Circulars issued during F.Y. 2022-23

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All the circulars issued by the CBIC during the period from 01.04.2022 to 31.01.2023 have been summarized in this article under six major heads as:

Compliance

1. Circular No. 170/02/2022-GST dated 06-Jul-2022

Mandatory furnishing of correct and proper information of inter-state supplies and amount of ineligible/ blocked Input Tax Credit and reversal thereof in return in Form GSTR-3B and statement in Form GSTR-1

1. The registered person making inter-State supplies – to the unregistered persons, shall also report the details of such supplies, PLACE OF SUPPLY-WISE, in Table 3.2 of FORM GSTR-3B and Table 7B or Table 5 or Table 9/10 of FORM GSTR-1, as the case may be.

2. The registered person making inter-State supplies to the registered persons paying tax under section 10 of the SGST/CGST Act (composition taxable persons) and to UIN holders, shall also report the details of such supplies, PLACE OF SUPPLY-WISE, in Table 3.2 of FORM GSTR-3B and Table 4A or 4C or 9 of FORM GSTR-1, as the case may be.

3. Taxpayers shall update their customer database properly with correct State name and ensure that correct POS is declared in the tax invoice and in Table 3.2 of FORM GSTR-3B while filing their return, so that tax reaches the Consumption State as per the principles of destination based taxation system.

4. Reversal of ITC which are absolute and not reclaimable and are permanent in nature like under Rule 38, Rule 42, Rule 43 i.e., reversal of ITC on account of exempt supply and as per S.17(5) on account of blocked or ineligible credit to be made in Table 4(B)(1).

5. Reversal of ITC which can be reclaimed later and are not permanent in nature such as under Rule 37 for reversal of credit due to non- payment within 180 days and under S.16(2)(b) & S.16(2)(c) for reversal due to invoice received earlier but goods and service received later to be made in Table 4(B)(2).

6. Such temporarily reversed ITC may be reclaimed in Table 4(A)(5) on fulfilment of necessary conditions. Further, all such reclaimed ITC shall also be shown in Table 4(D)(1).

7. Table 4(B)(2) may also be used by registered person for reversal of any ITC availed in Table 4(A) in previous tax periods because of some inadvertent mistake.

8. ITC not available, on account of limitation of time period as delineated in section 16(4) of the CGST Act or where the recipient of an intra-State supply is located in a different State / UT than that of place of supply, may be reported by the registered person in Table 4D (2).

2. Circular No. 183/15/2022-GST dated 27-Dec-2022

Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19

CBIC has prescribed procedure for dealing with ITC mismatch between GSTR-3B returns and GSTR-2A. This applies only to Financial Years 2017-18 and 2018-19
Proper officer shall seek details from registered person regarding all invoices on which ITC has been availed in GSTR-3B and but not reflecting in GSTR-2A.
Proper office will ascertain if all condition of section 16 has been fulfilled.
The proper officer shall also check whether any reversal of input tax credit is required to be made in accordance with section 17 or section 18 of CGST Act and also whether the said input tax credit has been availed within the time period specified under section 16(4) of CGST Act.
The proper officer will also verify whether tax on the said supply has been paid by the supplier. Where the difference exceeds Rs.5 lakhs in a financial year, certificate (containing UDIN) from CA or CMA has been specified. If difference is up to Rs.5 lakhs, certificate from supplier has been specified.
These instructions will apply only to the ongoing proceedings in scrutiny/audit/ investigation, etc. for FY 2017-18 and 2018-19 and not to the completed proceedings

Refund

1. Circular No. 173/05/2022-GST dated 06-Jul-2022

Clarification on issue of claiming refund under inverted duty structure where the supplier is supplying goods under some concessional notification

The intent of para 3.2 of Circular No. 135/05/2020-GST dated 31.03.2020 was not to cover those cases where the supplier is making supply of goods under a concessional notification and the rate of tax of output supply is less than the rate of tax on input supply (of the same goods) at the same point of time due to supply of goods by the supplier under such concessional notification. Therefore, it is clarified that in such cases, refund of accumulated input tax credit on account of inverted structure would be allowed in cases where accumulation of input tax credit is on account of rate of tax on outward supply being less than the rate of tax on inputs (same goods) at the same point of time, as per some concessional notification issued by the Government providing for lower rate of tax for some specified supplies subject to fulfilment of other conditions.

2. Circular No. 174/06/2022-GST dated 06-Jul-2022

Prescribing manner of re-credit in electronic credit ledger using FORM GST PMT-03A

The taxpayer shall deposit the amount of erroneous refund through FORM GST DRC-03 by debit of amount from electronic cash ledger. The proper officer, on being satisfied that the full amount of erroneous refund, has been paid by the said registered person in FORM GST DRC-03 by way of debit in electronic cash ledger, he shall re-credit an amount in electronic credit ledger, equivalent to the amount of erroneous refund so deposited by the registered person, by passing an order in FORM GST PMT-03A, preferably within a period of 30 days from the date of receipt of request for re-credit of erroneous refund amount so deposited or from the date of payment of full amount of erroneous refund, whichever is later.

3. Circular No. 175/07/2022-GST dated 06-Jul-2022
Manner of filing refund of unutilized ITC on account of export of electricity.
• The applicant would be required to file the application for refund under “Any Other” category electronically in FORM GST RFD-01, on the portal.
• The applicant would be required to furnish/upload the details contained in Statement 3B (and not in statement 3) of FORM GST RFD-01 (in pdf format), containing the number and date of the export invoices, details of energy exported, tariff per unit for export of electricity as per agreement.
• The applicant will also be required to upload the copy of statement of scheduled energy for electricity exported by the Generation Plants (in format attached as Annexure-I)

– The relevant date shall be the last date of the month, in which the electricity has been exported as per monthly Regional Energy Account (REA) issued by the Regional Power Committee Secretariat under regulation 2(1)(nnn) of the CERC (Indian Electricity Grid Code) Regulations, 2010.
• Turnover of export of electricity shall be calculated using the lower of the quantum of electricity exported mentioned on the statement of scheduled energy exported and that mentioned on the invoice issued on account of export of electricity.
• If the proper officer is satisfied that the whole or any part of the amount claimed is payable as refund, he shall request the applicant, in writing, if required, to debit the said amount from the electronic credit ledger through FORM GST DRC-03. Once the proof of such debit is received by proper officer, he shall proceed to issue the refund order in FORM GST RFD-06 and the payment order in FORM GST RFD-05

4. Circular No. 176/08/2022-GST dated 06-Jul-2022

Withdrawal of Circular No. 106/25/2019-GST dated 29.06.2019

Rule 95A has been omitted, retrospectively w.e.f. 01.07.2019, vide Notification No. 14/2022-Central Tax, dated 05.07.2022. Accordingly, Circular No. 106/25/2019-GST dated 29.06.2019 which relates to Refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange, has been withdrawn ab-initio.

5. Circular No. 181/13/2022-GST dated 10-Nov-2022

Clarification on refund related issues

Clarification No.1: Vide Notification No. 14/2022-Central Tax dated 05.07.2022, amendment has been made in Rule 89(5) of CGST Rules, 2017, modifying the formula to include input on services as well along with goods. The said amendment is applicable prospectively with effect from 05.07.2022. Accordingly, it is clarified that the refund of input tax credit on INPUT SERVICES on account of inverted duty structure would be applicable in respect of refund applications filed on or after 05.07.2022. The refund applications filed before 05.07.2022 will be dealt as per the formula as it existed before the amendment made vide Notification No. 14/2022-Central Tax dated 05.07.2022.
Clarification No. 2: Vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022, certain goods falling under chapter 15 and 27 have been specified in respect of which no refund of unutilised input tax credit shall be allowed, where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies of such specified goods (other than nil rated or fully exempt supplies). The said notification has come into force with effect from 18.07.2022. The restriction imposed vide Notification No. 09/2022-Central Tax (Rate) dated 13.07.2022 on refund of untilised input tax credit on account of inverted duty structure in case of specified goods falling under chapter 15 and 27 would apply prospectively only. Accordingly, it is clarified that the restriction imposed by the said notification would be applicable in respect of all refund application filed on or after 18.07.2022, and would not apply to the refund application filed before 18.07.2022.

6. Circular No. 188/20/2022-GST dated 27-Dec-2022

Prescribing manner of filing an application for refund by unregistered persons

CBIC has prescribed manner in which an unregistered person, who has suffered the burden of GST, but the contract has been cancelled later (e.g., Construction contract or long-term Insurance policy, where the supplies is bound by the statutory time limit to issue credit note with GST), file application for refund of GST.

Following procedure has been prescribed as to how the unregistered person can obtain a temporary GST registration to claim refund of GST.

(i) New functionality has been introduced in the GST common portal to obtain temporary registration in the supplier’s State and apply for refund under the category ‘Refund for Unregistered person.’

(ii) Unregistered person would be required to undergo Aadhaar authentication and enter his bank account details in which he seeks to obtain the refund.

(iii) Refund claim shall be filed in FORM GST RFD-01 on the common portal which cannot exceed the GST charged on the invoice.

(iv) Upload documentary evidence to establish that he has borne the tax incendence.

(v) Where time limit for issue of Credit Note has not expired at the time of cancellation /termination of agreement/ contract, the concerned suppliers can issue credit note and pass on the benefit.

(vi) Date of cancellation of contract/ agreement for supply which be considered as the relevant date for ascertaining the time limit.

(vii) Refund application would be not entertained, if the claim is less than INR 1000/-.

Demand and Recovery

1. Circular No. 171/03/2022-GST dated 06-July-2022

Clarification on various issues relating to applicability of demand and penalty provisions in respect of transactions involving fake invoices.

– Case -1: Where the person issues just an invoice without supply of goods.

Clarification: Where the person issues just an invoice without supply of goods where the person issues just an invoice without supply of goods, no tax liability arises against such person for the said transaction and accordingly no demand and recovery proceedings shall be initiated against such person under section 73 or 74 of the CGST Act, 2017, as there is no underlying supply. However, he shall be made liable to Penalty under section 122(1)(ii) for issuing tax invoice without actual supply which is equal to wrong ITC passed.

Case 2: Where a person avails ITC on fake invoices and such ITC used for payment of his output tax liability in respect of his genuine sales.

Clarification: The person availed and utilised fraudulent ITC on the fake invoice, he shall be liable for the demand of such ITC, along with Penalty under section 74 of the CGST Act & no further penalty under section 122 shall be imposed.

Case 3: Where a person avails ITC on fake invoices and issued the fake invoice for passing such credit.

Clarification: No demand and recovery of either input tax credit wrongly/ fraudulent availed in such cases or tax liability in respect of the said outward transaction is required to be made under the provisions of section 73 or section 74 of CGST Act as there is no underlying supply at all. However, this person shall be liable for penal action both under section 122(i)(vii) of the CGST Act which is equivalent wrongly ITC available as well as ITC passed.

Circular No. 185/17/2022-GST dated 27-Dec-2022

Clarification with regard to applicability of provisions of section 75(2) of Central Goods and Services Tax Act, 2017 and its effect on limitation.

As per section 75(2) of CGST OF CGST Act, 2017 where the appellate authority or appellate tribunal or court concludes that the notice issued by proper officer under section 74(1) is not sustainable for reason that the charges of fraud or any willful-misstatement or suppression of facts to evade tax have not been established, then the proper officer shall determine the tax payable by the notice, deeming as if the notice was issued under Section 73(1).
This Circular clarifies the time limit within which the proper officer is required to re-determine the amount of tax payable considering notice to be issued under section 73(1).
In such cases, the proper officer is required to issue the order of redetermination of tax, interest and penalty payable within the time limit as specified to under sub-section (3) of section 75 of the CGST Act, i.e. within a period of two years from the date of communication of the said direction by appellate authority or appellate tribunal or the court, as the case may be.
Thus, tax shall be determined within 2 years, from the date of communication of the direction appellate authority or appellate tribunal or the court, as the case may be.
The Circular provides for different situations for determination of tax deeming the notice to be issued under section 73(1) of CGST Act, 2017.

Transitional Credit

1. Circular No. 180/12/2022-GST dated 09-Sep-2022

Guidelines for filing/revising TRAN-1/TRAN-2 in terms of order dated 22.07.2022 & 02.09.2022 of Hon’ble Supreme Court in the case of Union of India vs. Filco Trade Centre Pvt. Ltd

The applicant may file declaration in FORM GST TRAN-1/TRAN-2 or revise earlier filed TRAN1/TRAN-2. In cases where the applicant is filing a revised TRAN-1/TRAN-2, a facility for downloading TRAN-1/TRAN-2 furnished earlier by him will be made available on common portal.
The applicant shall also upload on the common portal the PDF copy of a declaration in the format as given in Annexure ‘A’ of this circular. The applicant claiming credit in table 7A of FORM GST TRAN-1 on the basis of Credit Transfer Document (CTD) shall also upload on the common portal the PDF copy of TRANS-3, containing the details in terms of the Notification No. 21/2017- CE (NT) dated June 30, 2017.
No claim for transitional credit shall be filed in table 5(b) & 5(c) of FORM GST TRAN-1 in respect of such C-Forms, F-Forms and H/I-Forms which have been issued after the due date prescribed for submitting the declaration in FORM GST TRAN-1 i.e., after December 27, 2017.
Where the applicant files a claim in FORM GST TRAN-2, he shall file the entire claim in one consolidated FORM GST TRAN-2, instead of filing the claim tax period wise. In such cases, in the column ‘Tax Period’ in FORM GST TRAN-2, the applicant shall mention the last month of the consolidated period for which the claim is being made.
The applicant shall download a copy of the TRAN-1/TRAN-2 filed on the common portal and submit a self-certified copy of the same, along with declaration in Annexure ‘A’ and copy of TRANS-3, where ever applicable, to the jurisdictional tax officer within 7 days of filing of declaration in FORM TRAN-1/TRAN-2 on the common portal. The applicant shall keep all the requisite documents/records/returns/invoices, in support of his claim of transitional credit, ready for making the same available to the concerned tax officers for verification.
The applicant can edit the details in FORM TRAN-1/ TRAN-2 on the common portal only before clicking the ‘Submit’ button on the portal. The applicant is allowed to modify/edit, add or delete any record in any of the table of the said forms before clicking the “Submit” button.
Once ‘Submit’ button is clicked, the form gets frozen, and no further editing of details is allowed. This frozen form would then be required to be filed on the portal using ‘File’ button, with Digital signature certificate (DSC) or an EVC.
Once the applicant files TRAN-1/TRAN-2 or revises the said forms filed earlier on the common portal, no further opportunity to again file or revise TRAN-1/TRAN-2, either during this period or subsequently, will be available to him.
It is clarified that those registered persons, who had successfully filed TRAN-1/TRAN-2 earlier, and who do not require to make any revision in the same, are not required to file/ revise TRAN1/TRAN-2 during this period from October 01, 2022 to November 30, 2022. In such cases where the credit availed by the registered person on the basis of FORM GST TRAN-1/TRAN-2 filed earlier, has either wholly or partly been rejected by the proper officer, the appropriate remedy in such cases is to prefer an appeal against the said order or to pursue alternative remedies available as per law. Where the adjudication/ appeal proceeding in such cases is pending, the appropriate course would be to pursue the said adjudication/ appeal. In such cases, filing a fresh declaration in FORM GST TRAN-1/TRAN-2, pursuant to the special dispensation being provided vide this circular, is not the appropriate course of action.
The declaration in FORM GST TRAN-1/TRAN-2 filed/revised by the applicant will be subjected to necessary verification by the concerned tax officers.

2. Circular No. 182/14/2022-GST dated 10-Nov-2022

Guidelines for verifying the Transitional Credit in light of the order of the Hon’ble Supreme Court in the Union of India vs. Filco Trade Centre Pvt. Ltd., SLP(C) No. 32709-32710/2018, order dated 22.07.2022 & 02.09.2022:

Accessing the filed or revised transitional forms

Jurisdictional tax officers can access the filed or revised TRAN-1 or 2 Forms on their back-office systems.
A self-certified copy of the transitional forms will also be made available to the jurisdictional tax officers by the applicants

Relevant officer for verification of the claims

Where the applicant is under the administrative control of central tax authorities, verification will be done by the jurisdictional central tax officer by following guidelines given in Annexure I of the Verification Guidelines whereas if the applicant is under the administrative control of state tax authorities, verification will be done by the jurisdictional state or union territory (UT) tax officer by following the guidelines issued by the respective states or UTs.

Commencement and time limit for completion of verification

The jurisdictional officers are required to commence the verification process immediately on availability of the filed or revised TRAN-1 or 2 Forms or receipt of the self-certified copy from the applicant, whichever is earlier.
Verification is required to be completed within a period of 90 days from 1 December 2022 upto 28 February 2023.

Reference to counterpart tax officer

Given that the transitional credit claim may have components of both central and state or UT taxes, the jurisdictional central tax officer should refer the said claim for verification of the component of state or UT taxes to their counterpart state or UT tax officer and vice versa.
For this purpose, the jurisdictional tax officers should share a list of GSTINs or ARNs with the counterpart officer. Also, an intimation should be made to the nodal officer appointed for ensuring coordination between the central and state or UT tax authorities as per the prescribed mode.

Verification report by the counterpart tax officer

The counterpart tax officer should send a signed verification report not later than 10 days from the date of request by the jurisdictional tax officer in the prescribed format, specifying the amount of transitional credit which may be allowed and liable for rejection, along with detailed reasons or grounds.
In case of any pending or concluded adjudication or appeal proceedings, the relevant facts, detailed findings, admissibility or inadmissibility with reasons, copies of the notices or orders should be clearly captured in the verification report.

Calling for records and issuance of notice

For verification of the claim, the jurisdictional tax officer or counterpart tax officer may call for relevant records, including requisite documents or returns or invoices, etc. from the applicant.
In case the jurisdictional tax officer finds that the said claim is inadmissible (partly or wholly), a notice seeking explanation should be issued within seven days from the date of receipt of the verification report, and an opportunity of hearing should also be provided

Passing order

A reasoned order should be passed within 15 days from the date of personal hearing, specifying the amount of transitional credit allowed or rejected.
The order should be uploaded on the common portal, for crediting the amount of allowed transitional credit to the electronic credit ledger of the applicant

Recovery of excess credit

Where the amount credited to electronic credit ledger pursuant to the originally filed TRAN-1 or TRAN-2 Forms exceeds the amount of credit admissible in terms of revised TRAN-1 or TRAN-2 Forms filed by the applicant, such excess credit should be liable to be demanded and recovered
from the applicant along with interest and penalty.

Input Tax Credit

1. Circular No. 184/16/2022-GST dated 27-Dec-2022

Clarification on the entitlement of input tax credit where the place of supply is determined in terms of the proviso to sub-section (8) of section 12 of IGST Act, 2017

Section 12(8) of IGST Act 2017, provides for the place of supply of services by way of transportation of goods, including by mail or courier, where location of the supplier as well as the recipient of services is in India. IGST shall be applicable as the service provider is in India whereas place of supply is outside India, i.e., foreign destination where goods are transported. The supplier of service shall report place of supply by selecting State Code as ‘96- Foreign Country’ from the list of codes in the drop-down menu available on the portal in FORM GSTR-1 and ITC would be available. It has thus been clarified that input tax credit would be available to the service recipient as per law.

Miscellaneous issues of GST

1. Circular No. 172/04/2022-GST dated 06-Jul-2022

Clarification on various issue pertaining to GST

Refund claimed by the recipients of supplies regarded as deemed export

The ITC availed by the recipient of deemed export supplies would not be subjected to provisions of Section 17 of the CGST Act, 2017. ITC availed by the recipient of deemed export supply for claiming refund of tax paid on supplies regarded as deemed exports is not to be included in the “Net ITC” for computation of refund of unutilised ITC on account of zero-rated supplies under rule 89(4) or on account of inverted rated structure under rule 89(5) of the CGST Rules, 2017.

Interpretation of section 17(5) of the CGST Act.

The proviso after sub-clause (iii) of clause (b) of sub-section (5) of section 17 of the CGST Act is applicable to the whole of clause (b) of sub-section (5) of section 17 of the CGST Act. The word “leasing” referred in sub-clause (i) of clause (b) of sub-section (5) of section 17 refers to leasing of motor vehicles, vessels and aircrafts only and not to leasing of any other items. Accordingly, availment of ITC is not barred under sub-clause (i) of clause (b) of sub-section (5) of section 17 of the CGST Act in case of leasing, other than leasing of motor vehicles, vessels and
aircrafts.

Perquisites provided by employer to the employees as per contractual agreement

The perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee.

Utilization of the amounts available in the electronic credit ledger and the electronic cash ledger for payment of tax and other liabilities.

Any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.

2. Circular No. 177/09/2022-GST dated 03-Aug-2022

Clarifications regarding applicable GST rates & exemptions on certain services

Rate of GST applicable on supply of ice-cream by ice-cream parlors during the period from 01.07.2017 to 05.10.2021

It is clarified that past cases of payment of GST on supply of ice-cream-by-ice-cream parlors @ 5% without ITC shall be treated as fully GST paid to avoid unnecessary litigation. Since decision is only to regularize the past practice, no refund of GST shall be allowed, if already paid at 18%.

Applicability of GST on services in form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF)

It is clarified that services by way of IVF are also covered under the definition of health care services and thus exempt.

Applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions

It is clarified that the amount or fee charged from prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is covered by exemption under Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Whether storage or warehousing of cotton in baled or ginned form is covered under entry 24B of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.) which exempted services by way of storage and warehousing of raw vegetable fibres such as cotton before 18.07.2022.

It is clarified that service by way of storage or warehousing of cotton in ginned and or baled form was covered under the above-mentioned entry and hence exempt.

Whether exemption under Sl. No. 9B of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. covers services associated with transit cargo both to and from Nepal and Bhutan

It is clarified that exemption under Sl. No. 9B of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 covers services associated with transit cargo both to and from Nepal and Bhutan.

Applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government departments.

It is clarified that if the above-mentioned services are procured by Indian Army or any other Government Ministry/Department which does not perform any functions listed in the 11th and 12th Schedule to the Constitution, in the manner as a local authority does for the general public, the same are not eligible for exemption.

Whether the activity of selling of space for advertisement in souvenirs is eligible for concessional rate of 5%.

It is clarified sale of space for advertisement in souvenir book is covered under serial number (i) of entry 21 of Notification No. 11/2017-Central Tax (Rate) and attracts GST @ 5% as ‘book’ has been defined in the Press and Registration of Books Act, 1867 in an inclusive manner with a wide ambit which would cover souvenir book also.

Taxability and applicable rate of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time.

Such services are nothing but “rental services of transport vehicles with operator” which fall under heading 9966 and attract GST @ 18% under Sr. No. 10 part (iii) of Notification No. 11/2017-Central Tax (Rate). This being so, it is not eligible for exemption under Sl. No. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 On such rental services of goods carriages where the cost of fuel is in included in the consideration charged from the recipient of service, GST rate has been reduced from 18% to 12% with effect from 18.07.2022.

Whether location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land constitute part of the lease premium or of upfront amount charged for long term lease of land and are eligible for the same tax treatment.

It is clarified that location charges or preferential location charges (PLC) paid upfront in addition to the lease premium for long term lease of land constitute part of upfront amount charged for long term lease of land and are eligible for the same tax treatment, and thus eligible for exemption.

Applicability of GST on payment of honorarium to the Guest Anchors

It is clarified that supply of all goods & services are taxable unless exempt or declared as ‘neither a supply of goods nor a supply of service’. Services provided by the guest anchors in lieu of honorarium attract GST liability subject to registration requirement as per provisions of the law.

Whether the additional toll fees collected in the form of higher toll charges from vehicles not having fastag is exempt from GST

It is clarified that additional fee collected in the form of higher toll charges from vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and may be given the same treatment as given to toll charges.

Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST

Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and accordingly does not attract GST.

Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers

It is clarified that where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966, and the body corporate shall be liable to pay GST on the same under RCM. However, where the body corporate avails the passenger transport service for specific journeys or voyages and does not take vehicle on rent for any particular period of time, the service would fall under Heading 9964 and the body corporate shall not be liable to pay GST on the same under RCM.

Whether hiring of vehicles by firms for transportation of their employees to and from work is exempt under Sr. No. 15(b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 transport of passengers by non-air-conditioned contract carriage

It is clarified that the said exemption would apply to passenger transportation services by nonair-conditioned contract carriages falling under Heading 9964 where according to explanatory notes, transportation takes place over pre-determined route on a pre-determined schedule. The exemption shall not be applicable where contract carriage is hired for a period of time, during which the contract carriage is at the disposal of the service recipient and the recipient is thus free to decide the manner of usage (route and schedule) subject to conditions of agreement entered into with the service provider.

Whether supply of service of construction, supply, installation and commissioning of dairy plant on turn-key basis constitutes a composite supply of works contract service and is eligible for concessional rate of GST prior to 18.07.2022.

It is clarified that a contract of the nature described here for construction, installation and commissioning of a dairy plant constitutes supply of works contract and was eligible for concessional rate of GST.

Applicability of GST on tickets of private ferry used for passenger transportation

“Transportation of passengers by public transport, other than predominantly for tourism purpose, in a vessel between places located in India” is exempted. It is clarified that this exemption would apply to tickets purchased for transportation from one point to another irrespective of whether the ferry is owned or operated by a private sector enterprise or by a PSU/government.

3. . Circular No. 178/10/2022-GST dated 03-Aug-2022

GST applicability on liquidated damages, compensation and penalty arising out of breach of contract

Liquidated Damages

Liquidated damages cannot be said to be a consideration received for tolerating the breach or non-performance of contract. They are rather payments for not tolerating the breach of contract. Such payments being merely flow of money are not a consideration for any supply and are not taxable. However, amounts paid for acceptance of late payment, early termination of lease or for pre-payment of loan or the amounts forfeited on cancellation of service by the customer as contemplated by the contract as part of commercial terms agreed to by the parties, constitute consideration for the supply of a facility, namely, of acceptance of late payment, early termination of a lease agreement, of pre-payment of loan and of making arrangements for the intended supply by the tour operator respectively. Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable.

Compensation for cancellation of coal blocks

There was no agreement between the prior allottees of coal blocks and the Government that the previous allottees shall agree to or tolerate cancellation of the coal blocks allocated to them if the Government pays compensation to them. No such promise or offer was made by the prior allottees to the Government. Therefore, the compensation paid for cancellation of coal blocks pursuant to the order of the Supreme Court in the above case was not taxable.

Cheque dishonor fine/ penalty

The fine or penalty that the supplier or a banker imposes, for dishonor of a cheque, is a penalty imposed not for tolerating the act or situation but a fine, or penalty imposed for not tolerating, penalizing and thereby deterring and discouraging such an act or situation. Therefore, cheque dishonor fine or penalty is not a consideration for any service and not taxable.

Penalty imposed for violation of laws

Penalties imposed for violation of laws cannot be regarded as consideration charged by Government or a Local Authority for tolerating violation of laws. They stipulate penalty not for tolerating violation but for not tolerating, penalizing and deterring such violations. These amounts are not leviable to GST.

Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period

The said amounts are recovered by the employer not as a consideration for tolerating the act of such premature quitting of employment but as penalties for dissuading the non-serious employees from taking up employment and to discourage and deter such a situation. Therefore, such amounts recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an act or a situation.

Late payment surcharge or fee

The facility of accepting late payments with interest or late payment fee, fine or penalty is a facility granted by supplier naturally bundled with the main supply. Since it is ancillary to and naturally bundled with the principal supply such as of electricity, water, telecommunication, cooking gas, insurance etc. it should be assessed at the same rate as the principal supply.

Fixed Capacity charges for Power

Both the components of the price, the minimum fixed charges/capacity charges and the variable/energy charges are charged for sale of electricity and are thus not taxable as electricity is exempt from GST.

Cancellation charges

Facilitation supply of allowing cancellation of an intended supply against payment of cancellation fee or retention or forfeiture of a part or whole of the consideration or security deposit in such cases should be assessed as the principal supply. However, forfeiture of earnest money by a seller in case of breach of ‘an agreement to sell’ an immovable property by the buyer or such forfeiture by Government or local authority in the event of a successful bidder failing to act after winning the bid for allotment of natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in return for such forfeiture of earnest money. Such payments being merely flow of money are not a consideration for any supply and are not taxable.

4. Circular No. 179/11/2022-GST dated 03-Aug-2022

Clarification regarding GST rates & classification (goods) based on the recommendations of the GST Council in its 47th meeting

Electric vehicles whether or not fitted with a battery pack, attract GST rate of 5%
Stones otherwise covered in S. No. 123 of Schedule-I (such as Napa stones), which are not mirror polished, are eligible for concessional rate under said entry
Mangoes under CTH 0804 including mango pulp, but other than fresh mangoes and sliced, dried mangoes, attract GST at 12% rate
Treated sewage water attracts Nil rate of GST
Nicotine Polacrilex Gum attracts a GST rate of 18%
Fly ash bricks and aggregate – condition of 90% fly ash content applied only to fly ash aggregate, and not fly ash bricks
The by-products of milling of pulses/ dal such as Chilka, Khanda and Churi are appropriately classifiable under heading 2302 that consists of goods having description as bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants. It is clarified that the subject goods which inter alia is used as cattle feed ingredient are appropriately classifiable under heading 2302 and attract GST at the rate of 5% vide S. No. 103A of Schedule-I of notification no. 1/2017-Central Tax (Rate), dated 28.06.2017.

5. Circular No. 186/18/2022-GST dated 27-Dec-2022

Clarification on various issue pertaining to GST

Taxability of ‘no claim bonus’ (NCB) offered by insurance companies:

CBIC has clarified that there is no supply provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s). No Claim Bonus cannot be considered as a consideration for any supply provided by the insured to the insurance company. Further, No Claim Bonus (NCB) is a permissible deduction under section 15(3)(a) of the CGST Act for the purpose of calculation of value of supply of the insurance services provided by the insurance company to the insured. Where the deduction on account of No claim bonus is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount, payable by the policy holders to the insurer, after deduction of No Claim Bonus mentioned on the invoice [section 15(3) (a) of the CGST Act].

Applicability of e-invoicing with respect to an entity, i.e., whether exemption from mandatory generation of E-invoice is available for the entity as a whole or available in respect of certain supplies

It has been clarified that the exemption prescribed in Notification No. 13/2020-Central Tax dated 21.03.2020 is not restricted by the nature of supply made by the entity but available for the entity as a whole. Thus, exemption from generation of e-invoices is for the entity as a whole and not restricted by nature of supply being made by entity. For example, a banking company providing banking services, may also be involved in making supply of some goods, including bullion. The said banking company is exempted from mandatory issuance of e-invoice in terms of Notification No. 13/2020-Central Tax, dated 21st March, 2020, as amended, for all supplies of goods and services and thus, will not be required to issue e-invoice with respect to any supply made by it.

6. Circular No. 187/19/2022-GST dated 27-Dec-2022

Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalized under Insolvency and Bankruptcy Code, 2016

As per Section 84 of CGST Act, if the government dues against any person under CGST Act are reduced as a result of any appeal, revision or other proceedings in respect of such government dues, then an intimation for such reduction of government dues has to be given by the Commissioner to such person and to the appropriate authority with whom the recovery proceedings are pending. Recovery proceedings can be continued in relation to such reduced amount of government dues. The word ‘other proceedings’ is not defined in CGST Act. As the proceedings conducted under IBC also adjudicate the government dues pending under the CGST Act or under existing laws against the corporate debtor, the same appear to be covered under the term ‘other proceedings’ in Section 84 of CGST Act. Rule 161 of CGST Rules, 2017 prescribes FORM GST DRC-25 for issuing intimation for such reduction of demand specified under section 84 of CGST Act. It has been clarified that in cases where a confirmed demand for recovery has been issued by the tax authorities for which a summary has been issued in FORM GST DRC07/DRC 07A against the corporate debtor, and where the proceedings have been finalized against the corporate debtor under IBC reducing the amount of statutory dues payable by the corporate debtor to the government under CGST Act or under existing laws, the jurisdictional Commissioner shall issue an intimation in FORM GST DRC-25 reducing such demand, to the taxable person or any other person as well as the appropriate authority with whom recovery proceedings are pending.

7. Circular No. 189/01/2023-GST dated 13-Jan-2023

Clarification regarding GST rates and classification of certain goods.

“Rab” means massecuite prepared by concentrating sugarcane juice on open pan furnaces, and includes Rab Galawat and Rab Salawat, but does not include khandsari molasses or lauta gur. Rab is appropriately classifiable under heading 1702 attracting GST rate of 18% (S. No. 11 in Schedule III of notification No. 1/2017-Central Tax (Rate), dated 28.06.2017).
W.e.f 01.01.2023, GST rate on by-products of milling of Dal/ Pulses such as Chilka, Khanda and Churi/Chuni., shall be exempt under GST vide S. No. 102C of schedule of notification No. 2/2017- Central Tax (Rate), dated 28.06.2017
The applicable six-digit HS code for the goods with description ‘Carbonated Beverages of Fruit Drink’ or ‘Carbonated Beverages with Fruit Juice’ is HS 2202 99. The said goods attract GST @28% and Compensation Cess @12%. It covers all such carbonated beverages that contain carbon dioxide, irrespective of whether the carbon dioxide is added as a preservative, additive, etc.
The snack pellets (such as ‘fryums’), which are manufactured through the process of extrusion, are appropriately classifiable under tariff item 1905 90 30, which covers goods with description ‘Extruded or expanded products, savory or salted’, and thereby attract GST at the rate of 18% vide S. No. 16 of Schedule-III of Notification No. 1/2017- Central Tax (Rate), dated 28.06.2017.
On goods specified in the list annexed to the Notification No. 3/2017-Integrated Tax (Rate), dated 28.06.2017, which are eligible for IGST rate of 12% under the said notification and are also eligible for the benefit of lower rate under Schedule I of the Notification No. 1/2017-Integrated Tax (Rate), dated 28.06.2017 or any other IGST rate Notification, the importer can claim the benefit of the lower rate.

8. Circular No. 190/02/2023-GST dated 13-Jan-2023

Clarification regarding GST rates and classification of certain services.

Accomodation service provided by air force mess to its personnel:

Accommodation services provided by Air Force Mess and other similar messes, such as, Army mess, Navy mess, Paramilitary and Police forces mess to their personnel or any person other than a business entity are covered by Sl. No. 6 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 provided the services supplied by such messes qualify to be considered as services supplied by Central Government, State Government, Union Territory or local authority.

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:

Incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.

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