2024 (10) TMI 1031 - HC - GST

Challenge to Circular No. 212/6/2024-GST dated 26 June 2024 Impugned Circular issued by the Central Board of Indirect Taxes and Customs CBIC as well as the Show Cause Notice SCN dated 02 August 2024 - guarantee commission and the service tax liability raised in connection therewith - discounts and Section 15 (3) (b) of the Central Goods and Services Tax Act, 2017 - HELD THAT - Insofar as the aspect of guarantee commission is concerned, the allegations noted which stand levelled in the impugned SCN and where the respondents view a failure on the part of the writ petitioner to discharge perceived GST liabilities considering commission income @ 0.75% of the corporate guarantee which may have been extended. Attention drawn to RBI Circular No. RBI/2021-22/121 dated 09 November 2021 in terms of which the Central Bank itself restrains parties from obtaining consideration by way of commission in respect of guarantees of the genre with which are concerned. While the respondents may continue with the proceedings forming part of the impugned SCN dated 02 August 2024, they shall desist from ruling on the issues pertaining to discounts and Section 15 (3) (b) as well as guarantee commission - Let the writ petition be called again on 09.01.2025.

Summary

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.