Policy Update - Goods and Services Tax

Goods and Services Tax

May 2024

Continued advocacy on E-way Bill related issues.
Forum to meet Department of Revenue officials to discuss need for clarifications on GST related investigations being carried out against foreign shipping lines.
Continued advocacy with MOF and MOD to address tax issues concerning Maintenance, Repair, Overhaul industry in India

April 2024

Forum will initiate advocacy with MOF and MOD to address tax issues concerning Maintenance, Repair, Overhaul industry in India
Forum plans to submit GST legislative and procedural issues to GST policy wing
Forum conducted roundtable and will initiate advocacy with MOF and MOD to address tax issues concerning Maintenance, Repair, Overhaul industry in India
Forum organised industry consultation with GST policy wing to discuss recommendations on challenges faced on export of services and need for liberalization of export rules (e.g., intermediary services, performance-based services etc), issues and challenges on the proposed amendment to the Input Service Distributor (ISD) provision – April 3rd
Forum to organise industry roundtable with Ministry of Defence (MoD) and Ministry of Finance (MoF) to address matter of inverted duty rates on Maintenance, Repair and Overhaul (MRO) – April 5th

March 2024

Forum to meet GST authorities to discuss matters related to challenges faced on export of services and need for liberalization of export rules (e.g. intermediary services, performance based services etc)
CBIC has notified “Public Tech Platform for Frictionless Credit” as system with which information may be shared by common portal in accordance with Section 158A of CGST Act. A summary of update can be accessed here and notification here
In light of upcoming GST council meeting likely in March 2024, forum plans to submit GST legislative and procedural issues to GST policy wing
Forum to initiate advocacy with Ministry of Defence and Ministry of Finance to address matter of inverted duty rates on MRO

Feb 2024

Forum to initiate advocacy with Ministry of Defence and Ministry of Finance to address matter of inverted duty rates on MRO
In light of the upcoming GST council meeting likely in March 2024, forum plans to submit GST legislative and procedural issues to the GST policy wing
Need for clarification on recent amendment relating to place of supply for e-commerce companies

Jan 2024

ESOPs classification under GST Law
Need for clarification on recent amendment u/s 10 IGST Act relating to place of supply
Need for paperless invoicing
Need for clarifying that Free Trade Warehousing Zone will mean a Free Trade Warehousing Zone set up under the SEZ Act, 2005 for the purpose of GST benefits.
Need for further clarity on impact of the Supreme Court decision in the case of M/s Northern Operating Systems Private Limited pertaining to secondment of employees
Ambiguities relating to Free Trade Warehousing Zone supplies

Dec 2023

Nov 2023

52nd GST Council meeting was held on October 07, 2023. Following recommendations of the USISPF’s Tax forum have been considered by the council. Detailed summary available here.

● Setting up of Tribunals can now be expected to be fast tracked.
● Clarification regarding guarantee provided by Directors/ holding companies – fine print would be key and the impact of this on other such similar related party transactions will need to be examined.
● Allowing supplies to SEZ units/ developer for authorized operations for IGST refund route
● Clarification regarding place of supply for transportation through mail/ courier

Below is a quick summary of the same.

 

Also, we have enclosed is the copy of the circulars for your reading and reference.

 

Circular

Clarifications issued along with Deloitte comments

Circular No. 202/14/2023 – GST

·         Clarification has been issued by CBIC that, even though the consideration against export is received in Indian Rupees, the same shall be considered as export of services if the same is received in special INR Vostro account

 

·         The circular also took reference to RBI Circular No.10 dated 11th July 2022 and Foreign Trade Policy (FTP) 2023 where RBI has permitted that Indian exporter, undertaking exports of goods and services through this mechanism, shall be paid the export proceeds in INR from the balances in the designated Special Vostro account of the correspondent bank of the partner country.

 

·         Based on said clarification, Indian exporter undertaking export of services can receive export proceeding in INR from the special rupee vostro accounts of correspondent banks.

 

This will also put rest to the disputes at ground level, wherein exports and consequently refunds are being denied (specifically DGGI officers)

 

Circular No. 203/15/2023 – GST

·         This circular clarifies about place of supply of service of transportation of goods, including through mail or courier.

 

·         It is clarified that place of supply for service of the transportation of goods other than through mail or courier after 1st October 2023 is location of recipient as per sec 13(2) of IGST act, if the location of the recipient is not available then it is location of the supplier of services.

 

·         CBIC infact has even clarified that the place of supply for the service of transportation through mail or courier is also the location of recipient both before and after 1st October 2023.

 

·         GST authorities at the ground level were asserting that the place of supply in case of transport of goods by mail or courier would be the location where the services are actually wholly or partly performed, because the recipient makes the goods or time-sensitive documents available to the courier agency or mail service provider in India for the transportation. With the Circular, the disputes around place of supply of services by way of transportation of goods through mail or courier should stand addressed.

 

·         The said circular also clarifies the place of supply of services in respect of advertisement sector (bill boards and hoardings).

 

·         It clarified that

 

  1. if services are provided in the form of supply of space or supply of right to use the space on hording/ structure for the display of advertisement on such hording or structure then the place of supply shall be location of such hording or structure i.e. Immovable property as per sec 12(3)(a) of IGST Act.

 

  1. Where advertisement services are provided in such a way that recipient of the services requests the advertisement company for display of advertisement in a specific area or location and it is responsibility of the advertisement company to arrange for such location, hording / billboards then place of supply shall be as per sec 12(2) of IGST Act.

 

·         The said circular also clarifies the place of supply of services in respect of supply of co-location services

 

·         If the co-location services provided are not limited to just renting of physical space along with air conditioning, security service, fire protection system and power supply but also includes information technology infrastructure services like network connectivity, backup facility, firewall services and monitoring and surveillance services etc., then place of supply shall be as per sec 12(2) of IGST Act.

 

·         It is clarified that, if the co-location services are providing physical space on rent, with basic infrastructure and without components of Hosting and Information Technology (IT) Infrastructure Provisioning services and no further responsibility of running, monitoring and surveillance, etc., then the place of supply shall be location of immovable property as per sec 12(3)(a) of IGST act.

Circular No. 204/16/2023 – GST

·         Clarification has been issued that, personal guarantee provided by a director of a Company to bank or financial institutions for sanctioning of credit facilities to the said company without any consideration is not taxable under GST.

 

·         The Circular provided reference to Section 7(1)(c) of CGST act read with schedule I of CGST act that supply of any goods or services between related person in course or furtherance of the business even without consideration shall be treated as a supply. Further valuation for such supply as per Rule 28 of the valuation rules shall be market value of such supply.

 

·         Placing reliance on the above provisions, the circular stated that the transactions between a director and its company is a related party transactions and the personal guarantee provided by the director is supply of services even though there is no consideration.

 

·         However, the circular also refers to RBI circular RBI/2021-22/21 dated November 2021 where the guidelines provide that

 

“The system of obtaining guarantees should not be used by the directors and other managerial personnel as a source of income from the company. Banks should obtain an undertaking from the borrowing company as well as the guarantors that no consideration whether by way of commission, brokerage fees or any other form, would be paid by the former or received by the latter, directly or indirectly. This requirement should be incorporated in the bank's terms and conditions for sanctioning of credit limits”

 

·         The circular based on the RBI guidelines provided that, since the directors of the company cannot take any consideration form the company for providing personal guarantee, the market value of service provided by the director is zero.

 

·         Since the market value of services provided by the director is zero, even though the activity between director and the company amounts to supply of services, GST is not taxable on the same. The circular also provides that, in cases where any remuneration is received by the directors, then GST is applicable on such transactions.

 

·         It is also clarified in the circular that after issue of notification 52/2023 dated 26.10.2023, as the transactions between related companies are valued at 1% as per rule 28(2), such transactions are taxable under GST Act.

 

Circular 1Circular 2Circular 3

Oct 2023

Below is the quick summary of the notifications:

Notification

Amendment

Deloitte comments

Notification 5/2023 IGST

In addition to the restrictions on refund, for the export of goods or services for specified goods, restriction is placed on refund of specified goods for SEZ as provided below:

"All suppliers to a Developer or a unit in Special Economic Zone undertaking authorised operations as the class of persons who may make supply of goods or services (except the goods specified in column (3) of the TABLE below) to such Developer or a unit in Special Economic Zone for authorised operations on payment of integrated tax and on which the said suppliers may claim the refund of tax so paid."

Except for supply of goods like Tobacco, Pan Masala, Hookah, Cigarettes etc as specified in the notification 1/2023 IGST, suppliers will be entitled to refund of tax paid on supplies made to a Developer or a unit in SEZ undertaking authorised operations,  with effect from October 01, 2023.

 

This amendment resolves the issue that had arisen due to amendment of Section 16 whereby rebate method was not available wef 01 October 2023 for supplies made to SEZ recipients.

Notification 52/2023 CGST

New valuation rules is as inserted as provided below under Rule 28

(2) Notwithstanding anything contained in sub-rule (1), the value of supply of services by a supplier to a recipient who is a related person, by way of providing corporate guarantee to any banking company or financial institution on behalf of the said recipient, shall be deemed to be one per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher.”

A new sub-rule has been inserted for the valuation of corporate guarantees between related parties, the valuation of corporate guarantees shall be higher of:

(a) 1% of the amount of guarantee offered or (b) Actual consideration provided for such guarantee

In Rule 142(3) for the words “proper officer shall issue an order”, the words “proper officer shall issue an intimation” shall be substituted.

Proper officer can only issue an intimation and not further order in Form DRC – 05 concluding proceedings of the notice if any payment is made through FORM DRC – 03 within 30 days of issue of show cause notice

The following words are included in rule 159 (2) after the words Commissioner to that effect

On expiry of a period of one year from the date of issuance of order under sub-rule (1), whichever is earlier

With effect to this amendment action shall be taken by the revenue authorities on the movable or immovable property attached by the commissioner of GST through FORM GST DRC – 22 on the earlier of following:

(a) After written instruction are received from the commissioner to take such action or (b) After expiry of one year from the date of issue of order in FORM GST DRC – 22

In Form GST REG – 01 in Part B "One person company" shall be included

A separate option is provided for registration of One Person Companies, before this amendment one person companies were registered under private limited companies

In addition, New Form GST REG-08 has been introduced in place of earlier one for Order of Cancellation of Registration as Tax Deductor at source or Tax Collector at source.

Also, changes have been made to GSTR-8 (Statement for tax collection at source) to provide for payment of late fee.

Notification 1Notification 2
The 52nd GST Council was held on October 7th in New Delhi under the Chairpersonship of Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman.
For more information click here.

Sep 2023

Government constitutes State Benches of GST Appellate Tribunal – Meeting the long standing ask of the industry and the forum, Central Government, on recommendations of the GST Council, constituted State Benches of Goods and Service Tax Appellate Tribunals. 31 benches constituted across various States, effective September 14, 2023. Press release.

National Informatics Centre (NIC) implements 30-day time limit for reporting of GST invoices with effect from Nov 01, 2023

August 2023

GST on Online Gaming – Summary of Amendments to GST laws approved by Lok Sabha
For more information click here.

Summary of Notifications issued by CBIC pursuant to enforcement of Finance Act 2023 and 50th GST Council Meeting decisions
For more information click here.

51st GST Council Meeting held on August 02, 2023

July 2023

CBIC issues Circular prescribing procedure for payment of IGST and cess on non- fulfilment of pre-import condition and manner of claiming ITC.

May 2023

CBIC issues instruction for special All-India Drive by Central and State Tax administrations to detect suspicious / fake GST registrations and target fake invoices in the GST eco-system
All India Model GST Audit Manual released by Committee of Officers on GST audit

December 2022

The Central Board of Indirect Taxes & Customs has prescribed the manner of processing and sanction of IGST refunds, withheld in terms of clause (c) of sub-rule (4) of rule 96, transmitted to the jurisdictional GST authorities under sub-rule (5A) of rule 96 of the Central Goods and Service Tax Rules, 2017. The instruction dated 28 November 2022 can be accessed.

CBIC has decided not to file a review petition against the Supreme Court ruling in the case of Mohit Minerals Private Limited wherein it was held that imposition of IGST on ocean freight is violative of GST law. The SC had also noted that recommendations of the GST Council only have a persuasive value and are not binding on the Centre and States.
The Central Board of Indirect Taxes & Customs has issued a Circular to clarify issues relating to application of formula for refund of unutilized input tax credit on account of inverted tax structure under GST. The Circular No. 181/13/2022-GST dated 10 November 2022 can be accessed here.
CBIC has issued instruction to the effect that taxpayers must use the dedicated CBIC-GST Integrated portal for making pre-deposits under section 35F of the Central Excise Act, 1944 and section 83 of the Finance Act, 1944. The instruction dated October 28, 2022 can be accessed here.

During the 47th GST Council meeting held earlier this year, the issue of uneven practices followed by the field formations regarding the issuance of recurring Show Cause Notices (SCNs) was discussed in detail. Following the same, the Council has issued an Office Memorandum clarifying that initial and recurring SCNs to be issued by same authority, and that recurring SCNs are to be issued by actual jurisdictional authorities responsible for assessment of returns of the taxpayer. The Memorandum dated October 19, 2022 can be accessed here.

The GST Implementation Committee of GST Council has extended due date of filing GSTR-3B return for the month of September 2022 by one day, from October 20, 2022 to October 21, 2022. The Notification No. 21/ 2022 – Central tax can be accessed here.
The reconstitution of GoM looking after GST System Reforms has been notified vide Office Memorandum dated September 22, 2022, which can be accessed here.

September 2022

The amendments to the CGST Act as proposed in the Union Budget 2022 have now been notified by CBIC, to be effective from October 01, 2022. Consequential amendments to the CGST Rules have also been made w.e.f. October 01, 2022. The Notification Nos. 18 to 20/2022- Central Tax all dated September 28, 2022 can be accessed here.

The Group of Ministers (GoM) on online gaming led by the Chief Minister of Meghalaya, in its meeting earlier this month decided that horse racing, online gaming and gambling would be taxed separately, instead of clubbing online gaming with gambling which had led to concerns within industry. The GoM’s final report shall be submitted after further consultations with stakeholders.
The Uttar Pradesh cabinet approved the draft Uttar Pradesh Goods and Services Tax (Amendment) Bill 2022 which shall simplify and rationalise various provisions, including filing details of return and outward supply, and relief to small tax payers using settlement scheme who fail to file tax returns.
Following the ruling of the Hon’ble Supreme Court in the case of in the case of Filco Trade Center to open the portal for filing TRAN-1 and TRAN-2, CBIC has issued guidelines detailing the procedure for such filings. The Circular No. 180/12/2022 – GST dated September 09, 2022 can be accessed here
CBIC has laid down guidelines on issuance of summons under the CGST Act, including procedure to be followed prior to issue of summons, and avoidance of summons notices calling for statutory information already filed online. The Instruction No. 03/2022-23 (GST-Investigation) dated August 17, 2022 can be accessed here.

Pursuant to the recommendations of the GST Council in its 47th meeting held on 28-29 June, CBIC issued a series of circulars in response to requests for clarifications from industry on various issues:

  • Clarifications regarding applicable GST rates and exemptions on certain services (Circular No. 177/09/2022-TRU)
  • GST applicability on liquidated damages, compensation and penalty arising out of breach of contract or other provisions of law (Circular No. 178/10/2022-GST)
  • Clarifications regarding applicable GST rates on EVs, Stones, Mangoes, Treated water, etc. (Circular No. 179/11/2022-GST)

The above Circulars issued on August 03, 2022, can be accessed here.

CBIC has notified that e-invoicing under GST will now be applicable to taxpayers having aggregate turnover exceeding INR10 crore in any preceding financial year from 2017-18 onwards. The Notification No.17/2022 – Central Tax dated August 01, 2022 can be accessed here.

July 2022

In response to a question posed in Rajya Sabha, the Minister of State for Finance Mr. Pankaj Chaudhary clarified that the ruling of the Supreme Court of India in Union of India & Anr. v M/s Mohit Minerals Pvt. Ltd. (which held that recommendations of the GST Council are non-binding on States) does not alter the constitutional mechanism of the GST Council. He stated that the State and Central Acts provide that rates, exemptions and rules etc. would be prescribed only on the recommendations of the council, and therefore are binding on the States and the Centre.

The documented response against Unstarred Question No. 203 on July 19, 2022 can be accessed here.

CBIC issued a series of notifications giving effect to the GST rate related decisions taken in the 47th Meeting of the GST council held last month. The relevant notifications No. 03/2022 to 11/2022-Central Tax (Rate) dated July 13, 2022 can be accessed here. A summary of these rate changes, effective July 18, 2022, is also available on the Tax Forum website.

Pursuant to the recommendations and decisions taken in the 47th GST Council meeting, the CBIC has given effect to the same via issue of necessary circulars and notifications (the relevant circulars can be accessed and the Notifications No. 09/2022 to 14/2022 can be accessed. A summary of these circulars and notifications is also available on the Tax Forum website.

In view of the recommendations of the 47th GST Council Meeting, a GoM was constituted to address necessary changes to provisions governing GST Appellate Tribunals. The GoM consists of Ministers from Haryana, Uttar Pradesh, Goa, Rajasthan, Andhra Pradesh, and Odisha. The Office Memorandum dated July 06, 2022 can be accessed here.

Pursuant to consultations with stakeholders and businesses, the CBIC is likely to release comprehensive SoP for issuing summons and notices as part of investigations under GST provisions. The aim is to streamline the investigation process, increase transparency, and prevent undue harassment of businesses.

Section 194-R, which came into effect on July 01, 2022 introduced TDS on benefits/ perquisites granted in the course of business to any resident taxpayer. While CBDT issued clarifications last month to address implementation issues arising from this levy, the industry has expressed numerous concerns from a practical and legal standpoint. In continuation of our advocacy efforts on Direct Tax matters, the Forum has collated details of such difficulties, and shall be organising a meeting with key officials from the Tax Policy and Legislation Unit of CBDT, and making a representation on behalf of the industry.

The recommendations made by the GST Council in its 47th meeting held last week were made effective via issue of official notifications by CBIC. The relevant Notifications No. 09/2022 to 14/2022 can be accessed here.

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