CBIC issues useful GST clarifications
The Central Board of Indirect Taxes and Customs (CBIC) has issued a few clarifications following some useful decisions taken at the 45th meeting of the GST Council.
The CBIC says that a company incorporated in India and a body corporate incorporated by or under the laws of a country outside India (referred to as foreign company under Companies Act, 2013) are separate legal entities and so, these two separate persons would not be considered as ‘establishments of a distinct person’.
Therefore, supply of services by a subsidiary/sister concern/group concern etc. of a foreign company that is incorporated in India to the establishments of the said foreign company incorporated outside India would not be barred for being considered as export of services. Similarly, supply from a company incorporated in India to its related establishments incorporated outside India, would not be treated as supply to establishment of a distinct person. Such supplies, therefore, would qualify as ‘export of services’, subject to fulfillment of other stipulated conditions.
Another clarification from CBIC explains the scope, basic pre-requisites and essential characteristics of intermediary services and says that subis not intermediary services. exclusion The CBIC has also clarified that only those goods on which some export duty has to be paid at the time of export will be covered by the restriction from claiming refund of accumulated input tax credit (ITC), under section 54(3) of the CGST Act, 2017. So, the export goods that are not subject to any export duty or attract ‘nil’ rate of duty or fully exempted from payment of export duty would not be covered by the restriction imposed under the first proviso to the said section 54(3).
The CBIC also says that there is no need to carry the physical copy of e-invoice generated by the supplier in the manner prescribed and that production of the Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically, for verification by the proper officer would suffice.
Another CBIC clarification says that from February 1, 2021, the date of issuance of debit note (not the date of underlying invoice) shall determine the relevant financial year for the purpose of Section 16(4) of the CGST Act, 2017. For taking ITC on or after that date (in respect of debit notes issued prior to or after that date), the eligibility for taking ITC will be governed by the amended provision of the said Section 16(4). However, any ITC availed prior to that date in respect of debit notes, shall be governed by the provisions of the said Section 16(4), as it existed before the said amendment on February 1, 2021.
The GST Council has decided to allow IGST exemption relating to import of goods on lease (where GST is paid on the lease amount), even if such goods are transferred to a new lessee in India upon expiry or termination of lease or where the lessor located in Special Economic Zone pays GST under forward charge. It has also decided to amend Section 50(3) of the CGST Act, 2017 retrospectively with effect from July 1, 2017 to charge interest at 18% on ineligible ITC availed and utilized only (and not on unutilized ITC) and allow transfer of unutilized cash ledger balance of CGST/IGST between distinct persons.
The CBIC clarifications will help avoid many disputes.