GST Update: Weekly Goods and Service Tax latest News – September 2024

GST WEEKLY UPDATE : 24/2024-25 (16.09.2024)

1. Clarification on place of supply (pos)of advertising company advertising service rendered to foreign co: Circular no.230/24/2024:

CBIC has clarified the following with respect to advertising services rendered by Indian advertising companies/ agencies (IAC) to foreign entities.

• In case of comprehensive agreements are entered between IACs and foreign entities wherein the IACs provides one stop solution and clients outsource their entire advertising activity to such IACs, then such IACs cannot be termed as ‘intermediary’ as they execute different P2P arrangements – One with foreign client and another with local vendors. Further, the same cannot be considered as a performance based service as such services do not require physical presence of the recipient. Accordingly, its been clarified that in such cases, POS will be determined in lines with S. 13(2) of the IGST act. i.e., POS shall be location of the Hence, said services would qualify as ‘export of service’ as far as POS is concerned.
• However, in a case where IAC merely acts as an agent for the foreign entity and such foreign entity enters into agreement directly with media houses, then IAC shall be termed as ‘intermediary’.

2. CBIC has provided clarity on the issue of availability of ITC on demo vehicles, as follows: circular no.231/25/2024:

• Demo vehicles that are used to promote the sale of similar type of motor vehicle can be considered as being used for making “further supply of such motor vehicles”. Hence, they fall under the exclusions specified in subclause (A) of Sec 17(5)(a) of CGST Act. Accordingly, ITC on demo vehicles shall be
• However ITC will not be available if the demo vehicles are used for purposes other than making further supply of such motor vehicles or if the authorized dealer is not making supply of motor vehicles on his own

Additionally, if authorized dealers capitalize such demo vehicles in their books of account, ITC shall be available, provided the conditions of Section 16(3) of the CGST Act are met. Further, should these capitalized demo vehicles be sold by the authorized dealer at a later date, compliance with the provisions of Section 18(6) of the CGST Act, along with Rule 44(6) of the CGST Rules 2017, will be required.

3. The CBIC has clarified the POS for data hosting services provided by Indian service providers to cloud computing providers located outside India, would be as follows: circular no. 232/26/2024:

• These services are provided on P2P rather than as intermediary services, so Sec 13(8)(b) of the IGST Act does not
• Such services cannot be classified as being provided in relation to goods “made available” by recipient e. cloud computing service provider, regardless of whether the recipient provides some hardware. Accordingly, POS cannot be determined under Sec 13(3)(a) of the IGST Act.
• The services are not provided directly in relation to “immovable property” or “physical premises” and hence POS shall not be determined as per Sec 13(4) of IGST

As seen above, these services do not appear to fit into any specific provisions in Sec 13(3) to 13(13) of IGST Act. Accordingly POS needs to be determined as per Sec 13(2) of IGST Act i.e. location of recipient of services i.e. the cloud computing service provider located outside India

Read Also: Research funds totally exempt from GST, notices sent to private institutions no longer to be sought

4. Clarification Regarding Benefit Under AA Or EPCG Scheme:

Circular 233/27/2024

The CBIC has clarified that the cases wherein initially goods were imported by availing benefit under Advance Authorization (‘AA’) or Export Promotion of Capital Goods Scheme (‘EPCG Scheme’) and subsequently, paid the applicable IGST and compensation cess on such imports, along with applicable interest, the IGST paid on exports, refunded to the exporter shall not be considered to be in violation of Rule 96(10) of the CGST Rules, 2017. Further, it is also clarified that the Bill of Entry in respect of the import of the said inputs must be reassessed by the Customs authorities to this effect.

5. Recommendations By 54^th GST Council Meeting:

• Following service has been proposed for exempted from gst:

1. Exemption on Supply of Research and Development Services
2. Exemption on Affiliation Services to Government School
3. Exemption on Import of Service by Branch Office of Foreign Airlines Company
4. Exemption on Application Fees for Electricity Connection, Rental Charges, etc.
5. Exemption on Flying Training Courses Conducted by DGCA

• Addition of new service in Reverse charge mechanism:

1. RCM on Renting of Commercial Property by Unregistered to Registered Person.
2. RCM on Supply of Metal Scrap by Unregistered to Registered Person

• Clarification of various issue pertain to gst:

1. ITC Eligibility on Demo Vehicles for Dealers of Vehicle Manufacturers.
2. Treatment of Preferential Location Charges in Construction Services: location charges or Preferential Location Charges (‘PLC’) paid along with the consideration for the construction services of residential/commercial/industrial complex before the issuance of a completion certificate forms part of the composite supply of construction service. In this composite supply, construction service is the principal supply and PLC is naturally bundled with it, thereby eligible for same tax treatment as the main supply i.e. construction service.
3. Ancillary Services by GTA to be Treated as Composite Supply of Transport Services: where a Goods Transport Agency (‘GTA’), who issues a consignment note, along with the services of transport, provides ancillary/intermediate services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc., such ancillary services would be treated as composite supply of service where the principle supply is a GTA service.
4. Place of Supply of Specified Services Provided to Foreign Entities: advertising service & data hosting service the place of supply would be the location of the service recipient which is located outside India. Accordingly, these services would qualify as export of services subject to the fulfilment of other conditions as prescribed.
5. IGST Refund Where Benefit Under Specified Export Incentive Schemes is Availed: recommended that if inputs were initially imported without paying IGST or Compensation Cess under the schemes like EOU, Advance Authorization, EPCG, etc., but these duties were subsequently paid (along with interest) and the Bill of Entry is reassessed by the Customs authorities, then the IGST refund on exports will not be considered as a violation of Rule 96(10).

Read Also: GST revenue from online gaming sees a 412 percent surge, reaching Rs 6,909 crore

6. Classification and GST Rate on Car Seats:The Council has recommended to clarify by way of a circular that car seats are classifiable under 9401 and attract a GST rate of 18%.

7. Roof Mounted Package Unit (RMPU) AC Machines for Railways Liable to GST at 28%.

8. Mechanism for Implementation of Section 16(5) and Section 16(6): The council has recommended to notify a special procedure for rectification of orders confirming demand for wrong availment of ITC on account of contravention of provisions of section 16(4) of the CGST Act where appeal against such order has not been filed.

It is further recommended to issue a circular to clarify the procedure and issues relating to the implementation of the said provisions of sub-section (5) and sub-section (6) of section 16 of the CGST Act.

9. Clarification on Section 128A and Procedures for Waiver of Interest & Penalty: Proposed section 164 of cgst the said section should be notified w.e.f. 01-11-2024. Hence, this date, once notified would be the start date for availing the benefit of Section 128A. Also, the Council has recommended that the last date for payment of tax to avail the benefit would be 31-03-2025.

• Introduction of e-Invoicing Facility in Respect of B2C Supplies: the Council has recommended to extend the similar e-invoicing requirement in case of B2C supplies. This requirement will be rolled out as a pilot project which will be implemented on a voluntary basis for selected sectors and states.
• GST @ 5% on Transportation of Passengers by Helicopter on Seat-share Basis

• Reduction in Rate of Extruded or Expanded Products, Savoury or Salted: The GST Council has recommended to reduce the GST rate on extruded or expanded products, savoury or salted falling under heading 1905 90 30 from 18% to 12%, with prospective effect.

• GST Rate on Major Cancer Drugs Reduced from 12% to 5%: Three major cancer drugs, namely Trastuzumab Deruxtecan, Osimertinib, and Durvalumab The GST Council has recommended to reduce the GST rate on these drugs from 12% to 5% to lower the cost of cancer treatment further.

• Regularizing GST Liability for Film Distributor or Sub-Distributor: The Council has recommended to regularise the GST liability for the past period prior to 01-10-2021 on ‘as is where is’ basis, where the film distributor or sub-distributor acts on a principal basis to acquire and distribute films.

Read Also: GST Council may propose 18% tax on payment aggregators for transactions up to Rs 2,000

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