Analysis of 7 Recent GST Circulars

Dr. Sanjiv Agarwal 24 Jun 2021 2,985 Views 0 comment Print Goods and Services Tax | Articles

GST law is full of confusions and different interpretations on taxability, applicability of exemption notifications and classification of goods and services. Recently CBIC, apex body for GST administration on the recommendation of GST Council, has clarified on issues of taxability, classification / rate / exemption in respect of the following activities or services:

Circular No.	Date	In relation to
149/05/2021-GST	17.06.2021	Clarification regarding applicability of GST on supply of food in Anganwadis and Schools.
151/06/2021-GST	17.06.2021	Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity).
151/07/2021-GST	17.06.2021	Clarification regarding GST on supply of various services by Central and State Board (such as National Board of Examination)
152/08/2021-GST	17.06.2021	Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis
153/09/2021-GST	17.06.2021	GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS
154/10/2021-GST	17.06.2021	GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them
155/11/2021-GST	17.06.2021	Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System
156/12/2021-GST	21.06.2021	Clarification in respect of applicability of Dynamic Quick Response (QR) Code on B2C invoices and compliance of notification 14/2020- Central Tax dated 21st March, 2020 – Reg.

GST on supply of food in aganwadi’s / schools

Serving of food in schools under mid -day meal scheme is exempt if such supplies are funded by Government grants under Entry 66 of Notification 12/2017-CT (Rate) dated 28.06.2017.
The scope of this entry is thus wide enough to cover any serving of any food to a school, including pre-school. Further, an Anganwadi interalia provides pre-school non-formal education. Hence, aganwadi is covered by the definition of educational institution (as pre-school).
CBIC has now clarified that services provided to an educational institution by way of serving of food (catering including mid- day meals) is exempt from levy of GST irrespective of its funding from government grants or corporate donations [under said entry 66 (b)(ii)]. Educational institutions as defined in the notification include aganwadi. Hence, serving of food to anganwadi shall also be covered by said exemption, whether sponsored by government or through donation from corporates.

[Source: CBIC Circular No. 149/05/2021-GST dated 17.06.2021]

GST on construction of road on deferred payment basis

GST is exempt on service, falling under heading 9967 (service code), by way of access to a road or a bridge on payment of annuity [entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers “supporting services in transport” under which code 996742 covers “operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services.
Entry 23 of said notification exempts “service by way of access to a road or a bridge on payment of toll. Together, the entries 23 and 23A exempt access to road or bridge, whether the consideration are in the form of toll or annuity [heading 9967].
However, services by way of construction of road fall under heading 9954. This heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels. Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities).
Thus, entry 23A does not cover services under heading 9954.
It is now clarified that entry 23A of notification No. 12/2017-CT(R) does not exempt GST on the annuity (deferred payments) paid for construction of roads.

Analysis of 7 Recent GST Circulars

[Source: CBIC Circular No. 150/06/2021-GST dated 17.06.2021]

Clarification on taxability of services by central /state board

Central /State Boards such as National Board of examination (NBE) provide various services including entrance examination ( on charging a fee) for admission to educational institution, input services for conducting such entrance examination for students, accreditation of educational institutions or professional so as to authorise them to provide their respective services.
Taking into account entry at S.No. 66 of Notification 12/2017-CT (Rate) dated 28.06.2017 and definition of ‘Educational Institutions’, it CBIC has clarified that :
GST is exempt on services provided by Central or State Boards ( including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of Notification 12/2017-CT (Rate) dated 28.06.2017

. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
- GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of Notification 12/2017-CT (Rate) dated 28.06.2017

- GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test ) so as to authorise them to provide their respective services

[Source: CBIC Circular No. 151/07/2021-GST dated 17.06.2021]

Clarification on GST rate on construction services

CBIC has clarified on rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis.
According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated 28.06.2017, GST rate of 12% is applicable, inter alia, on-

“(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, (other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above) provided to the Central Government, State Government, Union Territory, a local authority a Governmental Authority or a Government Entity, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; “

Entry No 3 (vi) does not apply to any works contract that is meant for the purposes of commerce, industry, business of profession, even if such service is provided to the Central Government, State Government, Union Territory, a local authority a Governmental Authority or a Government Entity.
It is clarified that :
- Civil constructions, such as rope way for tourism development shall not be covered by said entry 3(vi) not being a structure that is meant predominantly for purposes other than business.
- While road, bridge, terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification, structures like ropeway are not covered by these entries too.
- Works contract service provided by way of construction such as of rope way shall fall under entry at sl. No. 3(xii) of notification No. 11/2017-CT (R) dated 28.06.2017
- and attract GST at the rate of 18%.

[Source: Circular No. 152/08/2021-GST dated 17.06.2021]

GST on milling activities

CBIC has clarified on levy of GST on milling of wheat into flour or paddy into rice for distribution by State Governments under Public Distribution System (PDS).
In terms of S.No. 3A of Notification 12/2017-CT (Rate) dated 28.06.2017, it has been clarified that :
- Composite supply of milling of wheat and its fortification by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc.) does not exceed 25% of the value of composite supply would be exempt from GST.
- In case the supply of service by way of milling of wheat into flour or of paddy into rice, is not eligible for the exemption for the reason that value of goods supply in such a composite supply exceeds 25%, in such case, the applicable GST rate would be 5% if such composite supply is provided to a registered person, being a job work service.

[Source: Circular No. 153/09/2021-GST dated 17.06.2021]

GST ON ‘guaranteeing loan’ services by state government to PSU’s

Entry No. 34A of Notification 12/2017-CT (Rate) dated 28.06.2017 exempts “Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.”
CBIC has clarified that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt under said entry No. 34A.

[Source: Circular No. 154/10/2021-GST dated 17.06.2021]

GST on laterals / parts of sprinklers or drip irrigation system

CBIC has clarified on GST rate on parts of Sprinklers or Drip Irrigation System, when they are supplied separately (i.e. not along with entire sprinklers or drip irrigation system).
As per Notification No. 1/2017-CT (Rate) dated 28.06.2017, as amended at S.No. 195B, for sprinklers; drip irrigation systems including laterals; mechanical sprayer under heading No. 8424, rate of CGST is 6%.
CBIC has clarified that intention of this entry has been to cover laterals (pipes to be used solely with sprinklers/drip irrigation system) and such parts that are suitable for use solely or principally with ‘sprinklers or drip irrigation system’, as classifiable under heading 8424 as per Note 2 (b) to Section XVI to the HSN. Hence, laterals/parts to be used solely or principally with sprinklers or drip irrigation system, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately. However, any part of general use, which gets classified in a heading other than 8424, in terms of Section Note and Chapter Notes to HSN, shall attract GST as applicable to the respective heading.

[Source: Circular No. 155/11/2021-GST dated 17.06.2021]

Applicability of QR code on b2c invoices

CBIC has issued clarification in respect of applicability of Dynamic Quick Response Code (QR Code) on B2C invoices and compliance of notification 14/2020- Central Tax dated 21st March, 2020 .
Accordingly,
- Any person, who has obtained a Unique Identity Number (UIN) as per the provisions of Sub-Section 9 of Section 25 of CGST Act 2017, is not a “registered person” as per the definition of registered person provided in section 2(94) of the CGST Act 2017. Therefore, any invoice, issued to such person having a UIN, shall be considered as invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code.
- Given that UPI ID is linked to a specific bank account of the payee/ person collecting money, separate details of bank account and IFSC may not be provided in the Dynamic QR Code.
- In cases where the payment is collected by some person, authorized by the supplier on his/ her behalf, the UPI ID of such person may be provided in the Dynamic QR Code, instead of UPI ID of the supplier.
- Wherever an invoice is issued to a recipient located outside India, for supply of services, for which the place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the supplier in foreign currency, through RBI approved mediums, such invoice may be issued without having a Dynamic QR Code, as such dynamic QR code cannot be used by the recipient located outside India for making payment to the supplier.
- In cases, where the invoice number is not available at the time of digital display of dynamic QR code in case of over the counter sales and the invoice number and invoices are generated after receipt of payment, the unique order ID/ unique sales reference number, which is uniquely linked to the invoice issued for the said transaction, may be provided in the Dynamic QR Code for digital display, as long as the details of such unique order ID/ sales reference number linkage with the invoice are available on the processing system of the merchant/ supplier and the cross reference of such payment along with unique order ID/ sales reference number are also provided on the invoice.
- The purpose of dynamic QR Code is to enable the recipient/ customer to scan and pay the amount to be paid to the merchant/ supplier in respect of the said supply. When the part-payment for any supply has already been received from the customer/ recipient, in form of either advance or adjustment through voucher/ discount coupon etc., then the dynamic QR code may provide only the remaining amount payable by the customer/ recipient against “invoice value”. The details of total invoice value, along with details/ cross reference of the part payment/ advance/ adjustment done, and the remaining amount to be paid, should be provided on the invoice.
- Circular No. 146 dated 23.02.2021 also stands modified accordingly.