GST RATES AND TAXABILITY OF SPECIFIED SERVICES

[Dr. Sanjiv Agarwal]

CBIC has issued Circular No. 177 dated 03.08.2022 clarifying on GST applicability issues in relation to various types of specified services. CBIC (TRU) has clarified on the following aspects of taxability and exemption in relation to few services:

CBIC clarifications on GST rates and exemption on specified services

The gist of clarifications is as follows:

1. Rate of GST applicable on supply of ice-cream by ice-cream parlors during the period from 01.07.2017 to 05.10.2021

It has been clarified that past cases of payment of GST on supply of ice-cream by ice-cream parlors @ 5% without ITC shall be treated as fully GST paid to avoid unnecessary litigation. Since the decision is only to regularize the past practice, no refund of GST shall be allowed, if already paid at 18%. With effect from 6.10.2021, the ice Cream parlors are required to pay GST on supply of ice-cream at the rate of 18% with ITC.

2. Applicability of GST on application fee charged for entrance or the fee charged for issuance of eligibility certificate for admission or for issuance of migration certificate by educational institutions
   • All services supplied by an ‘educational institution’ to its students are exempt from GST. Consideration charged by the educational institutes by way of entrance fee for conduct of entrance examination is also exempt.
   • Services supplied by an educational institution by way of issuance of migration certificate to the leaving or ex-students are also covered by the exemption.
   • The amount or fee charged from prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or ex-students is covered by exemption under S.No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

3. Storage or warehousing of cotton in baled or ginned form whether covered under entry 24B of Notification No. 12/2017-Central Tax (Rate) which exempted services by way of storage and warehousing of raw vegetable fibres such as cotton before 18.07.2022

Services by way of storage or warehousing of cotton in ginned and or baled form was covered under entry 24B of Notification No. 12/2017- Central Tax (Rate) Dated 28.06.2017 in the category of raw vegetable fibres such as cotton. It may however be noted that this exemption has been withdrawn w.e.f 18.07.2022

4. Exemption under S.No. 9B of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 whether covers services associated with transit cargo both to and from Nepal and Bhutan

• Exemption under S.No. 9B of Notification 12/2017- Central Tax (Rate) covers services associated with transit cargo both to and from Nepal and Bhutan.
• Movement of empty containers from Nepal and Bhutan, after delivery of goods there, is a service associated with the transit cargo to Nepal and Bhutan and is therefore covered by the exemption.
• The regulations governing transit / transhipment have to be followed in addition to the ensuring that an electronic track and trace facility is in place. This facility uses container numbers to locate the cargo. Thus, it is verifiable that the empty container returning from Nepal or Bhutan is the same container which was used to deliver goods to Nepal or Bhutan.

5. Applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government departments

• The exemption under entry 3& 3A of Notification No. 12/2017- Central Tax (Rate) Dated 28.06.2017 has been given on pure services & composite supplies procured by Central Government, State Government, Union Territories or local authorities for performing functions listed in the 11th and 12th schedule of the constitution.
• If such services are procured by Indian Army or any other Government Ministry/Department which does not perform any functions listed in the 11th and 12th Schedule, in the manner as a local authority does for the general public, the same are not eligible for exemption under Sl. No. 3 and 3A of Notification 12/2017- Central Tax (Rate).

6. Activity of selling of space for advertisement in souvenirs whether eligible for concessional rate of 5%

• As per serial number (i) of entry 21 of Notification No. 11/2017-Central Tax (Rate) Dated 28.06.2017 selling of space for advertisement in print media attracts GST @ 5%.
• It has been clarified sale of space for advertisement in souvenir book is covered under serial number (i) of entry 21 of Notification No. 11/2017-Central Tax (Rate) and attracts GST @ 5%.

7. Taxability and applicable rate of GST on transport of minerals from mining pit head to railway siding, beneficiation plant etc., by vehicles deployed with driver for a specific duration of time

Such renting of trucks and other freight vehicles with driver for a period of time is a service of renting of transport vehicles with operator falling under Heading 9966 and not service of transportation of goods by road. This being so, it is not eligible for exemption under S.No. 18 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. On such rental services of goods carriages where the cost of fuel is in included in the consideration charged from the recipient of service, GST rate has been reduced from 18% to 12% with effect from 18.07.2022. Prior to 18.07.2022, it attracted GST at the rate of 18%.

8. Location charges or preferential location charges (PLC) collected in addition to the lease premium for long term lease of land whether constitute part of the lease premium or upfront amount charged for long term lease of land and are eligible for the same tax treatment

Location charges or preferential location charges (PLC) paid upfront in addition to the lease premium for long term lease of land constitute part of upfront amount charged for long term lease of land and are eligible for the same tax treatment, and thus eligible for exemption under S.No. 41 of Notification no. 12/2017- Central Tax (Rate) dated 28.06.2017.

9. Applicability of GST on payment of honorarium to the Guest Anchors

Services provided by the guest anchors in lieu of honorarium attract GST liability. However, guest anchors whose aggregate turnover in a financial year does not exceed Rs 20 lakhs (Rs 10 lakhs in case of special category states) shall not be liable to take registration and pay GST.

10. Additional toll fees collected in the form of higher toll charges from vehicles not having fastag whether exempt from GST

Additional fee collected in the form of higher toll charges from vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and may be given the same treatment as given to toll charges.

11. Applicability of GST on services in the form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF)

The abnormality/disease/ailment of infertility is treated using ART procedure such as IVF. It is clarified that services by way of IVF are also covered under the definition of health care services for the purpose of exemption Notification No. 12/2017-CT(Rate) dated 28.06.2017.

12. Sale of land after levelling, laying down of drainage lines etc., whether taxable under GST

• Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST.
• It may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services.

13. Situations in which corporate recipients are liable to pay GST on renting of motor vehicles designed to carry passengers

Where the body corporate hires the motor vehicle (for transport of employees etc.) for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966, and the body corporate shall be liable to pay GST on the same under Reverse Charge Mechanism. It may be seen that reverse charge thus would apply on act of renting of vehicles by body corporate and in such a case, it is for the body corporate to use in the manner as it likes subject to agreement with the person providing vehicle on rent.

14. Hiring of vehicles by firms for transportation of their employees to and from work whether exempt under S.No. 15(b) of Notification No. 12/2017-Central Tax (Rate) transport of passengers by non-air conditioned contract carriage

• S.No. 15 (b) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “transport of passengers, with or without accompanied belongings, by non-air conditioned contract carriage, other than radio taxi, for transport of passengers, excluding tourism, conducted tour, charter or hire.”
•  ‘Charter or hire’ excluded from the exemption entry is charter or hire of a motor vehicle for a period of time, where the renter defines how and when the vehicles will be operated, determining schedules, routes and other operational considerations.

15. Supply of service of construction, supply, installation and commissioning of dairy plant on turn-key basis whether constitutes a composite supply of works contract service and whether eligible for concessional rate of GST prior to 18.07.2022

• A contract of the nature described for construction, installation and commissioning of a dairy plant constitutes supply of works contract. There is no doubt that dairy plant which comes into existence as a result of such contracts is an immovable property.
• Such works contract services were eligible for concessional rate of 12% GST under serial number 3(v)(f) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 prior to 18.07.2022. With effect from 18.07.2022, such works contract services would attract GST at the rate of 18% in view of amendment carried out in notification No. 11/2017- Central Tax (Rate) vide Notification No. 03/2022- Central Tax (Rate).

16. Applicability of GST on tickets of private ferry used for passenger transportation

• Private ferries are used as means of transport from one island to another in Andaman and Nicobar Islands.
• This exemption would apply to tickets purchased for transportation from one point to another irrespective of whether the ferry is owned or operated by a private sector enterprise or by a PSU/government.

The readers may refer to the Circular for detailed reading.