Indirect Tax Newsletter March 2023 – Tax Authorities

CRUCIAL CASE LAWS

PRODUCTS AND SERVICES TAX (GST)

1. The Petitioner gotten cancellation of cancellation of
   registration, cancelled due to failure in providing returns for
   3 durations consecutively. The Department turned down the
   application of the Petitioner looking for cancellation of cancellation of
   registration. Being aggrieved by the Order of the Department, the
   Petitioner submitted appeal prior to the Appellate Authority which got
   dismissed on ground of restriction. Subsequently, the Petitioner
   submitted Writ Petition (WP) versus the order gone by the
   Department.

   The High Court held that the Petitioner was making its income
   through its business and needs registration under GST laws to
   run the business. The arrangements of GST laws cannot be translated
   so regarding reject the right to continue trade and commerce to any
   citizen. Further, the state shall suffer loss of revenue in case
   GST registration of the Petitioner is not revived. Hence, the order
   of cancellation of GST registration was quashed.

   Takeaway: Provisions of GST law cannot be interpreted so as
   to reject the right to bring on trade and commerce to any
   person.

   

   [M/s Rohit Enterprises Vs. The Commissioner, WP No. 11833 of 2022,
   Order dated February 16, 2023 (High Court, Mumbai)]




2. The Petitioner procures pre-paid payment instruments like gift
   vouchers, cash back vouchers and e-vouchers from the issuers and
   supplies them to its clients for specified face value. The
   Petitioner filed an application for advance ruling to determine
   taxability of such pre-paid instruments (vouchers). The Authority
   for Advance Ruling (the AAR) held that supply of vouchers would be
   taxable as goods. The Appellate Authority for Advance ruling (the
   Appellate AAR) affirmed the order passed by the AAR. Subsequently,
   the Petitioner filed WP challenging the order passed by the
   Appellate AAR.

   The High Court held that vouchers are mere instruments accepted as
   consideration for supply of goods or services and do not have any
   inherent value of their own. The transaction between the Petitioner
   and his clients is procurement of printed forms and their delivery.
   The issuance of vouchers is similar to pre-deposit and not supply
   of goods or services. Vouchers are mere instruments accepted as
   consideration for supply of goods or services, and hence, would be
   covered under definition of ‘money’ under Section 2(75) of
   the Central Goods and Services Tax Act, 2017 (the CGST Act) and
   excluded from definition of goods and service. Accordingly,
   vouchers, neither being goods nor services, would not be amenable
   to GST.

   Takeaway: GST is not leviable on vouchers being in nature
   of instruments

   [M/s Premier Sales Promotion (P) Limited Vs. UOI, WP No. 5569 of
   2022, Order dated January 16, 2023 (High Court, Karnataka)]




3. The Petitioner is engaged in business of providing goods
   transportation agency (GTA) services. The Petitioner is registered
   for such services, both under Reverse Charge Mechanism (RCM) and
   under Forward Charge Mechanism (FCM) in the same state as some of
   its customers were willing to discharge the liability under RCM and
   others were not. While depositing balance in its electronic cash
   ledger of FCM registration (from which it had to discharge tax
   liability), the Petitioner inadvertently deposited the amount in
   its RCM registration. Consequently, excess balance was left in the
   electronic cash ledger of the RCM registration. Subsequently, the
   Petitioner filed a refund application for claiming excess amount
   deposited in the electronic cash ledger of RCM registration. The
   Department issued a Show Cause Notice (SCN) and alleged that there
   is a mismatch in the outward tax supplies in Form GSTR-3B compared
   to Form GSTR-1 of RCM registration. The Department rejected the
   refund and alleged that the Petitioner has obtained two
   registrations in the same place of business and therefore it is not
   eligible to claim refund. The Petitioner filed WP challenging the
   order passed by the Department.

   The High Court held that the order passed pursuant to the reply to
   the SCN has not deliberated with the content of reply, and rather,
   the Department has proceeded to pass an order rejecting the refund
   application on the grounds which were never part of SCN. It is
   settled principle of law that if an allegation or ground is not
   made at the time of issuance of SCN, the Department cannot go
   beyond the scope of SCN to create new ground at the later stage of
   adjudication. Also, the impugned proceedings are in gross violation
   of principles of natural justice as neither a proper SCN has been
   issued nor any opportunity of hearing was given to the Petitioner.
   Accordingly, the High Court set aside the impugned order passed by
   the Department as being bad in law, vague and cryptic in
   nature.

   Takeaway: The Department cannot pass an order beyond the
   scope of SCN

   [M/s CJ Darcl Logistics Limited Vs. UOI, WP(T) No. 215 of
   2022, Order dated February 9, 2023 (High Court, Jharkhand)]




4. The Petitioner supplied goods from Begusarai to Guwahati and
   accordingly, paid Integrated Goods and Services Tax (IGST).
   However, e-way bill generated by the Petitioner got expired as
   carriage carrying goods suffered breakdown. In order to release the
   vehicle, the Petitioner paid tax and penalty but preferred an
   appeal before the Appellate Authority which also got dismissed.
   Subsequently, the Petitioner filed WP challenging the order passed
   by the Department imposing tax and penalty.

   The High Court held that the Petitioner’s consignment was found
   lying within the territory of the State for more than three days.
   The Petitioner had the opportunity to extend the validity of the
   E-Way bill when the goods vehicle had mechanical defect, however,
   the Petitioner did not take any step for extension of expired E-Way
   bill. Accordingly, the Department had lawfully imposed tax and
   penalty against the Petitioner.

   Takeaway: Levy of Tax and penalty imposed for failure to
   extend validity of e-way bill

   [M/s Ashok and Sons (HUF) Vs. Joint Commissioner, WPA No.
   190 of 2023, Order dated February 6, 2023 (High Court,
   Calcutta)]




5. The Petitioner challenged summons issued by the State GST
   Department on ground that proceedings have already been initiated
   by the Central GST Department on the same subject matter.

   The High Court held that the State Department cannot prosecute the
   Petitioner in case Central Authority has already initiated action
   in respect of the same subject matter. Accordingly, the Petitioner
   was directed to appear for personal hearing before the State
   Department and state all its objections with regard to impugned
   summons issued by the State Department.

   Takeaway: Parallel proceedings cannot be initiated by
   Central/State Tax Authorities on the same subject
   matter

   [M/s Tvl Metal Trade Incorporation Vs. Commissioner of GST and
   Others, WPA No. 3033 of 2023, Order dated February 6, 2023 (High
   Court, Madras)]




6. The Petitioner is a merchant exporter of mobile phones, who
   purchased mobile phones through its sister concern, which
   instructed the vendor to deliver the mobile phones to the airport
   directly for export by the Petitioner. The vendor raised invoice in
   name of sister concern of the Petitioner, but generated e-way bill
   with delivery address mentioned as the airport. Its siter concern
   raised an invoice upon the Petitioner for sale of mobile phones,
   and the Petitioner files shipping bills and exported the goods
   after due clearance from customs authorities. The Petitioner
   claimed refund of IGST paid on export of mobile phones in
   accordance with Rule 96 of the Central Goods and Services Tax
   Rules, 2017 (the CGST Rules). Due to single movement of the goods
   from the premise of the vendor to the airport, only one e-way bill
   was generated by the vendor wherein the delivery address was
   mentioned as the airport. During investigation proceedings, query
   was raised regarding refund claimed by the petitioner on export and
   the Department alleged that the e-way bill was not generated in
   respect of purchases made by the Petitioner from its sister
   concern, which was construed as deficiency of documents. The
   Petitioner filed WP challenging the investigation initiated by the
   GST Department.

   The High Court held that the Customs Department has permitted the
   goods to be exported and the Petitioner has paid IGST on export.
   The process of refund of IGST after clearance of goods for export
   as has been provided under Rule 96 of the CGST Rules is very clear
   that shipping bill of the export would be treated as refund
   application. Since e-way bill once has been generated, export
   cannot be disputed and if there is any doubt as regards export of
   goods, it is for the Custom Department to take up the issue.
   Accordingly, the Court held that the Petitioner would be entitled
   to refund and the same would be paid along with interest.

   Takeaway: The GST Department has no jurisdiction to
   initiate investigation in relation to refund of IGST claimed for
   export of goods

   [M/s Mobile Shoppe Vs. UOI, R/Special Civil Application No. 10110
   of 2020, Order dated January 20, 2023 (High Court, Gujarat)]




7. The Petitioner filed WP challenging the Department’s order
   for period July 2017 to March 2018 wherein GST demand of INR 10
   Crores has been proposed against the Petitioner. The question was
   whether the Petitioner can be denied opportunity of hearing merely
   because he had chosen the option ‘NA’ against the column
   description ‘Date of personal hearing’ in the reply to the
   SCN submitted through online mode.

   The High Court, while relying upon the decision of M/s
   Bharat Mint & Allied Chemicals Vs. Commissioner Commercial
   Tax¹, held that once it has been laid down
   by way of a principle of law that a person/assessee is not required
   to request for ‘opportunity of personal hearing’ and it
   remained mandatory upon the Assessing Authority to afford such
   opportunity before passing an adverse order, the fact that the
   petitioner may have signified ‘No’ in the column meant to
   mark the assessee’s choice to avail personal hearing, would
   bear no legal consequence. It further held that such opportunity
   would ensure observance of rules of natural justice and also allow
   the authority to pass appropriate and reasoned order as may serve
   the interest of justice. Accordingly, the impugned order was set
   aside.

   Takeaway: The opportunity of hearing cannot be denied
   merely because the Assessee has opted against personal hearing
   through online portal
   
   
   
   [M/s Mohan Agencies Vs. State of UP, Writ Tax No. 58 of 2023, Order
   dated February 13, 2023 (High Court, Allahabad)]




8. The Applicant is engaged in the business of providing
   restaurant services, catering services and renting of banquet
   services. The Applicant also sells alcoholic liquor for human
   consumption to its customers on standalone basis.

   The Applicant sought as to whether the Applicant is liable to
   reverse Input Tax Credit (ITC) used for the sale of alcoholic
   liquor for human consumption effected by it at its premises under
   Section 17(2) of the CGST Act read with Rule 42 of the CGST
   Rules?

   The AAR held that the activities of selling of alcoholic liquor for
   human consumption by the Applicant qualifies as ‘supply’
   under GST laws on which tax is not leviable and therefore, will be
   treated as ‘non-taxable supply’. Further, ‘exempt
   supply’ includes ‘non-taxable supply’ under GST laws
   and therefore, it clearly denotes that the aforesaid supply will
   also be treated as ‘exempt supply’ under the CGST Act.
   Hence, the Applicant is required to reverse ITC for supply of
   alcoholic liquor for human consumption under Section 17(2) of the
   CGST Act read with Rule 42 of the CGST Rules.

   Takeaway: Reversal of ITC on account of supply of alcoholic
   liquor for human consumption

   [M/s Karnani FNB Specialities LLP, Order No. 22/WBAAR/2022-23,
   Order dated February 9, 2023 (AAR, West Bengal)]

SERVICE TAX

1. The Appellant downloaded software electronically from M/s. SSP
   Sirius Ltd. UK (SSPSL) located outside India, for Core Insurance
   Solution. Thereafter, a series of events/ activities were performed
   for operationalizing the software, agreement was entered on May 27,
   2008 and the invoice was raised on July 22, 2008. On being pointed
   out during an audit objection, the Appellant deposited an amount of
   Rs.58,63,413/-, along with interest. The Appellant subsequently
   sought refund of the same as they were of the view that no tax was
   payable even prior to the introduction of the service in the
   Finance Act, 1994.

   The information technology software was supplied to the Appellant
   electronically from abroad by SSPSL and downloaded in December
   2007, i.e., prior to the introduction of said service in the
   Finance Act, 1994 (May 16, 2008). The Revenue contended that mere
   downloading of software does not make the service complete unless
   other incidental activities are completed and issued SCN and
   confirmed the demand.

   The issue that arose was whether the point of taxation is the date
   of downloading of software; or the date of commissioning of such
   software. It was held that the actual right to use the software
   took place only after the agreement was signed and payment for the
   invoice was made, which happened after inclusion of such services
   under service tax net. Accordingly, the information technology
   software service was held to be leviable to service tax in the
   present case.

   Takeaway: Actual right to use and not the date of
   downloading the software is the point of taxation for determining
   tax liability 

   [M/s Mobile Shoppe Vs. UOI, R/Special Civil Application No. 10110
   of 2020, Order dated January 20, 2023 (High Court, Gujarat)]




2. The Appellant is a hospital and has engaged doctors as
   consultants for providing medical services to its patients. The
   Invoice raised on the patients include doctor fees, hospital room
   charges, medicines, other charges and out of the total fees
   collected from the patients, 22% is retained by hospital and
   remaining 78% is disbursed to doctors.

   A SCN was issued wherein the Revenue contended that hospital is
   providing infrastructural support services which include
   secretarial support, consultation chamber, Operation Theatre and
   other facilities essential for providing medical care services and
   money retained by hospital is towards the consideration of such
   services and proposed to levy service tax under Business Support
   Services. Being aggrieved by the order, the Appellant preferred
   appeal before the Customs Excise and Service Tax Appellate Tribunal
   (the CESTAT).

   The CESTAT held that the arrangement between hospital and doctors
   is a mutually beneficial earnings sharing model wherein doctors
   provide the skills and knowledge and hospital manages the patient
   and provide necessary support to the patient, which is nothing but
   health care services and not business support services. Hospitals
   are clinical establishments and provide health care services to
   patients which is exempt from service tax w.e.f. July 1, 2012.
   Prior to that, heath care services were only taxed for defined
   category of hospitals and for specified patients. Accordingly, the
   impugned order was set aside.

   Takeaway: Hospitals do not render ‘business support
   services’ and revenue retained is pursuant to revenue sharing
   arrangement and is not infrastructure/ support
   service

   [Maharaja Agrasen Hospital Charitable Trust Vs. CST – ST Appeal No.
   52193/2016, Order dated February 22, 2023 (CESTAT, Delhi)]

CENTRAL EXCISE

1. The Appellant availed Cenvat credit of various input services
   procured by them for constructing residential quarters and civil
   structures located at township away from the factory. Such credit
   was denied by the Revenue on the ground that construction of
   township is a welfare measure for employees and has no nexus with
   the manufacture, storage and sale of final products.

   The dispute that arose lies upon the nexus of the aforesaid
   activity with business of the Appellant and accordingly, qualifying
   within the inclusive leg of Rule 2(l) of the Cenvat Credit Rules,
   2004 (the CCR).

   It was observed that perception of ‘nexus’ with its
   unbounded meanings is not appropriate and conformity to the
   definition of ‘input service’ must be tested including the
   principal and inclusive leg. The principle of nexus of service
   should not restrict itself to direct use but should encompass
   indirect deployment and hence should be examined in relation to the
   definition. It was held that there is a lack in the finding and the
   appeal was accordingly, set aside and remanded back to identify
   nexus or lack thereof.

   Takeaway: Complete definition of input and input services
   and its nexus with output service must be established to determine
   eligibility of credit

   [Reliance Industries Ltd Vs. CCE & ST – Excise Appeal No.
   1043/2012, Order dated January 20, 2023 (CESTAT, Mumbai)]




2. The Appellant purchased certain inputs from a vendor and
   availed Cenvat credit of the excise duty charged on such purchases.
   The Revenue alleged that the vendor is not engaged in manufacturing
   but has deposited excise duty. It was further alleged that tax
   deposited is towards an amount paid under Section 11D of Central
   Excise Act, 1944 which is in relation to deposition of excess tax
   collected. SCN was issued denying the Cenvat credit on the ground
   that credit of only duty of excise is allowed and demand was
   confirmed.

   It was observed that neither the Appellant nor the jurisdictional
   officer of the Appellant has the right to change the
   self-assessment made by the vendor. The Appellant cannot be
   expected to investigate the activities of each supplier and
   determine if activity undertook by vendor amounts to manufacture
   and thereafter avail credit of such duty. The order was
   accordingly, set aside and credit was allowed.

   Takeaway: Credit can be availed based on invoice of vendor
   and recipient is not expected to determine correctness of tax
   charged by vendor.

   [M/s RMC Switch Gears Ltd Vs. CCE, Excise Appeal No. 52817/2018,
   Order dated February 17, 2023 (CESTAT, Delhi)]

CUSTOMS

1. M/s. Ashwin Gold Pvt. Ltd. (AGPL) imported gold in its export
   unit in Special Economic Zone Cochin (SEZ) and moved the imported
   gold for job work in Domestic Tariff Area (DTA). The Customs
   Department conducted search and seizure of AGPL’s DTA unit and
   subsequently at its SEZ unit on the alleged clandestine movement of
   gold. The question before the High Court was whether the Customs
   Officers had jurisdiction for seizure or recovery of material in a
   DTA area, which came from SEZ area.

   The Revenue argued that since the breach originated in SEZ and
   travelled beyond it and the gold was seized from DTA, the Officers
   of Customs had jurisdiction for search and seizure in such SEZ area
   as well. AGPL argued that the gold has been moved from SEZ to DTA
   under the permission.

   The High Court held that the SEZ authority has jurisdiction over
   establishment and continuance of a SEZ unit. However, for importing
   products into DTA, the Customs Department have jurisdiction. In the
   present case, the search and seizure occasioned in DTA, therefore,
   the Customs Department would have the jurisdiction over illegal
   movement of gold out of SEZ.

   Takeaway: Customs Officers had jurisdiction for seizure or
   recovery of material in a search carried out in DTA which led them
   to importer’s unit in SEZ 

   [CC (Preventive), Kerala & Ors. Vs. Ashwin Gold Pvt. Ltd. &
   Ors., Cus Appeal No. 9/2022, Order dated December 22, 2022 (High
   Court, Kerala)]

INDIA REGULATORY & TRADE HIGHLIGHTS

FOREIGN TRADE

1. Consequent to the inclusion of export items from Chapter 28
   (products of Chemical or Allied Industries), 29 (Organic
   chemicals), 30 (Pharmaceutical products) & 73 (articles of iron
   or steel) under RoDTEP (vide Notification No. 47 dated December 07,
   2022), Appendix 4R is aligned with First Schedule of the Customs
   Tariff Act, 1975 for implementation with effect from February 15,
   2023. [Notification No. 55/2015-2020 dated February 7, 2023].




2. Gemological Science International (GSI) Pvt. Ltd., Mumbai,
   Maharashtra, India is added as an agency permitted to import
   diamonds for certification/ grading & re-export. [Notification
   No. 56/2015-2020 dated February 07, 2023].




3. The procedure for allocation of quota for import of (i)
   Calcined Pet Coke for use in Aluminum Industry; and (ii) Raw Pet
   Coke for Calcined Pet Coke manufacturing industry for the year
   2023- 24 is notified. [Public Notice No. 57/2015-20 dated February
   14, 2023].




4. One time relaxation is granted in submission of additional fee
   to cover excess duty utilized in Export Promotion Capital Goods
   authorizations issued under Foreign Trade Policy (2009-14)
   (extended up to March 31, 2015). [Public Notice No. 58/2015-2020
   dated February 24, 2023].




5. Para 4.42 of the Handbook of Procedures 2015-2020 is amended to
   integrate a uniform and transparent system for implementation of
   all Policy Relaxation Committee decisions for levy of Composition
   Fee for allowing extension of Export Obligation period and/or
   regularization of exports already made under Advance Authorization
   Scheme. [Public Notice No. 59/2015-2020 dated February 28,
   2023].

THE DIRECTORATE GENERAL OF TRADE REMEDIES, MINISTRY OF COMMERCE
& INDUSTRY

1. Initiation of Anti-Circumvention Investigation of
   Anti-Dumping Duty imposed on import of:

   




2. Final Findings regarding Anti-Subsidy Investigation on
   import of:

   




3. Final Findings regarding Sunset Review Anti-Dumping
   Duty Investigation on import of:

   

INDIAN CUSTOMS HIGHLIGHTS

1. Devices affixed on durable containers exempted from
   basic customs duty (BCD) and IGST

   Containers of durable nature were exempted from BCD as well as
   additional duty subject to specified conditions. The Notification
   exempts device such as tag, tracking device or data logger already
   affixed on the container at the time of import from BCD and
   IGST.

   [Notification No. 14/2023-Cus dated February 28,
   2023]




2. Details of ex-bond bill of entry no./shipping bill no.
   And date to be provided by warehouse license holder

   Form A provided in Circular 25-2016-Cus dated June 8, 2016, that is
   to be maintained by the warehouse licensee has been amended to
   include following additional details in cases of removal of goods
   from warehouse for home consumption or export:

   • Ex-Bond Bill of Entry No.

   
   

   • Date/Shipping Bill No. and date

   
   
   
   
   [Circular No. 04/2023-Cus dated February 21, 2023]




3. Time limit of 45 days has been provided for antecedent
   verification of application for warehouse licence

   Due to lack of prescribed time limit, antecedent verification of
   application for a warehouse licence has been facing unreasonable
   delays. To get rid of such delay, time limit of 45 days from
   receipt of the application has been provided vide this
   circular.

   [Circular No. 05/2023-Cus dated February 21, 2023]

INDIA GST HIGHLIGHTS

1. Activities carried on by any authority, board or a body set up
   by the Central Government or State Government including National
   Testing Agency for conduct of entrance examination for admission to
   educational institutions shall be treated as educational
   institution for the limited purpose of providing services by way of
   conduct of entrance examination for admission to educational
   institutions w.e.f., March 1, 2023.

   [Notification No. 1/2023- CT(R), IT(R) & UT(R) dated February
   28, 2023]




2. GST under reverse charge mechanism (RCM) to be applicable on
   services supplied by Courts and Tribunals to business entities.
   Also, registered person is liable to pay GST under RCM in case
   renting of immovable property services received from Courts and
   Tribunals w.e.f., March 1, 2023.

   [Notification No. 02/2023-CT(R), IT(R) & UT(R) dated February
   28, 2023]




3. Rate of GST revised on supply of specified goods
   w.e.f., March 1, 2023

   

   [Notification No. 03/2023-CT(R), IT(R) & UT(R) dated February
   28, 2023]




4. Exemption from payment of GST on supply of Rab, other than
   pre-packaged and labelled w.e.f., March 1, 2023.

   [Notification No. 04/2023-CT(R), IT(R) & UT(R) dated February
   28, 2023]




5. Exemption from payment of Compensation Cess on supply of coal
   rejects to and by a coal washery, arising out of coal on which Cess
   has been paid and no ITC thereof has been availed by any person
   w.e.f., March 1, 2023.

   [Notification No. 01/2023-Compensation Cess (R) dated February 28,
   2023]

TREATMENT OF SALE OF ALCOHOLIC LIQUOR FOR HUMAN CONSUMPTION
UNDER GST

Article 366(12A) of the Constitution of India, the very
fountainhead of GST in India, defines GST as any tax on supply
of goods, or services or both, except for taxes on the supply of
the alcoholic liquor for human consumption. By virtue of
Article 366 (12A) of the Constitution of India, the scope of GST
has been restricted to specifically exclude the supply of alcoholic
liquor for human consumption.

Taking genesis from the Constitution of India, the Legislators
have framed GST laws in India. The charging section of the CGST
Act² provides that GST shall be leviable on all
intra-state supply of goods/services except on supply of
alcoholic liquor for human consumption³. The term
‘supply’ includes all forms of supply of goods or services
or both such as sale, transfer, barter, exchange, license, rental,
lease or disposal made or agreed to be made for a factor to consider by
a person in course of furtherance of business⁴. Further,
non-taxable supply means supply of products or services or both
which is not leviable to tax⁵.
Now, on a bare reading of definition of term ‘provide’ and
‘non-taxable supply’, it appears that sale of any products
would fall under the ambit of ‘supply’. Accordingly, sale
of liquor for human consumption might also fall under the ambit of
‘supply’ under GST laws but would remain out of the tax net
basis the charging section. Further, supply of alcoholic liquor for
human consumption being not leviable to tax, appears to be
categorised as ‘non-taxable supply’. However, reaching to
this conclusion does not appear to be in sync with the Constitution
of India since the basic definition of GST defines it as any
tax on supply of goods, or services or both, except for
taxes on the supply of the alcoholic liquor for human
consumption. Moreover, in case supply of alcoholic liquor for
human consumption is classified as being non-taxable supply, there
would be implications of reversal of input tax credit⁶.
Hence, the determination of applicability of GST laws on supply of
liquor need factor to consider.

Recently, the West Bengal Authority for Advance Ruling in case
of M/s Karnani FNB Specialities LLP held
that sale of alcoholic liquor for human consumption qualifies as
‘supply’ under GST laws on which tax is not leviable and is
accordingly, to be treated as ‘non-taxable supply’. It has
been further held that ‘exempt supply’ includes
‘non-taxable supply’ under GST laws and therefore, supply
of alcoholic liquor for human consumption by the Applicant shall
also be treated as ‘exempt supply’ under the CGST Act.
Accordingly, the Applicant would be required to reverse ITC for
supply of alcoholic liquor for human consumption under Section
17(2) of the CGST Act.

CONCLUSION

On perusal of the AAR order, it can be seen that the supply of
alcoholic liquor for human consumption has been treated as
‘non-taxable supply’. However, it cannot be ignored that
legislative intent was nowhere to bring alcoholic liquor into the
ambit of GST. The Constitution of India empowers the State
Government to levy excise duty and VAT on alcoholic liquor for
human consumption and it does not form the subject matter of GST to
be levied either by the State or the Central Government. However,
by including the supply of alcoholic liquor for human consumption
under the ambit of ‘non-taxable’ and thus, ‘exempt
supply’, the authorities have tried to cast an unnecessary
burden upon the assessee by requiring it to include the revenue
earned out of sale of alcohol for the purpose of reversal of ITC
under GST laws.

Footnotes

1. 2022-VIL-189-ALH

2. The Central Goods and Services Tax Act,
2017

3.  Section 9 of CGST Act

4. Section 7(1) of CGST Act

5. Section 2(78) of CGST Act

6. Section 17(2) of CGST Act

The material of this article is intended to provide a general
guide to the topic. Specialist advice should be looked for
about your particular situations.

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