RECENT GST CLARIFICATIONS – PART 2

Post 53rd GST Council meeting held on 22.06.2024, CBIC has issued 16 Circulars bearing Nos. 207 to 222, all dated 26.06.2024, clarifying taxability, place of supply, time of supply etc on various issues.

This Part-2 of the Article offers the gist of Circular No. 210, 211 and 212 which are on the following topics:

Valuation of supply of import of services by related persons - Circular No. 210/4/2024-GST dated 26.06.2024

Based on the recommendation of 53^rd GST Council meeting held on 22.06.2024, CBIC has issued clarification in relation to valuation of supply of import of services by a  related  person where recipient is eligible to full input tax credit -

• As per second proviso to rule 28(1) of CGST Rules, in cases involving supply of goods or services or both between the distinct or related persons where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the said goods or services.
• Clarification which had been issued videCircular No. 199/11/2023-GST dated 17.07.2023  in respect of supplies of services between distinct persons in cases where full ITC is available to the recipient, is equally applicable in respect of import of services between related persons.
• Circular No. 199/11/2023-GST dated 17.07.2023, clarification has been issued regarding taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons.
• Further, in cases where full input tax credit is available to the recipient, if HO has not issued a tax invoice to the BO in respect of any particular services being rendered by HO to the said BO, the value of such services may be deemed to be declared as Nil by HO to BO, and may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules.
• It was clarified that as per the second proviso to rule 28(1) of CGST Rules, in respect of supply of services by Head Office(HO) to Branch Offices(BO) of an organisation, the value of the said supply of services declared in the invoice by HO shall be deemed to be open market value of such services, if the recipient BO is eligible for full input tax credit.
• In cases where the  foreign  affiliate is  providing certain  services  to  the related  domestic  entity,  and  where  full  input  tax  credit  is  available to the  related  domestic  entity, the  value  of  such  supply  of  services  declared  in  the invoice  by the said related domestic entity may be deemed as open market value in terms of second proviso to rule  28(1) of  CGST  Rules, 2017.
• In  cases  where  full  input  tax  credit  is  available  to  the recipient, if  the  invoice  is  not  issued by  the  related  domestic  entity with  respect  to  any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as Nil, and may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules , 2017.

Time limit for availment of ITC under RCM supplies from unregistered persons  - Circular No. 211/5/2024-GST dated 26.06.2024

Based on the recommendation of 53^rd GST Council meeting held on 22.06.2024, CBIC has issued clarification in relation on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered persons -

• In case of supplies received from unregistered suppliers where tax has to be paid by the recipient under reverse charge mechanism (RCM) and where invoice is to be issued by the recipient of the supplies in accordance with section 31(3)(f) of CGST Act,2017, the relevant financial year for calculation of time limit for availment of ITC under section 16(4) of CGST Act will be the financial year in which the invoice has been issued by the recipient, subject  to  payment  of  tax  on  the  said  supply  by  the  recipient  and  fulfilment  of  other conditions and restrictions of section 16 and 17 of CGST Act, 2017.
• In case, the recipient issues the invoice  after  the  time  of  supply  of  the  said  supply  and  pays  tax  accordingly,  he will  be required  to  pay  interest  on  such  delayed  payment  of  tax. Further,  in  cases of  such  delayed issuance  of  invoice  by  the  recipient,  he  may  also  be  liable  to  penal  action  under  the provisions of Section 122 of CGST Act, 2017.

ITC related mechanism for providing evidence of compliance by supplier - Circular No. 212/6/2024-GST dated 26.06.2024

Based on the recommendation of the 53^rd GST Council meeting held on 22.06.2024, CBIC has issued clarificatory mechanism to ensure uniformity in the implementation of the provision of law to provide evidence of compliance of conditions of Section 15(3)(b)(ii) in relation to reversal of ITC by recipient when supplier issues tax Credit Note post supply -

• At present there is no functionality / facility available on the common portal to enable the supplier / tax officer to verify whether the ITC attributable to such discount offered through tax Credit Notes has been reversed by the recipient or not.
• GST authorities currently impose demand on supplier till the time substantial proof is submitted for reversal of proportionate ITC by the recipient and the same has been a matter of litigation.
• It is clarified that till the time a functionality / facility is made available on the common portal to enable the supplier / tax officer to verify the compliance of the said condition of Section 15(3)(b)(ii), the supplier may produce a certificate certifying that the recipient has reversed proportionate ITC at his end in respect of credit note issued by the supplier, where –

• the amount of tax exceeding Rs 5,00,000 in a FY to a particular recipient, then certificate from the recipient, issued by the CA / CMA,
• the amount of tax does not exceed Rs 5,00,000 in a FY to a particular recipient, then an undertaking / certificate from the recipient

• This certificate or self-undertaking from recipient to include:

• Details of the credit notes
• Details of the relevant invoice number
• the amount of ITC reversal
• details of the FORM GST DRC-03 / return / any other relevant document through which such reversal of ITC has been made
• certificate issued by CA or CMA shall contain UDIN

• Such undertakings / certificates issued shall be treated as a suitable and admissible evidence for the purpose of section 15(3)(b)(ii) of the CGST Act, 2017.
• These certificates /undertakings may be produced before the tax officers as evidence during any proceedings such as scrutiny, audit, investigations, etc.
• For the past period, also the concerned taxpayer may procure and provide such certificates / undertakings to the concerned investigating / audit / adjudicating authority as evidence of requisite reversal of   input tax credit by his recipients.

 (To be continued…)