GST Update No 254 on clarification regarding applicability of GST and exemptions

The trade and industry sought clarifications on various issued from the Government as regards to levy of GST and applicability of exemptions. To address the same, recently CBIC issued Circular No. 177/09/2022-TRU dated 03.08.2022 clarifying certain matters, some of which were also discussed in 47th GST Council Meeting. The present update seeks to highlight key takeaways of the said clarification. Following are the key highlights of the above referred Circular: 1. Applicability of GST Rate on supply of ice-cream parlours: The 45th GST Council meeting clarified vide Circular 164/20/2021-GST dated 06.10.2021 that supply of ice-cream parlours shall be taxable at the rate of 18% with ITC since they do not have a character of restaurants. However, the confusion as regards to correctness of GST paid @5% without ITC by many taxpayers was a matter of concern for them. Now, the CBIC in order to regularise the practice and avoid unnecessary litigations has clarified that GST at the rate of 18% shall be levied on supply of ice-cream by ice-cream parlours w.e.f. 06.10.2021. Further, the ice cream parlours which paid GST at the rate of 5% without ITC during the period 01.07.2017 to 05.10.2021, shall be considered to have discharged their GST liability fully. It is also stated that no refund shall be allowed if GST @18% was paid for the said period. 2. Levy of GST on application fee charged for entrance or fee charged for issuance of eligibility certificate for admission or issuance of migration certificate by educational institution:- As regards the levy of GST on application fee or eligibility or migration certificate, it is stated that education services by educational institutions are exempt vide Entry No. 66 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. The relevant extract of the same is reproduced as under: - “Services provided – a. by an educational institution to its students, faculty and staff; [(aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee;]…” It is therefore stated that services supplied by educational institutions to the students are exempt from GST. Hence, consideration charged by educational institutions by entrance fee or issuance of migration certificate is also exempt form GST. 3. Whether storage or warehousing of cotton in baled or ginned form is exempt under Entry 24B of Notification No. 12/2017-Central Tax (Rate)? In this respect, it is clarified the Circular that prior to 18.07.2022, Entry 24B of the said Notification exempted service by way of storage of warehousing of raw vegetable fibres such as cotton, flax, jute etc. Accordingly, it is clarified that service of storage of cotton in ginned or baled form was covered in aforesaid exemption entry which however is withdrawn w.e.f. 18.07.2022. 4. Whether exemption under Entry No. 9B of Notification No. 12/2017 dated 28.06.2017 covers services associated with transit cargo both to and from Nepal and Bhutan:- It is clarified that the services of transit of cargo and movement of empty cargo to and from Nepal and Bhutan, services are exempt. 5. Applicability of GST on sanitation and conservancy services supplied to Army and other Central and State Government department: It is clarified that as regards to services procured by Army or any other Government which does not performs any functions prescribed under Schedule 11 and 12 of the Constitution, the same are not eligible for exemption under the aforesaid exemption entry. 6. Whether activity related to selling of space for advertisement in souvenirs is eligible for GST at the rate of 5%? It is stated that selling of space in print media is leviable at the rate of 5%. Since, souvenir books are defined in Press and Registration of Books Act, the same shall be taxable at the rate of 5%. 7. Taxability and applicability of GST rate on transport of minerals from mining pit head to railway siding etc. by vehicles deployed with driver for specific duration: The issue as regards to transport of minerals from pit head to railway siding is prone to litigations from erstwhile GST regime. The person taking vehicle on rent defines how and when to operate the vehicle along with its schedule. On the contrary, person giving vehicle on rent with operator cannot be said to be supplying services of transportation of goods. Hence, it is clarified that it is covered under renting of motor vehicles and not transportation of goods. On such rental services, where cost of fuel is included in the consideration charged, GST rate is reduced from 18% to 12% w.e.f. 18.07.2022. 8. Whether Preferential location charges (PLC) collected in addition to lease premium for long term lease of land constitute part of lease premium or of upfront amount charged for long term lease of land are eligible for the same tax treatment: The ambiguity and confusion as regards to applicability of GST on PLC charges is a neverending issue. Hence, it is now clarified in line with recommendation of GST Council that PLC charges paid upfront in addition to lease premium for long term lease of land constitutes part of upfront amount and hence, is eligible for same tax treatment and eligible for exemption vide Entry No. 41 of the Exemption Notification. 9. Applicability of GST on payment of honorarium to Guest Anchors: Various representations were received as regards to applicability of GST on honorarium paid to guest anchors. It is now clarified that supply of goods and services are taxable unless exempt or declared as “neither supply of goods nor services”. Therefore, services provided by guest anchors shall be liable to GST provided their aggregate turnover exceeds the threshold limit. 10. Applicability of GST on additional toll fee collected in form of higher toll charges from vehicles not having fastag: It is stated that Ministry of Road Transport & Highways vide Circular dated 16.02.2021 directed to collect additional amount from users of road to the extent of two times of toll fee, applicable to the vehicle which is not having Fastag. It is clarified that the additional amount is in nature of additional toll charges so will be exempt as toll charges. 11. Whether sale of land after levelling, laying down of drainage lines etc. is taxable under GST? As per Schedule III of CGST Act, 2017, sale of land is neither supply of goods nor supply of service and hence, not chargeable to GST. Further, land may be sold either as it is or after some development. It is now clarified that sale of such developed land is also sale of land and hence, covered under ambit of Schedule III and thereby, no GST shall be levied on same. However, service provided for development of land shall attract GST at the applicable rates. 12. Applicability of Reverse Charge Mechanism on renting of motor vehicles to carry passenger: It is stated that recipient shall pay tax under RCM in case of renting of motor vehicles for transportation of passenger by a non-body corporate to a body corporate. Various representations were submitted seeking clarification whether RCM is applicable on service of transportation of passenger or renting of motor vehicle designed to carry passenger. It is clarified that services of renting of motor vehicle covered under the said entry is for period of time where the renter defines how and when the vehicles will be operated, determining their schedules and routes. On the contrary, passenger transport services are vehicles that are operated over pre-determined routes and schedules. GST Council recommended that where the body corporates hires motor vehicle for period of time during which is shall be at the disposal of body corporate, RCM shall be applicable on the same. 13. Whether hiring of vehicles by firms for transportation of employees to and from work is exempt under transportation of passenger by non-air-conditioned contract carriage? In this respect, it is clarified that exemption would be applicable to passenger transport service by non-air conditioned contract carriage in case transportation takes place over predetermined route on a predetermined schedule. Therefore, no exemption shall be available in case where contract carriage is hired for a specific period of time. 14. Whether supply of Service of Construction, installation and commissioning of dairy plant on turn-key basis is composite supply of works contract service and thereby eligible for concessional GST rate prior to 18.07.2022? In this respect, it is pertinent to mention that Bihar and Gujarat AAR ruled out that such supply is not eligible for concessional GST at the rate of 12% applicable on aforesaid works contract. Further, prior to 18.07.2022, GST at the rate of 12% on composite supply of works contract was levied. Therefore, it now clarified that such works contract is eligible for concessional rate of 12% GST prior to 18.07.2022. Afterwards, it shall be chargeable at the rate of 18% in view of changes in Notification No. 11/2017-Central Tax (Rate) vide Notification No. 03/2022-Central Tax (Rate). 15. GST applicability on tickets of ferry used for transportation of passengers: In this respect, it is clarified that exemption shall be applicable to tickets purchased for transportation from one point to another irrespective of whether ferry is owned or operated by a private sector enterprise or by PSU. Furthermore, the expression “pubic transport” used in the Exemption Notification means that the transport is open for public use which can be owned privately or publicly. The transportation for the purpose of tourism is only excluded such as cruises, shikhara etc.

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GST Update No 254 on clarification regarding applicability of GST and exemptions

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