Various circulars have been issued by the CBIC today to in line with the recommendations of the 45th GST Council meeting. Synopsis of the same is as follows:
Clarification has been provided on doubts related to scope of “intermediary” as per Sec 2(13) of IGST Act. Primary requirements for the concept of intermediary services have been listed down which are as follows:
- There should be minimum of 3 parties
- There should be 2 distinct supplies – Main supply between 2 principals and an ancillary supply of intermediary services
- Intermediary should have a character of an agent, broker or any other similar person
- Intermediary does not include a person who supplies such goods or services or both or securities on his own account
- Sub-contracting for a service is not an intermediary service
Certain illustrations have been provided in the said circular to explain the scope of intermediary services. However, caution has been made to examine the facts of each case and the terms of contract to establish existence of intermediary services in a given case.
Certain issues have been clarified which are summarised below:
- W.e.f. 01.01.2021, in case of debit notes, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of the CGST Act.
- For availment of ITC on or after 01.01.2021, in respect of debit notes issued
either prior to or after 01.01.2021, the eligibility for availment of ITC will be governed by the amended provision of section 16(4), whereas any ITC availed
prior to 01.01.2021, in respect of debit notes, shall be governed under the provisions of section 16(4), as it existed before the said amendment on 01.2021.
- There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules (E-invoice).
- Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) from availment of refund of accumulated ITC.
Clarification relating to export of services-condition (v) of section 2(6) of the IGST Act 2017 has been provided.
- Clause (v) of sub-section (6) of section 2 of IGST Act, which defines “export of
services”, places a condition that the services provided by one establishment of a person to another establishment of the same person, considered as establishments of distinct persons as per Explanation 1 of section 8 of IGST Act, cannot be treated as export.
- If a foreign company is conducting business in India through a branch or an agency or a representational office, then the said branch or agency or representational office of the foreign company, located in India, shall be treated as establishment of the said foreign company in India.
- A company incorporated in India and a foreign company incorporated outside India, are separate “person” under the provisions of CGST Act and accordingly, are separate legal entities. Accordingly, these two separate persons would not be considered as “merely establishments of a distinct person in accordance with Explanation 1 in section 8” and hence the benefit of export of service would apply provided other conditions are fulfilled.