Quick Summary
The Government of India, Ministry of Finance, issued Circular No. 245/02/2025-GST to provide clarifications on the applicability of GST on specific services based on the recommendations of the 55th GST Council meeting held on 21st December 2024. The circular addresses various aspects of GST applicability, exemptions, and regularization of payments.
Key Highlights
1. GST on Penal Charges by Regulated Entities
- As per RBI's direction (effective 01.01.2024), Regulated Entities (REs) such as banks and NBFCs must charge penal charges instead of penal interest.
- These penal charges are not subject to GST as they are not considered a consideration for tolerating an act but are rather deterrents for breach of contract.
2. GST Exemption for Payment Aggregators (PAs)
- PAs facilitating transactions up to ₹2,000 via card-based payments fall within the definition of "acquiring bank" as per GST laws.
- Hence, GST exemption under Sl. No. 34 of Notification No. 12/2017-CTR applies to such transactions.
- Payment Gateways (PGs) do not qualify for this exemption.
3. GST on Research & Development Services by Government Entities
- Exempted from GST w.e.f. 10.10.2024 under Notification No. 08/2024-CT(Rate).
- GST paid on such services from 01.07.2017 to 09.10.2024 is regularized on an 'as is where is' basis.
4. GST on Skilling Services by Training Partners (NSDC)
- Exemption for skilling services under NSDC was withdrawn on 10.10.2024.
- Based on concerns raised by the Ministry of Skill Development, the GST exemption was reinstated on 16.01.2025.
- GST paid between 10.10.2024 to 15.01.2025 is regularized on an 'as is where is' basis.
5. GST on Facility Management Services for MCD Headquarters
- Services such as housekeeping, civil maintenance, horticulture, etc., received by MCD for its HQ are taxable under GST.
- These services do not fall under the exemption for services related to municipal functions under Article 243W.
6. Status of Delhi Development Authority (DDA) under GST
- DDA is not considered a "local authority" under Section 2(69) of the CGST Act, 2017.
- Services provided by DDA to business entities will not be subject to reverse charge mechanism (RCM).
7. GST on Renting of Commercial Property (Reverse Charge)
- Renting of commercial property by an unregistered person to a registered person was brought under RCM from 10.10.2024.
- Composition taxpayers are now excluded from this rule w.e.f 16.01.2025.
- GST paid on such transactions from 10.10.2024 to 15.01.2025 is regularized.
8. GST on Support Services by Electricity Utilities
- Services like meter rentals, testing of transformers, issuing duplicate bills, etc., are now exempt from GST w.e.f. 10.10.2024.
- GST paid on such services between 10.10.2024 and 15.01.2025 is regularized.
9. GST on Services Provided by Goethe Institute/Max Mueller Bhawans
- These institutes did not pay GST earlier, assuming exemption.
- GST payments for 01.07.2017 to 31.03.2023 are regularized on 'as is where is' basis.
FAQ :
No, penal charges levied by regulated entities like banks and NBFCs, as directed by the RBI, are not subject to GST. They are considered deterrents for contract breaches rather than consideration for tolerating an act.
Payment Aggregators (PAs) facilitating transactions up to ₹2,000 via card-based payments are exempt from GST, as they fall under the definition of 'acquiring bank' for GST purposes. Payment Gateways (PGs) do not qualify for this exemption.
Research & Development services provided by government entities have been exempted from GST effective 10.10.2024. GST paid on such services from 01.07.2017 to 09.10.2024 is regularised on an 'as is where is' basis.
The GST exemption for skilling services under NSDC, which was withdrawn on 10.10.2024, was reinstated on 16.01.2025. GST paid between 10.10.2024 and 15.01.2025 is regularised.
No, the Delhi Development Authority (DDA) is not considered a 'local authority' under the CGST Act, 2017. Therefore, services provided by DDA to business entities are not subject to the reverse charge mechanism (RCM).
Renting of commercial property by an unregistered person to a registered person was brought under the reverse charge mechanism (RCM) from 10.10.2024. Composition taxpayers are excluded from this rule from 16.01.2025, and GST paid between 10.10.2024 and 15.01.2025 is regularised.
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