Always use a strong password.  The longer and more complex your password, the more difficult it is to crack.  Shorter and simpler passwords take less time and resources for hackers to compromise.

2. Do not share your sensitive personal  information  (like usemames  and  passwords,  OTP,

3. Exporters   are  advised  to  cheek,  from  time  to  time.   that  dutv  credit  scrips are accounted  for  and  renected  in  their  online  module,  if  such  scrips  have  not  been transferred/utilized by them.

4. In  case  of  any  suspicion  on  unauthorized  issuance  of  a  DSC,  the  concerned firm  is required to approach the Licensed CA immediately and also report the same to the CCA.

5. Regularly check the custody of DSC and ensure that it is not accessible to unscrupulous agents/ persons.

6. Do  not  click  on  links  or  attachments  from  senders  that  you  do  not  recognize. Be especially wary of .zip or other compressed or executable file types.

7. Make sure you open any attachment  or  click  on any link  from  an email  id only if you know the sender and are expecting an email from them.

8. Public  WIFI  is  not  as secure  as  the  Office  WIFI  or  your  personal  WIFI  at home.  It  is advised  not to access your  Official/Personal Email ID or to login  to the DGFT Website using public WIFI.

9. Watch for email senders that use suspicious or misleading domain names.

10. Inspect URLs carefully to make sure they're legitimate and not imposter sites.

11. Do not try to open any shared document that you're not expecting to receive.

EPCs and Industry Associations are requested to sensitize their members about the need to be vigilant and prevent any online theft of duty credit scrips/ certificates/ authorizations.

Removal of Inverted Tax Structure on MMF Textiles Value chain and uniformity of rates brings relief to Textiles sector;

Uniform rate of 12% for entire value chain of MMF textiles sector will reduce the compliance burden of the industry players;

MMF textiles sector will be benefiting and save lot of working capital;

It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structure

The Government has notified uniform goods and services tax rate at 12 % on MMF, MMF yarn, MMF fabrics and apparel that has addressed the inverted tax structure in the MMF textile value chain. The changed rates will come into effect from 1st January, 2022. This will help the MMF segment grow and emerge as a big job provider in the country.

The Textiles & Apparel (T&A) industry was having long pending (first under sales tax then, under VAT and finally under GST regime) demand for removal of inverted tax structure on manmade fibre (MMF) value chain. The GST on MMF, MMF Yarn and MMF Fabrics were 18%, 12% and 5% respectively. The taxation of inputs at higher rates than finished products created build up of credits and cascading costs. It further led to accumulation of taxes at various stages of MMF value chain and blockage of crucial working capital for the industry.

Though there is a provision in GST law to claim the unutilised Input Tax Credit (ITC) as a refund, but there were other complications and resulted more compliance burden. The inverted tax structure caused effective increase in rate of taxation of the sector. The world textiles trade has been moving towards MMF but India was not able to take advantage of the trend as its MMF segment was throttled by inverted tax regime.

This 12% uniform GST rate is likely to contribute positively to the growth of the sector in the following ways:

1.  The uniform rate of 12% for entire value chain of MMF textiles sector will be benefiting and save lot of working capital. It will reduce the compliance burden of the industry players. This is a welcome step by the Government with no inversion.
2. The uniformity of GST rates will be helpful to resolve the ITC residues that accumulated due to the inverted tax structure earlier.
3. The uniformity in the GST rates shall 12% GST on job work related to dying and printing services will benefit the industry to absorb and recover unutilised ITC.
4. The significant portion of MMF products (output) is expected to be exported, it will lend a better scope for encashing the untilised ITC. Also since tax on input will get refunded, on output (export) which will be zero rated, it would not add to cost and make exports competitive.
5. Uniform 12% GST will help the industry having huge portion of piled up opening ITC by enabling them to encash the same progressively

Differential rates for garment creates problem in compliance of tax regime. MMF garment cannot be identified easily and cannot be taxed differently; hence there is need for uniform rate. Uniform rate makes it simple and since there is so much high potential of value addition in garment segment that the increase in rate is likely to be absorbed in value addition.   It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structure.

The GST Council’s 45th meeting was held on 17th September, 2021 in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the recommendations relating to changes in GST rates on supply of goods and services.

GST concessional rate on Covid drugs extended from 30^th September 2021 to 31^st December 2021. Whereas GST rate changes are made for the other goods and services as per the recommendation of the GST Council.

You can access all GST rate notifications in this respect from below links;

CBIC vide Circular No. 166/22/2021-GST dated 17^th  Nov, 2021 issued clarification on various issued in respect to GST Refund, full clarification can be accessed from below link.