GST Clarifications: Passenger Transport, Electricity Charges, Job Work, DMFTs & Horticulture Services

The Indian Ministry of Finance’s Department of Revenue has issued Circular No. 206/18/2023-GST dated 31st October, 2023, providing much-needed clarifications on the applicability of Goods and Services Tax (GST) to certain services. These clarifications stem from recommendations made by the GST Council during its 52nd meeting on 7th October, 2023. The circular addresses various service-related issues and their implications for businesses and consumers.

1. ‘Same Line of Business’ and Passenger Transport Service

The first issue addressed in the circular is whether ‘same line of business’ includes passenger transport service and renting of motor vehicles, specifically leasing of motor vehicles without operators. It is clarified that input services in the same line of business include the transport of passengers or renting of motor vehicles with operators. Leasing of motor vehicles without operators is taxed differently and falls outside this category.

2. GST on Reimbursement of Electricity Charges

The circular also addresses the applicability of GST on the reimbursement of electricity charges received by real estate companies, malls, and airport operators from their lessees or occupants. It clarifies that when electricity is supplied bundled with renting of immovable property and/or maintenance of premises, it constitutes a composite supply. The principal supply, i.e., renting of immovable property and/or maintenance of premises, dictates the GST rate, even if electricity is billed separately.

3. GST on Job Work for Processing of “Barley” into “Malted Barley”

The circular provides guidance on whether job work for processing barley into malt attracts GST at 5% (as for job work related to food and food products) or 18% (for job work related to the manufacture of alcoholic liquor for human consumption). It clarifies that the conversion of barley into malt is considered job work related to food products, regardless of its end use. Therefore, it attracts a 5% GST rate.

4. District Mineral Foundations Trusts (DMFTs) and GST Exemptions

DMFTs established by state governments are discussed in the circular. It clarifies that DMFTs are eligible for the same GST exemptions as other governmental authorities. These trusts work for the benefit of individuals and areas affected by mining operations and provide various services, including drinking water supply, environment protection, healthcare, and education.

5. Exemption from GST for Horticulture Services to CPWD

The circular also delves into the exemption from GST for services related to horticulture and horticulture works when the value of goods in the total supply does not exceed 25%. Such services, when provided to the Central Public Works Department (CPWD), are eligible for exemption under specific notification clauses. This exemption is aligned with constitutional provisions relating to Panchayats and Municipalities.

Conclusion

The circular, Circular No. 206/18/2023-GST, offers valuable clarifications on the GST treatment of various services, ensuring that businesses and consumers have a clear understanding of their tax obligations and liabilities. These clarifications help streamline the GST process and promote transparency and compliance. If any difficulties arise in implementing the circular’s recommendations, stakeholders are encouraged to bring them to the notice of the Board for resolution.

*****

F. No. CBIC-190354/195/2023-TO (TRU-II)-CBEC
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
*****
North Block, New Delhi

Circular No. 206/18/2023-GST Dated: 31st October, 2023

To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Subject: Clarifications regarding applicability of GST on certain services – reg.

Based on the recommendations of the GST Council in its 52nd meeting held on 7th October, 2023, at New Delhi, clarification, with reference to GST levy, related to the following issues are being issued through this circular.

i. Whether ‘same line of business’ in case of passenger transport service and renting of motor vehicles includes leasing of motor vehicles without operators.

ii. Whether GST is applicable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees/occupants.

iii. Whether job work for processing of “Barley” into “Malted Barley” attracts GST @ 5% as applicable to “job work in relation to food and food products” or 18% as applicable on “job work in relation to manufacture of alcoholic liquor for human consumption”.

iv. Whether District Mineral Foundations Trusts (DMFTs) set up by the State Governments are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority.

v. Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

2. Whether ‘same line of business’ in case of passenger transport service and renting of motor vehicles includes leasing of motor vehicles without operators.

2.1 Services of transport of passengers by any motor vehicle (SAC 9964) and renting of motor vehicle designed to carry passengers with operator (SAC 9966), where the cost of fuel is included in the consideration charged from the service recipient attract GST at the rate of 5% with input tax credit of services in the same line of business.

2.2 Same line of business as stated in the notification No. 11/2017- Central Tax (Rate) means “service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle”.

2.3 It is hereby clarified that input services in the same line of business include transport of passengers (SAC 9964) or renting of motor vehicle with operator (SAC 9966) and not leasing of motor vehicles without operator (SAC 9973) which attracts GST and/or compensation cess at the same rate as supply of motor vehicles by way of sale.

3. Whether GST is applicable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees/occupants.

3.1 Doubts were raised on the applicability of GST on supply of electricity by the real estate companies, malls, airport operators etc., to their lessees or occupants.

3.2 It is clarified that whenever electricity is being supplied bundled with renting of immovable property and/or maintenance of premises, as the case may be, it forms a part of composite supply and shall be taxed accordingly. The principal supply is renting of immovable property and/or maintenance of premise, as the case may be, and the supply of electricity is an ancillary supply as the case may be. Even if electricity is billed separately, the supplies will constitute a composite supply and therefore, the rate of the principal supply i.e., GST rate on renting of immovable property and/or maintenance of premise, as the case may be, would be applicable.

3.3 However, where the electricity is supplied by the Real Estate Owners, Resident Welfare Associations (RWAs), Real Estate Developers etc., as a pure agent, it will not form part of value of their supply. Further, where they charge for electricity on actual basis that is, they charge the same amount for electricity from their lessees or occupants as charged by the State Electricity Boards or DISCOMs from them, they will be deemed to be acting as pure agent for this supply.

4. Whether job work for processing of “Barley” into “Malted Barley” attracts GST @ 5% as applicable to “job work in relation to food and food products” or 18% as applicable on “job work in relation to manufacture of alcoholic liquor for human consumption”.

4.1 References have been received to clarify whether services by way of job work for conversion of barley into malt attracts GST at 5% prescribed for “job work in relation to all food and food products falling under Chapter 1 to 22 of the customs tariff” or at the rate of 18% prescribed for “services by way of job work in relation to manufacture of alcoholic liquor for human consumption”.

4.2 Malt is a food product. It can be directly consumed as part of food preparations or can be used as an ingredient in food products and also used for manufacture of beer and alcoholic liquor for human consumption. However, irrespective of end-use, conversion of barley into malt amounts to job work in relation to food products.

4.3 It is hereby clarified that job work services in relation to manufacture of malt are covered by the entry at Sl. No. 26 (i) (f) which covers “job work in relation to all food and food products falling under chapters 1 to 22 of the customs tariff” irrespective of the end use of that malt and attracts 5% GST.

5. Whether District Mineral Foundations Trusts (DMFTs) set up by the State Governments are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority.

5.1 DMFTs work for the interest and benefit of persons and areas affected by mining related operations by regulating receipt and expenditure from the respective Mineral Development Funds created in the concerned district. They provide services related to drinking water supply, environment protection, health care facilities, education, welfare of women and children, supply of medical equipment etc.

5.2 These activities are similar to activities that are enlisted in Eleventh Schedule and Twelfth Schedule of the Constitution. The ultimate users of the various schemes under DMF are individuals, families, women and children, farmers/producer groups, SHGs of the mining affected areas etc. The services/supplies out of DMF fund are provided free of charge and no consideration is realized from the beneficiaries by DMF against such services.

5.3 Accordingly, it is clarified that DMFT set up by the State Governments are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority.

6. Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

6.1 Public parks in government residential colonies, government offices and other public areas are developed and maintained by CPWD.

6.2 Maintenance of community assets, urban forestry, protection of the environment and promotion of ecological aspects are functions entrusted to Panchayats and Municipalities under Article 243G and 243W read with Sr. No. 29 of 11th Schedule and Sr. No. 8 of 12th Schedule of the constitution.

6.3 Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017. exempt pure services and composite supply of goods and services in which value of goods does not constitute more than 25%, that are provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

6.4 Accordingly, it is clarified that supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

7. Difficulties, if any, in implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

(Rajeev Ranjan)
Under Secretary, TRU