On the 19th of October, 2023, the Ministry of Finance, Department of Revenue, Government of India, released Notification No. 12/2023- Union Territory Tax (Rate). This notification brings forth significant amendments to Union Territory tax rates, specifically focusing on the application of taxes in cases of input services in the same line of business. This article aims to provide a comprehensive analysis of these changes, their implications, and illustrative examples to facilitate a better understanding.
Detailed Analysis:
1. Amendments to Serial Number 8: The notification introduces alterations to the tax rate conditions for services related to transportation by motor cabs. A new provision restricts the input tax credit if the supplier of an input service in the same line of business charges Union Territory tax at a rate higher than 2.5%. Tax credit can only be claimed on the input service in the same line of business to the extent of tax paid or payable at the rate of 2.5%. The provision is elucidated through an illustration that emphasizes the credit limitation in cases of varying tax rates.
2. Amendments to Serial Number 10: These amendments are parallel to those in serial number 8 and relate to the hiring of motor cabs for transportation services. The condition states that if the supplier of an input service in the same line of business charges Union Territory tax at a rate higher than 2.5%, the recipient can only claim a credit of input tax equivalent to the tax paid or payable at the rate of 2.5%. An illustrative example is included for clarity.
3. Amendments to Serial Number 34: In this section, two significant changes are introduced. Item (iv) replaces the phrase “totalisator or a license to” with “licensing a.” Furthermore, item (v) and the associated entries are omitted, signaling a substantial shift in the application of tax rates for these services.
Conclusion:
Notification No. 12/2023- Union Territory Tax (Rate) brings crucial amendments to tax rate conditions, primarily impacting services involving the hiring of motor cabs for transportation. The key highlight is the introduction of a provision that limits the input tax credit for services provided by suppliers charging Union Territory tax rates higher than 2.5%. This alteration is intended to standardize tax rates, ensuring they align with the government’s objectives in the public interest.
To help taxpayers grasp the practical implications of these changes, the notification includes illustrative examples. These examples elucidate how the revised conditions affect the calculation of tax credits, providing clarity and guidance to taxpayers, businesses, and service providers.
Effective from the 20th of October, 2023, these changes necessitate thorough understanding and compliance from both service providers and recipients. Adjusting tax calculations and credit claims in accordance with these new provisions is essential to prevent discrepancies and ensure adherence to the law.
These amendments reflect the government’s commitment to enhancing tax rate transparency and fairness. It’s crucial for businesses and individuals involved in the specified services to familiarize themselves with these regulatory changes and adapt their practices accordingly. This will help maintain compliance and avoid potential consequences associated with non-compliance.
Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 12/2023- Union Territory Tax (Rate) | Dated : 19th October, 2023
G.S.R.761(E).-In exercise of the powers conferred by sub-sections (1), (3) and (4) of section 7, sub-section (1) of section 8, clause (iv), clause (v) and clause (xxvii) of section 21 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017), read with 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 the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, 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-Union Territory Tax (Rate),dated the 28thJune, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 702(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 Union Territory 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’ Union Territory tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ Union Territory 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 Union Territory 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’ Union Territory tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ Union Territory 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. This notification shall come into force with effect from the 20th day of October, 2023.
[F.No. CBIC-1 90354/1 95/2023-TO (TRU-I I)-CBEC]
(Rajeev Ranjan)
Under Secretary to the Government of India
Note: -The principal Notification Number. 11/2017-Union Territory Tax (Rate),dated the 28thJune, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) ,vide number G.S.R. 702 (E), dated the 28th June, 2017 and was last amended vide notification number 06/2023-Union 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. 539(E), dated the 26th July,
