Analysis of GST Notifications Issued on 17th June 2021

1. Applicability of GST on supply of food in Anganwadis and Schools. (Circular No. 149/05/2021-GST)

Key Points

1. The CBIC vide Circular No. 149/05/2021-GST dated June 17, 2021 clarified that services provided to an educational institution by way of serving of food ( catering including mid-day meals) is EXEMPT from levy of GST irrespective of its funding from government grants or corporate donations.
2. Educational institutions as defined in the notification include aganwadi
3. Hence, No GST on Supply of Food in Anganwadis and Schools.

2. Applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity). (Circular No. 150/06/2021-GST dated June 17, 2021)

Key Points

It clarified that Entry 23A of notification No. 12/2017-Central Tax does NOT exempt GST on the annuity (deferred payments) paid for construction of roads.

• GST is exempt on service, falling under heading 9967 (service code), by way of access to a road or a bridge on payment of annuity[entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers 'supporting services in transport' under which code 996742 covers 'operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services'. Entry 23 of said notification exempts 'service by way of access to a road or a bridge on payment of toll'. Together the entries 23 and 23A exempt access to road or bridge, whether the consideration are in the form of toll or annuity [heading 9967].
• Services by way of construction of road fall under heading 9954.
• This heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels. Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, plain reading of entry 23A makes it clear that it does not cover construction of road services (falling under heading 9954), even if deferred payment is made by way of instalments (annuities).

3. GST on supply of various services by Central and State Board (such as National Board of Examination - NBE). (Circular No. 151/07/2021-GST)

Key Points

• GST is exempt on services provided by Central or State Boards ( including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall NOTapply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
• GST is exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017- CT(R)].
• GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test ) so as to authorise them to provide their respective services

4. GST rate on construction services provided to a Government Entity w.r.t construction of a Ropeway on turnkey basis. (Circular No. 152/08/2021-GST)

Key Points

• Whether services supplied to a Government Entity by way of construction such as of 'a ropeway' are eligible for concessional rate of 12% GST.
• It clarified that works contract service provided by way of construction such as of rope way shall fall under entry at Sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.

5. GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS. (Circular No. 153/09/2021-GST)

Key Points

• IT clarified that Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, said entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply. It is a matter of fact as to whether the value of goods in such composite supply is up to 25% and requires ascertainment on case-to-case basis.
• In case the supply of service by way of milling of wheat into flour or of paddy into rice, is NOT eligible for exemption under Sl. No. 3 A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5% if such composite supply is provided to a registered person, being a job work service (entry No. 26 of notification No. 11/2017- Central Tax (Rate) dated June 28, 2017). Combined reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes it clear that a person registered only for the purpose of deduction of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry No. 26, and thus said supply to such person is also entitled for 5% rate.

6. GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans. (Circular No. 154/09/2021-GST)

Key Points

• It clarified that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically EXEMPT under Entry No. 34A of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017.
• What is Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated June 28, 2017 exempts?

'Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.'

7. GST rate on laterals/parts of Sprinklers or Drip Irrigation System. (Circular No. 155/09/2021-GST)

IT clarified the intention of notifying GST rate on laterals/parts of Sprinklers or Drip Irrigation System at 6% (each CGST and SGST).

The GST rate on Sprinklers or Drip Irrigation System along with their laterals/parts are governed by S.No. '195B' under Schedule II of notification No. 1/2017- Central Tax (Rate), dated June 28, 2017 which has been inserted vide notification No. 6/2018- Central Tax (Rate), dated January 25, 2018 and reads as below:

The intention of this entry has been to cover laterals (pipes to be used solely with with p irrigation system) and such parts that are suitable for use solely or principally with 'sprinklers or drip irrigation system', as classifiable under heading 8424 as per Note 2 (b) to Section XVI to the HSN. Hence, laterals/parts to be used solely or principally with sprinklers or drip irrigation systems, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately. However, any part of general use, which gets classified in a heading other than 8424, in terms of Section Note and Chapter Notes to HSN, shall attract GST as applicable to the respective heading.