On the 19th of October, 2023, the Ministry of Finance, Department of Revenue, Government of India, issued Notification No. 12/2023-Central Tax (Rate). This notification brings significant amendments to the taxation framework governed by the Central Goods and Services Tax Act, 2017. In this article, we will provide an in-depth analysis of these amendments and their implications.
Detailed Analysis:
1. Amendments in Serial Numbers 8 and 10: Changes have been made to serial numbers 8 and 10, particularly related to input services in the same line of business charging central tax. If the supplier of an input service charges central tax at a rate higher than 2.5%, the credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5% will not be allowed. This amendment impacts the calculation of input tax credit in these scenarios.
2. Amendment in Serial Number 34: Serial number 34 is modified to change the wording in item (iv) from “totalisator or a license to” to “licensing a.” Additionally, item (v) and the entries relating to it have been omitted. This amendment affects the classification of services in this category.
3. Scope and Impact: The amendments primarily affect the calculation of input tax credit and the classification of certain services. The conditions for availing input tax credit are now more specific, especially when the supplier of input service charges a higher central tax rate in the same line of business.
4. Effective Date: These tax changes will be in effect from the 20th of October, 2023. It is essential for businesses and taxpayers to understand and comply with the new tax regulations to ensure proper adherence and avoid potential legal or financial complications.
Conclusion:
Notification No. 12/2023-Central Tax (Rate) issued by the Ministry of Finance, Department of Revenue, Government of India, introduces significant amendments to the taxation framework governed by the Central Goods and Services Tax Act, 2017. These amendments impact the calculation of input tax credit when the supplier of an input service charges central tax at a rate higher than 2.5% in the same line of business.
Additionally, changes in the classification of services in serial number 34 indicate the government’s intent to streamline the categorization of services provided. Effective from the 20th of October, 2023, businesses and taxpayers must familiarize themselves with these new tax regulations and ensure compliance to avoid potential legal and financial repercussions. Staying informed is key to successful adaptation and adherence to the updated tax provisions.
Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 12/2023- Central Tax (Rate) | Dated: 19th October, 2023
G.S.R. 759(E).— In exercise of the powers conferred by sub-section (1), sub-section (3) and sub-section (4) of section 9, sub-section (1) of section 11, sub-section (5) of section 15, sub-section (1) of section 16 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 11/2017-Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 690(E), dated the 28th June, 2017, namely:-
In the said notification, –
(A) in the Table,
(i) against serial number 8, in column (3), in item (vi), after the condition in column (5) against the rate of 2.5 percent, the following condition shall be inserted, namely:-
“Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.
Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs. 1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at the rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs. 48.”;
(ii) against serial number 10, in column (3), in item (i), after the condition in column (5) against the rate of 2.5 percent, , the following condition shall be inserted, namely:-
“Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.
Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs. 1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at the rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs. 48.”;
(iii) against serial number 34, –
(a) in column (3), in item (iv), for the words “totalisator or a license to” , the words “licensing a” shall be substituted;
(b) in column (3), item (v) and the entries relating thereto shall be omitted;
(B) in the Annexure: Scheme of Classification of Services,-
(i) serial number 696 and the entries relating thereto shall be omitted;
(ii) serial number 698 and the entries relating thereto shall be omitted.
2. This notification shall come into force with effect from the 20th day of October, 2023.
[F.No. CBIC-190354/195/2023-TO (TRU-II)-CBEC]
(Rajeev Ranjan)
Under Secretary to the Government of India
Note: -The principal notification number 11/2017 -Central Tax (Rate), dated the 28th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 690 (E), dated the 28th June, 2017 and was last amended vide notification number 06/2023-Central Tax (Rate), dated the 26th July, 2023 published in the Gazette of India, Extraordinary, Part II , Section 3 , Sub-section (i) vide number G.S.R. 537(E), dated the 26th July, 2023.
