Dr. Sanjiv Agarwal, FCA, FCS

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Articles clarifies on Amendment in the meaning of Advance Authorization,  section 140(1) of the CGST Act, 2017, GST on Services of Business Correspondent (BC)/ Business Facilitator (BF) to Banking Companies,  GST on supply of food and beverage services by Educational Institutions,  GST on  Printing of pictures,  Applicability of GST on services provided by ADB and IFC,  Applicability of GST on various programmes conducted by the Indian Institutes of Managements (IIMs) and  Approval of National Bench of Appellate Tribunal.

Goods and Services Tax is now in third calendar year of its existence (w.e.f. 1st July, 2017). Though January being the 19th month of its existence, GST is still a huge work-in-progress so far as its implementation is concerned. And this work in relation  to implementation suffers from many issues from law drafting, flawed procedures prescribed in GST rules, filing of returns, payment and penalties etc coupled with technical glitches being faced at every stage in GST implementation. The multiple Advance Ruling Authority model is also a major hurdle now without there being central level appellate authority.

Following are the recent changes / amendments in GST law :

1.  Amendment in the meaning of Advance Authorization

  • CBIC has amended the meaning of advance authorization by inserting a proviso after the entry No. 1 in Notification No. 48/2017-Central Tax dated the 18th October, 2017 which provides that exports which have been made after availing input tax credit on inputs used in manufacture of such exports and are used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods), a certificate to this effect from a chartered accountant is required to be submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply.

Where input tax credit has not availed on inputs used in manufacture of export goods no such certificate shall be required.

  • The words ‘on pre-import basis’ against serial number 1 of the said Notification shall be omitted.

[Notification No. 1/2019-Central Tax dated 15.01.2019]

2. Clarification regarding section 140(1) of the CGST Act, 2017

  • The CENVAT credit of service tax paid under section 66B of the Finance Act, 1994 was available as transitional credit under section 140(1) of the CGST Act.
  • CBIC has clarified that expression “eligible duties” in section 140(1) which are allowed to be transitioned would cover within its fold the duties which are listed as “eligible duties” at sl. no. (i) to (vii) of explanation 1, and “eligible duties and taxes” at sl. no. (i) to (viii) of explanation 2 to section 140, since the expression “eligible duties and taxes” has not been used elsewhere in the Act.
  • This would ensure that the credit allowed to be transitioned under section 140(1) is not linked to credit of goods in stock, as provided under Explanation 1, and credit of goods and services in transit, as provided under Explanation 2. However, the duties and taxes for which transition is allowed shall be governed by para 3.2 above.
  • No transition of credit of cesses, including cess which is collected as additional duty of customs under sub-section (1) of section 3 of the Customs Tariff Act, 1975, would be allowed in terms of Explanation 3 to section 140, inserted vide sub-section (d) of section 28 of CGST Amendment Act, 2018

[Circular No. 87/03/2019-GST dated 01.01.2019]

3. GST on Services of Business Correspondent (BC)/ Business Facilitator (BF) to Banking Companies

  •  As per RBI’s Circular, banks pay reasonable commission/fee to the BCs, the rate and quantum of which may be reviewed periodically. The agreement of banks with the BC specifically prohibits them from directly charging any fee to the customers for services rendered by them on behalf of the bank.
  • Only banks (and not BCs) are permitted to collect reasonable service charges from the customers for such services in a transparent manner.
  • CBIC has clarified that in such transactions, banking company is the service provider in the BF model or the BC model operated by a banking company. The banking company is liable to pay GST on the entire value of service charge or fee charged to customers whether or not received via BFs or the BCs.
  • Further, for the purpose of availing exemption from GST under Sl. No. 39 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, it is essential that the services provided by a BF/BC to a banking company in their respective individual capacities should fall under the Heading 9971 and that such services should be with respect to accounts in a branch located in the rural area of the banking company. The procedure for classification of branch of a bank as located in rural area and the services which can be provided by BF/BC, is governed by the RBI guidelines. Therefore, classification adopted by the bank in terms of RBI guidelines in this regard should be accepted.

[Circular No. 86/05/2019- GST dated 01.01.2019]

4. GST on supply of food and beverage services by Educational Institutions

  • Supply of all services by an educational institution to its students, faculty and staff is exempt under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, Sl. No. 66.
  • Such services include supply of food and beverages by an educational institution to its students, faculty and staff.
  • CBIC has now clarified that supply of food and beverages by an educational institution to its students, faculty and staff, where such supply is made by the educational institution itself, is exempt under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, vide Sl. No. 66 w.e.f. 01-07-2017 itself.
  • However, supply of food and beverages by any person other than the educational institutions based on a contractual arrangement with such institution is leviable to [email protected] 5%.

[Circular No.85/04/2019-GST, dated 01.01.2019]

5. Printing of pictures attracts 18% GST

  • The service code “998386 Photographic and videographic processing services, includes, – developing of negatives and the printing of pictures for others according to customer specifications such as enlargement of negatives or slides, black and white processing; colour printing of images from film or digital media; slide and negative duplicates, reprints, etc.
  • The service code 998912 “Printing and reproduction services of recorded media, on a fee or contract basis” clearly excludes,

   – colour printing of images from film or digital media, cf. 998386

    -audio and video production services, cf. 999613”

  • CBIC has now clarified that service of “printing of pictures” falls under service code “998386: Photographic and videographic processing services” attracting GST @ 18% and not under “998912: Printing and reproduction services of recorded media, on a fee or contract basis.

[Circular No. 84/03/2019-GST dated 01.01.2019]

6. Applicability of tax on services provided by ADB and IFC

  • The services provided by Asian Development Bank (ADB) and International Finance Corporation
  • (IFC) are exempt from GST in terms of provisions of ADB Act, 1966 and IFC Act, 1958.
  • The exemption is available only to the services provided by ADB and IFC and not to any entity appointed by or working on behalf of ADB or IFC.

[Circular No. 83/03/2019-GST dated 01.01.2019]

7. Applicability of GST on various programmes conducted by the Indian Institutes of Managements (IIMs)

  • Earlier for the period from 1st July, 2017 to 30th January, 2018 three programs of IIMs under Sl. No. 67 of Notification No. 12/2017- Central Tax (Rate) were exempt from GST.
  • CBIC has now exempted following program conducted by Indian Institutes of Managements for from GST w.e.f 31.01.2018

All long duration programs (one year or more) conferring degree/ diploma as recommended by Board of Governors as per the power vested in them under the IIM Act, 2017 including one- year Post Graduate Programs for Executives.

[Circular No. 82/03/2019-GST dated 01.01.2019]

As the country goes to polls in next few months, this year’s Budget before elections may be an interim budget with full budget to be announced after election by the new Government. The Budget session of Parliament starts from 31st January, 2019. It is unlilkely to have any major bearing on the goods and services tax.

It is expected next 2-3 GST Council meetings may  address the concerns of taxpayers, trade associations and other forums to ensure better understanding and compliance alongwith facilitating ease of doing business.

8. Approval of National Bench of Appellate Tribunal

Union cabinet has approved on 23.01.2019 the creation of the National Bench of the Goods and Services Tax Appellate Tribunal (GSTAT). The National Bench of the Appellate Tribunal shall be situated at New Delhi. GSTAT shall be presided over by its President and shall consist of one Technical Member (Centre) and one Technical Member (State).

Goods and Services Tax Appellate Tribunal is the forum of second appeal in GST laws and the first common forum of dispute resolution between Centre and States. The appeals against the orders in first appeals issued by the Appellate Authorities under the Central and State GST Acts lie before the GST Appellate Tribunal, which is common under the Central as well as State GST Acts. Being a common forum, GST Appellate Tribunal will ensure that there is uniformity in redressal of disputes arising under GST, and therefore, in implementation of GST across the country.

Chapter XVIII of the CGST Act provides for the Appeal and Review Mechanism for dispute resolution under the GST Regime. Section 109 of this Chapter under CGST Act empowers the Central Government to constitute, on the recommendation of Council, by notification, with effect from such date as may be specified therein, an Appellate Tribunal known as the Goods and Services Tax Appellate Tribunal for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority.

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