55TH GST COUNCIL: NEW CBIC CLARIFICATIONS

[Dr. Sanjiv Agarwal]

CBIC has issued following clarifications, all dated 31.12.2024, on the last date of 2024, i.e., 31.12.2024 to clarify on various issues in relation to taxability under GST law. These were discussed in 55th meeting of GST Council held on 21.12.2024:

Circular No.	In relation to
240/34/2024-GST	Clarification in respect of input tax credit availed by electronic commerce operators where services specified under Section 9(5) of Central Goods and Services Tax Act, 2017 are supplied through their platform i.e., on reverse charge basis.
241/35/2024-GST	Clarification on availability of input tax credit as per section 16(2)(b) of the Central Goods and Services Tax Act, 2017 in respect of goods which have been delivered by the supplier at his place of business under Ex-Works Contract [transactions between automobile dealers and Original Equipment Manufacturers (OEM)]
242/36/2024-GST	Clarification on recording of correct place of supply on invoices of Online Services supplied by the suppliers of services or through E-coms to unregistered recipients.
243/37/2024-GST	Clarification on various issues pertaining to GST treatment of vouchers – supply of goods or services, treatment of transactions in vouchers by distributors / P to P basis / on fee or commission basis, unredeemed vouchers, additional services etc.

ITC by E-Coms for services under Reverse Charge Mechanism (Circular No. 240/34/2024-GST dated 31.12.2024)

• CBIC has issued clarification on Input Tax Credit (ITC) availed by Electronic Commerce Operators (ECOs) where services specified under Reverse Charge Mechanism (RCM) [Section 9(5)] of the CGST Act, 2017, are supplied through their platform.
• ECO is required to pay tax under RCM for supplies notified u/s 9(5) of CGST Act, 2017.
• ECO supplies his own services by providing its electronic platform against fee / commission. For this, it procures inputs and input services for which ITC is availed.
• CBIC Circular No. 167/23/2021-GST dated 17.12.2021 (Q.No. 6) clarified that:

• ECOs shall not be required to reverse ITC for inputs or input services, on account of restaurant services through their platform on which he required to pay tax under section 9(5) of the Act, 2017 and,
• ITC will not be allowed to be utilized for payment of such tax liability and,
• Whole of the tax liability will be required to be paid in cash

• Principle outlined in Circular No. 167 dated 17.12.2021 also applies to the supplies in respect of other services u/s 9(5) of the CGST Act, 2017.
• Electronic Commerce Operator, who is liable to pay tax under section 9(5) of the CGST Act in respect of specified services, is not required to reverse the input tax credit on his inputs and input services proportionately under section 17(1) or section 17(2) of CGST Act to the extent of supplies made under section 9(5) of the CGST Act.
• ECO will be required to pay the full tax liability on account of supplies under section 9(5) of the CGST Act only through electronic cash ledger.
• The credit availed by him in relation to the inputs and input services used to facilitate such supplies cannot be used for discharge of such tax liability under section 9(5) of the CGST Act but such credit can be utilized by him for discharge of tax liability in respect of supply of services on his own account.

ITC in Automobile Sector (Circular No. 241/35/2024-GST dated 31.12.2024)

• CBIC has issued clarification on availability of Input Tax Credit (ITC) as per section 16(2)(b) of the CGST Act, 2017 in respect of goods which have been delivered by the supplier at his place of business under Ex-Works Contract (EXW) between the automobile dealer and the Original Equipment Manufacturers (OEM).
• As per EXW contract between the dealer and OEM:

1. The goods are being handed over by the OEM to the transporter at his factory gate for onward transmission to the dealer;
2. Transport is arranged by OEM on the behalf of dealer; and
3. If insurance is arranged, it is done on the behalf of dealer and any claim in case of loss has to be lodged by the dealer.

• CBIC has clarified that :

• In such scenarios, the property in the said goods can be considered to have been passed on to the dealer by the OEM upon handing over of the said goods to the transporter at its factory gate, meaning thereby that the goods can be considered to have been delivered to the registered person (dealer), through the transporter, by the supplier (OEM) at his factory gate and the supply of the said goods can be considered to have fructified at the factory gate of the OEM, even though the goods may be physically received by the registered person (the dealer) after the transit period.
• As per Explanation to clause (b) of section 16(2) CGST Act, the registered person (dealer) can be considered to have “received” the said goods at the time of such handing over of the goods by the supplier to the transporter, at its factory gate, for their onward transmission to the said registered person (dealer) and ITC is available to the registered person subject to fulfillment of conditions of section 16 and 17 of CGST Act, 2017, including the condition that the said goods are used or intended to be used in the course or furtherance of business by the said registered person (dealer).
• The same principle is applicable in respect of supply of other goods also where the contract between the supplier and recipient is an EXW contract, and as per terms of the contract, the goods are to be delivered by the supplier to the recipient, or to any other person (including a transporter) on behalf of the recipient, at his (supplier’s) place of business and the property in the goods stands transferred to the recipient at the time of such handing over.  Thus, the said goods can be construed to have been “received” by the said recipient at the time of handing over the said goods to the recipient or to the transporter, as the case may be.
• As per section 16(1), a registered person is entitled to input tax credit only in respect of supply of goods or services or both, which is used or intended to be used in the course or furtherance of business. Therefore, the input tax credit may be available to the registered person on such receipt of goods by the said registered person from the supplier at his (supplier’s) factory gate or business premises, subject to fulfilment of other conditions of section 16 and section 17 of CGST Act, including the condition that the said goods are used or intended to be used in the course or furtherance of business by the said registered person.
• Further, the registered person shall not be entitled to ITC on such goods if:

• The goods are found to have been diverted for non-business purposes at any stage, either before physically receiving the said goods at his business premises or subsequently.
• At any time after “receiving” the goods, such goods are lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Determination of Place of supply for Online Services (Circular No. 242/36/2024-GST dated 31.12.2024)

• CBIC has issued clarification on correct place of supply of online services on the invoices supplied by the suppliers of services themselves or through Electronic Commence Operators to unregistered recipients.
• Section 12(2) of IGST Act, 2017 provides that the place of supply of services, except the services specified in sub- section (3) to (14)-

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be, -

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.

• Thus, when the services are supplied to a registered person, the place of supply of services shall be the location of the recipient and when the services are supplied to an unregistered person, the place of supply of the said services shall be the location of the recipient, if his address is available on record, and shall be the location of the supplier, if the address is not available on record.
• In respect of supply of services made to unregistered persons, irrespective of the value of the said supply, the supplier is required to mandatorily record the name of the State of the unregistered recipient on the tax invoice, in cases involving supply of online money gaming or supply of taxable services by or through an electronic commerce operator or supply of online information and database access or retrieval (OIDAR) services.
• Recording of the name of State of the unregistered recipient on the tax invoice in respect of such supply of services shall be deemed as the address on record of the recipient for the purpose of determination of place of supply of the said services under section 12(2)(b) of IGST Act. The place of supply of such services shall be considered as the location of the recipient of the services as per provisions of section 12(2)(b)(i) of IGST Act.
• Rule 46(f) of the CGST provides for mentioning some details on the invoice in case of supplies made to unregistered recipient. Further, proviso to rule 46(f) of the CGST Rules provides that in cases involving the supply of online money gaming or involving supply of any taxable services by or through an electronic-commerce operator or by a supplier of online information and database access or retrieval services, to an unregistered recipient, irrespective of the value of the said supply, the tax invoice issued by the registered supplier must contain the recipient's State name. Such State name shall be deemed to be the address on record of the recipient.
• All services supplied to unregistered recipients over digital or electronic network, either by the supplier using his own digital or electronic facility / platform or through any other electronic or digital platform owned and operated by an independent electronic commerce operator, will be covered under proviso to rule 46(f) of CGST Rules.
• Provisions of proviso to rule 46(f) of CGST Rules shall be applicable in respect of all the online supplies of services supplied to an unregistered recipient, in addition to the supply of online money gaming and OIDAR services e.g., subscription of e-newspapers and e-magazines, online subscription of entertainment services (e.g. OTT platforms), online telecom services, digital services through mobile applications etc.
• In respect of supply of any such online/ digital services, OIDAR services and online money gaming to unregistered recipients, the suppliers are mandatorily required to record the name of the State of the recipient on the tax invoice, irrespective of the value of supply of such services, and to declare place of supply of the said services as the location of the recipient (based on the name of State of the recipient) in their details of outward supplies in FORM GSTR-1/1A.
• For recording the name of the State of the recipient on tax invoice in respect of such supplies made to unregistered persons for such online services, supplier should devise suitable mechanism to ensure collection of such details from unregistered recipient before making any supplies to him.
• The name of the State of the recipient so recorded shall be deemed to be the address of recipient available on record and thus, for determining place of supply of the said services, provisions of section 12(2)(b)(i) of IGST Act will be applicable as per which the place of supply shall be the location of the recipient.
• If the supplier fails to issue invoice as per law by not recording correct mandatory particulars, including recording of name of State of unregistered recipient in respect of such supplies, he may be liable to penal action under the provisions of section 122(3)(e) of CGST Act.

Tax treatment of Vouchers under GST (Circular No. 243/37/2024-GST dated 31.12.2024)

• CBIC has issued clarification on various issues pertaining to tax treatment on vouchers under GST law.
• There issues are such as whether transactions in voucher are a supply of goods and/or services, whether GST is leviable on trading of vouchers by distributor/sub-distributor and whether unredeemed vouchers (breakage) are taxable.
• Whether “transactions in vouchers” falls under the category of supply of goods and/or services?

• ‘Voucher’ may be in nature of payment instrument which creates an obligation on the supplier to accept it as a consideration or part consideration for the supply of goods and/or services.
• Where the voucher is covered as a pre-paid instrument recognized by the RBI and is used as a consideration to settle an obligation, the voucher will fall under the definition of ‘money’. As ‘money’ is excluded from the definition of goods and services as provided in section 2(52) and section 2(102) of the CGST Act respectively, the transactions in voucher would be considered neither as a supply of goods nor as a supply of services.

• Where voucher is not covered as a pre-paid instrument recognized by RBI and hence, cannot be treated as money, the voucher will be in nature of an obligation on the supplier to receive it as consideration or part consideration and assure the beneficiary/voucher holder to claim certain goods and/or services as specified on the voucher or in the related documents. Such voucher can be considered as an ‘actionable claim’ within the meaning of section 2(1) of the CGST Act.
• As per entry 6 of Schedule III of CGST Act, an activity or transactions of actionable claims, other than specified actionable claims, is to be treated neither as a ‘supply of goods’ nor as a ‘supply of services’. Further as per section 2(102A) of CGST Act, specified actionable claim means the actionable claim involved in or by way of betting, casinos, gambling, horse racing, lottery or online money gaming.
• As vouchers are not covered under definition of specified actionable claim, transaction in vouchers would be treated neither as a ‘supply of goods’ nor as a ‘supply of services’.
• Thus, irrespective of whether voucher is covered as a pre-paid instrument recognized by RBI or not, the voucher is just an instrument which creates an obligation on the supplier to accept it as consideration or part consideration and the transactions in voucher themselves cannot be considered either as a supply of goods or as a supply of services. However, supply of underlying goods and/or services, for which vouchers are used as consideration or part consideration, may be taxable under GST.

• What would be the GST treatment of transactions in vouchers by distributors/ sub-distributors/ agents etc.?

• There are two models for distribution – on P to P basis and through distributors / sub-distributors.
• Where vouchers are distributed through the distributors/ sub-distributors/ dealers on Principal-to-Principal(P2P) basis-  In such cases, distributors/ dealers (including sub-distributors) own the vouchers and operate autonomously with full control over the process from purchase to the final sale of the vouchers to the end user.
• Where vouchers are distributed using distributors/ sub-distributors/ agents on commission/ fee basis- In such cases, GST would be payable by such distributor/sub-distributor/agent, acting as an agent of the voucher issuer, on the commission/fee or any other amount by whatever name called, for such purpose, as a supply of services to the voucher issuer.

• What would be GST treatment of additional services such as advertisement, cobranding, marketing & promotion, customization services, technology support services, customer support services etc.

• These services may be provided by either the distributor/ sub-distributor or by another person to the voucher issuer against a service fee/ service charge/ affiliate charge or any other amount, by whatever name called, as per contract/agreement between such service provider and the service recipient (voucher issuer).
• The said service fee/ service charge/ affiliate charge or other amount for supply of such additional services to the voucher issuer as per the terms of contract/agreement, would be liable to GST at the applicable rate in the hands of the said service provider.

• What would be the GST treatment of unredeemed vouchers (breakage)?

• There is no supply of goods and/or services on account of such unredeemed vouchers (breakage).
• As there is no underlying supply of goods and/or services in case of non-redemption of vouchers by the customer, the amount retained for unredeemed vouchers by the voucher issuer cannot be construed as consideration for any supply.
• The amount attributable to non-redemption of voucher (breakage) would not constitute as a “monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person”.
• No GST appears to be payable on such amount attributable to non-redemption of voucher (breakage).