1. Rent-a-Cab Services
Condition has been inserted in services provided by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient. In the following 2 categories of service which can be supplied at two rates, an additional condition has been inserted-
a. Cab + Driver + Fuel → is 5% (no ITC except Rent-a-Cab taken from another operator) and 12% (full ITC)
b. Cab + Fuel → is 5% (no ITC except Rent-a-Cab taken from another operator) and 12% (full ITC)
The government has inserted a condition in 5% (2.5% CGST+ 2.5% SGST) rate category, w.e.f. 20-10-2023 and stated 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.
i.e. 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.
The Supplier 'B' in his return will reverse the credit under Rule 42 of the CGST Rules, 2017 and state the reversal of Rs. 28 (48-20) in Table 4B(1) of GSTR-3B. and pay CGST of Rs. 5(Rs. 25 (2.5% of Rs. 1000) less Rs. 20 (ITC)) and an equivalent amount of reversal and GST will be payable under SGST.
It is important to recall that such services when provided to a body corporate, by any person, other than a body corporate, fall under reverse charge mechanism. Provided such a provider does not issue an invoice charging GST at 12% to the service recipient.
2. Refund of Unutilised Credit under Sec 54(3) of the CGST Act, 2017 on Inverted rated goods and services
This refund is allowed when the rate of GST on input is higher than the rate of GST on output supply. However, the government has kept powers with itself to restrict refund of unutilised goods or services as it may notify.
Over this period of time, the government has restricted the refund of the following -
1. In case of services - Services specified in sub-item (b) of item 5 of schedule II of the CGST Act, 2017.
2. In case of goods -
a. Rail locomotives, railway or tramway coaches;
b. all edible oils like soya-bean oil, ground-nut oil, olive oil, palm oil;
c. Coal
The government has reduced the scope of services on which refund will be denied. It has vide NN 15/2023-CTR dt. 19-10-2023, w.e.f. 20-10-2023, stated that on civil structure construction service, the refund of inverted duty structure is allowed.
The government has now re-worded services on which refund of inverted duty structure will be denied and excluded the services of civil structure construction services and retained words 'building or complex construction service' of sub-item (b) of item 5 of schedule II of the CGST Act, 2017 so as to bring about this change.
3. Restriction on Refund of Unutilised Credit under Sec 54(3) of the CGST Act, 2017 on Imitation zari thread or yarn made out of Metallised polyester film /plastic film
The government has w.e.f. 20-10-2023 denied the refund of ITC because of inversion on these goods available as per Sec 54(3). The government has introduced this restriction as it has clarified that such goods will be taxable at the GST rate of 5%.
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