GST Updates Summary October 2023

This articles covers the latest gst updates summary October 2023. It contains all the Notifications and Circulars issued in October 2023 which covers all GST Updates in October 2023. All these amendments have been presented hear topic wise and reference of relevant latest gst notifications and latest gst circulars have been given at bottom of each topic. As well as, I have given our own analysis wherever it is necessary.

Limitation on GST Credit for Passenger Transportation Services at 2.5% Rate effective from 20-10-2023

• Heading No.9964 & 9966 :

In case of Transportation of Passenger of service & rental services of transport vehicles (with Operators) covered under Heading of 9964 & 9966, Supplier of input service in the same line of business cannot claim the ITC in excess of the rate charged at time of sale effective from 20-10-2023

Our Analysis:

Before this Notification issued it is like, if a person provides passenger transportation services using vehicle or Rental services of any motor vehicle includes the cost of fuel in the fare charging from customers, he can claim a tax credit for the input tax (tax they paid on goods and services) related to services you receive from other passenger transportation service providers or renting vehicles for this purpose.

So, he can get a tax benefit for services he buy from other companies in the same line of business.

After the Notification issued, Government has inserted one more Proviso effective from 20-10-2023 in Heading No.9964 –serial No.8 (vi) & Heading 9966- serial no.10 (i) with following words.

“Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%,shall not be taken.

In simpler terms, with effect from 20-10-2023 businesses offering passenger transportation services under the category of 9964 at a 2.5% GST rate  or renting any motor vehicle under heading 9966 @ 2.5% GST rate having ITC with in same type of business can only claim a tax credit for the amount of GST they paid when buying goods and services. They cannot claim more than that amount as a credit when they sell their services. So, they can’t get back more GST than they originally paid on their expenses. 

Let’s understand with the Example:

Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs.1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs.800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at The rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same Line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs.48.”

Heading No.9996 –Serial No.34-(iv) :

Certain changes in exemption of services effective from 20-10-2023

• With Effect from 20-10-2023 Exemption is granted to services provided to Governmental Authorities by way of:
• Water supply
• Public Health
• Sanitation Conservancy
• Solid Waste Management
• Slum Improvement/Upgradation

Our Analysis:

Government has amend the notification no.12/2017-Central tax (Rate) by adding serial No.3B in notification to provide one more exemption effective from 20-10-2023.

• Forward Charge Mechanism for Indian railways effective from 20-10-2023:

Government has amend the Notification No.12/2017-Central tax (Rate) dated 28-06-2017 effective from 20-10-2023 with following:

1. In serial no.6, in column No. (3), in item (a) after the words “Department of Posts” the words “the ministry of Railways (Indian Railways) shall inserted.

Before the amendment it is like services provided by the Central Government, State Government, Union territory, or local authorities are covered under exemption but excluding following services:

(a) Services by the Department of Posts:

(b) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport

(c) Transport of goods or passengers

(d) Any service, other than services covered under entries (a) to (c) above, provided to business entities

After amendment in notification with effect from 20-10-2023, Government has added the words Ministry of Railways (Indian Railways) which means:

Service provided by government excluding:

(a) Service by the department of Posts and the Ministry of Railways

(b) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport

(c) Transport of goods or passengers

(d) Any service, other than services covered under entries (a) to (c) above, provided to business entities

In simple words, Service provided by government related to postal services, Ministry of Railways (effective from 20-10-2023) and services related to transportation, service other than (a) to (c) are not subject to exemptions.

2. In serial no.7, in column No. (3), in the explanation, in item (a) after the words “Department of Posts” the words “the ministry of Railways (Indian Railways) shall inserted.

Before the amendment exemption is available on Service provided by Central Government, State Government, Union Territory, or local authority to a business that had a low turnover in the previous financial year, low enough to not need registration under the Central Goods and Services Tax Act, 2017. However, this exemption does not apply to:

 a) Services provided by the Post Office services related to airplanes or ships near ports or airports, and transportation services for goods or passengers.

(b) Renting out property services. services, like postal services and property renting

After the amendment exemption does not apply to

(a) Services provided by the Post Office, Indian Railways, services related to airplanes or ships near ports or airports, and transportation services for goods or passengers.

(b) Renting out property services.

3. In serial no.8, in column No. (3), in the Proviso, in item (i) after the words “Department of Posts” the words “the ministry of Railways (Indian Railways) shall inserted.

Before the amendment it is like:

Exemptions are available when CG, SG, UT, or LA provides services to another CG, SG, UT, or LA, but these exemptions do not apply to postal services, services related to airplanes or ships, or transportation services.

After the amendment exemption is available when CG, SG, UT, or LA provides services to another CG, SG, UT, or LA, but these exemptions do not apply to postal services, Ministry of Railways (Indian railways) (Effective from 20-10-2023), services related to airplanes or ships, or transportation services.

4. In serial no.9, in column No. (3), in the first Proviso, in item (i) after the words “Department of Posts” the words “the ministry of Railways (Indian Railways) shall inserted.

Before the amendment exemption is available when services provided by the Central Government, State Government, Union territory, or a local authority where the cost of the service is less than five thousand rupees. However, there are exceptions to this rule:

The exemption doesn’t apply to services provided by the Department of Posts.

It doesn’t apply to services related to aircraft or vessels, whether inside or outside ports or airports.

It doesn’t apply to the transportation of goods or passengers. Additionally, If the government provides a service continuously throughout the year (like an ongoing service), the exemption (meaning the special rule) applies only if the total payment for that service in a financial year does not exceed five thousand rupees

After the amendment exemption does not apply to postal services, Ministry of Railways (Indian railways) (effective from 20-10-2023), transportation services, or services related to airplanes or ships. If a service is provided continuously, the exemption applies only if the total payment for that service in a year is less than five thousand rupees.

Ministry of Railways Now Subject to Forward Charge Mechanism from 20-10-2023

With Effect from 20-10-2023, Indian Railways are now covered under the Forward charge mechanism for any supplies by them.

Our Analysis:

• Government has amend the Notification No.13/2017-Central tax (Rate) dated 28-06-2017 effective from 20-10-2023 with following:

1. In serial no.5, in column No. (2), in item (i) after the words “Department of Posts” the words “the ministry of Railways (Indian Railways) shall inserted

Before the amendment: RCM is applicable on the service provided by government to business entity but for service related to renting of immovable property, postal services, Services related to airplanes or ships, whether they are inside or outside the area of a port or an airport , transportation of goods or passengers  RCM will not applicable. FCM will apply on such services.

After the amendment:

RCM is applicable on the service provided by government to business entity but for service related to renting of immovable property, postal services, service by Ministry of Railway, Services related to airplanes or ships, whether they are inside or outside the area of a port or an airport, transportation of goods or passengers, RCM will not applicable. FCM will apply for such services.

2. Effective from 20-10-2023, In serial no.5A, in column No. (2), after the words “Services supplied by the Central Government” the words “excluding the ministry of Railways (Indian Railways) shall inserted.

Before the amendment

When the Central Government, State Government, Union Territory, or local authority rents Immovable property to someone who is registered under the Central Goods and Services Tax Act of 2017, RCM will applicable on such transaction.

After the amendment

Central Government excluding the ministry of Railways (Indian Railways), state Government, Union territory or local authority supplies the service related to renting of immovable property to any person registered under CGST Act 2017 liable for RCM.

Government has amend the Notification No.04/2017-Central tax (Rate) dated 28-06-2017 effective from 20-10-2023 with following:

RCM will not applicable to ministry of Railways if it supplied used vehicles, seized and confiscated goods, old and used goods, waste and scrap to any registered person as Indian Railway is out of the purview of RCM. FCM will applicable to Indian Railways.

No refund of accumulated ITC in case of Builder

Government has amend notification No.15/2023-Central Tax (Rate) by changing certain words which is effective from 20-10-2023.

In simple words, the government is saying that if you’re in the business of constructing and selling buildings or parts of buildings, and you’ve included the cost of the land in what you charge your customers, you won’t get a refund for any unused tax credit you may have. Even if you’ve received all the payment for your construction work either after the government has approved your construction project by issuing completion certificate or after someone has started living or working in the building, whichever happens first.

By this amendment government has fixed that with effect from 20-10-2023, No refund of accumulated ITC for service specified above so in future there may not have any litigation for the same.

Certain changes in Transportation of passenger through e-commerce operator using Omni-Bus

Government has amend the Notification No.17/2017-Central tax (Rate)-dated 28-06-2017 related to the cases where E-Commerce operator is liable to pay the tax on the services supplied through it applicable from 20-10-2023.

In the clause (i) words “any other motor vehicle except omnibus is substituted. It means service of transportation of passenger by radio Taxi, motor cab, and Maxi-cab, motor cycle or any other motor vehicle except omnibus supplied through E-commerce Operator then e-commerce operator will liable to pay the tax.

But government has added one more clause that is clause (ia) for omnibus applicable from 20-10-2023. It says if service of transportation of passenger is provided through e-commerce operators then e-commerce is liable to pay tax but if the person is company who supplied transportation of passengers services through e-commerce operator using omnibus then company will liable to pay the taxes effective from 20-10-2023.

In the Explanation after (c) clause following is inserted:

“Company” has the same meaning as assigned to it in clause (20) of section 2 of the Companies Act, 2013 (18 of 2013).

Changes in Rate of Goods effective from 20-10-2023

No Refunds for Polyester Film used in preparation of Imitation Zari Yarn” effective from 20-10-2023

No refund on Polyester film or plastic film used in preparation of imitation Zari thread or Yarn under inverted duty structure with effect from 20-10-2023.

Our Analysis

Notification No.05/2017-Central tax (Rate) dated 28-06-2017 states that No refund of unutilized ITC is available where rate of tax on input is more than rate of tax on the output.Government has insert the above entry of 6AA for imitation Zari thread or Yarn made out of Metalised polyester film/ plastic with explanation.Explanation of the above entry says that refund is not allowed on purchase of polyester film or plastic film in the preparation of imitation Zari thread or Yarn with effect from 20-10-2023.

E.g. if Imitation Zari thread or Yarn made out of 4 Different things. Out of 4 if one is Polyester film or plastic film then refund will not be allowed on polyester film or Plastic film from 20-10-2023. On the remaining 3 items refund will allowed if it not fall under the Notification No,05/2017 criteria.

Clarification on Export Payments in INR Vostro Accounts

Meaning of Vostro Account

A Vostro account is a type of account that banks use for holding funds on behalf of another bank or financial institution. Essentially, it’s an account maintained by a bank for another bank. The term “Vostro” comes from Latin and means “yours” in English, indicating that the account belongs to the other bank. In the context of international trade and finance, Vostro accounts are often used for facilitating transactions between banks in different countries. For example, if Bank A in India has a Vostro account with Bank B in the United States, Bank A can deposit funds into this account with Bank B to facilitate transactions or settlements related to international trade or remittances. These accounts help banks manage their international operations and facilitate smooth financial transactions across borders.

Clarification regarding determination of place of supply in various cases

Clarification on issue relating to Personal Guarantee and corporate guarantee

People in the trade and field formations have asked for clarity regarding the tax implications when:

1. Directors provide personal bank guarantees to banks to help their company get credit.

2. A related individual or a holding company gives a corporate guarantee to banks or financial institutions either for another related individual or for its subsidiary company, respectively.

To ensure consistency in how the law is applied everywhere, the Board, using its authority under section 168 (1) of the Central Goods and Services Tax Act, 2017 (CGST Act), is providing clarifications on these issues.

Certain changes in CGST Rules,2017

• Rule 28 of CGST Rules, 2017 is for determining the value of goods or services supplied between parties who are related or distinct other than through an agent.

As per sub rule (1) the value of supply of goods or services or both shall be

Open Market Value: Initially, the value should be the open market value of the supply.

Goods/Services of Like Kind: If there’s no open market value, then it should be the value of similar goods or services.

Use Specific Rules: If neither of the above can be determined, then the value should be found using rule 30 or rule 31, in that sequence.

Above specified methods will not apply:

1. if the goods are going to be sold as they are (without any modifications), the seller (supplier) has the option to decide the value of these goods in a specific way:

The value can be set at 90% of the price that the buyer will charge when they sell those goods to their own customers, as long as those customers are not related to the buyer

2. Where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services.

Government has added following sub rule in rule 28 of CGST Act, 2017:Notwithstanding anything contained in sub-rule (1), the value of supply of services by a supplier to a recipient who is a related person, by way of providing corporate guarantee to any banking company or financial institution on behalf of the said recipient, shall be deemed to be one per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher.

In simple words it means:

Even if the first rule (sub-rule (1)) says something else, when a company provides a corporate guarantee to a bank or financial institution for a related company, the value of this service is set in a specific way. It’s either:

1% of the total amount guaranteed, OR

The actual payment received for providing this guarantee. Whichever of these two amounts is higher will be used as the value for the service.

• Rule 142 of CGST Rules, 2017 is related to notice and order of demand of amount payable.

The government made changes to Rule 142 of the CGST Act, specifically in sub rule (3). Earlier, the proper officer used to issue an order after receiving payment. Now, they issue an intimation instead.

Here’s what it means:

Payment Notification: If someone owes taxes and pays them within 30 days of getting a notice (as per section 73(8) or 74(8)), or pays a specific amount mentioned in section 129(1) within seven days of getting a notice, they need to inform the tax officer using “FORM GST DRC-03.”

Intimation Instead of Order: After receiving this payment information, the proper officer now sends an intimation in “FORM GST DRC-05.” This intimation marks the end of issues related to the original notice, replacing the earlier practice of issuing an order.

So, the main change is that instead of issuing an order, the proper officer now sends an intimation after being informed about the payment, effectively closing the matter related to the original notice.

• Rule 159 of CGST Rules, 2017 is related to Provisional attachment of property.

The Government made changes to Rule 159 of CGST Act, specifically in sub rule (2).

Earlier, Only the Commissioner’s written permission could lift the restriction. Now the restriction will be lifted either with the Commissioner’s permission or after one year from the order issuance, whichever comes first.

As per Rule 159(2) the Commissioner sends a copy of the attachment order (FORM GST DRC-22) to relevant authorities to formally restrict the specified property.

The restriction on the property can be lifted in two ways:

With the Commissioner’s written permission.

If one year has passed since the order was issued.

In Simple Words, Rule 159 originally required the Commissioner’s permission to lift property restrictions. After the amendment, these restrictions can also be lifted With earlier of the Commissioner’s written permission or one year has passed since the order was issued.

• Form GST REG-01 :

Form GST REG-01 is related to application  for registration Government has added one more constitution of business in Part-B under serial No.2 after clause (xiva) “One Person Company”.

Form GST REG-08 substituted

Clarification regarding GST Rate on imitation zari thread or yarn

Clarification on applicability of GST on certain services

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