Notifications & Circulars - In light of 53rd GST Council Meeting Recommendations

I. Notification No. 12/2024- Central Tax dated

Particulars

1. Amendment in Rule 28 (2) of the CGST Rules i.e. Valuation in case of Corporate Guarantee

In light of the said Notification, Rule 28(2) of the CGST Rules stands amended w.e.f 26 October 2023. The same now reads as the value of services provided in the form of corporate guarantee to any banking or financial institution by a supplier to a related person located in India, value of supply of service , shall be deemed to be 1% of -

i. The amount of such guarantee offered per annum, or

ii. The actual consideration; whichever is higher

Further, a proviso to sub-rule (2) of Rule 28 has been inserted which provides that where the recipient who is eligible for full ITC, the Invoice value shall be deemed to be the value of supply of services.

Impact: With the term per annum being added in the Rule 28(2) of CGST Rules, Parent/Holding company providing corporate guarantee to its subsidiary company will have to pay GST on an annual basis and not qua the period for which guarantee is provided.

2. CBIC (w.e.f a date to be notified) shall substitute sub-rule (1) of Rule 39 of CGST Rules which provides for distribution of ITC by Input Service Distributor (ISD)

An ISD shall distribute ITC in the manner and subject to following conditions:-

1. ITC available for distribution in a month is to be distributed in the same month by filing Form GSTR-6. The amount of credit distributed, can, in no case exceed the amount of credit available for distribution. Also, the credit shall be distributed to that recipient only to whom has availed such input services.

2. The credit of tax paid on input services attributable to more than one recipient or all the recipient shall be distributed among such recipients and such distribution shall be pro-rata on the basis of recipient's turnover in a State/UT during the relevant period, to the aggregate of turnover of all recipients who are operational in the current year, during the said relevant period.

3. ITC shall be distributed even to unregistered recipients or recipients engaged in making exempt supply. The same shall be calculated in lieu of the formula provided therewith.

4. The ISD shall distribute the ineligible and the eligible ITC separately.

5. ITC on account of integrated tax shall be distributed as ITC of integrated tax

6. ITC on account of CGST and SGST /UTGST shall in respect of a recipient located in same State as that of ISD, shall be distributed as input tax of CGST and SGST. In case, ISD is located in other State, the same said credit of CGST and SGST /UTGST shall be distributed as IGST.

7. ISD shall issue an ISD invoice as provided in Rule 54(1) of CGST Rules, clearly indicating in such invoice that it is issued only for distribution of credit.

8. ISD shall issue a credit note in case distributed credit gets reduced for any reason. Also, in case of additional amount of credit on account of issuance of debit note to be distributed in the manner mentioned therein.

Additionally, sub-rule (1A) shall be inserted, namely-

In case of distribution of credit in respect of input services falling under RCM, a registered person having the same PAN and State code as an ISD, may issue an invoice/credit note/debit note to transfer the credit of such common input services to the ISD and the same shall be distributed in the manner as provided in sub-rule (1) (discussed above).

The term relevant period shall be:

i. If the recipients of credit have turnover in their States/UTs in the FY preceding the year during which credit is to be distributed, the said FY

ii. If some or all recipients of credit do not have any turnover in their States or UTs in the FY preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all recipients are available, previous to the month during which credit is to be distributed

Impact: With substitution of sub-rule (1) in Rule 39 of CGST Rules prescribing the manner and conditions for distribution of credit, implementation of ISD mechanism is around the corner. Hence, it is prudent for businesses to be prepared for said change by clearly identifying the credits which are to be distributed through ISD and the credit to be transferred through cross-charge by keeping in mind the clarification issued vide Circular No. 199/11/2023-GST dated 17 July 2023.

3. Alterations and additions in Rule 142 (Notice and order for demand of amounts payable under the Act)

The last part of sub-rule (2) of Rule 142 of the CGST is substituted with 'he shall inform the proper officer of such payment in FORM GST DRC-03 and an acknowledgement in FORM GST DRC- 04 shall be made available to the person through the common portal electronically.

In light of the amendment in sub-rule (2A) of Rule 142 of CGST Rules, the proper officer may now issue an intimation in Part-C of FORM GST DRC-01A, accepting the payment or the submissions or both, as the case may be.

A new sub-rule (2B) has been inserted in Rule 142 of CGST Rules. The same reads as in case of any payment made vide Form GST DRC-03 of tax, interest or penalty under Section 52/Section 73/Section 74/Section 76/Section 122/Section 123/Section 124/Section 125/Section 127/Section 129 or Section 130, instead of crediting the said amount in electronic liability register in Form GST PMT-01 against the debit entry created for said demand, the said person may file an application in Form GST DRC-03A on the GSTN portal and accordingly the said amount shall be credited in the Electronic Liability register (in Form GST PMT-01) against the debit entry created for the said demand, as if the payment is made towards the said demand.

Further, the proviso to said-rule reads as, where an Order in Form GSTR DRC-05 is issued in terms of sub-rule (3) concluding the proceedings, in respect of payment of an amount in Form GST DRC-03, an application in Form GST DRC-03A cannot be filed in respect of payment.

4. Insertion of fourth proviso to Rule 138(3) of CGST Rules [effective date is yet to be notified]

In light of the said Notification, the newly inserted proviso states that an unregistered person (who is required to generate E-way bill in Form GST EWB-01, or is opting to do so) shall submit the details on the GSTN Portal in Form GST ENR-03 either directly or through a Facilitation Centre. Pursuant to the validation of the details so furnished, the unregistered person shall receive a Unique Enrolment number.

5. Notification with respect to Aadhar authentication

Insertion of new proviso in Rule 8(4A) of CGST Rules. It provides that in term of Rule 8(4) wherein an applicant has not opted for Aadhar authentication:

i. shall be followed by taking photograph of the applicant wherein the applicant is an individual

ii. Verification of the original copy uploaded with the application in FROM GST REG-01 in case where the applicant is not an individual

The application shall be deemed to be completed only after successful verification.

6. Notification with respect to Rule 88B -Calculation of Interest

A new proviso is inserted after sub-rule 1 of Rule 88B. It provides that where any amount has been credited in the Electronic cash ledger on or before the due date of said filling return, but is debited from electronic cash ledger after the due date i.e. at time of filing return, the said amount should not be considered for calculating the interest if the said amount is lying unutilised in the cash ledger from the due date till date of debit at the filling the return.

7. Notification with respect to rule 110

Rule 110 of CGST Rules is substituted as below:

1. An Appeal to the appellate tribunal shall be filed in FORM GST APL-05, along with relevant documents, electronically and provisional acknowledgement shall be issued immediately. Manual filing of appeal is allowed only if the registrar allows the same by issuing a special or general order to that effect, as per restriction and conditions specified in said order.

2. A memorandum of cross objection to the appellate tribunal shall be filed electronically in FORM GST APL-06,

3. The appeal and the memorandum of cross objections shall be signed in the manner specified as per Rule 26.

4. Where the Order appealed against is uploaded on common portal, a final acknowledgment indicating the appeal number, shall be issued in FORM GST APL-02. The date of issue of provisional acknowledgment shall be considered as date of filing of appeal

Proviso to said sub-rule provides that where the order appealed against is not uploaded on common portal, appellant shall submit or upload self-certified copy of the order within seven days from the date of filing FORM GST APL-05, and a final acknowledgment indicating the appeal number shall be issued in FORM GST APL-02.

Further 2nd Proviso to said sub-rule provides that where the self-certified copy of the Order appealed against is submitted or uploaded after a period of seven days from the date of filling of FORM GST APL-05, a final acknowledgment, indicating appeal number, shall be issued in FORM GST APL-02 and the date of submission or uploading of such self-certified copy shall be considered as the date of filing of appeal.

Further, the explanation to Sub-rule (4) provides that the appeal shall be treated as filed only when the final acknowledgement indicating the appeal number is issued.

5. The fees for filing of appeal or restoration of appal shall be one thousand rupees for every one lakh rupees of tax or input tax credit involved or the difference in tax or input tax credit involved or the amount of fine, fee or penalty determined in the order appealed against, subject to a maximum of 25,000/- and minimum of 5,000/-.

Proviso to said sub-rule provides that fees for filling an appeal in respect of an Order not involving any demand of tax, fees, fine, interest or penalty shall be five thousand rupees.

There shall be no fee for application made before the appellate tribunal for rectification of errors referred to in sub-section (10) of section 112".

8. Notification with respect to Rule 59 of CGST Rules

Proviso inserted after sub rule 1 of the Rule 59.

The same reads as 'after furnishing the details of outward supplies of goods or services or both in Form GSTR-1 for a tax period but before filing the FORM GSTR3B for the said tax period, the registered person at his option, may amend or furnish additional details of outward supplies of goods or services or both in FORM GSTR-1A for the said tax period electronically through common portal directly or through facilitation centre as may be notified by the commissioner.

After sub rule 4 of the rule 59, sub rule 4A is inserted. The same reads as:

The additional details or amendments of the details of outward supplies of goods or services or both furnished in FORM GSTR-1A as per requirement of the registered person shall include the followings:-

a) Invoice wise details of:-

i. inter-State and intra-state supplies made to the register person,

ii. inter-State supplies made to unregistered person with invoice value more than one lakh rupees (w.e.f 1.08.2024),

b) Consolidate details of:-

i. Intra state supplies made to unregistered person for each rate of tax,

ii. State wise inter-State supplies made to unregistered person with invoice value more than one lakh rupees for each rate of tax (w.e.f 1.08.2024),

c) Debit and credit notes, if any issued during the month for invoices issued previously.

9. Insertion of the amendments related to GSTR-1A

In light of the captioned notification, the words "as amended in FORM GSTR-1A, if any" shall be added after the words "FORM GSTR-1" in following rules:-

Rule 21 -Registration to be cancelled in certain cases

Rule 21A -Suspension of Registration

Rule 36 -Documentary requirements and conditions for claiming input tax credit

Rule 37A- Reversal of input tax credit in the case of non-payment of tax by the supplier and re- availment thereof

Rule 40 -Manner of claiming credit in special circumstances

Rule 48 -Manner of issuing invoice

Rule 60 - Form and manner of ascertaining details of inward supplies.

Rule 78 -Matching of details furnished by the e-commerce operator with the details furnish by the supplier

Rule 88C -Manner of dealing with difference in liability reported in statement of outward suppliers and that reported in return

Rule 96 -Refund of integrated tax paid in goods or services exported out of India

Rule 96A -Export of goods or services under bond or letter of undertaking

Rule 163 -Consent based sharing of information

10. New FORM GSTR-1A

1. Taxpayer may declare additional details of Invoices for the current tax period other than which are already declared in FORM GSTR-1.

2. Taxpayer may amend invoice which are furnished in FORM GSTR-1 in current tax period.

3. The form would be available on portal after due date of FORM GSTR-1 or actual filing of FORM GSTR-1 whichever is later, till filing of FORM GSTR3B of the same return period. Same is applicable in case of Quarterly taxpayers.

4. The details declared or amended in FORM GSTR 1 and FORM GSTR 1A shall be made available in FORM GSTR3B.

Supplies declared or amended in Form GSTR-1A shall be made available in the next open FORM GSTR-2B i.e. of subsequent month.

II. Notification No. 13/2024 - Central Tax dated 10 July 2024

CBIC vide the said Notification has rescinded the Notification No. 27/2022- Central Tax dated 26 December 2022 which provided that provisions of Rule 8(4A) of the CGST Rules (Person opting for Aadhar authentication at the time of registration) shall not apply in all the States and Union Territories except the State of Gujarat.

III. Notification No. 14/2024 - Central Tax dated 10 July 2024

In light of the said Notification, exemption from filing Annual return in GSTR-9 is granted to registered person whose aggregate turnover in the F.Y 2023-24 is upto two crore rupees.

IV. Notification No. 15/2024- Central Tax dated 10 July 2024

TCS to be collected by Electronic Commerce operator from the consideration related to supplies made through, is reduced from 1% to 0.5% (CGST and SGST 0.25% each or IGST 0.5%) of the net value of taxable supplies. The said notification is effective from 10 July 2024 i.e. the date it is published in official gazette.

I. Circular No. 224/18/2024 GST dated 11 July 2024

Clarifications in respect of appeals against orders of First Appellate Authority, which could not be filed before GSTAT, merely, due to its non-constitution.

1. With respect to 'Stay against recovery' as per Section 112(9) of the CGST Act.

In light of the said Circular, it is clarified that where the taxpayer is desirous to file an appeal before GSTAT, a mechanism on the GSTN portal shall be provided for payment of pre-deposit which would be mapped against the selected order and demand value would be reduced in the balance liability in the Electronic Liability Register.

Therefore the amount deposited by the taxpayer would be adjusted against the amount of pre-deposit in terms of Section 112(8) of the CGST Act and accordingly the benefit of stay from recovery of remaining amount can be availed by the taxpayer as per the terms of Section 112(9) of the CGST Act.

However, the above shall be subject to an undertaking/declaration filed with the jurisdictional proper officer wherein the taxpayer assents to file appeal before GSTAT, as and when it comes into operation.

2. If no pre-deposit paid or undertaking/declaration not provided

In the said scenario, it shall be presumed that the taxpayer is not willing to file appeal before GSTAT and accordingly, recovery proceedings can be initiated as per the applicable provisions.

3. In case of amounts already paid through Form GST DRC-03 and were paid on account of a particular demand

In view of Notification No. 12/2024-CT dated 10 July 2024 which provides the mechanism for the tax, interest or penalty inadvertently paid through Form GST DRC-03 under Rule 142(2) of the CGST Rules; Filing of Form GST DRC-03A shall result in the said amount to be adjusted towards its corresponding demand on the date of such intimation through Form DRC-03.

The amount paid shall be adjusted against the amount of pre-deposit required for the appeal before Appellate Authority or GSTAT, thus, pursuant to filing of the said appeal, the remaining amount of the confirmed demand shall be stayed.

However, if no appeal is filed within the prescribed timelines; the remaining amount of the demand would be recovered as per the provisions of law.

Payment made through Form GST DRC-03 and adjusted through application in Form GST DRC-03A shall not be applicable in cases where proceedings have been concluded vide Order in Form GST DRC-05.

II. Circular No. 225/19/2024-GST dated 11 July 2024

Clarification on taxability and valuation in case of corporate guarantee provided to related persons

1. Will Rule 28(2) of the CGST Rules apply to corporate guarantee provided prior to 26th October 2023?

NO. Rule 28(2) shall apply only on corporate guarantees provided on or after 26 October 2023.

For corporate guarantees provided prior to 26 October 2024, Rule 28 shall apply.

2. Where no loan is disbursed or the loan disbursed is less than the amount of corporate guarantee provided. Also whether recipient shall be eligible to avail full ITC even before the loan is disbursed?

In view of the captioned circular, there is no nexus between providing of corporate guarantee with the actual disbursal of loan.

Thus, the valuation shall be calculated as per guarantee amount (without taking into consideration the amount of loan actually disbursed).

Further, it is also clarified ITC on the service of corporate guarantee can be availed by the recipient at the time of supply of said service without taking into effect the time at which the loan is actually disbursed or the amount of loan actually disbursed.

3. What shall be the GST implications for takeover of existing loans?

No GST shall apply for mere takeover of loan from one banking company/financial institute to another.

However, if takeover of loan is followed/ accompanied by the issuance of fresh corporate guarantee or there is renewal of existing corporate, then, GST shall apply.

4. How shall GST be determined in cases where corporate guarantee is being provided by multiple related entities?

In such scenarios, GST shall be payable by each co-guarantor proportionately.

For instance If "A" has given guarantee worth 65 lakhs and B has given guarantee worth 35 Lakh, the GST payable by the "A" shall be 1% of 65 lakh and for "B", GST payable shall be 1% of 35 lakh.

5. Where intra-group corporate guarantee has been issued, whether GST is payable under RCM in absence of actual invoice and payment since the recipient entity would not be able to avail ITC?

It is clarified that where domestic corporate issues intra-group guarantees, GST shall be paid on forward charge mechanism and invoice needs to be issued by the supplier of service.

In case of Guarantee provided by foreign/overseas entity to related person located in India, GST shall be payable on reverse charge basis by the Indian recipient.

6. Whether the tax liability on Corporate Guarantee @ 1% of guarantee offered is to be done one-time or on yearly or on monthly basis and when issued for a fixed term of say 5 or 10 years as per tenure of Loan?

It is clarified that the value of supply of service shall be one percent of the amount guaranteed per annum or actual consideration, whichever is higher.

Accordingly, the value shall be -

Value= 1% of amount of such guaranteed offered x No. of years (for which the said guarantee has been offered); or the actual consideration, Whichever is higher.

Example: If corporate guarantee is provided for 5 years, then the valuation in terms of Rule 28(2) i.e. 1% of guaranteed amount multiply by number of years (i.e.5 in the instant case) and GST would payable on such amount at the time issuance of corporate guarantee.

If corporate guarantee is provided for 5 years and the same is renewed in each year, then GST shall be payable on 1% of the amount issued of such corporate guarantee in first year as well as on every renewal in subsequent year.

7. Whether the valuation in terms of Rule 28(2) of CGST Rules will apply to export of services of providing corporate guarantee between related persons?

As per the amendment made in Rule 28(2) vide Notification dated 10 July 2024, the provisions of said sub-rule will not apply in cases where the recipient of service is located outside India. Accordingly, the said sub-rule shall not apply in case of export of service of providing corporate guarantee between related people.

III. Circular No. 226/20/2024-GST dated 11 July 2024

The captioned circular provides that the refund of additional IGST paid on account of upward revision in price of goods (post exports) shall be claimed in Form GST RFD-01 under the category "any other" in the time and manner provided therewith.