RECENT GST CLARIFICATIONS – PART 5

[Dr. Sanjiv Agarwal]

Post 53rd GST Council meeting held on 22.06.2024, CBIC has issued 23 Circulars bearing Nos. 207 to 229, all dated between 26.06.2024 and 15.07.2024 clarifying taxability, place of supply, time of supply etc on various issues relating to goods and services.

This Part-5 of the Article offers the gist of Circular No. 220, 221, 222 and 223 which are on the following topics:

Circular No. / date	In relation to
Circular No. 220/14/2024-GST dated 26.06.2024	Place of Supply for Custodial Services by Banks to FPI’s
Circular No. 221/15/2024-GST dated 26.06.2024	Time of Supply in NHAI Projects
Circular No. 222/16/2024-GST dated 26.06.2024	Time of Supply for Spectrum Services
Circular No. 223/17/2024-GST dated 10.07.2024	Proper officer for registration and composition levy under GST

Place of Supply for Custodial Services by Banks to FPI’s - Circular No. 220/14/2024-GST dated 26.06.2024

Based on the recommendation of 53^rd meeting of GST Council held on 22.06.2024, CBIC has clarified on place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors i.e. whether the activity of providing Custodial Services by banks or financial institutions to FPIs will be treated as services provided to 'account holder' under Section 13(8)(a) of the IGST Act, 2017 and  how the place of supply of the said services shall be determined?

• Various banks enter into custodial agreements with the Foreign Portfolio Investors (FPIs) for the provision of such custodial services. The main activity carried out by banks as a custodian in relation to custodial services is maintaining account of the securities held by the FPIs.
• As per section 13(8)(a) of IGST Act, 2017, place of supply of services supplied by banking company or a financial institution or a non-banking company to account holders shall be the location of the supplier of services.
• Under Service Tax regime, the custodial services were not considered to be covered under the services provided by bank to account holders, but considered to be covered under the services which are not provided to account holder. The clarification given under Service Tax Regime is equally applicable under GST Regime.
• It is clarified that the custodial services provided by banks or financial institutions to FPIs are not to be treated as services provided to 'account holder' and therefore, the said services are not covered under Section 13(8)(a) of the IGST Act.
• Thus, the place of supply of such services is not to be determined under Section 13(8)(a) of the IGST Act but has to be determined under the default provision i.e., sub-section (2) of section 13 of the IGST Act.
• Such custodial services shall be considered to be export of service and hence a zero rated supply in GST regime.

Time of Supply in NHAI Projects - Circular No. 221/15/2024-GST dated 26.06.2024

Based on the recommendation of 53^rd meeting of GST Council held on 22.06.2024, CBIC has issued clarification on time of supply in respect of supply of services of construction of road and maintenance thereof of National Highway Projects of National Highways Authority of India (NHAI)in Hybrid Annuity Mode (HAM) model where certain portion of Bid Project Cost is received during construction period and remaining payment is received through deferred payment (annuity) spread over years. Hybrid Annuity Model (HAM) of concession agreements, the highway development projects are under Design, Build, Operate and Transfer model (DBOT), wherein the concessionaire is required to undertake new construction of Highway and Operation and Maintenance (O&M) of Highways. Accordingly,

• HAM contract is a single contract for construction as well as operation and maintenance of the highway. The payment terms are so staggered that the concessionaire is held accountable for the repair and maintenance of the highway as well.
• The contract needs to be looked at holistically based on the services to be performed by the concessionaire and cannot be artificially split into two separate contracts for construction and operation and maintenance, based on the payment terms.
• In HAM contract, the payment is made spread over the contract period in installments and payment for each installment is to be made after specified periods, or on completion of an event, as specified in the contract. (Continuous supply of services’ as defined under section 2(33) of the CGST Act)
• Time of supply of services under HAM contract, including construction and O&M portion, should be the date of issuance of such invoice, or date of receipt of payment, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract, as applicable.
• Where the invoice is not issued on or before the specified date or the date of completion of the event specified in the contract, time of supply should be the date of provision of the service, or date of receipt of payment, whichever is earlier.
• In case of continuous supply of services, the date of provision of service may be deemed as the due date of payment as per the contract, as the invoice is required to be issued on or before the due date of payment as per the Section 31(5) of CGST Act.
• The tax liability on the concessionaire under the HAM contract, including on the construction portion, would arise at the time of issuance of invoice, or receipt of payments, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract, as applicable.
• If invoices are not issued on or before the specified date or the date of completion of the event specified in the contract, tax liability would arise on the date of provision of the said service (i.e., the due date of payment as per the contract), or the date of receipt of the payment, whichever is earlier.
• It is further clarified that as the installments/annuity payable by NHAI to the concessionaire also includes some interest component, the amount of such interest shall also be includible in the taxable value for the purpose of payment of tax on the said annuity/installment

Time of Supply for Spectrum Services - Circular No. 222/16/2024-GST dated 26.06.2024

Based on the recommendation of 53^rd meeting of GST Council held on 22.06.2024, CBIC has clarified on time of supply of services of spectrum usage and other similar services under GST. Accordingly,

•  The time of supply for payment of GST in respect of supply of spectrum allocation services in cases where the successful bidder for spectrum allocation (i.e. the telecom operator) opts for making payments in instalments under deferred payment option as per Frequency Assignment Letter (FAL) issued by Department of Telecommunication (DoT), Government of India has been clarified.
• Bidder (the telecom operator) bids for securing the right to use spectrum offered by the government. Service provider is the Government of India (through DoT) and service recipient is the bidder/ telecom operator.
• The GST is to be discharged on the supply of spectrum allocation services by the recipient of services (the telecom operator) on reverse charge basis.
• If the telecom operator chooses the option to make payment in installments, the payment has to be made spread over the contract period in installments and payment for each installment is to be made after specified periods, as specified in the Frequency Assignment Letter of DoT, which is in the nature of contract. (continuous supply of services).
• Frequency Assignment Letter is in the nature of a bid acceptance document intimating the telecom operator that the result of the auction has been accepted by the competent authority and the details of blocks and spectrum allotted to the telecom operator.
• It also mentions the options and the amounts to be paid by the telecom operator in each of the two options.
• Tax invoice will be required to be issued in respect of the said supply of services, on or before such due date of payment as per the option exercised by the telecom operator.
• Where full upfront payment is made by the telecom operator, GST would be payable when the payment of the said upfront amount is made or is due, whichever is earlier.
• Where deferred payment is made by the telecom operator in specified installments, GST would be payable as and when the payments are due or made, whichever is earlier.
• It is further clarified that similar treatment regarding the time of supply, may apply in other cases also where any natural resources are being allocated by the government to the successful bidder/ purchaser for right to use the said natural resource over a period of time, constituting continuous supply of services with the option of payments for the said services either through an upfront payment or in deferred periodic installments over the period of time.

Proper officer for registration and composition levy under GST - Circular No. 223/17/2024-GST dated 10.07.2024

• CBIC had issued Circular No. 01/01/2017-GST dated 26.06.2017 regarding functions of proper officer for provisions in relation to registration and composition levy under the CGST Act, 2017.
• CBIC has now amended Circular No. 01/01/2017-GST consequent to the shifting of the GST back office operations of Central Board of Indirect Tax & Customs from ACES-GST to GSTN BO.
• It has been decided that the functions of proper officer in relation to section 30 & Proviso to sub-section (1) of section 27 of CGST Act, as well as rule 6, rule 23 & rule 25 of CGST Rules be assigned to Superintendent of Central Tax instead of Assistant or Deputy Commissioners of Central Tax or Assistant or Deputy Directors of Central Tax.
• The new assignment of functions shall be as follows:

Officers	Functions under
Assistant or Deputy Commissioners of Central Tax and Assistant or Deputy Directors of Central Tax	Section 10(5)
Superintendent of Central Tax	Section 25 (8)  Section 27(1) Proviso  and Sections 28, 29 and  30 Rules 6,  9,  10,  12,  16,  17,  19,  22,   23,  24 and  25

 (To be continued…)

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