GST Circulars | Recommendations of 50th GST council meeting

 Ministry of Finance has recently issued various circulars pursuant to the recommendations/ proposals made in the 50^th GST council meeting.

 

We have summarized hereinbelow the clarifications issued vide these circulars for your quick reference.

 

Circulars	Clarifications Provided
Circular No 192/04/2023-GST dated 17 July 2023	Clarifications on interest payable in case of wrong availment of IGST credits   The clarification is being sought as to whether the wrongly availed IGST credit would be considered as utilized for the purpose of charging of interest under section 50(3) of the CGST Act, 2017 along with rule 88B of the CGST Rules, 2017, in case where the Input Tax Credit (ITC) in IGST ledger is less than the amount wrongly availed, however the total ITC under the heads CGST, SGST & IGST together remains more than such wrongly availed IGST credit.   The CBIC has clarified the issues as under:   ►    In case where IGST credit has been wrongly availed, no interest liability under section 50(3) of CGST Act, 2017 would be levied,  if the balance of ITC in the electronic credit ledger, under the heads IGST, CGST and SGST taken together, has not fallen below the amount of such wrongly availed ITC.   ►    However, when the balance of ITC taken together under all the three heads falls below such wrongly availed ITC, the interest as per section 50(3) of CGST Act will be applicable.   ►    Further, the credit of compensation cess available in electronic credit ledger cannot be taken into consideration for the purpose of calculation of interest under sub- rule (3) of rule 88B of CGST Rules in respect of wrongly availed and utilized IGST, CGST or SGST credit.
Circular No 193/05/2023-GST dated 17 July 2023	Clarification in cases of difference between ITC availed in FORM GSTR-3Bs and FORM GSTR-2As for the period April 2019 to December 2021   ►    It is clarified that for the period 1 April 2019 to 8 October 2019, the process and guidelines provided by Circular No. 183/15/2022-GST dated 27th December 2022 shall be applicable As a background, the said Circular was issued for dealing with the difference between ITC availed in FORM GSTR-3B as compared to FORM GSTR-2A for FY 2017-18 and 2018-19 Vide the said circular, it was clarified that the officer shall be required to verify the fulfilment of credit eligibility conditions (i.e. availability of valid tax invoice/ debit note, receipt of goods/ services by the recipient and status of payment being made to the supplier, in terms of section 16 of the CGST Act, 2017) along with furnishing certificate from supplier or from CA/ Cost Accountant (as applicable)   ►    Further, for the period 9 October 2019 to 31 December 2021 where rule 36(4) of the CGST Rules, 2017 allowed additional credit availment to the tune of: 20% of the eligible credit for the period 9 October 2019 to 31 December 2019; 10% of the eligible credit for the period 1 January 2020 to 31 December 2020; and 5% of the eligible credit for the period 1 January 2021 to 31 December 2021, the following clarifications have been issued:   ►       The guidelines and procedures for verification of ITC, as provided by Circular No. 183/15/2022-GST (supra) shall be applicable for the aforementioned period(s) as well.   ►       The above verification/ procedures shall be applicable only to the extent of amount covered under the permitted percentage (20%/10%/5%), as was allowed under Rule 36(4) of the CGST Rules.  For reference, below illustration has been provided:   ITC available as per Form GSTR-2A ...(a) 3,00,000 ITC availed as per Form GSTR 3B ...(b) 5,00,000 Eligible credit as per Rule 36(4)...(c) = (a)*1.20 3,60,000 Excess ITC availed in GSTR 3B...(b-c) 1,40,000 ITC to be allowed subject to verification as per procedures prescribed as per Circular 183 (i.e. only upto 20%* of the credit available in GSTR 2A) 60,000 Excess ITC availed - not admissible 1,40,000 * - Percentage only for illustration purpose. The same shall change basis the period mentioned hereinabove   ►    It is further clarified that consequent to amendment of rule 36(4) of CGST Rules w.e.f. 1 January 2022, no excess ITC shall be allowed on or after the said period in respect of a supply which does not appear in recipient’s FORM GSTR-2B.   The said procedure for verification can be applied only to the ongoing scrutiny/ audit/ investigation (in respect of the said period) or cases where adjudication or appeal is pending. It cannot be applied for the completed proceedings.
Circular No 194/06/2023-GST dated 17 July 2023	Clarifications on TCS liability under section 52 of the CGST Act, 2017 in case of multiple E-commerce Operators (ECOs) in one transaction   ►    Where the supplier side ECO is not the actual supplier in the said supply (Buyer à Buyer-side ECO à Seller-side ECO à Seller)   The compliance is to be done by the supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through it   ►    Where the supplier-side ECO is the supplier of the said supply (Buyer à Buyer-side ECO à Seller)   The compliance is to be done by the Buyer-side ECO while making payment to the supplier for the particular supply made through it
Circular No 195/07/2023-GST dated 17 July 2023	Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period   Clarification on following issues/ transactions have been issued   ►    Whether GST would be payable on replacement of parts or supply of repair services, without any consideration being charged from the customer, as part of warranty?   It has been clarified that, where a manufacturer provides replacement of parts and/ or repair services to the customer, without charging separate consideration, GST shall not be payable on such replacement of parts and/ or repair service provided – as, value of original supply by manufacturer to customer includes cost towards replacement of parts and / or repair services.   If additional consideration is charged by manufacturer for aforesaid replacement/services, GST shall be payable on such additional consideration.   ►    Whether manufacturer (in above case) is required to reverse ITC in respect of such replacement of parts or repair services for which no additional consideration is charged?   It has been clarified that manufacturer shall not be required to reverse ITC in respect of the parts replaced and/or repair services provided – as the value of original supply already includes these costs   Further, replacement of parts and/ or repair service provided to the customer (without consideration) shall not be considered as exempt supply   ►    Whether GST would be payable on replacement of parts and/ or repair services provided by a distributor without any consideration from the customer, as part of warranty on behalf of the manufacturer?   Since no consideration is being charged by the distributor from the customer, no GST would be payable for providing replacement of parts and/ or repair services to the customer. However, if additional consideration is charged by distributor for aforesaid replacement/services, GST shall be payable on such additional consideration.   ►    In the above case, whether any supply is involved between the distributor and the manufacturer, and whether distributor would be required to reverse ITC in respect of such replacement of parts?   Scenario -1: Distributor replaces part(s) by using his stock or purchases from third party, and charges manufacturer for the same by issuing a tax invoice: Distributor is liable to pay GST on supply made to manufacturer, and Manufacturer is entitled to avail ITC on the same Distributor is not required to reverse ITC in this respect   Scenario -2: Distributor raises a requisition to the manufacturer for the part(s) to be replaced and manufacturer provides the said part(s) GST is not payable by manufacturer, for replacement to be undertaken during warranty period, without charging any separate consideration from customer Further, reversal of ITC is not required in the hands of the manufacturer in respect of part(s) replaced by distributor under warranty.   Scenario-3: Distributor replaces part(s) out of the supply already received by him from the manufacturer and manufacturer issues a credit note in respect of such replaced parts Where manufacturer issues a credit note in respect of replaced parts, subject to Section 34(2) of CGST Act (time limit to issue a GST credit note), tax liability may be adjusted by the manufacturer – subject to the condition that the distributor has reversed the ITC availed against the parts so replaced.   ►    Where distributor provides repair services in addition to replacement of part(s), on behalf of manufacturer, and charges manufacturer for such repair, either by way of issuing a tax invoice or debit note   GST shall be payable by distributor on supply made to manufacturer; ITC shall be available to manufacturer in respect of such supply   ►    Implications on cases where Extended Warranty is offered by Manufacturer   Customer enters in to an agreement of extended warranty with the manufacturer at the time of original supply Consideration for the extend warranty becomes part of the value of composite supply (principal supply being supply of goods) and GST would be payable on the same   Customer enters into an agreement of extended warranty at any time after the original supply  This would be treated as a separate contract and GST would be payable by the service provider (either manufacturer or the distributor or any third party) depending on the nature of the contract (i.e. whether the extended warranty is only for goods or for services or for composite supply involving goods and services)
Circular No 196/08/2023-GST dated 17 July 2023	Clarifications regarding taxability of share capital held in subsidiary Company by the parent Company   ►    Securities are neither considered as goods nor services in terms of definition of goods and services under CGST Act.     ►    Further, securities include ‘shares’ as per definition of securities under Securities Contracts (Regulation) Act, 1956.   ►    For a transaction/activity to be treated as supply of services, there must be a supply as defined under section 7 under CGST Act.   ►    Solely on the basis that there is exists an entry in SAC schedule, it cannot be said that a service is being provided unless there is a supply of services by the holding company to the subsidiary company.   Accordingly, it has been clarified that the activity of holding of shares of subsidiary company by the holding company per se cannot be treated as a supply of services by a holding company to the said subsidiary company, and cannot be taxed under GST.
Circular No 197/09/2023-GST dated 17 July 2023	►    Refund of accumulated ITC to be allowed basis details available in Form GSTR 2B   Considering that ITC availment has been linked with Form GSTR 2B w.e.f. 1 January 2022, it has been clarified that refund of accumulated ITC u/s 54(3) shall be restricted to invoices reflecting in GSTR 2B (as against GSTR 2A presently) of the applicant for the said tax period or any previous tax periods on which ITC is available. Relevant paras in the previous circulars relating to refund also stands modified to this extent.   This clarification shall be applicable for the refund claims for the tax period of January 2022 onwards, and in case where refunds have been granted prior to issuance of this circular and basis extant guidelines, such cases shall not be re-opened
	►    Modification in the undertaking required at the time of refund application and submission of other documents   Reference of compliance to Section 42(2) of the CGST Act (concept of matching of credits), mentioned in the current undertaking format (furnished electronically by the applicant), in relation to paying back the refund amount along with interest on account of non-compliance to the said provision, has been updated to include compliance with requirement mentioned in provision of Section 16(2)(c)   Further, requirement to additionally upload copy of GSTR 2A and self-certified copies of invoices not available in GSTR-2A, along with refund application, has also been dispensed off
	►    Clarification in respect of calculation of ‘Adjusted Total Turnover’   It has been clarified that the “value of export goods”, to be included while calculating “adjusted total turnover” in the formula prescribed under rule 89(4) of the CGST Rules, 2017, shall be calculated as lower of FOB value or value declared in tax invoice (i.e., same as being determined as per the Explanation inserted in the said sub-rule)   The above clarification is issued in order to align the computation of adjusted total turnover, in light of the above explanation
	►    Refund of tax and interest (on subsequent export) voluntarily paid due to failure to export goods or realise proceeds within the prescribed time limits   It may be recalled that the exporter is liable to pay tax and applicable interest within 15 days from timelines stipulated in Rule 96A, in case where: o    Goods have not been exported out of India within three months from the date of invoice (or such time as may be extended by Commissioner); o    Payment in foreign currency has not been realised within one year (or such time as may be extended by Commissioner) from the date of invoice, in case of export of services.   Vide the current circular, it has been clarified that, on subsequent compliance to the aforesaid requirement (i.e. where the goods have been exported or payment against export of services has been realised), the exporter is entitled to claim refund of such tax paid in addition to refund of unutilized ITC on account of exports effected by it.  However, refund of interest paid shall not be permitted.   Currently, refund application in such scenario may be filed under “Any other” category, till time the facility to claim such refund under the category “Excess payment of tax” is made available on the portal.
Circular No 198/10/2023-GST dated 17 July 2023	Applicability of E- Invoice for supplies made by registered person to Government Departments or establishments/ Government agencies/ local authorities/ PSUs registered solely for deduction of tax at source as per section 51 of the CGST Act, 2017   ►    Government Departments or establishments/ Government agencies/ local authorities/ PSUs, which are required to deduct tax at source as per section 51 of the CGST/SGST Acts, are liable for compulsory registration as per section 24(vi) of the CGST Act, 2017   ►    It has been clarified that the registered person, whose turnover exceeds the prescribed threshold for generation of e-invoicing, is required to generate IRN and comply with e-invoices rules, for supplies made to such Government Departments or establishments/ Government agencies/ local authorities/ PSUs, etc under rule 48(4) of the CGST Rules 2017
Circular No 199/11/2023-GST dated 17 July 2023	Clarification regarding taxability of services between distinct persons (offices of the same entity)   1.       In respect of common input services procured by Head Office (HO) but attributable to HO and/ or Branch Office(s) (BOs), following are the clarifications provided   ►   Whether HO can avail ITC in respect of such common services? – Yes. HOs can avail the full ITC with an option to distribute the ITC by following Input Service Distribution (ISD) mechanism.   ►   Whether is it mandatory for HO to follow ISD mechanism for distribution of ITC? – No. As per the present provisions of the GST law, the ISD is not mandatory. However, if opted, HO is mandatorily required to get an ISD registration.   ►   Whether HO can issue tax invoice to BOs? – Yes. HO can also issue tax invoices to BOs in respect of such common input services   ►   Whether BOs can then avail ITC? – Yes. BOs can avail ITC on the said invoices issued by HO subject to the relevant conditions/ restrictions for availing the ITC   The distribution of ITC through ISD/ the issuance of tax invoice from HO to BOs can only be made if the said input services are attributable to the said BO(s) or have actually been provided to the said BO(s).   2.       In respect of other services provided by HO on their own to branch offices, following are the clarifications provided   The value of supplies between distinct persons shall be the Open Market Value (OMV). However, the value declared in the invoice shall be deemed to be the OMV if recipient is eligible for full ITC.   ►   Whether HO is mandatorily required to issue invoice to BOs? – No. It is not mandatory to issue the invoice   ►   Treatment in case the HO is not issuing tax invoices where full ITC is available to BOs - The value may be deemed to be declared as Nil by HO and the same shall be deemed as OMV   ►   If HO issues tax invoice to BOs, whether the cost of all components including salary cost of HO employees involved in providing the said services has to be included in the computation of value of services – The value declared in the invoice shall be deemed to be the OMV irrespective of the fact of inclusion/ non-inclusion of certain costs   ►   Where full ITC is not available to BOs, whether the cost of salary of employees of the HO involved in providing said services to the BOs is mandatorily required to be included while computing the taxable value of the said supply? – No. It is not mandatory to include the salary costs of HO employees while computing the taxable value even in these cases