On 31st December 2018, CBIC has issued multiple circulars to clarify various issues. Besides, CBIC also issued various notifications and orders to give effect to the decisions taken at the 31st GST Council meeting as a welcome for New Year of 2019.
In this article, I would give you a quick grasp of all the clarifications given by CBIC on various issues
In Circular no. 76/50/2018 dated 31 December 2018 CBIC provides various topical clarifications. The key clarifications are as under:
- CBIC has clarified that in case of supply of used vehicles, seized and confiscated goods, old and used goods, waste and scrap made by the Central Government, State Government, Union territory or a local authority to an unregistered person, Government departments would be liable to get registered and pay GST. In case of a registered person, GST would be paid under RCM by such person;
- The penalty under section 73(11) of the Central GST Act, 2017 is not applicable in case of delayed filing of Form GSTR 3B returns as such penalty pertains to non-payment of tax. However, a general penalty under Section 125 of the CGST Act, 2017 may be imposed after following the due process of law.
- In case of revision of prices, after the appointed date, of any goods or services supplied before the appointed day, which requires the issuance of any supplementary invoice, debit note, credit note, the rate as per the provisions of the Central GST Act, 2017 would be applicable.
- The provisions of TDS under section 51 of the Central GST Act, 2017 are applicable only to such authority or board or any other body set up by an Act of Parliament or a State legislature or established by any Government in which 51% or more participation by way of equity or control is with the Government.
- Taxable value for the purposes of GST should include the amount of tax collected at source (TCS) under the provisions of the Income-tax Act, 1961 since the value to be paid to the supplier by the buyer is inclusive of the TCS.
- For the purposes of section 129(1) of the CGST Act, the owner of goods would be either the consignor or the consignee, if the invoice or any other specified document is accompanying the consignment of goods. If it is not accompanying the consignment of goods, then in such cases, the proper officer would determine who should be the owner of the goods.
In Circular no. 76/50/2018 dated 31 December 2018, it is been clarified that, the effective date for withdrawal from the composition scheme shall be the date indicated by him in his intimation/application filed in FORM GST CMP-04 but such date may not be prior to the commencement of the financial year in which such intimation/application for withdrawal is being filed;
- In case of contravention of any of the provisions of GST Laws, the action may be initiated for recovery of tax, interest, and penalty. In case of denial of the option by the tax authorities, the effective date of such denial shall be from a date, including any retrospective date as may be determined by tax authorities, but shall not be prior to the date of contravention of the provisions of the GST Law;
Circular no. 78/52/2018 dated 31 December 2018 provides clarification on the export of services in cases, where a service exporter has outsourced portion of the service contract to a person outside India. It has been clarified that:
- In such case, two supplies take place; one from Indian service exporter to the end client, and another from the outsourced service provider to Indian service exporter.
- The Indian service exporter will be required to pay GST under reverse charge on the import of services received from the outsourced service provider.
- If the full consideration for the services as per the contract is not received in convertible foreign exchange where the end client directly pays the outsourced service provider, even that portion of the consideration would be treated as receipt for exports if Reserve Bank of India has permitted retention of part of consideration outside India and the Indian service exporter has paid Integrated GST on consideration paid to outsourced service provider under reverse charge.
Circular no. 79/53/2018 dated 31 December 2018 provides clarification on various issues relating to refund. The major clarifications are as under:
- While submitting the refund application, it was previously required that the copy of the refund application and the supporting documents were required to be physically submitted to the jurisdictional tax officer. Now such documents can be uploaded on the common portal.
- In case of refund of accumulated credit due to an inverted duty structure, the refund would be granted irrespective of applicable tax rates on the various inputs (whether higher or lower or equal to the rate applicable on output supply).
- The assessee would get interest on delayed refund on the refund amount immediately starting from the date after the expiry of 60 days from the date of receipt of application (ARN) till the refund has been actually credited to the bank account of the claimant.
- Where the refund application has been electronically submitted and the ARN is generated on the common portal before the issuance of this circular but the application has not been received by the jurisdictional office (except refund of excess balance in electronic cash ledger), the refund claims of less than Rs.1,000 should be rejected and the amount re-credited to the electronic credit ledger. In case of refund claims for amounts more than Rs. 1,000, the claimant should be sent an electronic mail communication to submit the application to the jurisdictional office within 15 days of receipt of the mail, failing which, the refund application would be dismissed and the amount debited would be re-credited to the credit ledger. In case of refund applications of excess balance in electronic cash ledger, the amount debited in the electronic cash ledger may be re-credited if there are no liabilities in electronic liability register. The amount should be re-credited, even though the return in Form GSTR 3B for the relevant period has not been filed.
- If an exporter, whose output does not attract compensation cess, has not claimed credit of compensation cess until May 2018 and decides to avail credit of such compensation cess later and claims refund of such compensation cess in a single month in which the credit is claimed, the amount of refund would be recomputed as if the same was available in the months in which refund of accumulated credits due to exports has been claimed. The consignments exported on payment of Integrated GST in the past would not be eligible for such refund of compensation cess.
- The refund of compensation cess paid on inputs would be available, irrespective of whether the inputs are used to make an intermediate product (such as electricity), which is used to make the final product which is exported.
- In case of compensation cess paid on inputs used for domestic supply as well as exports, where the assessee only avails the credit of the portion of compensation cess attributable towards exports, the amount of credit claimed would be treated as total credit and the refund claim would be allowed of such amount in the proportion of exports. If the assessee avails the balance credit after reversing the initial entry writing off the proportionate ITC of cess, it can again claim the refund of such credit of cess and consequently, refund. (Restricted to the amount of refund computed to be available, if the entire credit has been claimed initially).
- The credit of an invoice for previous period, which is claimed in subsequent period, should be considered for the purpose of computing eligible refund for the period for which such credit has been claimed.
- The credit of any inputs used in the business and for making taxable (including zero-rated) supplies should be considered as net ITC for refund, and ITC claimed as inputs on items such as stores and spares (including charged off to revenue and not capitalized), packing materials, material purchased for machinery repairs, printing and stationery items should be considered for refund if such credit is otherwise eligible.
- The refund of tax paid on input services and capital goods would not be available in case of claim of refund of accumulated credit due to inverted duty structure.
Circular no. 80/54/2018-GST dated 31 December 2018 clarifies the applicable rate of tax and classification of various goods. Some salient clarifications are as under:
- LPG supplied in bulk, whether by refiner/ fractionator to OMC or by one OMC to another for bottling and further supply for domestic use will attract GST @ 5% with effect from 25 January 2018.
- Concessional rate of GST on goods used for setting up of Waste to Energy Plants is available only on the goods covered under chapters 84, 85 and 94, and other products would not be eligible for the concessional rate of tax. Further, the supplier needs to satisfy himself with a requisite document from the buyer before claiming concessional rate of tax.
- Any inter-State movement of goods for the provision of service on own account by a service provider, where neither transfer of title in such goods nor transfer to a distinct person is involved, does not constitute a supply of such goods and it is clarified that any movement on own account would not be liable to GST.
Kindly refer circular for classification of various goods listed therein & applicability of GST rates on such items.
Circular No. 81/55/2018- GST dated 31 December 2018 clarifies GST rate for Sprinkler and Drip irrigation System including laterals. Kindly refer circular for the classification & applicable GST rate.
Applicability of GST on various programmes conducted by the Indian Institutes of Management (IIMs). In Circular No. 82/01/2019- GST dated 1st January 2019 it clarifies that through vide Notification No. 12/ 2017- CT (Rate) dated June 28, 2017, it was specified that with effect from January 31, 2018, all the IIMs will be “educational institutions”. Hence, w.e.f such date all IIMs have become eligible for exemption benefit under Sl. No. 66 of said notification. As such, specific exemption granted to IIMs vide Sl. No. 67 has become redundant.
- Further, it has been clarified by Hon’ble Supreme Court in many cases that if there are two or more exemption notifications available to an assessee, the assessee can claim the one that is more beneficial to him. Therefore, from January 31, 2018, to December 31, 2018, IIMs can avail exemption either under Sl. No 66 or Sl. No. 67 of the said notification for the eligible programmes.
- However, Short duration executive programs provided by IIMs will attract GST @ 18%. (CGST 9% + SGST 9%).
Applicability of GST on Asian Development Bank (ADB) and International Finance Corporation (IFC). In Circular no. 83/02/2019 dated 1 January 2019 it clarifies that the services provided by International Finance Corporation and Asian Development Bank are exempt from GST in terms of International Finance Corporation (Status, Immunities, and Privileges) Act, 1958 and Asian Development Bank Act, 1966 respectively. The exemption will be available only to the services provided by Asian Development Bank (ADB) and International Finance Corporation (IFC), and not to any entity appointed by or working on behalf of ADB or IFC.
Clarification on the issue of classification of service of printing of pictures covered under 998386. In Circular no. 84/03/2019 dated 1 January 2019 It is been clarified that service of ‘printing of pictures’ falls under service code 998386 i.e. ‘Photographic and video graphic processing services’ and not under 998912 i.e. ‘Printing and reproduction services of recorded media, on a fee or contract basis’ of the scheme of classification of service annexed to Notification No. 11/2017-CT(Rate) dated June 28, 2018. The applicable GST rate would be 18%.
Clarification on GST rate applicable on the supply of food and beverage services by educational institution In Circular no. 85/04/2019 dated 1 January 2019 it clarifies that Supply of all services by an educational institution to its students, faculty, and staff is exempt vide S. No. 66 of Notification No. 12/2017-CT (Rate) dated June 28, 2017. Such services include supply of food and beverages by an educational institution to its students, faculty, and staff. However, such supply of food and beverages by any person other than the educational institutions would attract GST@ 5%.
GST on Services of Business Facilitator (BF) or a Business Correspondent (BC) to Banking Company. In Circular no. 86/05/2019 dated 1 January 2019 it clarifies the issues relating to transactions between the banking companies and banking facilitators (BF)/ banking correspondents (BC). The clarifications are as under:
- Banking company provides services to the customers and would be liable to pay GST on the entire value of service charge or fee charged to customers, whether or not received via BF/ BC.
- To avail exemption on services provided in relation to ‘accounts in rural area branch’, the applicable conditions in notification, i.e., the classification of services of BF/ BC in their respective individual capacity should be covered under the heading 9971, and the service should be with respect to accounts in a branch located in the rural area. The classification adopted by the bank as per the Reserve Bank of India guidelines in this regard should be accepted.
Circular no. 87/06/2019 dated 2 January 2019 clarifies the issues arising from the Central GST (Amendment) Act, 2018 on section 140(1) of the Central GST Act, 2017 deal with carrying forward of credit balances. The clarifications are as under:
- The closing balance of CENVAT credit pertaining to service tax can be carried forward as the legislative intent was not to disallow transition CENVAT credit in the form of service tax.
- The expression “eligible duties” under section 140(1) of the Central GST Act, 2017 does not refer to the condition regarding goods in stock or to a condition regarding inputs and input services in transit. It has also been decided not to notify clauses 28(b)(i) and 28(c)(i) of the Central GST (Amendment) Act, 2018 (dealing with linking carry forward of closing balance of credits as per returns with various conditions) to avoid such linkage.
- The eligible duties which are allowed to be carried forward under section 140(1) of the Central GST Act, 2017 would only cover the duties listed as eligible duties in sr. nos. 1 to 7 of explanation 1 to section 140 of the Central GST Act, 2017 and eligible duties and taxes as listed in sr. nos. 1 to 8 of explanation 2 to section 140 of the Central GST Act, 2017. - No transition credit of cesses, including cess, collected as an additional duty of customs under section 3(1) of the Customs Tariff Act, 1975 would be allowed.
The clarifications regarding carrying forward of CENVAT credit of service tax etc. clear the apprehension of the industry regarding a potential challenge to carry forward of service tax credits etc. as it was restricted under sec 140(1) of CGST Act. However, the clarification prohibiting the carry forward of the credit of the cesses may see the judicial challenge from the industry
Further, the simplification of refund procedures, doing away with the physical submission of application and various supporting documents is welcome and will lead to reduction in procedural aspects. Parties claiming the refund of compensation cess as exporters will need to review the classifications and their impact on past claims which are still unprocessed.