Indirect Tax

Section 50 of the Central Goods and Services Tax Act 2017 (CGST Act) was amended1 to provide that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the relevant period furnished after the due date, except after commencement of any proceedings under section 73 or section 74 of the CGST Act in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular dated 10 June 2020 (Circular), clarifying the applicability of goods and services tax (GST) on the remuneration paid to whole time directors and independent directors. Services rendered by an employee to his/her employer in the course of, or in relation to, his/her employment are not exigible to GST, and therefore, the moot issue was whether services provided by directors are in the course of employment or not.

With a view to ensure that businesses are not saddled with indirect tax payments and related compliances and to maintain smooth functioning of business activity amidst the COVID-19 outbreak, the Ministry of Finance and Ministry of Commerce and Industry have announced a slew of relaxation measures. We have set out below a broad overview of the key updates in the area of indirect taxes and foreign trade:

In an unprecedented decision, the Delhi High Court in the case of Brand Equity Treaties Limited v Union of India and Another (Writ Petition Civil No 11040 of 2018) has held the credit of taxes paid on inputs to be a vested right. In the lead petition (which was argued by us), the Court has concluded that the time limit prescribed under Rule 117 of Central Goods and Services Tax Rules, 2017 (CGST Rules) is directory and not mandatory.