Synopsis of GST Circulars issued by CBIC on 3rd August 2022

Synopsis of Circulars issued by CBIC on Aug 3, 2022 based on discussions in the 47th GST Council meeting w.r.t. services

Certain issues on taxability of services on which representations had been received were examined by the GST Council in its 47th meeting held on 28th and 29th June, 2022. Pursuant to the said meeting and discussions held, issue-wise clarifications as recommended by the GST Council has been issued. These are as follows:

1. Rate of GST applicable on supply of ice-cream by ice-cream parlors during the period from 01.07.2017 to 05.10.2021

It has been clarified that past cases of payment of GST on supply of ice-cream by ice-cream parlors @ 5% without ITC shall be treated as fully GST paid to avoid unnecessary litigation. Since the decision is only to regularize the past practice, no refund of GST shall be allowed, if already paid at 18%. With effect from 6.10.2021, the ice Cream parlors are required to pay GST on supply of ice-cream at the rate of 18% with ITC. 

2. Applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions

It has been clarified that the amount or fee charged from prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/ admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is exempt from GST.

3. Whether storage or warehousing of cotton in baled or ginned form is covered under entry 24B of Notification No. 12/2017-Central Tax (Rate) which exempted services by way of storage and warehousing of raw vegetable fibres such as cotton before 18.07.2022

It has been clarified that service by way of storage or warehousing of cotton in ginned and or baled form was covered under entry 24B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 in the category of raw vegetable fibres such as cotton. It may however be noted that this exemption has been withdrawn w.e.f. 18.07.2022

4. Whether exemption under Sl. No. 9B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 covers services associated with transit cargo both to and from Nepal and Bhutan

Representations had been received by the GST Council regarding applicability of GST on transportation of empty containers returning from Nepal and Bhutan after delivery of transit cargo, to India. It has been clarified that exemption under Sl. No. 9B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 covers services associated with transit cargo both to and from Nepal and Bhutan.

5. Applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government departments

It has been clarified that since the exemption is only for such services which are required to be carried out by a local authority under articles 243W & 243G of the Constitution (listed in the 11th and 12th Schedule), hence if such services are procured by Indian Army or any other Government Ministry/ Department which does not perform any functions as such, the same are not eligible for exemption.

6. Whether the activity of selling of space for advertisement in souvenirs is eligible for concessional rate of 5%

It has been clarified that sale of space for advertisement in souvenir book attracts GST @ 5%. 

7. Taxability and applicable rate of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time

It has been clarified that such renting of trucks and other freight vehicles with driver for a period of time is a service of renting of transport vehicles with operator falling under Heading 9966 and not service of transportation of goods by road. This being so, it is not eligible for exemption. On such rental services of goods carriages where the cost of fuel is included in the consideration charged from the recipient of service, GST rate has been reduced from 18% to 12% with effect from 18.07.2022. Prior to 18.07.2022, it attracted GST at the rate of 18%.

8. Whether location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land constitute part of the lease premium or of upfront amount charged for long term lease of land and are eligible for the same tax treatment

It has been clarified that location charges or preferential location charges (PLC) paid upfront in addition to the lease premium for long term lease of land constitutes part of upfront amount charged for long term lease of land and is eligible for the same tax treatment, and thus eligible for exemption under Sl. No. 41 of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017

9. Applicability of GST on payment of honorarium to the Guest Anchors

It has been clarified that services provided by the guest anchors in lieu of honorarium attracts GST liability.

10. Whether the additional toll fees collected in the form of higher toll charges from vehicles not having fastag is exempt from GST

It has been clarified that additional fee collected in the form of higher toll charges from vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and may be given the same treatment as given to toll charges.

11. Applicability of GST on services in form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF)

It has been clarified that services by way of IVF are also covered under the definition of health care services for the purpose of exemption notification.

12. Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST

It has been clarified that sale of developed land is also sale of land and accordingly does not attract GST.

13. Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers

It has been clarified that where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966 (Renting of motor vehicle designed to carry passengers) and the body corporate shall be liable to pay GST on the same under RCM. However, where the body corporate avails the passenger transport service for specific journeys or voyages and does not take vehicle on rent for any particular period of time, the service would fall under Heading 9964 (Transportation of passengers) and the body corporate shall not be liable to pay GST on the same under RCM.

14. Whether hiring of vehicles by firms for transportation of their employees to and from work is exempt under Sr. No. 15(b) of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 transport of passengers by non-air conditioned contract carriage

It has been clarified that the exemption shall not be applicable where contract carriage is hired for a period of time, during which the contract carriage is at the disposal of the service recipient and the recipient is thus free to decide the manner of usage (route and schedule) subject to conditions of agreement entered into with the service provider. Thus the activity of hiring of vehicles by firms for transportation of their employees to and from work by non-air conditioned contract carriage shall be taxable.

15. Whether supply of service of construction, supply, installation and commissioning of dairy plant on turn-key basis constitutes a composite supply of works contract service and is eligible for concessional rate of GST prior to 18.07.2022

It has been clarified that a contract for construction, installation and commissioning of a dairy plant constitutes supply of works contract. There is no doubt that dairy plant which comes into existence as a result of such contracts is an immovable property. It has also been clarified that such works contract services were eligible for concessional rate of 12% GST prior to 18.07.2022. With effect from 18.07.2022, such works contract services would attract GST at the rate of 18% in view of amendments carried out in GST rates.

16. Applicability of GST on tickets of private ferry used for passenger transportation

It has been clarified that the exemption in GST would apply to tickets purchased for transportation from one point to another irrespective of whether the ferry is owned or operated by a private sector enterprise or by a PSU/ government. It has been further clarified that, the expression ‘public transport’ used in the exemption notification only means that the transport should be open to public. It can be privately or publicly owned. Only exclusion is on transportation which is predominantly for tourism, such as services which may combine with transportation, sightseeing, food and beverages, music, accommodation such as in shikara, cruise etc.

The abovementioned clarifications have been covered in Circular No. 177/09/2022-TRU dt. 3rd August, 2022.

17. Applicability of GST on Liquidated damages

It has been clarified that where the amount paid as ‘liquidated damages’ is an amount paid only to compensate for injury, loss or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied, by the aggrieved party receiving the liquidated damages, to refrain from or tolerate an act or to do anything for the party paying the liquidated damages, in such cases liquidated damages are mere a flow of money from the party who causes breach of the contract to the party who suffers loss or damage due to such breach, hence such payments do not constitute consideration for a supply and are not taxable.

18. Applicability of GST on Compensation for cancellation of coal blocks

It has been clarified that the compensation paid for cancellation of coal blocks pursuant to the order of the Supreme Court was not taxable.

19. Applicability of GST on Cheque dishonor fine/ penalty

It has been clarified that cheque dishonor fine or penalty is not a consideration for any service and not taxable.

20. Applicability of GST on penalty imposed for violation of laws

It has been clarified that fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to GST.

21. Applicability of GST on forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period

It has been clarified that such amounts recovered by the employer are not taxable.

22. Applicability of GST on compensation for not collecting toll charges

During the period from 8.11.2016 to 1.12.2016, the service of access to a road or bridge continued to be provided without collection of toll from users, the consideration being compensated later by the project authority. It has been clarified that for this period, for the same service, although consideration came from a person other than the actual user of service does not mean that the service has changed, hence there is no applicability of GST on such compensation.

23. Applicability of GST on late payment surcharge or fee

It has been clarified that even if this service is described as a service of tolerating the act of late payment, it is an ancillary supply naturally bundled and supplied in conjunction with the principal supply, and therefore should be assessed as the principal supply, hence should be assessed at the same rate as the principal supply.

24. Applicability of GST on Fixed Capacity charges for Power

It has been clarified that the minimum fixed charges/capacity charges and the variable/energy charges are both charged for sale of electricity and are thus not taxable as electricity is exempt from GST.

25. Applicability of GST on Cancellation charges

It has been clarified that allowing cancellation of an intended supply against payment of cancellation fee or retention or forfeiture of a part or whole of the consideration or security deposit should be assessed at the same rate as applicable to the principal supply.

The abovementioned clarifications have been covered in Circular No. 178/10/2022-GST dt. 3rd August, 2022.

I sincerely hope that the above compilation will help you in your business and profession.

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