Navigating GST Clarity: Key Insights from Recent CBIC Circulars & Future Expectations for Small Taxpayers

To bring the recommendations of the 53rd GST Council meeting to life and address longstanding industry concerns, the CBIC issued 16 comprehensive GST circulars on June 26, 2024. These circulars cover various facets of GST and offer much-needed clarity on several critical issues. This article aims to distill the essence of the most relevant circulars, specifically those that have a significant impact on small taxpayers.

Dive in to uncover the key insights and updates that could streamline your tax processes and enhance compliance:-

A. Circular No. 207/1/2024-GST Dated: 26th June 2024

• Subject: Reduction of Government Litigation – Fixing Monetary Limits for Filing Appeals or Applications by the Department before GSTAT, High Courts, and Supreme Court
• Overview: Section 120 of the Central Goods and Services Tax Act, 2017 (CGST Act) empowers the Central Board of Indirect Taxes & Customs (CBIC) to set monetary limits for appeals filed by tax authorities. Based on GST Council recommendations and under Sections 120 and 168 of the CGST Act, the CBIC establishes the following monetary thresholds for appeals or applications by Central Tax officers before the Goods and Service Tax Appellate Tribunal (GSTAT), High Court, and Supreme Court:

Appellate Forum	Monetary Limit (amount involved in Rs.)
GSTAT	20,00,000/-
High Court	1,00,00,000/-
Supreme Court	2,00,00,000

The Principle which needs to considered while determining whether a case falls within the above monetary limits or not are as follows:-

1. Tax Disputes: The aggregate disputed tax amount (including CGST, SGST/UTGST, IGST, and Compensation Cess) determines the applicability of monetary limits.
2. Interest Disputes: The disputed interest amount is considered.
3. Penalty Disputes: The disputed penalty amount is considered.
4. Late Fee Disputes: The disputed late fee amount is considered.
5. Combined Interest, Penalty, and Late Fee Disputes: The aggregate disputed amount is considered if no tax is involved.
6. Erroneous Refund Disputes: The disputed refund amount is considered.
7. Composite Orders: The total disputed amount from composite orders (covering multiple appeals/demand notices) is considered.

Exclusions: The specified monetary limits are generally applicable, except in cases where:

1. Provisions of CGST/SGST/UTGST/IGST Acts or GST (Compensation to States) Act are held ultra vires to the Constitution.
2. Rules or regulations are held ultra vires to the parent Act.
3. Government/Board orders, notifications, instructions, or circulars are held ultra vires.
4. Issues are related to valuation, classification, refunds, place of supply, or recurring matters involving interpretation of the Act/Rules/notifications/circulars/orders/instructions.
5. Strictures/adverse comments or costs have been imposed against the Government/Department or their officers.
6. Any other case deemed necessary by the CBIC board in the interest of justice or revenue.

Objective: Appeals should be filed based on the merits of the case, not merely due to exceeding monetary limits. The goal is to reduce unnecessary litigation and provide certainty to taxpayers regarding their tax assessments. 

B. Circular No. 208/2/2024-GST Dated: 26th June 2024

• Subject: Clarifications on Issues Pertaining to Special Procedure for Manufacturers of Specified Commodities per Notification No. 04/2024 – Central Tax dated 05.01.2024

Based on recommendations from the 50th GST Council meeting, a special procedure was notified (Notification No. 30/2023-Central Tax dated 31.07.2023) for registered persons engaged in manufacturing specified goods. To ensure uniform implementation, the CBIC board clarifies various issues under Section 168(1) of the Central Goods & Services Tax Act, 2017 (CGST Act).

1. Make, Model, and Machine Number:
   • Issue: Non-availability of make, model number, and machine number.
   • Clarification: In Table 6 of FORM GST SRM-I, make and model numbers are optional. If the make is unavailable, the purchase year may be declared as the make. The machine number is mandatory. If unavailable, the manufacturer can assign a numeric number.
2. Electricity Consumption Rating:
   • Issue: Absence of electricity consumption rating for packing machines.
   • Clarification: Declare the electricity consumption rating based on machine details or records. If unavailable, have a Chartered Engineer calculate and certify it in FORM GST SRM-III. Upload this certificate with FORM GST SRM-I and provide document details in Table 10.
3. Value Reporting for Goods without MRP:
   • Issue: Reporting value in Column 8 of Table 9 for goods without MRP (e.g., export goods).
   • Clarification: Enter the sale price of the manufactured goods in Column 8 of Table 9 of FORM GST SRM-II.
4. Qualification of Chartered Engineer:
   • Issue: Qualification and eligibility of Chartered Engineers for providing certificates.
   • Clarification: A practicing Chartered Engineer with a certificate of practice from the Institute of Engineers India (IEI) is qualified to provide certificates under the special procedure.
5. Applicability to SEZ Units:
   • Issue: Applicability of the special procedure to manufacturing units in Special Economic Zones (SEZ).
   • Clarification: The special procedure is not applicable to SEZ manufacturing units.
6. Applicability to Manual Processes:
   • Issue: Applicability of the special procedure to manual processes using electric heat sealers and seamers.
   • Clarification: The special procedure does not apply to manual seamer/sealer operations or manual packing operations like post-harvest tobacco leaf packing.
7. Reporting Serial Numbers for Multiple Machines:
   • Issue: Serial number reporting in Table 6 when multiple machines are used for filling, capping, and packing.
   • Clarification: Report the machine used for final packing of the specified goods in Table 6 of FORM GST SRM-I.
8. Compliance in Job Work or Contract Manufacturing:
   • Issue: Responsibility for compliance in job work or contract manufacturing.
   • Clarification: The special procedure applies to all persons involved in manufacturing, including job workers/contract manufacturers. If unregistered, the principal manufacturer must comply.

This circular aims to clarify and ensure consistent implementation of the special procedure for the manufacturing of specified commodities. 

C. Circular No. 212/6/2024-GST Dated: 26th June 2024

• Subject: Mechanism for Providing Evidence of Compliance with Section 15(3)(b)(ii) of the CGST Act, 2017 by Suppliers

When suppliers offer discounts via tax credit notes after supply, these discounts are excluded from the taxable value only if the recipient reverses the input tax credit (ITC) attributable to the discount, as per Section 15(3)(b)(ii) of the CGST Act. There is currently no facility on the common portal for suppliers or tax officers to verify whether this ITC reversal has occurred. Therefore, a suitable mechanism is required.

• Interim Solution:

Until a portal functionality is available, suppliers can obtain a certificate from the recipient’s Chartered Accountant (CA) or Cost Accountant (CMA). This certificate must confirm the recipient has reversed the proportionate ITC and should include:

• Details of credit notes
• Relevant invoice numbers
• Amount of ITC reversal for each credit note
• Evidence of reversal through FORM GST DRC-03, returns, or other documents
• The certificate must contain the Unique Document Identification Number (UDIN).

• For Discounts Not Exceeding Rs 5,00,000:

If the total tax amount (CGST, SGST, IGST, and compensation cess) involved in the discounts within a financial year does not exceed Rs 5,00,000, the supplier may obtain an undertaking from the recipient instead of a CA/CMA certificate. This undertaking should state that the recipient has reversed the ITC attributable to the discounts, including relevant details.

• Admissibility of Certificates:

The CA/CMA certificates or recipient undertakings will serve as acceptable evidence for compliance with Section 15(3)(b)(ii) of the CGST Act. Suppliers must present these documents to tax officers when required, such as during scrutiny, audits, or investigations. For past periods, suppliers should provide these certificates or undertakings as evidence of the requisite ITC reversal to the relevant tax authorities. 

D. Circular No. 211/5/2024-GST Dated: 26th June 2024

• Subject: Clarification on Time Limit under Section 16(4) of the CGST Act, 2017 for RCM Supplies Received from Unregistered Persons

This circular clarifies the time limit for availing input tax credit (ITC) under Section 16(4) of the CGST Act, 2017, in the context of supplies received from unregistered suppliers, where tax is payable by the recipient under the reverse charge mechanism (RCM).

For supplies from unregistered suppliers, where the recipient must issue an invoice under Section 31(3)(f) of the CGST Act, the relevant financial year for calculating the time limit to avail ITC under Section 16(4) will be the financial year in which the recipient issues the invoice. This is subject to the recipient paying the tax on the supply and fulfilling the other conditions and restrictions outlined in Sections 16 and 17 of the CGST Act.

If the recipient issues the invoice after the time of supply and pays the tax accordingly, interest on the delayed tax payment will be required. Additionally, in cases of delayed invoice issuance by the recipient, penal action under Section 122 of the CGST Act may also be applicable. 

E. Circular No. 209/3/2024-GST Dated: 26th June 2024

Subject: Clarification on Clause (ca) of Section 10(1) of the Integrated Goods and Services Tax Act, 2017 – Place of Supply for Goods to Unregistered Persons

This circular addresses queries from the trade and industry regarding the place of supply provisions under the newly added clause (ca) of Section 10(1) of the IGST Act, 2017, particularly for goods supplied to unregistered persons where the billing address differs from the delivery address, especially for e-commerce transactions.

To ensure uniformity in the application of these provisions, the CBIC board, under Section 168(1) of the CGST Act, 2017, provides the following clarification:

• Issue: When Mr. A (an unregistered person) in State X orders a mobile phone via an e-commerce platform to be delivered to State Y but provides a billing address in State X, what is the place of supply for this transaction?
• Clarification: According to clause (ca) of sub-section (1) of Section 10 of the IGST Act, for supplies to unregistered persons, the place of supply is determined by the address recorded on the invoice. If no address is recorded, it defaults to the supplier’s location. The Explanation to this clause states that recording the State name of the unregistered person on the invoice is deemed sufficient.

Therefore, in scenarios where the delivery address on the invoice differs from the billing address, the place of supply is the delivery address recorded on the invoice. For the example provided, the place of supply would be State Y, where the delivery address is located.

Suppliers are advised to record the delivery address as the recipient’s address on the invoice when billing and delivery addresses differ, to correctly determine the place of supply for such transactions.

In conclusion, the CBIC’s issuance of 16 circulars following the 53rd GST Council meeting has brought much-needed clarity and guidance on various GST-related issues. These circulars address critical concerns, particularly for small taxpayers, providing solutions that aim to simplify compliance and ensure fair treatment. By summarizing the key points from these circulars, I hope to shed light on the practical implications and benefits for the taxpayer community.

Taxpayers are now eagerly awaiting the implementation of other recommendations from the 53rd GST Council meeting, anticipating further improvements and resolutions that will enhance the GST framework. As these recommendations come into effect, it is expected that the GST system will continue to evolve, becoming more efficient and user-friendly for all stakeholders involved.