On July 11, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued a series of important circulars in alignment with the 53rd GST Council meeting‘s recommendations. These circulars address crucial issues such as the recovery of outstanding dues in the absence of an operational Appellate Tribunal, the taxability and valuation of corporate guarantees, the mechanism for refunding additional IGST paid, and the electronic filing of refund applications by Canteen Stores Department (CSD). This summary provides an overview of these circulars, highlighting their key provisions and implications for taxpayers.
1. Circular No. 224/18/2024 dated 11 July 2024
Clarification for recovery of outstanding dues, in cases wherein first appeal has been disposed of, till Appellate Tribunal comes into operation.
In case of the first appellate authority has confirmed the demand issued by the adjudicating authority, either partially or fully, the taxpayers cannot file appeal against the said appellate order at present as GST Appellate Tribunal is non operation yet. And therefore are not able to make the pre deposit under the provision of CGST Act 2017.
So, the tax officers are taking a view that there is no stay against recovery as per sub-section (9) of section 112 of CGST Act, as the pre-deposit cannot be made, to mitigate this issue, it is hereby clarified that in cases where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make the payment of the amount of pre-deposit as per section 112 (8) of CGST act, by
- Navigating to Services >> Ledgers>> Payment towards demand, from dashboard.
- Navigated to Electronic Liability Register (ELL) Part-II.
- Select the order against which payment is intended to be made and make the payment.
- The said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required at the time of filing appeal before the Appellate Tribunal.
- The taxpayer also needs to file an undertaking/ declaration with the jurisdictional proper officer that he will file appeal against the said order of the appellate authority before the Appellate Tribunal.
In case, the taxpayer does not make the payment of the amount equal to amount of pre- deposit or does not provide the undertaking/ declaration to the proper officer, then it will be presumed that taxpayer is not willing to file appeal against the order of the appellate authority and in such cases, recovery proceedings can be initiated as per the provisions of law.
In some cases, taxpayers have already paid amounts that were intended to have been paid towards a demand, through FORM GST DRC-03, In such cases, the said person can file an application in FORM GST DRC 03A, electronically on the common portal, and the amount so paid and intimated through the FORM GST DRC 03 shall be adjusted as if the said payment was made towards the said demand on the date of such intimation through FORM GST DRC 03.
2. Circular No. 225/19/2024- dated 11 July 2024
Clarification on various issues pertaining to taxability and valuation of supply of services of providing corporate guarantee between related persons.
Q.1 Whether, Sub-rule (2) of rule 28 of CGST Rules will apply to the corporate guarantees issued prior to insertion of the said sub-rule on 26th October 2023?
Ans. Prior to the insertion of the said sub-rule, i.e., before 26th October 2023, the valuation of service of providing corporate guarantee to any banking company or financial institution by a supplier to a related recipient, on behalf of the said recipient, was to be done as per the provisions of Rule 28 of CGST Rules, as it existed then.
In respect of supply of services of providing corporate guarantee between related persons, in respect of corporate guarantee issued or renewed before 26th October 2023, the valuation of the said supply is to be done in accordance with Rule 28, as it existed during that time.
Q.1 where intra-group corporate guarantees have been issued before 26th October 2023, which are still in force today, would they be liable to pay GST on “1% of the amount of such guarantee offered” on such guarantees?
Ans. In respect of corporate guarantee issued or renewed before 26th October 2023, the valuation of the said supply is to be done in accordance with Rule 28.
If the corporate guarantee is issued or renewed on or after 26th October 2023, then the valuation of the said supply will be required to be done as per Rule 28(2) of CGST Rules.
Q.3 where the corporate guarantee is provided for a particular amount, whereas the loan is only partly availed or not availed at all by the recipient, what will be the value of supply of corporate guarantee?
Ans. The value of supply of the service of providing a corporate guarantee will be calculated based on the amount guaranteed and will not be based on the amount of loan actually disbursed to the recipient of the corporate guarantee.
Q.4 whether the recipient would be eligible to avail full ITC (Input Tax Credit) even before total loan is disbursed?
Ans. The recipient of the service of providing corporate guarantee shall be eligible to avail the ITC, subject to other conditions specified in the Act and the Rules made thereunder irrespective of when the loan is actually disbursed to the recipient, and irrespective of the amount of loan actually disbursed.
Q.5 In the case of takeover of existing loans, since there is merely an assignment of an already issued corporate guarantee, whether GST would be applicable again? (in the context of Banking and Financial Institution).
Ans. The loan issued by the banking company/ financial institution is taken over by another banking company/ financial institution, the said activity of taking over of the loan does not fall under the service of providing corporate guarantee to any banking company or financial institution by a supplier to a recipient.
Therefore, in such cases, there will be no impact on GST, unless there is issuance of fresh corporate guarantee or there is a renewal of the existing corporate guarantee. However, if the takeover of the loan is followed/ accompanied by issuance of fresh corporate guarantee, then GST would be payable on the same.
Q.6 Where corporate guarantee is provided by more than one entity / co-guarantor, what is the amount on which GST is payable by each co-guarantor?
Ans. In cases where corporate guarantee is being provided by multiple related entities, the value of such services of providing corporate guarantee shall be the sum of the actual consideration paid/ payable to co-guarantors, if the said amount of total consideration is higher than one per cent of the amount of such guarantee offered. In cases where the sum of the actual consideration is less than one per cent of the amount of such guarantee offered, then GST shall be payable by each co-guarantor proportionately on one per cent of the amount guaranteed by them.
Q.7 Where intra-group corporate guarantee is issued, whether GST may be paid by the recipient under reverse charge, as in the absence of actual invoice and payment, the recipient entity may not be able to claim input tax credit of tax paid by the domestic guarantor?
Ans. In case of domestic corporates issue intra-group guarantees, GST is to be paid under forward charge mechanism, and invoice is to be issued by the supplier under Section 31 of CGST Act, 2017.
However, in cases where such guarantee is provided by the foreign/ overseas entity for a related entity located in India, then GST would be payable under reverse charge mechanism, by the recipient of service.
Q.8 Whether the discharge of tax liability on corporate guarantee @ 1% of such guarantee offered is to be done one time or on yearly basis or on monthly basis and when issued for a fixed term of say, five years or ten years as per tenure of the loan?
Ans. The value of supply of the service of providing corporate guarantee to a banking company or a financial institution on behalf of a related recipient shall be one per cent of the amount guaranteed per annum or the actual consideration, whichever is higher.
In cases where the corporate guarantee is provided for a period less than a year, say 6 months (half a year), then in those cases as well, the valuation may be done on proportionate basis for the said period.
If a corporate guarantee is issued, say for a period of one year and is renewed five times, for a period of one year each, then tax would be payable on one per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher, on the issue of such corporate guarantee in the first year as well as on every renewal in subsequent years.
Q.9 Whether the valuation in terms of Rule 28(2) of CGST Rules will apply to the export of the service of providing corporate guarantee between related persons?
The provisions of the said sub-rule will not apply in cases where the recipient of the services of providing corporate guarantee between related persons is located outside India. Accordingly, the provisions of the said sub-rule shall not apply to the export of the services of providing corporate guarantee between related persons.
Q.10 Circular No. 226/19/2024- dated 11 July 2024
Mechanism for refund of additional Integrated Tax (IGST) paid on account of upward revision in price of the goods subsequent to exports by way of Debit notes.
Ans. Exporter may file an application for refund of such additional IGST paid in FORM GST RFD-01 electronically on the common portal and such application for refunds would be processed by the jurisdictional GST officer of the concerned exporter.
i. Till the time such separate category for claiming refund of additional amount of IGST paid is developed on the common portal, such exporter(s) may claim refund under the category “Any other” with remarks “Refund of additional IGST paid on account of increase in price subsequent to export of goods” along with the relevant documents as prescribed in rule 89 (2) (bb).
ii. No such refund shall be paid if the amount claimed is less than one thousand rupees.
iii. The application for refund of additional IGST paid can be filed before the expiry of two years from the relevant date as section 54 (2) (a) of CGST Act. However, in cases, where the relevant date as per section 54 (2) (a) of CGST Act was before the date on which of rule 89 (1B) has come into force, such refund application can be filed before the expiry of a period of two years from the date on which the said sub-rule has come into force.
Q.11 Circular No. 227/21/2024- dated 11 July 2024
Processing of refund applications filed by Canteen Stores Department (CSD) – regarding
i. In order to enable CSD to file application for refund electronically, a new functionality has been made available on the common portal which allows CSD to apply for refund by filing an application electronically on the common portal.
ii. In cases where the refund is claimed of fifty per cent of the applicable central tax, integrated tax and Union territory tax paid by the said CSD on all inward supplies of goods received by it, application for refund in FORM GST RFD-10A electronically on the common portal.
iii. The CSD is required to apply for refund once in every quarter. The CSD will also be allowed to file the refund application for multiple quarters, clubbing multiple FYs,.
iv. CSD can file the application for refund of tax paid by it on inward supplies of goods or services or both, before the expiry of two years from the last day of the quarter in which such supply was received.
v. The proper officer shall process the refund claim filed by the CSD in a manner similar to the refund claims filed in FORM GST RFD-01 under the provisions of rule 89 of the rules.
vi. The proper officer shall ensure that the amount of refund sanctioned is not more than 50 % of the central tax, state tax, Union territory tax and integrated tax paid on the supplies received by CSD.
vii. It is also mentioned that the provisions of the Circular No. 60/34/2018-GST dated 04.09.2018 shall continue to apply for all refund applications filed manually before the amendments in CGST Rule.
Conclusion: The circulars issued by CBIC on July 11, 2024, offer critical clarifications and procedural guidance on various GST-related matters. From addressing the recovery of outstanding dues and the valuation of corporate guarantees to facilitating refunds of additional IGST and simplifying the refund process for CSD, these circulars aim to ensure compliance and ease of operations for taxpayers. Staying informed about these updates is essential for businesses to navigate the GST landscape effectively and leverage the benefits of these regulatory changes.
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Disclaimer: The information in this document is for educational purposes only and nothing conveyed or provided should be considered as legal, accounting or tax advice. User is advised to apply his/her analytical skills before implementing any or all the suggestions above. The suggestions are given, keeping in mind the present legal position.
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