The Central Board of Indirect Taxes and Customs (CBIC) has recently issued several Circulars and Notifications for inter alia providing certain clarifications and for amending the Central Goods and Services Tax Rules, 2017 (‘CGST Rules’). Some of these Circulars and Notifications have been issued to implement recommendations of the 54th meeting of the Goods and Services Tax Council held in September 2024. The key clarifications and amendments from the same are summarized hereunder:
Applicability and rate of GST on certain services
(Circular No. 234/28/2024-GST dated 11.10.2024, Notification No. 07/2024-Central Tax (Rate) dated 08.10.2024, Notification No. 08/2024-Central Tax (Rate) dated 08.10.2024 and Notification No. 08/2024-Integrated Tax (Rate) dated 08.10.2024)
GST on the service of affiliation provided by universities to colleges
- It has been clarified that the activity of affiliation is to monitor and ensure if the colleges possess the required infrastructure, faculty strength etc. and is not related to the admission of students or the conduct of examinations by such colleges. Therefore, such affiliation services provided by universities to the colleges are not covered within the exemptions provided to educational institutions vide Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and would attract GST at the rate of 18%.
GST on the service of affiliation provided by Central and State Educational Boards or Councils to schools
- Vide Circular No. 151/07/2021-GST dated 17.06.2021, it was clarified that accreditation services of Central and State Educational Boards or Councils are liable to GST at the rate of 18%. Vide the present Circular, it has been clarified that the payment of GST on the services of affiliation provided by Central and State Educational Boards or Councils to all schools, for the period from 01.07.2017 to 17.06.2021, would be regularized on ‘as is where is’ basis.
- Further, vide Notification No. 08/2024-Central Tax (Rate), the said services of affiliation, to the extent provided by a Central or State Educational Board or Council or any other similar body, to a school established, owned or controlled by the Central Government, State Government, Union Territory, local authority, Governmental authority or Government entity, has been exempted effective from 10.10.2024.
GST on the Directorate General of Civil Aviation (DGCA) approved flying training courses conducted by Flying Training Organizations (FTOs) approved by the DGCA
- It has been clarified that the approved flying training courses conducted by FTOs approved by DGCA, wherein the DGCA mandates the requirement of a completion certificate, are covered under Sr. No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (providing exemption for services provided by educational institutions to its students, faculty and staff) and therefore, training services in respect of the same provided by FTOs are exempted from GST.
GST on transport of passengers by helicopter
- Vide Notification No. 07/2024-Central Tax (Rate), services of transportation of passengers, with or without accompanied baggage, by air, in a helicopter on seat share basis has been made taxable @ 5% subject to condition that ITC on goods used for providing the said services cannot be availed. This has been made effective from 10.10.2024.
- Vide the Circular, it has been clarified that –
- payment of GST on transportation of passengers, with or without accompanied baggage, by air, in a helicopter on seat share basis would be regularized on ‘as is where is’ basis for the period from 01.07.2017 to 09.10.2024.
- transport of passengers by helicopter on other than seat share basis, i.e., for charter operations, will continue to attract GST at the rate of 18%.
GST on ancillary services provided in relation to transportation of goods by road
- It has been clarified that –
- The ancillary or incidental services provided by Goods Transport Agency (GTA) in the course of transportation of goods by road, such as loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as composite supply of transport of goods. The method of invoicing used by GTAs, by showing these ancillary services separately on the invoice, will not generally alter the nature of the composite supply of service.
- However, if such services are not provided in the course of transportation of goods and are invoiced separately, these services will not be treated as composite supply of transport of goods.
GST on import of services by an establishment of a foreign airline company from a related person or any of its establishment outside India, when made without consideration
- Vide Notification No. 08/2024-Integrated Tax (Rate), import of services by an establishment of a foreign airline company in India from a related person or from any of its other establishments outside India, when made without consideration, has been exempted. This exemption is subject to following conditions:
- GST at applicable rates is paid by the said establishment in India on transport of goods and passengers;
- Ministry of Civil Aviation certifies that the said establishment in India is that of an airline company which has been designated by the foreign government under the applicable bilateral air services agreement with India and
- Ministry of Civil Aviation certifies that on a reciprocal basis, designated Indian airlines are not subject to levy of similar taxes by whatever name called for the same services, by the Government of the country designating the foreign airline company.
This exemption has been made effective from 10.10.2024.
- Vide the Circular, it has been clarified that the payment of GST on such import of services by an establishment of a foreign airline company would be regularized, on ‘as is where is’ basis, for the period from 01.07.2017 to 09.10.2024.
GST on Preferential Location Charges (PLC) collected along with consideration for sale of residential/commercial properties
- It has been clarified that service underlying location charges or PLC paid along with the consideration for the construction services of residential/commercial/industrial complex is naturally bundled with supply of the said construction services and therefore, the same is composite supply. In this composite supply, the supply of construction service is the principal supply and therefore, PLC is liable for the same tax treatment as the main supply of construction service.
GST on support services provided by an electricity transmission or distribution utility
- Vide Notification No. 08/2024-Central Tax (Rate), supply of services by way of providing metering equipment on rent, testing for meters/transformers/capacitors etc., releasing electricity connection, shifting of meters/service lines, issuing duplicate bills etc., which are incidental or ancillary to the supply of transmission and distribution of electricity provided by electricity transmission and distribution utilities to their consumers has been exempted. This has been made effective from 10.10.2024.
- Vide the Circular, it has been clarified that GST on the aforesaid services would be regularized on ‘as is where is’ basis from 01.07.2017 to 09.10.2024.
GST on services of film distributors or sub-distributors
- Prior to 01.10.2021, the applicable rate of GST on the services of temporary or permanent transfer or permitting use of IP in goods other than information technology software, classified under HSN 9973, was 12%. With effect from 01.10.2021, such services were brought under 18% GST rate.
- While most industry players engaged in distribution or sub-distribution of films had classified their services under HSN 9973 and discharged 12% GST on the same till 30.09.2021, the authorities have been questioning classification of such services under HSN 9973 in cases where licensing is done by a person other than copyright owner. The authorities have been alleging classification of such services under HSN 9996 as motion picture distribution services, which attracted GST at the rate of 18% right from 01.07.2017.
- Vide the Circular, it has been clarified that the payment of GST on transaction of granting of theatrical rights to the exhibitors by the distributors, would be regularized for the period from 01.07.2017 to 30.09.2021 on ‘as is where is’ basis. The issue regarding rate of GST for this period is thus likely to be settled.
Clarification regarding the scope of “as is” or “as is, where is basis” mentioned in the GST Circulars in the context of regularization of past practices (Circular No. 236/30/2024-GST dated 11.10.2024)
- The CBIC has issued various circulars clarifying applicable GST rates and classification for various goods/service in line with recommendations of the GST Council; which in some cases are also providing for regularization of past practices on “as is” or “as is, where is basis”.
- Vide the present Circular, it has been clarified that –
- The phrase “regularized on as is where is basis” means that the payment made at lower rate or exemption claimed by the taxpayer shall be accepted and shall be treated as tax fully paid for the period that is regularized.
- No refund shall be eligible if tax was paid at the higher rate.
- For the interpretational issue between tax rates (e.g. 5% vs. 12%), the regularization would not apply to situations where no tax has been paid at all. In such a case, GST at the applicable GST rate would be liable to be recovered.
Implementation of provisions of Section 16(5) and (6) as regards time limit for availment of ITC for the period till March 2021 (Circular No. 237/31/2024-GST dated 15.10.2024 and Notification No. 22/2024-Central Tax dated 08.10.2024)
- The Finance (No. 2) Act, 2024 has inserted sub-sections (5) and (6) in Section 16 of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) whereby the time limit to avail ITC under Section 16(4) of CGST Act, pertaining to FY 2017-18 to FY 2020-21, has been retrospectively extended in certain specified cases.
- Vide the Circular, it has been clarified that where the demand involved in any proceedings pertains to availment of ITC pertaining to the period from FY 2017-18 to FY 2020-21 in contravention of the provisions of Section 16(4) of the CGST Act and the taxpayer is now entitled to avail such ITC in terms of Section 16(5) or (6) of the CGST Act –
– The Adjudicating Authority/Appellate Authority/Revisional Authority shall take cognizance of Section 16(5) and (6) of the CGST Act and will accordingly pass the appropriate orders.
– Where an order in such matter has already been issued by the Adjudicating Authority/Appellate Authority/Revisional Authority and no appeal has been filed against the said order by the taxpayer, the taxpayer may apply for rectification of such order in terms of the special procedure notified vide the Notification No. 22/2024-Central Tax.
- Notification No. 22/2024-Central Tax has been issued to provide a special procedure for rectification of orders in the cases referred above. The taxpayer may apply for rectification, alongwith the prescribed details, within a period of six months from the date of issuance of this Notification. Pursuant to such an application, the authorities would be required to issue a rectified order within a period of three months from the date of application.
Clarification of various doubts related to Section 128A of the CGST Act (Circular No. 238/32/2024-GST dated 15.10.2024, Notification No. 21/2024-Central Tax dated 08.10.2024)
- The Finance (No. 2) Act, 2024 has inserted Section 128A in the CGST Act, with effect from 01.11.2024, to provide for waiver of interest and/or penalty, relating to demands under section 73 of the CGST Act pertaining to FY 2017-18, 2018-19 and 2019-20, subject to certain conditions. A taxpayer is essentially required to make payment of tax component of the demands involved for the said period in order to be eligible for waiver of interest and penalty.
- As part of amendments to the CGST Rules introduced vide the Notification No. 20/2024-Central Tax dated 08.10.2024, Rule 164 has also been inserted in the CGST Rules to lay down procedure and conditions for closure of proceedings under section 128A of CGST Act. Further, vide Notification No. 21/2024-Central Tax dated 08.10.2024, the last date for making payment of tax component of the demands involved has been prescribed as 31.03.2025.
- The Circular reiterates the procedure to be followed as regards filing of application, payment of tax, processing of application etc., and provides clarifications on certain issues in this regard.
Clarifications
- The benefit of waiver of interest and/or penalty under Section 128A of the CGST Act will be available even if tax component was paid by the taxpayer before insertion of the said Section.
- The amount recovered by the tax officers as tax due from any other person, on behalf of the taxpayer, against a particular demand will be considered as tax paid towards the same for the purposes of Section 128A of the CGST Act.
- Any amount paid by the taxpayer or recovered by the tax officers, as interest or penalty, cannot be adjusted towards the amount of tax payable for the purposes of Section 128A of the CGST Act.
- The benefit of waiver of interest and/or penalty shall be available in cases where tax dues were already paid and the notice or demand orders under Section 73 only pertains to interest and/or penalty involved, except in cases where interest has been demanded on account of delayed filing of returns or delayed reporting of any supply in the return (on the rationale that the same pertains to interest on self-assessed liability).
- If the taxpayer opts to apply under Section 128A of the CGST Act, the taxpayer shall not be allowed to avail partial waiver of interest and/or penalty on certain issues and litigate for the remaining issues involved in the notice/order.
- Even in cases where an SLP is pending before the Supreme Court, the taxpayer will be eligible to apply under Section 128A of the CGST Act subject to the condition that the said SLP will be required to be withdrawn.
- The benefit of Section 128A will also be available for matters involving IGST and Compensation Cess. However, the benefit of Section 128A cannot be availed in respect of IGST payable on import of goods.
- Since the transitional credit can be demanded under Section 73 of the CGST Act, the benefit of Section 128A of the CGST Act can be availed for the demands involving transitional credit.
- Any penalty under Section 73, 122, 125, etc. imposed, vide the demand notice/statement/order issued under Section 73, will be waived under Section 128A of the CGST Act. However, late fee, redemption fine etc. are not covered under the waiver provided under Section 128A.
- Payment of tax, required in terms of Section 128A, can be made by utilizing Input Tax Credit except in cases where the underlying demand pertains to liability payable under reverse charge or erroneous refund paid in cash to the taxpayer.
Key amendments in the CGST Rules (Notification No. 20/2024-Central Tax dated 08.10.2024)
- A new Rule 47A has been inserted to provide the time limit for issuance of self-invoice (required to be issued as per Section 31(3)(f) of the CGST Act in cases where the recipient is liable to pay GST under reverse charge mechanism and the supplier is not registered under the GST law). Effective from 01.11.2024, such self-invoice shall be required to be issued within a period of thirty days from the date of receipt of the underlying goods or services.
ELP Comments |
While the newly inserted Rule 47A prescribes the time limit for issuance of self-invoices by the recipient, for the purpose of Section 13(3) of the CGST Act (the statutory provision determining time of supply in case of services on which tax is payable under reverse charge), the time of supply is inter-alia reckoned with respect to date of issuance as opposed to due date of issuance of self-invoice. Accordingly, even if a self-invoice is issued beyond the prescribed time limit of thirty days in terms of Rule 47A, such a non-compliance would not lead to the time of supply occurring at the end of thirty days period under Section 13(3). |
- Rule 96(10), Rule 89(4A) and 89(4B) of the CGST Rules which restricted claiming refund of IGST paid on exports, for the cases where benefit of the specified concessional rate / exemption notifications is availed on inward supplies, have been omitted. Therefore, the refund of IGST paid on the exports in such cases would now be available. This is effective from 08.10.2024.
ELP Comments |
Rule 96(10) of the CGST Rules, first introduced in December 2017 and amended several times thereafter (each with retrospective effect from October 2017), provided that person claiming benefit of specified exemption notifications (such as those pertaining to EPCG, Advance Authorization, EOU, etc.) or receiving supplies from suppliers who have claimed benefits of such notifications shall not be entitled to claim refund of GST paid on export of goods/services (i.e., rebate). The Rule has been subject matter of considerable litigation due to ambiguous language and a series of retrospective amendments. The Gujarat High Court in case of Cosmo Films Limited vs. Union of India [2020 (10) TMI 1099 – Gujarat High Court)] as rectified recently [2024 (10) TMI 275 – Gujarat High Court] upheld validity of the said Rule for the period starting 09.10.2018.
The recommendation of the GST Council to remove the said restriction is a welcome step. It is however noteworthy that the omission of the said Rule, carried out in pursuance of such recommendation, is on prospective basis and the issues and litigation, for the intermediate period, may continue. |
Renting of property other than residential dwelling by an unregistered person to registered recipient covered under reverse charge mechanism (Notification No. 09/2024-Central Tax dated 08.10.2024)
- For the services by way of renting of any property, other than residential dwelling, supplied by the unregistered person to the registered person, the said registered recipient shall be liable to pay GST under reverse charge mechanism effective from 10.10.2024.
Applicability and rate of GST on certain goods
(Circular No. 235/29/2024-GST dated 11.10.2024 and Notification No. 05/2024-Central Tax (Rate) dated 08.10.2024)
GST rate on Extruded/Expanded Savoury food products
- Vide Notification No. 05/2024-Central Tax (Rate), GST rate on Extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HSN 1905 90 30, has been reduced from 18% to 12% effective from 10.10.2024.
- The Circular clarifies that the reduced GST rate of 12% will apply prospectively i.e., from 10.10.2024 and for the past period, GST rate of 18% shall be payable.
GST rate on Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways
- It has been clarified that RMPU Air Conditioning Machines for Railways are classifiable under HSN 8415 and liable to GST at the rate of 28%.
GST rate on seats of car and two wheelers
- The seats of two wheelers are classifiable under HSN 8714 and the same was attracting GST rate of 28% whereas seats of cars are classifiable under HSN 9401 and the same was attracting GST rate of 18%. In order to address this inconsistency, the rate of GST for seats of car has been increased from 18% to 28% vide Notification No. 05/2024-Central Tax (Rate) effective from 10.10.2024.
- The Circular clarifies that the increased GST rate of 28% on car seats is applicable on prospective basis (w.e.f. 10.10.2024).
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