This Tax Alert summarizes recent Circulars[1] issued by Central Board of Indirect Taxes and Customs pursuant to the recommendations made in the 54th Goods and Services Tax (GST) Council meeting.
The key recommendations are:
- Indian advertising agencies are not intermediaries when providing comprehensive advertising services to foreign clients. However, where advertising agencies act as an agent of the foreign client for facilitating provision of media space and broadcasting services from media owners, then such agencies are considered as intermediaries.
- Place of supply of data hosting services provided to foreign clients should be determined basis location of the recipient since suppliers are neither intermediaries nor the services supplied are in relation to goods being "made available" or related to immovable property.
- Input tax credit (ITC) on demo vehicles used by dealers is not blocked u/s 17(5)(a) since they are used to promote sale of similar vehicles and hence, are considered to be used for "further supply of such motor vehicles”.
However, if such vehicles are used for staff transportation or if dealers act as agents without direct involvement in sales, then ITC is not available.
- Refund of integrated tax (IGST) paid on exports is not restricted under Rule 96(10) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) in cases where IGST and Compensation Cess were initially not paid at the time of imports under specified exemption notifications, but subsequently paid along with interest and the Bill of Entry is reassessed.
Comments:
- In the past, there have been divergent advance rulings on eligibility of ITC on demo vehicles in the hands of dealers including rulings in case of Chowgule Industries Private Limited [2019 (27) G.S.T.L 272 (AAR – GST)] and Platinum MotoCorp LLP [2021-VIL-54-AAR]. The clarification seeks to address the dispute.
- Clarification on eligibility of refund in case of exports with payment of tax, is likely to provide relief to exporters. The condition of reassessment of Bill of Entry may pose challenges.
- As per the press release issued post 54th GST Council Meeting, Rule 96(10) along with Rules 89(4A) and 89(4B) is proposed to be omitted prospectively.
[1] Circular Nos. 230-233/2024 – CGST all dated 10 September 2024
