CBIC issues further clarifications based on recommendations made in the 52nd GST Council Meeting

This Tax Alert summarizes the recent Circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) based on the recommendations made in the 52nd Goods and Services Tax (GST) Council meeting.

The key clarifications are:

• Suppliers opting to pay GST @5% on passenger transport services by motor vehicle (SAC 9964) or rental services of motor vehicles with operator (SAC 9966) cannot claim input tax credit (ITC) on inward supply of leasing of motor vehicles without operator (SAC 9973).
  
• Reimbursement of electricity charges received by real estate companies, malls, airport operators etc., from the lessee form part of composite supply of renting of immovable property and/or maintenance of premises, whether or not billed separately. 
• Where the electricity charges are recovered by real estate owners, residential welfare associations, real estate developers, etc., as a pure agent, it will not form part of the value of supply.
• Job work services in relation to conversion of barley into malt attracts tax @5%, irrespective of the end use.
• District Mineral Foundation Trust (DMFT) set up by State Governments are “Governmental Authorities” and thus eligible for the same exemptions from GST as available to any other Governmental Authority. 8
• Supply of pure services and composite supplies by way of horticulture/ horticulture works (where the value of goods constitutes not more than 25% of the total value) to Central Public Works Department (CPWD) is exempt from GST.

Comments

• The cost of providing passenger transport services and rental services of motor vehicles with operator may increase due to ITC denial on account of leased motor vehicles. 
  
• Businesses may have to re-evaluate their tax positions on recovery of electricity charges pursuant to the Circular.
• Clarification regarding reimbursement of electricity charges may also apply to gas, water and other charges recovered in similar fashion.
• CBIC vide GST flyer on Co-operative Housing Societies had clarified that charges collected by society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the threshold maintenance limit of INR7500 per month for the purpose of exemption.
• It is relevant to note that Chhattisgarh Appellate Authority for Advance Ruling [2022 (62) G.S.T.L. 53 (App. A.A.R. - GST - Chh.)] had held that DMFTs fall within ambit of “local authority”.