Alerts & Updates 23rd Jan 2023

ELP Tax Update – Recent clarifications to settle certain issues under GST

Authors

Rohit Jain Partner | Mumbai
Harsh Shah Partner | Mumbai
Gourav Sogani Partner | Mumbai

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Recent clarifications to settle certain issues under GST

  • A. Clarifications issued by the Board pursuant to the 48th GST Council Meeting:

    Pursuant to the 48th GST Council Meeting held on December 17, 2022, the Central Board of Indirect Taxes & Customs (CBIC) has issued Circular No. 189/01/2023-GST Dated: 13.01.2023, to clarify the classification of certain goods and/or rate of GST applicable thereof.

    • Clarification on applicability of Compensation cess on Sports Utility Vehicles (‘SUVs’):

    It has been clarified that Compensation Cess of 22% is applicable on SUVs, falling under heading 8703, which cumulatively satisfy all the following four specifications, namely:

    – these are popularly known as SUVs;
    – the engine capacity exceeds 1,500 cc;
    – the length of the SUV exceeds 4,000 mm; and
    – the ground clearance is 170 mm and above

    Important to note that this clarification is restricted only to SUVs.

    • Applicability of IGST rate on goods specified under notification No. 03/2017-Integrated Tax (Rate):

    Doubts arose with respect to the goods specified in the list annexed to the Notification No. 3/2017-Integrated Tax (Rate), dated 28.06.2017, which are liable to IGST @ 12% as per the said notification. However, these  goods are also eligible for the benefit of lower rate of IGST under Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), dated 28.06.2017.

    It has finally been clarified that the importer can claim the benefit of the lower rate of tax under Notification No. 1/2017-Integrated Tax (Rate), dated 28.06.2017 or any other IGST rate notification.

    ELP comments
    The clarification allowing availment of benefit of lower rate of tax is a welcome move. This is in line with the settled principle of law that if the benefit of two or more entries are available then an assessee can choose whichever is more beneficial to him.
    • Clarification on the HS codes of the ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice:

    It has been clarified that the 6-digit HS Code for the ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice’ is “2202 99”. The said goods attract GST at the rate of 28% and Compensation Cess at the rate of 12%.

    Further, it has also been clarified that the said goods include the carbonated beverages that contain carbon dioxide, irrespective of whether the carbon dioxide is added as a preservative, addictive, etc.

    • Clarification regarding classification and applicable rate of GST on snacks pellets manufactured through extrusion process

    It has been clarified that ‘snack pellets’ (such as “fryums”) produced through the extrusion process are classifiable under tariff item “1905 90 30,” which includes goods with the description “Extruded or expanded products, savory or salted.” As a result, in terms of SL No. 16 of Schedule III of Notification No. 1/2017-CT(R) dated 28.06.2017, such snack pellets are subject to GST at the rate of 18%.

    • Other clarifications:

    – It has been clarified that “Rab” (massecuite prepared by concentrating sugarcane juice on open pan furnaces, including Rab Galawat and Rab Salawat, but excluding khandsari molasses or lauta gur) is classifiable under heading 1702 and is liable to 18% GST under SL No. 11 in Schedule III of Notification No. 1/2017-CT(R) dated 28.06.2017.
    – It has been clarified that the by-products of milling of Dal/Pulses such as Chika, Khanda and Churi/Chuni shall be exempt from GST w.e.f. 01.01.2023 vide introduction of new entry SL No. 102C in Notification No. 2/2017-CT(R) Dated 28.06.2017 irrespective of its end use. Further, it has been clarified that the taxability of said products prior to 01.01.2023 is regularized on “as is” basis from the date of issuance of Circular No. 179/11/2022-GST dated 03.08.2022.

  • B. Clarification with respect to applicability of GST on certain services

    CBIC has issued Circular No. 190/02/2023-GST Dated: 13.01.2023 to provide clarification regarding applicability of GST on certain transactions.

    • Clarification regarding applicability of GST on accommodation services supplied by Air Force Mess to its personnel:

    It has been clarified that exemption from payment of GST (provided under Sl. No. 6 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017) which is applicable to services supplied by the Central Government, State Government, Union territory or local authority to any person other than  business entities, is also applicable to the accommodation services provided by Air Force Mess and other similar messes, such as Army mess, Navy mess, Paramilitary and Police forces mess to their troops or any person other than a business entity.

    This exemption is available, provided the services offered by such messes qualify to be treated as services supplied by the Central Government, State Government, Union territory or local authority.

    • Clarification regarding applicability of GST on incentive paid by Ministry of Electronics and Information Technology (MeitY) to acquiring banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions

    It has been clarified that the incentives that are paid by MeitY to acquiring banks as part of the incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions, do not constitute any form of consideration that is paid by the Government for any service that is provided by the acquiring bank. The Board has further clarified that the said incentives take the form of a subsidy and are directly linked to the price of the service. Accordingly, in terms of the provisions of the Central Goods and Services Tax Act, 2017, such incentives do not form part of the taxable value of the transaction and are thus not taxable.

    We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

    Rohit Jain, Partner – RohitJain@elp-in.com
    Harsh Shah, Partner – HarshShah@elp-in.com
    Gourav Sogani, Partner – gouravsogani@elp-in.com
    Pavni Lakhanpal, Associate – pavnilakhanpal@elp-in.com

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein