Pursuant to the 54th GST Council meeting held on 9 September 2024, CBIC has issued clarificatory circulars on various issues. We have prepared a summary of the circulars below for your ready reference.
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Circulars |
Clarifications Provided |
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Circular
No. 230/24/2024-GST, dated September 10, 2024 |
It
is clarified that advertising services provided by Indian agencies to foreign
clients qualify as exports under the GST regime, resolving prevailing
uncertainties about the place of supply and export benefits for such
services. The circular addresses the following key points of
contention: A.
Whether the services are in the nature of
‘intermediary’? Generally,
the advertising agencies enters into two distinct agreements – · With the foreign
client, providing a one-stop solution from advertisement perspective; and · With the media
company, to procure media space for the display of the advertisement and to
monitor campaign progress. Based on this arrangement, it is clarified
that the advertising company is involved in the main supply of advertising
services on a principal-to-principal basis and thus, it does not fulfil the
criteria of an "intermediary" under section 2(13) of the IGST Act. Consequently,
the place of supply in such cases cannot be linked with the location of the
supplier of services as per section 13(8)(b) of the IGST Act. Instead, the
place of supply is determined by the location of the recipient, which in this
case is outside India, as per the default provision under section 13(2) of
the IGST Act B.
Who is the recipient of service? · As per Section
2(93) of the CGST Act, the person liable to pay consideration is to be
treated as recipient for the supply of services. In the context of
advertising services provided by Indian companies to foreign clients, the
foreign client is the one who pays the consideration, not the Indian
representative or the target audience in India. · Even if a
representative based in India interacts with the advertising company on
behalf of the foreign client, the recipient is still the foreign client if
the contract, invoice, and payment are directly between the foreign client
and the advertising company. · Consequently, the
target audience in India cannot be considered the recipient of the services
as per the definition under section 2(93) of the CGST Act. Therefore, the
recipient of the advertising services is the foreign client, not the Indian
representative or the target audience C.
Can such services be classified as performance-based
services? · Advertisement
services do not require the physical presence of the recipient with the
supplier, and therefore, the place of supply is not determined by the
location of performance. Instead, the default provision under section 13(2)
applies, placing the supply location at the recipient's location outside
India |
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Circular
No 231/25/2024-GST dated 10 September 2024 |
Clarification
on availability of input tax credit in respect of demo vehicles
1.
Availability of ITC on demo vehicles , which are motor
vehicles for transportation of passenger having approved seating capacity of
not more than 13 persons (including the driver), in terms of section 17(5)(a)
of CGST Act, 2017
motor vehicles for
transportation of persons having approved seating capacity of not more than
thirteen persons (including the driver), except when they are used for making
the following taxable supplies, namely:- A.
Further supply of such motor vehicles B.
Transportation of passengers C.
Imparting training on driving The
use of the phrase “such motor vehicle” instead of “said motor vehicles”
indicates the intention of the lawmakers was not only to exclude the blockage
of ITC for vehicles that are directly further supplied but also for those
used to facilitate further supply of similar types of motor vehicles. Since,
demo vehicles promote sale of similar type of motor vehicles, they are
considered to be used by dealer for making further supply of such motor
vehicles. Accordingly, ITC in respect of such demo vehicles is available
to the dealer. However,
in cases where demo vehicles are used for purposes other than for making
further supply of such motor vehicles, say for transportation pf its staff
employees , ITC is not available. There
may be cases where the dealer is not directly involved in purchase and sale
of vehicle and is merely act as an agent or service provider to the vehicle
manufacturer for providing marketing service, including vehicle test drive. ITC
in respect to such motor vehicles would not be available to such dealers
as the demo vehicle cannot be said to be used by the dealer for making
further supply of such vehicle. 2.
Availability of ITC on demo vehicles in cases where
such vehicles are capitalized in the books of account by the authorised
dealers As
per section 2(19) of the CGST Act, 2017, "Capital goods" are
defined as goods whose value is capitalized in the books of account of the
person claiming the input tax credit (ITC) and are used or intended to be
used in the course or furtherance of business. Demo
vehicles used by authorized dealers to promote further sales of similar motor
vehicles are considered to be used in the course or furtherance of business.
When such vehicles are capitalized in the books of accounts by the authorized
dealer, they fall under the definition of "capital goods" under
section 2(19) of the CGST Act. As
per section 16(1) of CGST Act, 2017, a recipient of goods in entitled to take
ITC of goods ( including capital goods) and services made to him, where such
goods or services are used in the course or furtherance of business.
Accordingly, the availability of input tax credit on demo vehicles is not
affected by the capitalization of such vehicles in the books of account
of the authorized dealers, subject to other provisions of the Act. However,
if the registered person has claimed depreciation on the tax component of the
cost of capital goods under the Income-tax Act, 1961, the input tax credit on
the said tax component shall not be allowed. Further, when the demo vehicle,
which is capitalised is sold, appropriate tax should be discharged as per
section 18(6) of CGST Act, 2017 read with rule 44(6) of the CGST Rules, 2017. |
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Circular
No. 232/24/2024-GST, dated September 10, 2024 |
GST Authorities have been contending that
place of supply of services data hosting services provided by the service
providers located in India to cloud computing service providers located
outside India is the location of data hosting service provider in India and
therefore, the benefit of export of services is not available on such supply
of data hosting services. In this regard CBIC has clarified that
place of supply of data hosting services shall be the location of recipient
of services being an overseas cloud computing entity and can be considered as
export of services. The circular has addressed he following key issues: a.
Intermediary Status: The cloud
computing service providers generally enter into contract with data hosting
service providers to use their data centres for hosting cloud computing
services. While the data hosting service provider generally handles all
aspects of data centre like rent, software and hardware infrastructure,
power, net connectivity etc., they do not deal with end users/consumers of
cloud computing services and may not even know about the end users. Accordingly,
data hosting service providers in India are not considered 'intermediary'
between cloud computing service providers and their end customers as per
Section 2(13) of the IGST Act. They provide data hosting services on a
principal-to-principal basis and are not acting as brokers or agents.
Therefore, the place of supply for these services is not determined as per
section 13(8)(b) of the IGST Act. b.
Whether data hosting services are provided
in relation to goods "made available" by recipient of such services: The
infrastructure used by data hosting service providers, such as hardware and
software, is owned or operated independently by them. Thus, data hosting
services are not provided in relation to goods "made available" by
the recipient of services to the service provider and hence, the place of
supply cannot be determined under section 13(3)(a) of the IGST Act. c.
Relation to Immovable Property: Data hosting
services involve a comprehensive set of services essential for cloud
computing viz. ventilation and cooling equipment, network connectivity, fire
suppression systems, security, human resource, etc., which are not directly
related to the physical premises. Hence, the services cannot be treated as in
relation to immovable property and the place of supply cannot be determined
under section 13(4) of the IGST Act. In view of the above, since the place of
supply for data hosting services does not fit into the specific provisions of
sections 13(3) to 13(13) of the IGST Act, it should be determined according
to the default provision under section 13(2) of the IGST Act, i.e., the
location of the recipient of the services. If the cloud computing service
provider is located outside India, the place of supply will be considered
outside India. Accordingly, if such services are provided to an
overseas cloud computing entity can be considered as an export of services,
subject to the fulfilment of other conditions mentioned in section 2(6) of
the IGST Act. |
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Circular
No. 233/27/2024-GST dated September 10, 2024 |
Clarification
regarding regularization of refund of IGST availed in contravention of rule
96(10) of CGST Rules, 2017, in cases where the exporters had imported certain
inputs without payment of integrated taxes and compensation cess.
The
circular clarifies for a scenario regarding the regularization of Integrated
Goods and Services Tax (IGST) refunds for goods exported by a registered
person who initially imported inputs without paying IGST and compensation
cess under Notifications No. 78/2017-Customs dated October 13, 2017 (seeks to
exempt goods imported by EOUs from integrated tax and compensation cess) or
Notification No. 79/2017-Customs dated October 13, 2017 (seeks to amend
various customs exemption notifications to exempt Integrated Tax/Cess on
import of goods under AA/EPCG schemes), but subsequently, at a later date,
the said person has either paid the IGST and compensation cess, along with
interest, on such imported inputs or is now willing to pay such IGST and
compensation cess, along with interest. The
circulars refer to sub-rule (10) of rule 96 of CGST Rules, which was
retrospectively amended through insertion of an explanation via notification
No. 16/2020 – CT dated March 23, 2020. The said explanation allows for the
regularization of IGST refunds on exports when the IGST and compensation cess
on imported inputs are paid at a later date along with interest. Accordingly,
in such cases, refund of IGST claimed on exports made with payment of IGST
may not be considered to be in contravention of provisions of sub-rule (10)
of rule 96 of CGST Rules. In
view of the above, it is clarified that where the inputs were initially
imported without payment of IGST and compensation cess by availing
benefits under Notification No. 78/2017-Customs dated October 13, 2017 or
Notification No. 79/2017-Customs dated October 13, 2017, but subsequently,
IGST and compensation cess on such imported inputs are paid at a later date,
along with interest, and the bill of Entry in respect of the import of the
said inputs is reassessed through the jurisdictional Customs authorities to
this effect, then the IGST refunded to the said exporter shall not be
considered to be in contravention of provisions of sub-rule (10) of rule 96
of CGST Rules. |
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