Top 10 benefits granted by Govt. in GST to taxpayer made effective in Oct, 2023

1. Corporate guarantee provided between related parties

New Rule 28(2) of CGST Rules, 2017 is being inserted w.e.f. 26-10-2023.

This rule provides for taxable value of supply of services provided by way of corporate guarantee to a recipient who is a related person, when such services are provided to banking company or financial institutions.For example,where the corporate guarantee is provided by a holding company, for its subsidiary company, those two entities also fall under the category of 'related persons' and this rule 28(2) will become applicable.

It states that value of supply will deem to be 1% of the amount of such guarantee offered, or the actual consideration, whichever is higher.

Further, this rule will mandatorily apply on such situations, irrespective of whether full ITC is available to the recipient of service or not.

It is to be noted that these types of corporate guarantees happen in cases of infra projects and real estate businesses. In these businesses there is a flat rate of GST without availability of ITC. Meaning thus that this mandatory levy of GST will be a burden for such corporates.

Most importantly, the CBIC has issued clarification no. 204/16/2023-GST dated 27-10-2023 and stated that such levy of GST on corporate guarantee will be applicable only prospectively from 26-10-2023.

2. Personal guarantee offered by directors to the bank against the credit limits/loans being sanctioned to the company for which no consideration is provided to the director - Value of such services may be treated as zero and thus no GST is payable. This has been clarified by CBIC through Circular No. 204/16/2023-GST dated 27-10-2023. However, if some consideration is paid to ex-directors, then consideration given will be the value of such services.

3. Provisional attachment of property shall not be valid after expiry of 1 year from the date of such order - This is already stated in Sec 83(2) of the CGST Act, 2017. However, difficulty was being faced by the taxpayer since Rule 159(2) states that such attachment shall be removed only on the written instructions from the Commissioner to that effect. Several taxpayers went to Writ Courts (High Courts) to get their provisionally attached property, primarily bank accounts released.

Now, the government has come to taxpayer’s rescue and amened Rule 159(2) w.e.f. 26-10-2023 and provided that attachment of property shall be removed

• only on the written instructions from the Commissioner to that effect or
• on expiry of a period of one year from the date of issuance of order under sub-rule (1),
• whichever is earlier.

4. IGST Refund on payment of tax - The government has recently amended Sec 16 of the IGST Act, 2017, w.e.f. 1-10-2023 and stated that filing LUT and claiming refund of ITC paid on inputs and input services shall be the default route for claiming refund. The government may however,state specific class of persons or goods or services, where refund can be claimed through payment of IGST.

The government has issued NN 1/2023-IGST dt. 31-7-2023, w.e.f. 1-10-2023 for this purpose to allow all commodities except commodities like pan masala, gutkha, etc. to claim refund on payment of IGST. Now, the government has amended NN 1/2023-IGST, w.e.f. 26-10-2023 to further allow all suppliers of SEZ unit or developer when such supplies are for authorised operations to claim refund on payment of IGST.

5. Scope of Services Exemption expanded - There are already two entries in NN 12/2017-CTR dt 28-6-2017 i.e. S.No. 3 and 3A which exempts pure and composite services provided to Central/State/UT Governments and local authorities in relation to function entrusted to Panchayat/Municipal under Article 243G and 243W of the Constitution of India. The government has amended NN 12/2017-CTR w.e.f. 20-10-2023 and inserted entry no. 3B to exempt services of water supply, public health, sanitation conservancy, solid waste management and slum improvement and upgradation. This exemption is applicable only when such services are supplied to Government Authorities.

6. Payment in Special INR Vostro Account - To qualify as export of services, one of the essential conditions is that currency should be received in foreign exchange or in INR whenever permitted by the RBI. The CBIC has issued a circular no. 202/14/2023-GST dated 27-10-2023 to clarify that export remittances received in Special INR Vostro account, as permitted by RBI, will qualify as consideration of export of services in terms of the provisions of sub-clause (iv) of clause (6) of section 2 of the IGST Act, 2017.

7. Service Exemptions Expanded - Services provided by CG, SG, UT, LA are mostly exempt or covered under reverse charge mechanism (RCM). Only following services are chargeable on forward charge mechanism (FCM) when provided by government 

1. Taxable services of department of post
2. Services in relation to an aircraft or a vessel
3. Transportation of goods or passenger
4. Renting of immovable property when provided to unregistered business entity.

Now a 5th service is being added to this list i.e. taxable service of Ministry of Railways (Indian Railways) through NN 13/2023-CTR dated 19-10-2023, w.e.f. 20-10-2023.

It is interesting to note that major part of services provided by Ministry of Railways (Indian Railways) i.e. goods and passenger transportation services, were always covered under FCM and the government has now sought to include all other taxable services of Indian Railways under FCM.

8. Corporate bus service providers - These bus service providers when supplying services through E-commerce operators (ECO) were denied input tax credit (ITC) and liability to pay GST was placed on the ECO under sec 9(5) of the CGST Act, 2017, w.e.f. 1-1-2022.

Now, w.e.f. 20-10-2023, the notification under sec 9(5) has been amended and ECO provisions will be applicable on services by way of transportation of passengers by an omnibus except where the person supplying such service through electronic commerce operator is a company. So corporate bus service providers have been excluded from the scope of Sec 9(5), thus enabling them to take input tax credit and pay GST.

9. Molasses has been made cheaper - The government has w.e.f. 20-10-2023, reduced GST on molasses from 28% to 5%. This is a big reduction in GST rate to give relief to cane farmers for faster clearance of dues and to reduce cost of manufacturing cattle feed.

10. Millet flour has become affordable - GST rates on "Food preparation of millet flour in powder form, containing at least 70% millets by weight", falling under HS 1901, with effect from 20-10-2023, havebeen reduced as:

1. 0% if sold in other than pre-packaged and labelled form.
2. 5% if sold in pre-packaged and labelled form.