InTouch Australia Japan

Asia Pacific VAT/GST Alert
InTouch
with indirect tax news
Issue 03/13
Australia
Japan
• Waiver of requirement to hold
adjustment notes
• GST rulings
• Supplies of travel services to nonresidents
• Margin scheme and going concern
• Motor vehicle incentives and rebates
• Japanese Consumption Tax (JCT) rate
increase
China
• New notice regarding detailed
implementation rules for zero-rated
VAT treatment for qualifying services
• New notice regarding detailed
implementation rules for VAT
exemption on cross-border services
India
•
•
•
•
Notifications/Circulars for VAT
VAT case law
Notifications/Circulars for Service Tax
Service Tax case law
Malaysia
• Potential implementation of GST
New Zealand
• GST implications of changes to mixeduse asset rules
Welcome to issue 03/13
of InTouch* which covers
developments in VAT/
GST in Asia Pacific during
the period July 2013 to
September 2013.
Please feel free to reach out
to any of the PwC contacts
on the back of this issue.
Philippines
• Exemption of transport of passengers
by international carriers from VAT
Singapore
• ACAP annual review guidelines for
businesses accorded with ACAP status
South Korea
• Restrictions on the issuance of revised
tax invoices on imports
Thailand
• Additional information required
on tax invoices, debit notes, credit
notes, output and input VAT reports
Australia
Waiver of requirement to hold
adjustment notes
The Australian Taxation Office (“ATO”) issued
two Legislative Instruments which waive, in
certain circumstances, the requirement for
an entity to hold an adjustment note before
claiming a decreasing adjustment for the
following categories of transactions:
• Reimbursements of an employee
• Supplies made by or to a partnership
GST rulings
The following GST rulings were issued:
Adjustment notes
• GSTR 2013/2: outlines the requirements
for adjustment notes and recipient
created adjustment notes under Division
29 of the GST Act, including when the
Commissioner will treat a particular
document as an adjustment note even
though that document does not meet all of
the adjustment note requirements under
s29-75(1).
Sale of second-hand goods
• GSTD 2013/2: sets out when second-hand
goods are acquired for the purpose of sale
in the ordinary course of business under
Division 66 of the GST Act.
Recognised trust scheme
• GSTD 2013/3: sets out the Commissioner’s
view in relation to the application of item 32
of the reduced input tax credit provisions in
the GST Regulations to acquisitions made
by a managed investment fund that is a
recognised trust scheme. The Determination
has removed the alternative view expressed
in Appendix 2 of the draft Determination as
highlighted in issue 02/13 of InTouch.
Input tax credits
• PS LA 2013/3 (GA): sets out the
administrative approach the ATO will take
in respect of input tax credits claimed by a
recipient of a non-taxable supply where the
Commissioner has the discretion to give a
refund of overpaid GST to the supplier.
Supplies of travel services to non-residents
The Commissioner issued an interim decision
impact statement (“DIS”) following the Federal
Court of Australia’s decision in ATS Pacific Pty Ltd.
The primary issue considered by the Court was
whether the supply made by the taxpayer to
non-resident (“NR”) travel agents was properly
characterised as a supply of arranging or booking
services (as the taxpayer contended) or a supply
of the Products and associated rights. The court
concluded that there was a separate supply of
arranging services which was sought for its own
sake and this was GST-free. The supply of the
Product (including hotel accommodation etc.)
consumed in Australia was taxable.
In its interim DIS, the Commissioner confirms
that until the matter is decided by the Full
Federal Court, the Commissioner will not make
any amended assessments in a manner that is
inconsistent with the existing Federal Court
decision. However, the Commissioner will make
amended assessments where taxpayers lodge on
the basis that their entire transaction (and not
just the margin) is GST-free.
Margin scheme and going concern
Following the High Court’s dismissal on 5 June
2013 of the special leave application made by the
taxpayer in Cyonara Snowfox Pty Ltd, the ATO has
issued a DIS. This case involves the application of the margin
scheme and the GST-free going concern
provisions of the GST Act; together with the
four year limit on recovery in section 105-50 of
Schedule 1 to the Taxation Administration Act
1953. As the Full Court’s decision is favourable
to the Commissioner and is consistent with
the Commissioner’s views, the Commissioner
has indicated that he will not amend any ATO
precedential material or law administration
practice statements in light of this case.
China
Motor vehicle incentives and rebates
The Full Federal Court’s decision in AP Group
Limited was handed down on 18 September
2013.
The decision concerned the GST treatment
of certain incentive payments made by motor
vehicle manufacturers and distributors to the
taxpayer (a motor vehicle dealer), while two
other incentives were not consideration for any
supply by the dealer.
The parties are currently considering seeking
special leave to appeal to the High Court of
Australia.
For more information, please contact:
Peter Konidaris
[email protected]
+61 3 8603 1168
New notice regarding detailed
implementation rules for zero-rated VAT
treatment for qualifying services
China’s State Administration of Taxation (SAT)
issued a Public Notice [2013] 47 (“Notice 47”),
which provides detailed implementation rules
in relation to the zero-rated VAT treatment for
qualifying export services. The Notice took
effect on 1 August 2013.
Notice 47 generally follows the principles
stated in the previous Public Notice [2012] 13
with some clarifications, which include:
• Where international transportation services
are provided using vehicles obtained under
a voyage charter, time charter or wet lease,
the lessee, rather than lessor, can apply for
zero-rated VAT treatment.
• A trading company that concurrently
provides services eligible for zero-rated VAT
treatment can obtain refunds of the input
VAT incurred on corresponding purchases
of taxable services, under the “exempt and
refund” method.
• The taxpayer providing services eligible
for zero-rated VAT treatment can elect for
exemption or to pay VAT. The taxpayer
should perform the record filing procedures
with his in-charge tax bureau for the waiver
of zero-rated VAT treatment. In addition,
the taxpayer cannot apply the “exempt and
refund” method within 36 months beginning
from the first day of the month after the date
of the record filing.
New notice regarding detailed
implementation rules for VAT exemption
on cross-border services
The SAT issued a Public Notice [2013] 52 (“Notice
52”) clarifying the qualifying criteria and recordfiling procedure for cross-border services eligible
for VAT exemption. The Notice took effect on 1
August 2013.
Some notable key points under Notice 52 include:
• Provision of a list of documents which the
taxpayers are required to submit to their
in-charge tax bureau for record-filing
purposes before they are eligible for the VAT
exemption treatment. The in-charge tax
bureau will review the documents submitted
by the taxpayers, and may require additional
information during such examination. If the
record-filing documents are not in accordance
with the regulations, the tax bureau will reject
the submission. The tax bureau will also from
time to time carry out inspection on the VAT
compliance on such cross-border services.
• Provision of further clarification on the scope
of qualifying cross-border services eligible for
VAT exemption. For instance, the provision
India
of certain support services such as airport
ground handling services, harbour services,
cargo and passenger handling services,
etc. are considered to be auxiliary logistics
services provided to foreign entities and
can qualify for exemption from VAT.
• Provision of certain criteria for taxpayers
who provide qualifying cross-border
services. No exemption is permitted unless
all of the following criteria are met:
– Taxpayers are to conclude written crossborder services contracts;
– For cross-border services provided to
foreign recipients, taxpayers are to
receive income from outside China; and
– Taxpayers are to separately compute
the sales amount of their cross-border
services, accurately compute the noncreditable input VAT and are not allowed
to issue special VAT invoices for such
exempt sales.
• Where there are changes to the services
supplied and the services fall within the
scope of qualifying services, taxpayers are
required to re-perform the record-filing for
VAT exemption.
For more information, please contact:
Alan Wu
[email protected]
+86 10 6533 2889
Notifications/Circulars for VAT
• Delhi – The following changes are effective
from 12 September 2013:
– Excess input tax credit or inadvertent
excess payment of tax cannot be carried
forward to the subsequent financial
year.
– Penalty provisions for the following acts
of non-compliance have been amended:
– Failure to apply for amendment in
registration;
– Failure to apply for cancellation/
surrender of registration;
– Failure to file return or supporting
annexure(s)
A new “residual penalty” is also
introduced.
– Online issuance of statutory forms is
also made mandatory for FY 2011/2012
and earlier.
• Gujarat – Effective from 6 August 2013,
the sale of all goods other than motor
vehicles, television sets, refrigerators,
air-conditioners, cameras, mobile phones
and computers by unit canteens run by the
Border Security Force and Central Police
Forces in Gujarat to their members are
exempt from VAT.
• Assam – Effective from 1 April 2013, the
taxable quantum for levy of tax has been
enhanced from INR 0.4 million to INR 0.6
million.
Effective from 12 September 2013, the
residuary rate of VAT has been increased from
13.50% to 14.50%. The rate of VAT in respect
of works contract transactions has also been
increased from 13.50% to 14.50%.
• Madhya Pradesh – A deemed assessment
scheme has been introduced for select dealers
having turnover of up to INR 100 million
during FY 2010/2011.
• Karnataka – Effective from 1 September
2013, electronic payment of tax has been
made mandatory for dealers paying INR
10,000 or more towards tax and other dues.
An amnesty scheme in the name of
“Karasamdhana Scheme 2013” has been
introduced wherein partial waiver of penalty
and interest levied under the Karnataka Sales
Tax Act, 1957 and the CST Act, 1956 will be
granted, subject to conditions and restrictions
as prescribed under the scheme.
• Punjab – Effective from 10 July 2013,
a facility for electronic submission of
information through virtual information
collection centres for inter-state/intra-state
movement of goods has been introduced.
The turnover limit for furnishing VAT audit
report has been increased from INR 5
million to INR 10 million.
VAT case law
• In Bharti Airtel Ltd v The State of West
Bengal, the Calcutta High court held that
West Bengal Tax on Entry of Goods into
Local Area Act, 2012 was not compensatory
in nature and was therefore ultra vires and
unconstitutional.
• In Commissioner of Uttar Pradesh v P M
Traders, the Ghaziabad Tax Tribunal held
that penalty could be imposed only in the
two circumstances described below:
(i) where the dealer was not a bona fide
dealer; and (ii)transactions were not recorded in the
books of accounts.
• In Commissioner of Commercial Tax v
GK Binding Wires Ltd, the Allahabad
High court held that no penalty was
to be levied on goods imported on the
strength of incomplete particulars in the
import declaration form when the missing
particulars are verifiable from other
accompanying documents and there was no
intention to evade tax.
• In Jay Enterprises v Additional
Commissioner of Commercial Taxes, the
Karnataka High court held that a job
worker was not entitled to claim input
tax credit on consumables used in the
processing of goods when the cost of such
consumables was recovered along with the
labour charges from the customer.
Notifications/Circulars for Service Tax
• In RAK Ceramics (India) Private Limited v
The Assistant Commissioner, the Andhra
Pradesh High Court held that the decision
of the Advance Ruling Authority is binding
upon the applicant and other non-applicant
dealers who are dealing in the goods or
executing transactions in relation to which
a clarification was sought.
• The CBEC has clarified various emerging
issues upon the introduction of the Service
Tax Voluntary Compliance Encouragement
Scheme (STVCES). The CBEC has also issued
an FAQ booklet to address the apprehensions
of the stakeholders with respect to the
STVCES.
• In National Small Industries Corporation
Ltd v The State of Tamilnadu, the Madras
High Court held that in an inter-State hire
purchase transaction, the time of passing
of property and place of delivery of goods
is irrelevant. Consequently, the dealer is
eligible to claim the benefit of transit sale
on the basis of endorsement of title to the
goods while the goods were in transit.
• In 21st Century Builders and Engineers v
State of Punjab, the Punjab VAT Tribunal
held that input tax credit cannot be denied
merely on a technical violation that VAT
was not separately charged on the invoices.
• The Central Board of Excise and Customs
(CBEC) has introduced a new scheme to grant
an up-front exemption of service tax levied on
specified services received by SEZ units and
the developer which are ‘used exclusively for
the authorised operations’.
• The Central Government has exempted the
National Skill Development Corporation
(NSDC) and its approved council/agencies/
training from payment of service tax on
various skill development programs/courses
etc offered by NSDC.
• The Central Government has granted an ad
hoc exemption from payment of service tax on
services by way of accommodation in a hotel/
inn/guest house/ club/ campsite and serving
of food and beverages by hotels, guest houses,
restaurants etc in the state of Uttarakhand
for the period from 17 September 2013 to 31
March 2014.
• The Central Government has issued
detailed guidelines on imperative
conditions and procedure to be followed
when exercising the power to arrest
and post-arrest formalities in relation to
cognizable offences under the Finance Act,
1994.
likely to affect the rights of the assessee, could
not be said to be a communication simplicitor.
The Tribunal further held that since the
objective of registration was to identify the
taxpayer and the person liable to pay service
tax under reverse charge was also a taxpayer,
accordingly if it satisfied the conditions for
centralised registration, denial of the same
would defeat the object of the law.
• The Central Board of Excise and Customs
has clarified that certain ‘auxiliary
educational services’ like hostels,
housekeeping, security services, etc.
provided to an educational institution
would be exempt from the levy of service
tax.
• In CCE ST v Kandla Port Trust, the
Ahmedabad Tribunal held that the taxable
event per the Finance Act, 1994 was the date
of provision of services.
Service Tax case law
• In Malabar Gold Pvt Ltd v Commercial Tax
Officer and ors, the Kerala High Court held
that the royalty received by the franchiser
for allowing the franchisee to use the
trademark without the right to transfer or
sub-let would be liable to service tax under
‘franchisee services’. Since there was no
transfer of ‘right to use’, liability to pay VAT
did not arise.
• In CCE v Maharashtra State Bureau of
Text Books Production and Curriculum
Research, the Mumbai Tribunal held that
the letter denying centralised registration
to an assessee was an appealable order. A
letter determining the rights, or that was
Accordingly, in case of a change of rate of
tax, the applicable rate would be the rate
prevailing on the date of provision of service,
and not on the date of payment. This ruling
is applicable for the period before the
implementation of the Point of Taxation Rules,
2011 (i.e. 1 April 2011).
• In Arcadia Shares and Stock Brokers Pvt Ltd
v CCE, the Mumbai Tribunal held that just
because the service tax was paid under a
wrong accounting code, the assessee could
not be asked to pay the tax again.
• In Intas Pharma Ltd v CST, the Ahmedabad
Tribunal held that service tax refund claim
could not be rejected merely on the ground
that the SEZ unit, instead of availing the
upfront exemption, had paid the service tax
on eligible input services and filed refund
claim for the same.
• In ThermaxLtd v CCE, the Mumbai Tribunal
held that where the assessee had contracted
under an out-of-court settlement to co-own
the trade secrets and confidential information
belonging to the owner-company with equal
rights, the transfer was permanent in nature
and could not be held liable to service tax
under ‘intellectual property services’.
• In Bhayana Builders (P) Ltd and Ors v CST, the
Delhi Tribunal held that goods and materials
supplied free of cost by a service recipient to
the provider of a taxable construction service
will not form part of the gross amount for the
purpose of levy of service tax.
For more information, please contact:
Vivek Mishra
[email protected]
+91 124 330 6518
Anita Rastogi
[email protected]
+91 124 330 6531
Japan
Malaysia
New Zealand
Japanese Consumption Tax (JCT) rate
increase
Potential implementation of GST
GST implications of changes to mixeduse asset rules
It is announced on 1 October 2013 that the JCT
will be increased from 5% to 8% from 1 April
2014.
Upon the JCT increase to 8% from April 2014,
a one-time cash “Simple Allowance” of 10,000
yen per person will be distributed to members
of “lower income households” that are exempt
from local taxes, which is around 24 million
people.
The Malaysian 2014 Budget announcement
will be made on 25 October 2013. It is
anticipated that the Malaysian Government
will announce the date of implementation
of the GST or at least whether is it to be
implemented.
New rules have been enacted which affect the
GST input deductions available in relation to
mixed-use assets. Mixed-use assets are land,
aircraft or boats that are used both privately as
well as for income-earning purposes. The new
rules contain a formula to determine the GST
input deductions allowed for costs relating to
mixed-use assets, based on the extent the asset
is used each period in making taxable supplies.
The next planned rate increase to 10% from 1 October 2015 will be decided in due course.
To date, more than 25 draft guides have
been released for public comments which
include the General Guide, Industry Guides
(including Approved Trader Scheme, Airline,
Freight Transportation, Fund Management,
Hire Purchase and Credit Sale, Insurance and
Takaful, Leasing, Manufacturing, Petroleum
Downstream) and Specific Guides (Agent,
Designated Areas, Export, Import, Input Tax,
Partial Exemption, Registration, Supply, Tax
Invoice & Record Keeping, Transfer of Going
Concern).
For more information, please contact:
Masanori Kato
[email protected]
+81 3 5251 2536
These draft guides including other documents
such as the draft GST Forms can be found on
the official GST portal of the Royal Malaysian
Customs (http://gst.customs.gov.my).
For more information, please contact:
Eugen Trombitas
[email protected]
+64 9 355 8686
Kotaku Kimu
[email protected]
+81 3 5251 2713
For more information, please contact:
Wan Heng Choon
[email protected]
+60 3 2173 1488
Gary O’Neill
[email protected]
+64 9 355 8432
An additional amount of 5,000 yen per person
will be given to some lower income households
who are receiving pension or child rearing
allowances (around 12 million people).
The mixed-use asset rules do not affect the
GST treatment where a GST-registered person
acquired land (or made improvements to
land) earlier in the year and claimed input tax
under the existing GST apportionment rules. However, the mixed-use rules can apply to
ongoing costs incurred on or after 17 July 2013
relating to that land. Ian Rowe
[email protected]
+ 64 4 462 7274
Philippines
Singapore
Exemption of transport of passengers by
international carriers from VAT
Assisted Compliance Assurance
Programme (“ACAP”) annual review
guidelines for businesses accorded with
ACAP status
Under Republic Act No 10378, the transport
of passengers by international carriers is
now exempt from 12% VAT and 3% common
carriers tax. For more information, please contact:
Malou P. Lim
[email protected]
Tel: +63 2 459 2016
The Inland Revenue Authority of Singapore
(“IRAS”) has provided guidelines on the scope
of review and audit sample size of the ACAP
Annual Review.
Businesses accorded with the ACAP status are
required to perform an annual review based
on the prescribed methodology in order to
maintain the ACAP status.
For more information, please contact:
Koh Soo How
[email protected]
+65 6236 3600
Weijie Lin
[email protected]
+65 6236 7481
South Korea
Restrictions on the issuance of revised
tax invoices on imports
With effect from 26 July 2013, the issuance of
a revised tax invoice on imports by the customs
office shall be allowed in limited circumstances
such as:
i) where the importer revises the import
declaration before the head of the customs
office determines or amends the tax base
or the amount due in accordance with the
Customs Act; and
ii) where the importer revises the import
declaration in accordance with the
Customs Act, acknowledging in advance
that the tax base or the amount due should
be reassessed for reasons indicated in the
Presidential Decree (e.g. customs audit). In the latter case, the importer must be able to
prove that the correction or reassessment of
the tax base or the amount due was caused by
a mistake made by the importer or that it is not
attributable to the importer’s responsibility. Hence, there is a potential risk that importers
may not obtain a refund of import VAT
additionally assessed by the head of the
customs office if the proof cannot be produced.
Thailand
The above restrictions are introduced to
facilitate correct and good compliance and
declaration by importers.
Additional information required on
tax invoices, debit notes, credit notes,
output and input VAT reports
For more information, please contact:
Dong-Keon (D.K.) Lee
[email protected]
+82 2 709 0561
On 28 May 2013, the Notifications of the
Director General of the Revenue Department
on VAT Nos. 194- 197 were issued which
required additional information to be included
on full format tax invoices, debit notes, credit
notes as well as various VAT reports.
Businesses are now required to include the
tax ID number of the customer and a notation
on whether both the seller and customer are
transacting via a head office or a branch.
The new regulations will apply to tax invoices
issued from 1 January 2014 onwards. Debit
and credit notes as well as the related output
and input VAT reports will be required to
include the new information when referring to
tax invoices issued from that date.
For more information, please contact:
Thavorn Rujivanarom
[email protected]
+662 344 1000 ext 1444
Somboon Weerawutiwong
[email protected]
+662 344 1000 ext 1247
Contacts
Australia
Peter Konidaris, Partner
Email: [email protected]
Tel: +61 3 8603 1168
Japan
Masanori Kato, Partner
Email: [email protected]
Tel: +81 3 5251 2536
Philippines
Malou P. Lim, Partner
Email: [email protected]
Tel: +63 2 459 2016
Thailand
Somboon Weerawutiwong, Partner
Email: [email protected]
Tel : +662 344 1000 Ext. 1247
Cambodia
Heng Thy, Partner
Email: [email protected]
Tel: +855 23 218 086
Kotaku Kimu, Director
Email: [email protected]
Tel: +81 3 5251 2713
Singapore
Koh Soo How, Partner
Email: [email protected]
Tel: +65 6236 3600
Vietnam
Richard J. Irwin, Partner
Email: [email protected]
Tel: +84 8 3823 0796
Laos
Thavorn Rujivanarom, Partner
Email: [email protected]
Tel: +662 344 1444
Lin Weijie, Manager
Email: [email protected]
Tel: +65 6236 7481
David Fitzgerald, Partner
Email: [email protected]
Tel: +84 8 3824 0116
Malaysia
Wan Heng Choon, Senior Executive Director
Email: [email protected]
Tel: +60 3 2173 1488
South Korea
Dong-Keon (D.K.) Lee, Partner
Email:[email protected]
Tel: +82 2 709 0561
New Zealand
Eugen Trombitas, Partner
Email: [email protected]
Tel: +64 9 355 8686
Sri Lanka
Hiranthi Ratnayake, Director
Email: [email protected]
Tel: +94 11 4719838
Gary O’Neill, Director
Email: [email protected]
Tel: +64 9 355 8432
Taiwan
Lily Hsu, Partner
Email: [email protected]
Tel: +886 2 2729 6666 Ext. 26207
China
Alan Wu, Partner
Email: [email protected]
Tel: +86 10 6533 2889
India
Vivek Mishra, Executive Director
[email protected]
+91 124 330 6518
Anita Rastogi, Associate Director
[email protected]
+91 124 330 6531
Indonesia
Ali Widodo, Partner
Email: [email protected]
Tel: +62 21 52890623
Abdullah Azis, Associate Director
Email: [email protected]
Tel: +62 21 5289 0601
For a comprehensive guide to global
VAT/GST information from over
70 countries worldwide, please
visit GlobalVATOnline at www.
globalvatonline.com. GlobalVATOnline
can keep you up to date on all VAT
issues and developments as they unfold.
Disclaimer. Clients receiving this Alert should take no action without first contacting their usual PwC Indirect Tax Advisor.
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