Circulars issued by CBIC pursuant to 55th GST Council Meeting

Pursuant to the 55^th Goods and Service Tax Council meeting held on December 21, 2024, Central Boards of Indirect Taxes and Customs has released a series of Circulars giving effect to the recommendations and proposals made by the Council.

• It is clarified that goods will be considered to have been passed on and delivered to a (vehicle) dealer by OEM upon handing over of goods to the transporter at the factory gate even though the goods may be physically received by the dealer after the transit period.
• Accordingly, it is clarified that the (vehicle) dealer will be considered to have received the goods in terms of explanation to Section 16(2)(b) of CGST Act, at the time of handing over of said goods by OEM to the transporter at the factory gate.
• This principle has been applied in case of Ex-works contract where goods are to be delivered by supplier to recipient, or to any other person (including a transporter) on behalf of the recipient, at supplier’s place of business. The property in goods stands transferred to recipient at the time of such handing over.
• However, ITC can only be claimed for goods used for business operations. If the said goods are lost, destroyed or used for personal purposes, ITC cannot be claimed.
• It is also explicitly clarified that unlike the erst while laws, physical receipt of goods at the business premises is not a mandatory requirement for claiming ITC under GST.

The circular provides clarity on various issues with respect to vouchers.

• With respect to whether transaction in vouchers qualify as supply of goods or services, it is clarified that:
  • Vouchers may function as payment instruments creating obligations for suppliers to accept them as consideration for goods or services;
  • If recognized by RBI as pre-paid instruments, vouchers may be categorized as “money,” which is excluded from the ambit of goods or services.
  • If not recognized by RBI, vouchers may not be categorized as money, however, they will be treated as actionable claims and hence, still be excluded from taxable supplies in terms of Schedule III of the CGST Act.
• With respect to GST treatment of transactions in vouchers by distributors/ sub-distributors/ agents etc., it is clarified that:
  • Where vouchers are distributed through the distributors/ sub-distributors/ dealers on Principal-to-Principal (P2P) basis, it would be in the nature of pure trading and hence, the transaction in vouchers will neither be a supply of goods nor supply of services;
  • Where vouchers are distributed using distributors/ sub-distributors/ agents on commission/ fee basis, the transaction in vouchers will be liable to GST on those earnings.
• With respect to GST treatment of additional services such as advertisement, cobranding, marketing & promotion, customization services, technology support services, customer support services etc., it is clarified that:
  • Service fee/ service charge/ affiliate charge or other amount for supply of such additional services to the voucher issuer as per the terms of contract/agreement, will be liable to GST in the hands of the said service provider
• With respect to GST treatment of unredeemed vouchers (breakage), it is clarified that:
  • Reference is made to Circular No. 178/10/2022-GST dated 03.08.2022 and it is clarified that amount attributable to non-redemption of voucher (breakage) would not constitute as a “monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person” and hence, GST will not be chargeable;
  • No GST is payable on breakage amounts retained by the voucher issuer;

In cases involving supply of online money gaming or supply of taxable services by or through an electronic commerce operator or supply of online information and database access or retrieval (OIDAR) services.

• Irrespective of the value of supply, in respect of supply of services made to unregistered persons, the supplier is required to mandatorily record the name of the State of the unregistered recipient on invoice.
• Recording of the name of State of the unregistered recipient on the tax invoice in respect of such supply of services will be deemed as the address on record of the recipient for the purpose of determination of place of supply of the said services under section 12(2)(b) of IGST Act.
• Penal action under section 122(3)(e) of the CGST Act will follow in case of failure to issue invoice in accordance with the said provisions.

• The Circular clarifies that no proportional reversal of ITC is required to be made under Section 17 (1) or Section 17(2) of CGST Act by an ECO in respect of supplies for which they are required to pay tax under section 9(5) of CGST Act.
• Tax must be paid through electronic cash ledger and ITC availed in relation to inputs and input services cannot be used for discharging Tax liability under Section 9(5) of CGST Act.
• However, such ITC is permitted to be utilized for discharging Tax liability in respect of supply of services on own account

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Rohit Jain, Deputy Managing Partner – Email – rohitjain@elp-in.com;

Vivek Baj, Partner – Email – vivekbaj@elp-in.com

Sai Dash, Senior Associate, Email – saidash@elp-in.com