GST Update: Circulars pursuant to 53rd GST Council meeting

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GST Update: Circulars pursuant to 53rd GST Council meeting

Tejasvi

@tejasvi

July 2, 2024

Public Policy

157

Dear All,

Pursuant to 53rd GST council meeting held on June 22, 2024, the Central Board of Indirect Taxes and Customs (CBIC) has issued 16 circulars to give effect to the decisions taken in the 53rd council meeting. Summary of the circulars relevant from our industry perspective is as follows:

Circular 207/1/2024-GST - Fixing monetary limits for filing appeals or applications by tax department

S. 120 of CGST Act, 2017 empowers CBIC for fixing the monetary limits for filing of appeal or application by the tax authorities. In the circular, following monetary limit has been set:

GSTAT: INR 20,00,000
High Court: INR 1,00,00,000
Supreme Court: INR 2,00,00,000

The circular provides how monetary limits apply based on whether disputes involve tax, interest, penalty, late fee, or refund.
The circular clarifies that non-filing of appeals based on monetary limits does not establish precedents. Reasons for non-filing must be explicitly stated, and it does not imply departmental acceptance of disputed issues solely due to monetary constraints.

Circular 209/3/2024-GST - Place of supply of goods to unregistered persons

S. 10(1)(ca) of IGST Act, 2017 provides that for supplies to unregistered persons, the place of supply is determined based on the address recorded in the invoice. If address of unregistered person is not recorded, the location of the supplier is considered. Explanation to the said clause clarifies that mentioning the State name of the unregistered person on the invoice equates to recording their address.
Circular clarifies that where billing address differs from delivery address, the place of supply for goods supplied to an unregistered person is determined by the delivery address recorded on the invoice. Therefore, in cases where the billing address (State X) differs from the delivery address (State Y), the place of supply is State Y (delivery address).
This will provide clarity and uniformity in tax implementation across different scenarios involving supply to unregistered persons, with varying billing and delivery addresses.

Circular 210/4/2024-GST - Valuation of services imported by a related domestic person from its foreign affiliate

In cases where related domestic person has imported services from its foreign affiliate and full input tax credit is available to the said related domestic entity for such services, value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value.
Further, in cases where full input tax credit is available to the recipient, but the invoice is not issued by the related domestic person, the value of such services may be deemed to be declared as Nil and may be deemed as open market value.
This circular effectively nullifies the deemed supply provision under Schedule I entry 4 in so far as it relates to a recipient entitled for full input tax credit. It will help in reducing the blockage of cash paid under reverse charge mechanism.

Circular 211/5/2024-GST - Time limit under S. 16(4) of CGST Act in respect of RCM supplies received from unregistered persons

In cases of supplies received from unregistered suppliers, where the recipient is required to issue self-Invoice and tax has to be paid under RCM, the time limit for availment of input tax credit will be calculated from the financial year in which the invoice has been issued by the recipient.
In case, the recipient issues the invoice after the time of supply and pays tax accordingly, he will be required to pay interest on such delayed payment of tax.
This will provide relief in cases where credit has been availed by Companies on RCM basis belated invoices. However, the interest and penalty may add on to the costs for delayed payments.

Circular 212/6/2024-GST - Mechanism to suppliers for providing evidence of compliance of conditions for exclusion of post-sale discounts from the value of supply to the effect that ITC has been reversed by the recipient on the said amount

Till the time a functionality/ facility is made available on the common portal, supplier may procure a certificate from the recipient of supply, issued by the Chartered Accountant (CA) or the Cost Accountant (CMA) where the value of discount is more than INR 5 lacs, certifying that the recipient has made the required proportionate reversal of input tax credit at his end in respect of such credit note issued by the supplier, along with prescribed details as given in para 2.5 of the circular.
Where amount is not exceeding 5 lacs, supplier may procure an undertaking/ certificate from the said recipient that the said input tax credit attributable to such discount has been reversed by him, along with prescribed details as given in para 2.5 of the circular.
This Circular has been issued in the backdrop of the decision rendered by the Hon’ble Rajasthan High Court in the case of Hindustan Unilever Limited. The Modus Operandi prescribed in this Circular is in line with Circular No: 183/15/2022-GST dated 27 December 2022.
The circular will help in reduction of litigation wherein the officers have questioned whether the recipient has reversed the ITC attributable to the post sale discounts.

Circular 213/7/2024-GST - Taxability of re-imbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees

It has been clarified that there is no supply of service between foreign holding company and the domestic subsidiary company where foreign holding company issues ESOP/ESPP/RSU to employees of domestic subsidiary company, and the domestic subsidiary company reimburses the cost of such securities / shares to the foreign holding company on cost-to-cost basis.
Further, the circular clarifies that in cases where an additional amount over and above the cost of securities/shares is charged by the foreign holding company, GST would be leviable under RCM on such additional amount charged as consideration.
The circular effectively clarifies that ESOP/ RSUs is not a supply and hence, no GST in the hands of the domestic subsidiary company. The circular further states that, in case there is a charge, only that charge suffers GST but it’s not mandatory to have a charge.
The aspect of a charge needs to be read along with the circular on valuation of import of services.

Circular 218/12/2024-GST - Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person

Where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons. Accordingly, there is no question of levy of GST on the same by resorting to open market value for valuation.
In case of loans provided between related parties, wherever any fee is charged, over and above the amount charged by way of interest or discount, the same is liable to GST.
This is a welcome move in light of various litigations faced by the industry by invoking the provisions of Schedule I of CGST Act for transactions between related persons.
The Circular rightly distinguishes between loans facilitated between unrelated persons who are required to ascertain the credit worthiness of customers as against the loans provided between related persons where such credit worthiness is not required to be ascertained/ readily available with related entity.

We hope you will find the update useful.

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Tejasvi