The Ministry of Finance, Department of Revenue, has issued Circular No. 228/22/2024-GST to clarify the applicability of GST on specific services, following the recommendations of the 53rd GST Council meeting held on June 22, 2024. This circular addresses various issues, including exemptions for services provided by Indian Railways, transactions between Special Purpose Vehicles (SPVs) and the Ministry of Railways, statutory collections by RERA, incentives for digital payments, reinsurance services, and certain accommodation services. This article provides a detailed analysis of the key clarifications and their implications.
Detailed Analysis
- GST Exemption for Indian Railways’ Outward Supplies Based on the Ministry of Railways’ request and the 53rd GST Council’s recommendations, certain services provided by Indian Railways, such as platform ticket sales, retiring room facilities, cloak room services, and battery-operated car services, are exempt from GST. This exemption also applies to services between different zones/divisions of Indian Railways. The effective date for these exemptions is July 15, 2024, with a retrospective regularization from October 20, 2023, to July 14, 2024.
- GST Exemption for Transactions between SPVs and Indian Railways The circular exempts the supply of services by SPVs to Indian Railways, including the use of infrastructure built and owned by SPVs during the concession period and maintenance services provided by Indian Railways to SPVs. This exemption is regularized for the period from July 1, 2017, to July 14, 2024.
- GST on Statutory Collections by RERA Statutory collections made by the Real Estate Regulatory Authority (RERA) under the Real Estate (Regulation and Development) Act, 2016, are clarified to be exempt from GST. RERA, being a governmental authority, falls under the scope of entry No. 4 of notification No. 12/2017-CT(R) dated June 28, 2017.
- GST on Incentive Amounts in Digital Payment Ecosystem The circular clarifies that incentives shared by acquiring banks with other stakeholders in the digital payment ecosystem, under the notified Incentive Scheme for RuPay Debit Cards and low-value BHIM-UPI transactions, are in the nature of a subsidy and are thus not taxable. This clarification extends to the distribution of incentives decided by the National Payments Corporation of India (NPCI).
- GST Liability on Reinsurance of Specified Insurance Schemes Reinsurance services for certain exempt general and life insurance schemes are regularized for the period from July 1, 2017, to January 24, 2018. This regularization aligns with the exemption provided from January 25, 2018, onwards.
- GST Liability on Reinsurance of Government-Sponsored Insurance Schemes Reinsurance services for insurance schemes fully paid by the government are exempt from GST for the period from July 1, 2017, to July 26, 2018. This aligns with the prospective exemption provided from July 27, 2018.
- Applicability of GST on Retrocession Services The term ‘reinsurance’ as mentioned in notification No. 12/2017-CT(R) is clarified to include ‘retrocession’ services. This clarification follows the definition provided in the IRDAI (Re-insurance) Regulations, 2018.
- GST on Certain Accommodation Services Accommodation services provided at a value less than or equal to twenty thousand rupees per person per month and for a minimum continuous period of ninety days are exempt from GST. This includes hostel accommodations and service apartments/hotels booked for longer periods, effective from July 15, 2024.
Conclusion
Circular No. 228/22/2024-GST provides significant clarifications and exemptions on the applicability of GST for various services, following the recommendations of the 53rd GST Council meeting. These clarifications aim to address practical difficulties faced by stakeholders and ensure compliance with GST regulations. Businesses and entities affected by these changes should review the circular in detail to understand the implications and ensure proper implementation of these GST provisions.
F. No. CBIC-190354/94/2024-TO(TRU-II)-CBEC
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
North Block, New Delhi
Circular No. 228/22/2024-GST Dated the 15th July, 2024
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioners of Central Tax (All) / The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Subject: Clarifications regarding applicability of GST on certain services-reg.
In exercise of the powers conferred under section 168(1) of the Central Goods and Services Tax Act, 2017 and on the recommendations of the 53rd GST Council in its meeting held on 22nd June, 2024, at New Delhi, clarifications, related to the following issues are being issued through this circular:
i. GST exemption on the outward supplies made by the Ministry of Railways (Indian Railways).
ii. GST exemption on the transactions between Special Purpose Vehicles (SPVs) and Ministry of Railways (Indian Railways).
iii. Applicability of GST on the statutory collections made by the Real Estate Regulatory Authority (RERA) in accordance with the Real Estate (Regulation and Development) Act, 2016.
iv. Applicability of GST on the incentive amount shared by acquiring bank with other stakeholders in the digital payment ecosystem under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BRIM-UPI transactions.
v. GST liability on the reinsurance of specified general and life insurance schemes.
vi. GST liability on the reinsurance of insurance schemes for which total premium is paid by the Government.
vii. Applicability of GST on retrocession services.
viii. GST liability on certain accommodation services.
2. GST exemption on the outward supplies made by Ministry of Railways (Indian Railways).
2.1 Based on the request of Ministry of Railways (Indian Railways) and recommendations of the 52nd GST Council meeting held on 07.10.2023, all supplies of goods and services made by Ministry of Railways (Indian Railways) were brought under Forward Charge Mechanism and consequently exemptions that were available to Ministry of Railways (Indian Railways) were withdrawn vide notification No.13/2023-CT(R) dated 19.10.2023 w.e.f. 20.10.2023.
2.2 However, Ministry of Railways had brought out certain difficulties in implementation of the abovesaid notification and matter was examined by the 53rd GST Council in its meeting held on 22nd June, 2024.
2.3 GST Council has recommended to exempt the services provided by Ministry of Railways (Indian Railways) to general public viz., sale of platform tickets, facility of retiring rooms/waiting rooms, cloak room services and battery-operated car services. GST council has also recommended to exempt the supply of services made between various zones/ divisions under Ministry of Railways (Indian Railways). Notification No. 04/2024-CT(R) dated 12.07.2024 has been issued in this regard and effective date of implementation of the said notification is 15.07.2024.
2.4 The GST Council in its 53rd meeting has also recommended to regularize GST liability for the intervening period i.e. from 20.10.2023 to 14.07.2024 on ‘as is where is’ basis.
2.5 Therefore, as recommended by the 53rd GST Council, the GST on the services provided by Ministry of Railways (Indian Railways) to general public viz., sale of platform tickets, facility of retiring rooms, cloak room services and battery-operated car services and supply of services made between various zones/ divisions under Ministry of Railways (Indian Railways) is hereby regularized on ‘as is where is’ basis from 20.10.2023 to 14.07.2024.
3. GST exemption on the transactions between Special Purpose Vehicles (SPVs) and Ministry of Railways (Indian Railways).
3.1 Based on the recommendations of the 48th GST Council meeting held on 17.12.2022, it was clarified to Ministry of Railways (Indian Railways) that supply of services by SPVs to Ministry of Railways (Indian Railways) by way of allowing Indian Railways to use infrastructure built and owned by them during the concession period against consideration and maintenance services supplied by Ministry of Railways (Indian Railways) to SPVs are taxable.
3.2 However, Ministry of Railways had brought out certain difficulties faced in implementation of the said recommendations of the 48th GST Council and matter was examined by the 53rd GST Council in its meeting held on 22nd June, 2024.
3.3 GST Council has recommended to exempt the supply of service by SPVs to Ministry of Railways (Indian Railways) by way of allowing Indian Railways to use the infrastructure built and owned by SPVs during the concession period against consideration and maintenance services supplied by Ministry of Railways (Indian Railways) to SPVs from GST. Notification No. 04/2024-CT(R) dated 12.07.2024 has been issued in this regard.
3.4 The GST Council in its 53rd meeting has also recommended to regularize the past period in respect of such transactions for the period from 01.07.2017 to 14.07.2024 on ‘as is where is’ basis.
3.5 Thus, as recommended by the 53rd GST Council, GST on the supply of services by SPVs to Ministry of Railways (Indian Railways) by way of allowing it to use infrastructure built and owned by them during the concession period against consideration and maintenance services supplied by Ministry of Railways (Indian Railways) to SPVs in relation to such use of infrastructure built and owned by SPVs during the concession period against consideration is hereby regularized for the period from 01.07.2017 to 14.07.2024 on ‘as is where is’ basis.
4. Applicability of GST on the statutory collections made by the Real Estate Regulatory Authority (RERA) in accordance with the Real Estate (Regulation and Development) Act, 2016.
4.1 Representation has been received requesting for clarification on whether GST is applicable on the statutory collections made by the Real Estate Regulatory Authority (RERA).
4.2 RERA is constituted under the Real Estate (Regulation and Development) Act, 2016. RERA performs function of regulating the real estate development and construction of the building entrusted to them which fall under Entry No.1 and 2 of the Twelfth Schedule of the Indian Constitution.
4.3 RERA is a ‘governmental authority’ as per the definition in the exemption notification No.12/2017- CT(R) dated 28.06.2017 and is covered under the scope of entry at Si. No. 4 of notification No.12/2017- CT(R) dated 28.06.2017.
4.4 GST Council in its 53rd meeting has recommended to clarify that statutory collections made by RERA are covered under the SI. No. 4 of notification No.12/2017- CT(R) dated 28.06.2017.
4.5 Thus, as recommended by the 53rd GST Council, it is hereby clarified that statutory collections made by RERA are covered under the SI. No. 4 of notification No.12/2017- CT(R) dated 28.06.2017.
5. Applicability of GST on the incentive amount shared by acquiring banks with other stakeholders in the digital payment ecosystem under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
5.1 Representation has been received requesting for clarification on whether GST is applicable on the incentive amount shared by acquiring banks with other stakeholders in the digital payment ecosystem under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
5.2 Under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions, the Ministry of Electronics and Information Technology (MeitY) pays the acquiring banks an incentive as a percentage of the value of the transactions up to two thousand rupees. Applicability of GST on the incentive paid by the MeitY to acquiring banks under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions was examined in the 48th GST Council meeting held on 17th December, 2022 and based on the recommendations of the GST Council meeting, it was clarified by Circular No. 190/02/2023- GST dated 13th January, 2023, that incentives paid by MeitY to acquiring banks under the said scheme are in the nature of subsidy and thus, not taxable.
5.3 The Gazette Notifications dated 17th December, 2021 and 14th January, 2023 issued by MeitY state that the incentives will be shared by the acquiring banks with other payment system participants and the payment system operator, in the proportion and manner decided by the National Payments Corporation of India (NPCI) in consultation with the participating banks. MeitY pays the incentive to the acquiring bank and it is further shared by the acquiring bank with the issuer bank. Issuer bank further shares the incentive with the Payer Payment Service Provider (PSP), which are typically banks, and the UPI app.
5.4 The share of incentive paid by the acquiring bank to the issuer bank and further shared by the issuer bank to the Payer PSPs and the UPI app are decided by the NPCI in consultation with participating banks. Payer PSPs may choose to further share this incentive with Third Party App Providers (TPAP). However, the proportion of the incentive shared by Payer PSPs with TPAPs is not being decided by NPCI in consultation with the participating banks for Financial Years 202122 and 2022-23 and was determined by the business agreement between the Payer PSPs and TPAP.
5.5 GST Council in its 53rd meeting held on 22nd June, 2024 has recommended to clarify that further sharing of the incentive amount by the acquiring bank with other stakeholders, up to the point where the incentive is distributed in the proportion and manner as decided by NPCI in consultation with the participating banks under the notified Incentive Scheme, is in the nature of a subsidy and thus, not taxable.
5.6 Thus, as recommended by the 53rd GST Council, it is hereby clarified that further sharing of the incentive amount by the acquiring bank with other stakeholders, up to the point where the incentive is distributed in the proportion and manner as decided by NPCI in consultation with the participating banks under the notified Incentive Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions, is in the nature of a subsidy and is thus, not taxable.
6. GST liability on the reinsurance of specified general and life insurance schemes.
6.1 Representations have been received to either exempt or regularize the GST liability, for the period from 01.07.2017 to 24.01.2018, on reinsurance of specified general insurance and life insurance schemes, which are exempt from GST.
6.2 Certain specified general insurance and life insurance schemes are exempt from GST under SI. Nos. 35 and 36 of notification No.12/2017- CT(R) dated 28.06.2017. Vide entry at SI. No. 36A of the said notification, reinsurance of the aforesaid exempted insurance schemes has also been exempted w.e.f. 25.01.2018.
6.3 GST Council in its 53rd meeting held on 22nd June, 2024 has recommended to regularize the GST liability on such reinsurance of exempt general insurance and life insurance schemes for the past period, i.e. from 01.07.2017 to 24.01.2018, on ‘as is where is’ basis.
6.4 Thus, as recommended by the GST Council, GST liability on the services by way of reinsurance of the insurance schemes specified in SI. Nos. 35 and 36 of notification No.12/2017- CT(R) dated 28.06.2017 is regularized for the period from 01.07.2017 to 24.01.2018 on ‘as is where is’ basis.
7. GST liability on the reinsurance of insurance schemes for which total premium is paid by the Government.
7.1 Representations have been received to exempt GST, for the period from 01.07.2017 to 26.07.2018, on reinsurance of those insurance schemes for which total premium is paid by the Government.
7.2 Services provided to the Central Government, State Government, or Union Territory under any insurance scheme for which total premium is paid by the Central Government, State Government, or Union Territory are exempt from GST under SI. No. 40 of notification No.12/2017- CT(R) dated 28.06.2017. Vide entry at Si. No. 36A of the said notification, re-insurance of the aforesaid insurance schemes has been prospectively exempted w.e.f. 27.07.2018.
7.3 GST Council in its 53rd meeting held on 22nd June, 2024 has recommended to regularize the GST liability on such reinsurance of Government sponsored insurance schemes for the past period, i.e. from 01.07.2017 to 26.07.2018, on ‘as is where is’ basis.
7.4 Thus, as recommended by the GST Council, GST liability on the services by way of reinsurance of insurance services covered under Sl. No. 40 of notification No.12/2017- CT(R) dated 28.06.2017 is regularized for the period from 01.07.2017 to 26.07.2018 on ‘as is where is’ basis.
8. Applicability of GST on retrocession services.
8.1 Representations have been received to clarify whether the term ‘reinsurance’ as mentioned in Sl. No. 36A of notification No.12/2017- CT(R) dated 28.06.2017 includes ‘retrocession’.
8.2 The matter was placed before the GST Council in its 53rd meeting held on 22nd June, 2024. As per the IRDAI (Re-insurance) Regulations, 2018, ‘Retrocession’ means a re-insurance transaction whereby a part of assumed reinsured risk is further ceded to another Indian Insurer or a CBR (Cross Border Re-insurer). Accordingly, the GST Council has recommended to clarify that reinsurance includes retrocession services.
8.3 Thus, as recommended by the GST Council, it is hereby clarified that the term `reinsurance’ as mentioned in SI. No. 36A of notification No.12/2017- CT(R) dated 28.06.2017 includes ‘retrocession’ services.
9. GST liability on certain accommodation services.
9.1 Representations have been received requesting to clarify whether service by way of hostel accommodation, service apartments/hotels booked for longer period is a service of renting of residential dwelling for use as residence and exempted under entry at Sl. No. 12 of notification No.12/2017- CT(R) dated 28.06.2017. Requests have also been received for GST exemption on hostels for poor and middle-class students run by charitable trusts.
9.2 The matter was placed before the GST Council in its 53rd meeting held on 22nd June, 2024 and the GST Council recommended to exempt the supply of accommodation services having value of supply less than or equal to twenty thousand rupees per person per month provided that the accommodation service is supplied for a minimum continuous period of ninety days. The same has been exempted w.e.f. 15.07.2024 vide notification No. 4/2024-CT(R) dated 12.07.2024.
9.3 In its 53rd meeting, the GST Council further recommended extending the benefit for past cases provided that value of supply of accommodation services supplied was less than or equal to twenty thousand rupees per person per month and that the accommodation service was supplied for a minimum continuous period of ninety days.
9.4 Thus, as recommended by the GST Council, GST liability on the supply of accommodation services is regularized on ‘as is where is’ basis for the period from 01.07.2017 to 14.07.2024 where value of supply of the accommodation service is less than or equal to twenty thousand rupees per person per month and the said accommodation service was supplied for a minimum continuous period of ninety days.
10. Difficulties, if any, in the implementation of this circular may be brought to the notice of the Board.
Yours faithfully,
(Limatula Yaden)
Joint Secretary, TRU
