Background
The recommendations made by the GST Council in its 53rd meeting include changes in GST rates as well as clarifications on various matters. Circulars have been issued and the following update gives the gist of all the circulars issued. Most of the clarifications are welcome in nature and gives relief from substantial issues raised by the field formations during the GST audits/assessments.
Gist of Circulars
Circular 207:- Fixing monetary limits for appeals or applications by Department Before GSTAT, High Courts and Supreme Court:
In accordance with the National Litigation Policy and invoking powers from Section 120 of the CGST Act, 2017, The GST Council has recommended fixation of the following monetary limits for filing appeals.
| Appellate Forum | Monetary Limit |
| GSTAT | 20 Lakhs |
| High Court | 1 Crore |
| Supreme Court | 2 Crore |
Wherein the dispute pertains to tax along with interest, and penalty, only the tax amount shall be considered for the monetary limit. Wherein tax amount is not involved in the dispute, the cumulative of interest, penalty or late fees shall be considered the monetary limit.
Further, the circular provides exclusions wherein the vires of the Act, Rules, notification, circulars etc is challenged. Also recurring matters with dispute on valuation, rate of tax, refunds, place of supply, etc are also excluded.
In essence the above circular gives broad guidelines for filing of appeal by the GST authorities but ultimately filing of appeal is to be decided on merits of the case. Further, it is mentioned that cases wherein it is decided not to file appeal in pursuance of these instructions, will not have any precedent value.
Circular No. 208:- Clarifications On issues pertaining to manufacturers of special commodities as per notification no 04/2024 dated 5.1.2024 regarding FORM GST SRM I:
A special compliances and procedures to be followed by persons engaged in manufacture of tobacco items were notified in January 2024. The industry needed certain clarifications on the procedure which has been issued by this circular.
1. Declaration of make and model number of the packing machine is optional and where make of machine is not available, its year of purchase may be declared as make Machine number is mandatory and if the same is not available, then manufacturer may assign a numeric number to said machine and declare.
2. When electricity consumption of machine is not available, the manufacturer may get electricity consumption per hour calculated through Chartered Engineer and upload the certificate received from Chartered Engineer.
3. Where goods are not having no MRP, then sale price of goods should be entered in column 8 of Table 9 of form GST SRM II.
4. When multiple machines are required in a process, then detail of that machine which is used in final packing of goods used should be furnished in Table 6 of Form GST SRM I.
5. These compliances are applicable to Job worker/ contract If the job worker is unregistered, then liability of compliance will be with the principal manufacturer.
Circular No. 209:- Clarifications relating to place of supply to unregistered persons according to provisions of clause (ca) of section 10(1):
1. Where supply of goods is made to URP, Place of supply will be the Location as per address of said person in invoice and location of supplier where the address of said person is not recorded.
2. The said provision has been inserted overriding the provisions under section 10(1)(a) or 10(1)(c) of IGST Act. An explanation has been added to the clause (ca) to clarify that recording the name of the state of the said person shall be deemed to be the recording of the address of the said person.
3. In cases where the supply of goods made to an unregistered person and the billing address and address of delivery are different (like in E-Commerce), place of supply would be address of delivery of goods recorded on invoice.
Circular No. 210:- Clarification on valuation of supply of import of services by related person where recipient is eligible to full ITC:
Import of services from related entities without consideration are taxable under reverse charge mechanism.
Since these services are without consideration, there has been dispute regarding the valuation of these supplies, accordingly the clarification has been issued.
1. Rule 28 of the Valuation rules provide for valuation for transactions between related or distinct In circular 199, it was clarified that the value declared on the invoice for transactions been distinct persons shall be deemed to be open market value, if the recipient is eligible for full ITC.
2. Herein it has been clarified that the same principle shall apply in case of all transactions between related Further, as clarified in circular 199, if the invoice has not been issued, the open market value shall be deemed to be NIL.
3. In case of import of services, the registered person in India is required to issue self-invoice and pay tax under reverse charge mechanism.
4. Accordingly, in case of provision of services by a foreign affiliate to a related domestic entity, where full input tax credit is available, the open market value shall be value declared on the self invoice. Further, wherein full ITC is available and self invoice is not issued by the related domestic entity, the value of such services shall be deemed to be NIL.
Circular No. 211:- Clarification on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered person:
In many cases, the registered persons are paying tax under RCM belatedly either on own ascertainment or being pointed out by authorities in audit, scrutiny or otherwise. Certain field formations have been taking a view that time limit for availing ITC under Section 16(4) is only upto September / November of the FY following the year in which services were received. The circular intends to resolve this issue:
1. As per sec 16(2)(a) of CGST Act, no registered person shall be entitled to claim ITC in respect of any supply of goods or services or both unless he is in possession of a tax invoice or debit note issued by a supplier registered under this act.
2. Rule 36(1)(b) of CGST Rules,2017 prescribes that ITC shall be availed by a registered person on the basis of an invoice issued in accordance with the provisions of clause(f) of sub-section (3) of sec 31 of CGST Act, subject to the payment of tax.
3. A registered person shall issue an invoice in respect of goods or services or both received by him from the supplier who is unregistered on the date of receipt of goods or services or both and the recipient is liable to pay tax in cash under RCM.
4. Supplies received from unregistered suppliers, where tax has to be paid on RCM and where invoice is to be issued by the recipient, the relevant FY for calculation of time limit for availment of ITC will be FY in which the invoice has been issued by the recipient (and not the year in which service was received). However, delayed issuance of invoice would attract penal implications.
Circular No. 212:- Mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers regarding discounts:
1. According to section 15 sub-section (3) of CGST Act the value of supply shall not include discount given by the supplier, subject to certain As per clause (b) of said sub-section, any discount which is given after the supply has been effected (vide a credit note) shall not be included in the value of supply, if it satisfies the relevant conditions. One of the condition is that the recipient of credit note has reversed the ITC.
2. However, there is no system functionality/ facility available on the common portal to enable the supplier or the tax officer to verify the compliance of the said condition of proportionate reversal of input tax credit by the recipient.
3. In the view of above, till the time such facility is made available to common portal, the supplier may procure a certificate from the recipient of supply, issued by the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that the recipient has made the required proportionate reversal of input tax credit at his end in respect of such credit note issued by the supplier having details of credit notes, invoice number, and amount of ITC.
4. If such amount of tax does not exceed Rs 5 Lakhs, then instead of CA/CMA certificate, the said supplier may procure an undertaking/ certificate from the said recipient that the said input tax credit attributable to such discount has been reversed by him.
Circular No. 213:- Clarification on the taxability of ESOP/ESPP/RSU provided by a company to its employees through its overseas holding company:
As part of various perquisites, some of Indian companies provide the option to their employees for allotment of securities/shares of foreign holding company. Under the arrangement, the shares are allotted by the foreign holding company on the request of the Indian company and Indian company reimburses the cost to the foreign company.
It is clarified that first of all no supply of service appears to be taking place between the foreign holding company and the domestic subsidiary company. Further, shares/securities are outside the purview of the definition of goods and services and thus cannot be subjected to tax.
However, in cases where an additional amount over and above the cost of securities/shares is charged by the foreign holding company from the domestic subsidiary company, by whatever name called, GST would be leviable on such additional amount charged as consideration for the supply of services of facilitating/ arranging the transaction in securities/ shares by the foreign holding company to the domestic subsidiary company on RCM Basis.
Circular No. 214:- Clarification on the requirement of reversal of input tax credit in respect of the portion of the premium for life insurance policies which is not included in taxable value:
1. Rule 32(4) of CGST Rules, 2017 provides a special valuation methodology for computation of value of taxable services in respect of life insurance business. The circular intends to clarify whether the portion not included in the taxable value will require common ITC reversal.
2. It has been clarified that just because some amount of consideration is not included in value of taxable supply as per the provisions of the statute, it cannot be said that the said portion of consideration becomes attributable to a non-taxable or exempt supply.
3. It is clarified that the amount of the premium for taxable life insurance policies, which is not included in the taxable value as determined under rule 32(4) of CGST Rules, cannot be considered as pertaining to a non-taxable or exempt supply and therefore, there is no requirement of reversal of input tax credit as per-provisions of Rule 42 or rule 43 of CGST Rules, read with sub-section (1) and sub- section (2) of Section 17 of CGST Act, in respect of the said amount.
Circular No. 215:- Clarification on taxability of salvage/ wreck value earmarked in the claim assessment of the damage caused to the motor vehicle:
1. In case the salvage/wreckage does not become the property of insurance company and ownership of that remains with insured, the deduction of salvage value cannot be said as consideration for any supply made by insurance company. Accordingly, there would be no GST liability of insurance company of this salvage.
2. In case that salvage/wreckage becomes the property of insurance company, the insured will be paid full amount without any deduction. So, the outward GST Liability on disposal/sale of salvage is to be discharged by insurance companies.
3. In cases where due to conditions mentioned in the contract itself, general insurance companies are deducting the value of salvage as deductibles from the claim amount, the salvage remains the property of insured and insurance companies are not liable to discharge GST liability on the same.
Circular No. 216:- Clarification in respect of GST liability and input tax credit (ITC) availability in cases involving Warranty/ Extended Warranty, in furtherance to Circular No. 195/07/2023-GST dated 17.07.2023:
1. The said circular only clarifies in respect of the situations involving replacement of part/ parts and does not specifically refer to the situation involving replacement of goods as It is clarified that the clarification provided in Para 2 of the said circular is also applicable in case where the goods as such are replaced under warranty. In essence, whether parts or the goods itself are replaced under warranty, ITC reversal is not required.
2. Where the distributor replaces the parts/ goods to the customer as part of warranty out of his own stock on behalf of the manufacturer and subsequently gets replenishment of the said parts/ goods from the manufacturer, GST liability as well as liability to reverse ITC in cases covered by the said scenario should be similar to that circular as referred above. In essence, no ITC reversal required at part of OEM and no liability on part of the distributor.
3. It has been clarified that supply of extended warranty is a service transaction and accordingly tax will be levied on the same.
Circular No. 217:- Entitlement of ITC by the insurance companies on the expenses incurred for repair of motor vehicles in case of reimbursement mode of insurance claim settlement:
1. In reimbursement mode of claim settlement, the payment is made by the insurance company for the approved cost of repair services through reimbursement to the insured. The liability to pay for the repair service for the approved claim cost lies with the insurance company, and thus, the insurance company is covered in the definition of “recipient” in respect of the said supply of services of vehicle repair provided by the garage under section 2(93) of CGST Act, to the extent of approved repair liability. Moreover, availment of credit in respect of input tax paid on motor vehicle repair services received by the insurance company for outward supply of insurance services for such motor vehicles is not barred under section 17(5) of CGST Act. So, ITC is available to Insurance Companies in case of reimbursement mode.
2. If the invoice for full amount for repair services is issued to the insurance company while the insurance company makes reimbursement to the insured only for the approved claim cost, then, the input tax credit may be available to the insurance company only to the extent of reimbursement of the approved claim cost to the insured, and not on the full invoice value.
3. When the invoice is not issued in name of company, then such insurance company is not eligible to avail ITC on such invoice.
Circular No. 218:- Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person:
1. In the cases, where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount (like service fee or processing fees), it cannot be said that any supply of service is being provided between the said related persons in the form of processing/ facilitating/ administering the loan. Accordingly, GST would not levy.
2. In case of loans provided between related parties, wherever any fee in the nature of processing fee/ administrative charges/ service fee/ loan granting charges is charged, over and above the amount charged by way of interest or discount, the same may be considered to be the consideration for the supply of services of processing/ facilitating/ administering of the loan, which will be liable to GST.
Circular No. 219:- Clarification on availability of input tax credit on ducts and manholes used in network of Optical Fiber Cables (OFCs) in terms of section 17(5) of the CGST Act, 2017:
1. According to Section 17,”plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes land, building or any other civil structures; telecommunication towers; and pipelines laid outside the factory premises. So, ITC is available on Plant and Machinery.
2. In view of the Explanation in section 17 of the CGST Act, it appears that ducts and manholes are covered under the definition of “plant and machinery” as they are used as part of the OFC network for making outward supply of transmission of telecommunication signals from one point to another. Moreover, ducts and manholes used in network of Optical Fiber Cables (OFCs) have not been specifically excluded from the definition of “plant and machinery”.
3. Accordingly, it is clarified that availment of input tax credit is not restricted in respect of such ducts and manhole used in network of Optical Fiber Cables (OFCs)
Circular No. 220:- Clarification on place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors:
1. It is clarified that the custodial services provided by banks or financial institutions to FPIs are not to be treated as services provided to ‘account holder’ and therefore, the said services are not covered under Section 13(8)(a) of the IGST Therefore, the place of supply of such services is not to be determined under Section 13(8)(a) of the IGST Act.
2. While issuing the said clarification, the CBIC has relied upon the clarification issued earlier vide the Service tax Education Guide since the provisions under the GST law and Service tax are similar.
Circular No. 221:- Clarification on time of supply in respect of supply of services of construction of road and maintenance thereof of National Highway Projects of National Highways Authority of India (NHAI)in Hybrid Annuity Mode (HAM) model:
1. The HAM contract for road construction generally runs over a period of 15-17 years and the payments are staggered over a long period of Since the payments are spread in instalments, the contracts appears to be covered under “Continuous Supply of Services”.
2. Time of supply of services under HAM contract, including construction and O&M portion, should be the date of issuance of such invoice, or date of receipt of payment, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract.
3. in cases, where the invoice is not issued on or before the specified date or the date of completion of the event specified in the contract, as per clause (b) of section 13(2), time of supply should be the date of provision of the service, or date of receipt of payment, whichever is earlier.
4. In case of continuous supply of services, the date of provision of service may be deemed as the due date of payment as per the contract, as the invoice is required to be issued on or before the due date of payment as per the provisions of Section 31(5) of CGST Act.
5. The tax liability will arise in same way as discussed above.
Circular No. 222:- Clarification on time of supply of services of spectrum usage and other similar services under GST:
1. When the telecom operator opts to make payment in instalments, the same is continuous supply of services (on RCM basis). According to Section 13, time of supply would be earlier of (a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or (b) the date immediately following sixty days from the date of issue of invoice or any other document.
2. As per section 31(5)(a) of CGST Act, in cases of continuous supply of services, where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before such due date of payment. In the instant case, the date of payment to be made by the telecom operator to DoT is clearly ascertainable from the Notice Inviting Applications read with the Frequency Assignment Letter. Accordingly, tax invoice will be required to be issued in respect of the said supply of services, on or before such due date of payment as per the option exercised by the telecom operator.
3. It is clarified that in case where full upfront payment is made by the telecom operator, GST would be payable when the payment of the said upfront amount is made or is due, whichever is earlier, whereas in case where deferred payment is made by the telecom operator in specified instalments, GST would be payable as and when the payments are due or made, whichever is earlier.
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