Petitioner gets interim relief against GST Circular 212/6/2024 on guarantee commission and discount liabilities pending final hearing

The HC granted interim relief to the petitioner challenging Circular No. 212/6/2024-GST and Show Cause Notice dated 02 August 2024 concerning guarantee commission and discount-related GST liabilities. The petitioner argued that requiring Chartered Accountant certificates for pre-2024 transactions was impractical and that RBI circulars prohibited commission on certain guarantees. The Court directed respondents to continue SCN proceedings but restrain from deciding on discount and guarantee commission issues. The petitioner received 30 days to respond, with proceedings adjourned to 09.01.2025 for further consideration of the substantive legal issues raised.

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Issues involved: Challenge to Circular No. 212/6/2024-GST and Show Cause Notice dated 02 August 2024 regarding guarantee commission, service tax liability, discounts, and Section 15 (3) (b) of the CGST Act.

Analysis:
1. The writ petitioner challenged Circular No. 212/6/2024-GST and the Show Cause Notice dated 02 August 2024 issued by the Central Board of Indirect Taxes and Customs (CBIC). The challenge focused on two main issues: guarantee commission and service tax liability, and the impact of discounts and Section 15 (3) (b) of the CGST Act.
2. The CBIC's Circular addressed the issue of discounts given after the supply has been effected, outlining conditions for excluding such discounts from the value of taxable supply. It highlighted the lack of a system functionality to verify the reversal of input tax credit by the recipient, necessitating a certificate from the recipient or a Chartered Accountant.
3. The petitioner argued that complying with the Circular's requirements, especially obtaining a Chartered Accountant's Certificate for transactions dating back to 2017-18, would be impractical. The petitioner contended that the Circular should not affect transactions predating 26 June 2024.
4. Regarding the guarantee commission, the SCN alleged the petitioner's failure to discharge GST liabilities related to commission income from corporate guarantees. However, reference was made to an RBI Circular prohibiting consideration by way of commission for certain guarantees.
5. The Court acknowledged the issues raised in the writ petition as warranting further consideration. It directed the respondents to continue with the SCN proceedings but refrain from making decisions on discount-related and guarantee commission issues. The petitioner was granted 30 days to respond to the SCN, with the next hearing scheduled for 09.01.2025.

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