CBIC issues Notifications and Circulars pursuant to recommendations made in 53rd GST Council meeting

This Tax Alert summarizes recent Notifications¹ and Circulars² issued by Central Board of Indirect Taxes and Customs (CBIC) pursuant to recommendations made in the 53rd Goods and Services Tax (GST) Council meeting. The key highlights are:

• Rule 28(2) of Central Goods and Services Tax Rules, 2017 (CGST Rules) has been amended retrospectively from 26 October 2023 to provide value of supply of providing corporate guarantee at 1% of the amount guaranteed per annum or actual consideration, whichever is higher. This valuation does not apply to export of such services or where the recipient is entitled to full input tax credit.
  
  Value of such supply will be calculated basis the amount guaranteed and not on the basis of loan actually disbursed. 
  
  
• Rule 59 of CGST Rules has been amended to provide for an optional facility by way of GSTR-1A to amend or add details in GSTR-1 before filing GSTR-3B for the same tax period.
  
  
• Proviso has been inserted in Rule 88B(1) to provide that interest is not leviable on amount available in cash ledger (on the due date of filing GSTR-3B) which is utilised while filing return belatedly.
  
  
• Refund of additional IGST paid on account of upward price revision subsequent to exports needs to be claimed by filing application in GST RFD-01 before expiry of two years from the relevant date.
  
  
• The rate of TCS (tax collected at source) is reduced from 1% to 0.5%.
  

Comments

• The Circular seems to clarify that the time of supply in case of corporate guarantee is the issuance of such guarantee. In light of this, taxability of guarantees given during service tax regime which are continuing under GST needs to be evaluated.
  
  
• Since the valuation is 1% per annum of amount guaranteed or actual consideration, whichever is higher, the same needs to be analyzed in cases where the guarantee is either perpetual or do not stipulate any quantum.
  
  
• Taxpayers who have claimed refund on account of export of service by way of corporate guarantee, after 23 October 2023 basis rule 28(2), will need to evaluate the implication of retrospective amendment. 
  
  
• Since the proviso under Rule 88B for interest computation is not inserted with retrospective effect, the issue of levy of interest for past period may be still open considering divergent HC rulings.
  
  
• As per the Instruction on revised Form GSTR-2B, the supplies declared or amended in Form GSTR-1A shall be made available in the next open Form GSTR-2B.

[1] Notification No. 12/2024 to 15/2024 - Central Tax all dated 10 July 2024 and Notification No. 01/2024- Integrated Tax dated 10 July 2024
[2] Circular No. 224/18/2024 to 227/21/2024 – Central Tax dated 11 July 2024