In light of the recommendations made during the 43rd GST Council Meeting, the Government has issued 7 Circulars on 17th June 2021 providing clarifications on the applicability of GST, GST rate etc on various services. The clarifications are tabulated below for the readers:
|Circular No 149/05/2021-GST dated 17 June 2021||Whether serving of food in schools under Mid-Day Meals Scheme would be exempt, if such supplies are funded by government grants and/or corporate donations?||Analysis –
As per Entry No 66 (b)(ii) of Notification No 12/ 2017—Central Tax (Rate) dated 28 June 2017 (‘exemption notification’)- “Services provided to an educational institution, by way of catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory” is exempt.
Further, Anganwadi is covered under the definition of an educational institution as a pre-school.
Services provided to an educational institution by way of serving food (catering including mid-day meals) is EXEMPT from levy of GST irrespective of its funding from government grants or corporate donations.
|Circular No 150/06/2021-GST dated 17 June 2021||Applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity payments).||Analysis –
As per Entry No 23 of exemption notification, “Service by way of access to a road or a bridge on payment of toll” is exempt.
Further, as per Entry No 23A of exemption notification, “Service by way of access to a road or a bridge on payment of annuity” is exempt.
Thus, Entry 23 and 23A exempt service of access to road or bridge, whether the consideration is in the form of toll or annuity payment (SAC head 9967).
Services by way of construction of road fall under SAC head 9954. Since Entry 23A specifically covers only SAC head 9967, it is clear that irrespective of the mode of payment (i.e. upfront or annuity), services by way of construction of the road (covered under SAC head 9954) does not fall under entry 23A.
Entry 23A of exemption notification DOES NOT EXEMPT GST on annuity i.e. deferred payments for construction of roads.
|Circular No 151/07/2021-GST dated 17 June 2021||GST on supply of various services by Central and State Board (such as National Board of Examination (‘NBE’)) – Clarification sought on the taxability of various services supplied by Central and State Board such as NBE.
Services include entrance exam for admission to education institution on a charge of fee, input services for conduct of examination, accreditation of educational institutions or professionals.
According to Explanation 3(iv) of exemption notification – “Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students.” Thus, NBE will be treated as an educational institution to the extent of conduct of examination to students.
As per Entry No 66 of exemption notification, the following services by education institution are exempt –
“Services provided –
(a) by an educational institution to its students, faculty and staff.
(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of the entrance fee.”
Further, Entry No 66 also exempts services provided to an educational institution relating to admission to, or conduct of examination, by such institution.
1. Services by Central or State Board including NBE, by way of conduct of examination for students is EXEMPT under Entry No 66(aa) of the exemption notification. Hence, GST shall not apply on the fee charged by Board for the conduct of such exams.
2. Input services provided to such boards in relation to admission to or conduction of examination is EXEMPT under Entry No 66(b)(iv) of the exemption notification. Exampled of input services include – online testing service, result publication, the printing of examination notification, admit card or question papers etc.
3. GST @ 18% applicable to other services provided by such boards such as providing accreditation to an institution or to a professional.
|Circular No 152/08/2021-GST dated 17 June 2021||Whether services provided to a government entity, in relation to construction such as of a Ropeway are eligible for a concessional rate of 12% under Entry No 3(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28 June 20177?||Analysis –
Under Entry No 3(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017 (refer to original notification), 12% rate is applicable on –
“Composite supply of works contract provided to Central/ state government, local authority, government authority, government entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;”
Further, civil constructions, such as ropeway 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.
Works contract service provided by way of construction such as of ropeway shall fall under entry at serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017 and attract GST at the rate of 18%.
|Circular No 153/09/2021-GST dated 17 June 2021||Question 1 – Whether composite supply of service by way of milling of wheat into wheat flour, along with fortification, by any person to a State Government for its distribution under Public Distribution System (‘PDS’) is eligible for exemption under Entry No. 3A of exemption notification?
Question 2 – What is the GST rate on such milling if it does not fall in said Entry No. 3A of exemption notification?
Entry No 3A of exemption notification exempts – “Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or governmental authority or a Government Entity 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.”
Answer to Question 1 –
PDS specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution.
Thus, composite supply of milling of wheat and fortification thereof 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.
The value of goods needs to be ascertained on a case-to-case basis.
Answer to Question 2 –
If the supply of service by way of milling of wheat into flour or of paddy into rice is not exempt under Entry 3A above, due to value of goods exceeding 25%, GST rate applicable will be 5%, if such supply is made to a registered person.
|Circular No 154/10/2021-GST dated 17 June 2021||GST on service supplied by State government to their undertakings of PSUs by way of guaranteeing the loan taken by them||Analysis –
Entry No 34A of exemption notification exempts the service – “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.”
Guaranteeing of loans by Central or State Government for their undertaking or PSUs
is specifically exempt under said Entry No 34A of the exemption notification.
|Circular No 155/11/2021-GST dated 17 June 2021||GST rate on laterals/parts of sprinklers or drip irrigation system when supplied separately i.e. not along with entire sprinklers or drip irrigation system.||Analysis –
GST rate on sprinklers or drip irrigation system and their laterals/ parts is specified at Serial No 195B under Schedule II of Notification No 1/2017-Central Tax (Rate) dated 28th June 2017 (inserted vide Notification No 6/2018-Central Tax (Rate) dated 25 January 2018) –
The entry was inserted with the intention 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
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% (6% CGST and SGST each), even if supplied separately.
Any other part of general use, not covered by SAC head 8424, will be subject to GST at rates applicable to the respective head.
Disclaimer: The above article is based on the information provided in the tax laws, tax rules, various tax platforms, the relevant circulars and notifications and the author’s personal view of the tax law. Please refer to the latest law and consult the author before forming an opinion basis the information provided above as tax laws are subject to frequent changes. The author is not responsible for any issues arising as a result of opinion based on the above article without consultation.
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