Effective Date of Amendment in GST: Analyzing the Conflict Between Circular No. 247/04/2025 and Notification No. 03/2023

CGST - Circular No. 247/04/2025 - Dated: 14-02-2025

Analysis of Circular No. 247/04/2025 and Notification No. 03/2023

Introduction

The interplay between Circular No. 247/04/2025 dated 14th February 2025 and Notification No. 03/2023 dated 26th July 2023 presents a significant issue in the realm of Goods and Services Tax (GST) law in India. The circular, issued by the Ministry of Finance, clarifies the application of GST rates and classifications based on the recommendations of the 55th GST Council meeting. Notably, it states that the amendments introduced by Notification No. 03/2023 will apply on or after 26th July 2023. However, the notification itself specifies that the changes come into effect on 27th July 2023. This discrepancy raises critical questions about the legal authority of circulars vis-`a-vis notifications, particularly in light of the Supreme Court's stance that circulars cannot override statutory notifications.

Objective and Purpose

The primary objective of Circular No. 247/04/2025 is to provide clarity on the application of GST rates and classifications for specific goods, as recommended by the GST Council. It aims to ensure uniformity in the implementation of GST provisions across different jurisdictions. On the other hand, Notification No. 03/2023 serves to amend existing GST compensation cess rates, implementing decisions made during the 50th GST Council meeting. The notification is a statutory instrument, issued under the authority of the Goods and Services Tax (Compensation to States) Act, 2017.

Detailed Analysis

1.  Circular No. 247/04/2025: 

Key Clarifications:  - Classification and GST rate on pepper of the genus Piper. - Exemption of GST for agriculturists supplying dried pepper and raisins. - GST rate on ready-to-eat popcorn based on its classification. - Classification and GST rate on autoclaved aerated concrete blocks with fly ash content. - Effective date of amended entry regarding ground clearance for motor vehicles. -

 Ambiguity in Effective Date:  - The circular states that the amendments in Notification No. 03/2023 apply on or after 26th July 2023, which conflicts with the notification's specified effective date of 27th July 2023.

2.  Notification No. 03/2023: 

Amendments Introduced:  - Changes in GST compensation cess rates for various tobacco products and motor vehicles. - Introduction of new entries and modifications to existing entries in the compensation cess schedule. - Clarification on the definition of "declared retail sale price" for compliance with legal metrology laws. -

Statutory Authority: - Issued under the Goods and Services Tax (Compensation to States) Act, 2017, making it a statutory instrument with legal force.

Practical Implications

The discrepancy in the effective date between the circular and the notification has practical implications for businesses, tax practitioners, and regulatory authorities:

Compliance Challenges:

- Businesses may face uncertainty regarding the applicable GST rates and classifications, leading to potential compliance issues.

- Tax practitioners must navigate the legal inconsistency to advise clients accurately.

-  Regulatory Impact:  - Tax authorities may encounter difficulties in enforcing GST provisions uniformly, potentially leading to disputes and litigation.

Comparative Analysis

In the context of Indian tax law, the Supreme Court has consistently held that circulars cannot override statutory notifications. This principle was reaffirmed in the case of M/S. SANDUR MICRO CIRCUITS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BELGAUM - 2008 (8) TMI 3 - SUPREME COURT, where the Court ruled that a circular issued by the Central Board of Excise and Customs (CBEC) cannot take precedence over a notification issued under statutory authority. The Court emphasized that circulars are meant to clarify and facilitate the implementation of statutory provisions, not to alter or contradict them.

Conclusion

The anomaly between Circular No. 247/04/2025 and Notification No. 03/2023 underscores the importance of ensuring consistency and clarity in the issuance of legal instruments. Given the Supreme Court's jurisprudence, it is evident that the notification's effective date of 27th July 2023 should prevail over the circular's conflicting statement. This situation highlights the need for potential reform or judicial clarification to prevent similar discrepancies in the future. 

Full Text:

CGST - Circular No. 247/04/2025 - Dated: 14-02-2025

Dated: 21-2-2025