The Central Board of Indirect Taxes and Customs (CBIC) has said that the new anti-profiteering mechanism will not be different from the existing one, except for changes in the institution. in an interview with business LineCBIC chairman Vivek Johri said the Competition Commission of India (CCI) is expected to handle the anti-profiteering cases from the end of this year. He also said that BPO and KPO cannot be termed as intermediaries by concept. Part:
As the Supreme Court has ruled that assessees from foreign group companies are liable to pay service tax second to the employee, there is a view that companies will have to review their existing arrangements and secondment contracts under the GST regime . What do you say?
There was the Supreme Court’s decision in the Northern Operating System case, where an appeal was filed against the CESTAT order. It belongs to the service tax era. The point was that if you have an expatriate working for a subsidiary of a multinational company abroad and he was paid salary, is that taxable under service tax or not? The court said that it is taxable. But, as I said, it is a service tax decision. This problem persists in GST also.
Under GST, there is no problem like there was no problem under Service Tax. It is treated as a supply of service on which tax is to be paid on reverse charge basis. You are entitled to take ITC on whatever tax you pay under GST. The problem is with service tax for which the court has accepted liability. Now, it will not be possible for those taxpayers to get ITC of that service tax as the transitional period is over and they are required to pay the tax as the demands are confirmed by the Supreme Court. Hence, the problem of ITC under GST does not continue. Under the GST law, there is no problem, but for the past liability of service tax, if the taxpayer wants to take credit now, it will not be admissible.
Can these assessees take advantage of the two months window to be opened for transitional credit claim?
They will not be able to apply as that window is for credit which was in the book of accounts as on June 30, 2017. But due to some reason, they were either prevented from filing the claim on time or they could not file it because of technical snag. Even if the assessee has to pay service tax, it will not be covered by the SC’s decision on transitional credit.
There are several judgments of the High Court and AAR on the applicability of GST on cross-charge. These decisions are giving confusing signals. Is CBIC working on issuing any clarification?
The issue is whether it is taxable or not, because under the GST law, if a payment is made under an employer-employee relationship, it is not chargeable to GST, as it has to be treated as supply of service for the purpose of GST. not considered as such. because of the employment contract. So, that part is clear. There is also the issue that the CEO, CXO or CFO is employed by the main entity and not by a particular GST-registered entity located at different locations. So, the main entity can be registered in multiple states, and the problem is the imposition of that obligation in different registrations. The issue needs clarification and we are looking into it.
Will there be any change in the profiteering formula once the anti-profiteering mechanism is handed over to the Competition Commission of India (CC)?
There is no change. Even the anti-profiteering mechanism from NAA (National Anti-Profiteering Authority) is being transferred to CCI. The legal provision is defined under Section 171 of the CGST Act, and it prescribes the position of profiteering. Those definitions will not change. This is just an institutional mechanism to decide whether there is profiteering or not, and now it will be done by the CCI against the National Anti-Profiteering Authority.
Any date fixed for handing over the anti-profiteering regime to CCI?
The current plan was to transit in December, but dates have not been confirmed. There are some complaints regarding higher increase in prices of certain products after July 18, when GST for pre-packaged and pre-labeled food and dairy products. Came into effect. For example, GST was levied at 5 per cent on some items, but the retail prices went up drastically. We have not been informed about this yet. Price revision is a business decision, but if companies say that the price hike is due to GST and it is more than the rate hike, then the issue needs to be investigated. We need to check the prices after the change in the way GST is charged on 18th July, and even though there may be an increase, it may not be that much.
CBIC came out with a circular last September on defining intermediaries, yet there are questions whether BPOs and KPOs should be called intermediaries or not. What do you say?
Our circular was very detailed on middlemen. We have deliberately mentioned that, ultimately, each case has to be determined on the basis of facts. If I generalize about the concept of BPO and KPO, then in my view, they cannot be considered as intermediaries. The circular also contains some examples to this effect, but it is not possible to state outright and state that there is no condition under which the institution providing the services can be treated as an intermediary. We have to investigate every matter. The feedback we have received from the industry is that they are generally told about the problems they are facing at one or two places, but they were not specific on how the correct interpretation of that circular by the regional formation has not been done. We are waiting for them to share those details and then we can check.