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The Central Board of Indirect Taxes and Customs (CBIC) issued various Circulars on 17 July 2023 to clarify the recommendations made in the 50th GST Council meeting held on 11 July 2023.
The Central Board of Indirect Taxes and Customs (CBIC) issued
various Circulars on 17 July 2023 to clarify the recommendations
made in the 50th GST Council meeting held on 11 July 2023. Please
find below a summary of the important clarifications issued vide
such Circulars:
A. Circular No. 197/09/2023-GST dated 17 July 2023
Sr. No.
Issue
Clarification
1
What should be the base to match the refund of
accumulated ITC under Section 54(3) of the CGST Act? GSTR-2A or
GSTR-2B
Since Input Tax Credit (ITC) availment has been linked with
Form GSTR2B w.e.f. 1 January 2022, a refund shall be
restricted to the invoices reflecting in Form GSTR-2B for
the said tax period or for any of the previous tax periods and on
which ITC is available to the applicant.
The said restriction shall be applicable to the claims
for the tax period of January 2022 onwards. However, in
cases where refund claims for the tax period from January
2022 onwards have already been disposed of by the proper
officer in accordance with the extant guidelines in force,
the same shall not be reopened because of the
clarification issued in this Circular.
Accordingly, Circular No. 125/44/2019-GST r/w 135/05/2020-GST
as well as Circular No. 139/09/2020-GST stand modified
2
Amendment to the undertaking in Form GST RFD-01
and Annexure A to the Circular No. 125/44/2019- GST
Pursuant to the omission of Section 42 and an amendment to
Section 41 of the CGST Act, the undertaking in Form GST RFD-01 has
been amended to read as follows:
"I hereby undertake to pay back to the Government the
amount of refund sanctioned along with interest in case it is found
subsequently that the requirements of clause (c) of subsection (2)
of Section 16 read with sub-section (2) of Section 42 of the CGST/
SGST Act have not been complied with in respect of the amount
refunded."
Consequentially, Annexure A to Circular 125/44/2019-GST also
stands amended to the following extent:
Removal of reference to Section 42(2)
Deletion of the requirement of a copy of GSTR-2A of the
relevant period and the self-certified copies of invoices not
reflected in GSTR2A as supporting documents.
3
Manner of calculation of Adjusted Total Turnover
under Rule 89(4) of the CGST Rules consequent to insertion of
Explanation therein vide Notification No. 14/2022- Central
Tax.
The value of goods exported out of India to be included while
calculating the "adjusted total turnover" will be the
same as being determined as per the Explanation inserted in Rule
89(4).
As per the Explanation, the value of goods exported out of
India shall be taken to be lower of:
Free on Board (FOB) value declared in the Shipping Bill or Bill
of Export, or
The value declared in the tax invoice or bill of supply.
4
Admissibility of refund where an exporter applies
for refund subsequent to compliance with the provisions of Rule
96A(1), viz. payment of IGST along with interest on account of
goods not being exported or payments not realized for export of
services within the prescribed time frame.
The taxpayer can apply for a refund of IGST paid under
the category of "Excess payment of tax."
Furthermore, the said exporter would be entitled to a refund of
unutilized ITC in terms of Section 54(3) of the CGST Act. However,
no refund of the interest paid in compliance with Rule 96A(1) shall
be admissible.
Till the time the refund application cannot be filed under the
category "Excess payment of taxes" due to the
non-availability of the facility on the GST portal to file a refund
of IGST in compliance with Rule 96A(1), the applicant may
file the claim under "Any Other" category.
Our Comments
The aforesaid clarifications should further help smoothen the
GST refund process. The Board has reiterated that the substantive
benefit of zero-rated supplies cannot be denied to the concerned
exporters as long as the goods are actually exported or, as the
case may be, the payment is realized vis-àvis export of
services, even if it is beyond the time frames prescribed in Rule
96A(1).
A specific point to ponder here is that if taxpayers opt to
claim a refund of IGST paid on exports (which is paid by utilizing
the ITC balance), will the refund be given in cash, or whether it
will be once again credited to the ITC pool. If it gets credited to
the ITC pool, will taxpayers be required to file another refund
claim (of unutilized ITC) to finally get the refund money in their
bank account?
B. Circular No. 198/10/2023-GST dated 17 July 2023
Sr. No.
Issue
Clarification
1
Requirement of generating einvoice w.r.t. supplies
made to government departments or establishments/government
agencies/local authorities/PSUs registered solely for the purpose
of TDS under Section 51 of the CGST Act.
Such persons are liable for compulsory registration under GST
law. Hence, they are to be treated as registered persons.
Accordingly, an e-invoice is required to be issued for
the supplies made to such government departments or establishments
/government agencies/local authorities/PSUs, etc., under Rule 48(4)
of the CGST Rules.
C. Circular No. 199/11/2023-GST dated 17 July 2023
Sr. No.
Issue
Clarification
1
Whether ISD mechanism is mandatory for the
distribution of ITC in respect of common input services procured by
HO from third-party vendors or can the cross-charging mechanism be
resorted to?
As per the present provisions of GST law, it is not
mandatory to distribute such ITC by ISD mechanism; Head
Office (HO) has the option to issue a tax invoice to the
concerned BOs in respect of common input services procured from a
third party which are attributable to the Branch Offices
(BOs) and the BOs can then avail ITC, subject to the
conditions of Sections 16 and 17 of the CGST Act.
Distribution of ITC through ISD can be made only if the
said input services are attributable to the said BO or have
actually been provided to the said BO.
Similarly, the HO can issue tax invoices to the concerned BOs
regarding any input services procured by HO for or on behalf of a
BO only if the services have been provided to the concerned
BOs.
2
Whether the HO is mandatorily required to issue invoices to BOs
for internally generated services and/or whether the cost of all
components, including the salary cost of HO employees involved in
providing the said services, should be included in the computation
of the value of services provided by HO to BOs when:
full ITC is available to the concerned BOs?
full ITC is not available to the concerned BOs?
Where full ITC is available to the concerned
BO
In respect of the supply of services by HO to BOs, the value
declared in the invoice by HO shall be deemed to be the open market
value of such services. This is irrespective of the fact
whether the cost of any particular component of such services, like
employee cost, etc., has been included or not in the value
of the services.
Even if HO has not issued a tax invoice, the value of
such services may be deemed to be declared as Nil by the HO and may
be deemed as open market value in terms of second proviso
to Rule 28 of CGST Rules.
Where full ITC is available to the concerned
BO
Salary cost is not mandatorily required to be
included while computing the taxable value of the services
supplied, even in cases where full ITC is not available to
the concerned BO.
Our Comments
The long-standing debate on ISD vs. cross-charge mechanism
stands answered, much to the relief of the taxpayers who have
hitherto been questioned for non-obtaining of ISD registration
during departmental audits/inquiries/investigations. However, it
may be pertinent to note that during its 50th meeting, the GST
Council has also recommended that an amendment be made in the GST
law to make the ISD mechanism mandatory prospectively for
distributing ITC of such common input services procured from third
parties.
The Circular has further clarified two controversial issues that
could have led to litigation:
If credit is eligible to the recipient, then not raising
invoices and charging GST shall be considered valid by deeming that
NIL value could be the open market value.
Whether the salary of corporate office employees should be
included in the cross-charge value offered to GST is now settled.
The confusion created by the Columbia Asia ruling now stands
cleared.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
