By Vinay Kumar Jain and Jay Chheda, Advocates
1. Whether an assessee can pay mandatory pre-deposit under GST by utilizing the ITC available in Electronic Credit Ledger?
Facts and Pleadings: Petitioner filed a Writ Petition before Bombay High Court on the ground that Input Tax Credit lying in Electronic Credit Ledger can be utilised for payment of mandatory pre-deposit of GST for filing an appeal before Appellate Authority under GST.
The Revenue’s case was that Section 49(4) of the CGST Act restricts the usage of the amount available in the Electronic Credit Ledger only for payment of output tax i.e. self-assessed tax and ITC cannot be utilized for payment of tax under Section 107(6)(b) towards mandatory pre-deposit.
Judgement passed by High Court of Bombay: The Revenue’s contention that ITC can be utilized for payment of only output tax is incorrect because Section 107(6)(b) of the Act provides a pre-condition of payment of 10% of Tax as a precondition for filing an appeal. That Tax can be IGST, CGST, SGST or UTGST. The amount of ITC available in the Electronic Credit Ledger can be utilized for the same. Output tax in relation to a taxable person is defined in Clause (82) of Section 2 of MGST Act as the tax chargeable on taxable supply of goods or services or both. Therefore, any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the GST Act can be made by utilization of the amount available in the Electronic Credit Ledger. The Bench also relied on the Circular F. No. CBIC-20001/2/2022-GST issued by CBIT&C and stated that it is clarified that any amount towards output tax payable, as a consequence of any proceeding instituted under the provisions of GST Laws, can be paid by utilization of the amount available in the Electronic Credit Ledger.
Oasis Realty v. Union of India & Others – 2022-TIOL-1287-HC-MUM-GST
2. Whether GST is payable under reverse charge by tenants who are registered under GST for renting of residential accommodation for personal use?
Facts and Pleadings: The Petitioner contended that Notification No. 4/2022 dated 13th July 2022 has been issued whereby the activity of renting of residential apartment by a registered person is subject to GST and the liability to pay GST has been imposed on the registered tenant under reverse charge. The Petitioner contended that this amendment is affecting those who are doing their business as a proprietary concern since now they are liable to pay GST under reverse charge. The Petitioner contended that denial of exemption solely on the basis that the tenant is registered under GST is not based upon any intelligible differentia and the said differentia has no rational relation to the object sought to be achieved.
The Respondent submitted that where the residential dwelling is rented by a person who is a proprietor in his personal capacity for use as his own residential dwelling, and such renting is not on account of its business, the exemption shall continue to be available to assessee. Similarly, where the residential dwelling is rented by a partner in his personal capacity for his own residential use and not accounted for in business entity’s account, the exemption will be available. The Respondent further clarified that, since the Government is bound by the recommendations of the GST Council, a proposal to amend Notification to bring in greater clarity regarding taxability of registered persons, is being examined to be placed before the GST Council, as the Notification No. 4/2022 does not specify that GST would be charged only where the registered person has rented residential dwelling in course or furtherance of business. For the present purposes, the renting of residential dwelling by a proprietor of a registered proprietorship firm who rents it in his personal capacity for use as his own residence and not for use in the course or furtherance of business of his proprietorship firm shall be exempt from tax.
Judgement passed by High Court of Delhi: The Hon’ble High Court accepted the clarification of Respondent that renting of a residential dwelling by a proprietor of a registered proprietorship firm, who rents it in his/her own personal capacity for use as his/her own residence shall be exempt from GST and held that the Respondent are bound by the same. Accordingly, the High Court disposed off the petitions.
Seema Gupta v. Union of India & Ors. – 2022-TIOL-1244-HC-DEL-GST