CBIC Circular 206/18/2023: Clarifications Regarding Applicability of GST on Certain Services

CBIC Circular No. 206/18/2023 Dated. 31 October 2023

CBIC Circular 206/18/2023-GST: Based on the recommendations of the GST Council in its 52nd meeting held on 7 October, 2023, at New Delhi, the Tax Research Unit (TRU) of the Department of Revenue has issued clarifications with reference to GST levy related to the following issues:

1. Whether in case of passenger transport service and renting of motor vehicles, the ‘leasing of motor vehicles without operators’ is considered as a ‘same line of business’?

2. Whether GST is applicable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees/occupants?

3. Whether job work for processing of “Barley” into “Malted Barley” attracts GST @ 5% as applicable to “job work in relation to food and food products” or 18% as applicable to “job work in relation to manufacture of alcoholic liquor for human consumption”?

4. Whether District Mineral Foundations Trusts (DMFTs) set up by the State Governments are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority?

5. Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to Central Public Works Department (CPWD) are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017?

Clarifications:

Purview of ‘Same Line of Business’ in Case of ‘Passenger Transport Service’ and ‘Renting of Motor Vehicles’

Services of transport of passengers by any motor vehicle (SAC 9964) and renting of motor vehicle designed to carry passengers with operator (SAC 9966), where the cost of fuel is included in the consideration charged from the service recipient attract GST at the rate of 5% with input tax credit of services in the same line of business.

Same line of business as stated in the notification No. 11/2017- Central Tax (Rate) means “service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle”.

It is clarified that, input services in the same line of business include transport of passengers (SAC 9964) or renting of motor vehicle with operator (SAC 9966) and not leasing of motor vehicles without operator (SAC 9973) which attracts GST and/or compensation cess at the same rate as supply of motor vehicles by way of sale.

Applicability of GST on Reimbursement of Electricity Charges by Real-Estate Companies, Malls, Airport, etc.

It is clarified that, whenever electricity is being supplied bundled with renting of immovable property and/or maintenance of premises, as the case may be, it forms a part of composite supply and shall be taxed accordingly. The principal supply is renting of immovable property and/or maintenance of premise, as the case may be, and the supply of electricity is an ancillary supply. Even if electricity is billed separately, the supplies will constitute a composite supply and therefore, the rate of the principal supply i.e., GST rate on renting of immovable property and/or maintenance of premise, as the case may be, would be applicable.

However, where the electricity is supplied by the Real Estate Owners, Resident Welfare Associations (RWAs), Real Estate Developers etc., as a pure agent, it will not form part of value of their supply. Further, where they charge for electricity on actual basis that is, they charge the same amount for electricity from their lessees or occupants as charged by the State Electricity Boards or DISCOMs from them, they will be deemed to be acting as pure agent for this supply.

GST Rate on  Job Work for Processing of Barley into Malted Barley 

Malt is a food product. It can be directly consumed as part of food preparations or can be used as an ingredient in food products and also used for manufacture of beer and alcoholic liquor for human consumption. However, irrespective of end-use, conversion of barley into malt amounts to job work in relation to food products.

Hence, it is hereby clarified that, job work services in relation to manufacture of malt are covered by the entry at Sl. No. 26 (i) (f) which covers “job work in relation to all food and food products falling under chapters 1 to 22 of the customs tariff” irrespective of the end use of that malt and attracts 5% GST.

Applicability of GST Exemption to District Mineral Foundation Trusts (DMFTs) Set Up by the State Governments

DMFTs work for the interest and benefit of persons and areas affected by mining related operations by regulating receipt and expenditure from the respective Mineral Development Funds created in the concerned district. They provide services related to drinking water supply, environment protection, health care facilities, education, welfare of women and children, supply of medical equipment etc.

These activities are similar to activities that are enlisted in Eleventh Schedule and Twelfth Schedule of the Constitution. The ultimate users of the various schemes under DMF are individuals, families, women and children, farmers/producer groups, SHGs of the mining affected areas etc. The services/supplies out of DMF fund are provided free of charge and no consideration is realized from the beneficiaries by DMF against such services.

Accordingly, it is clarified that DMFT set up by the State Governments are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority

Applicability of GST Exemption on Supply of Pure Services & Composite Supplies of Horticulture or Horticulture Works to CPWD when Value of Goods Not More Than 25%

Public parks in government residential colonies, government offices and other public areas are developed and maintained by CPWD.

Maintenance of community assets, urban forestry, protection of the environment and promotion of ecological aspects are functions entrusted to Panchayats and Municipalities under Article 243G and 243W read with Sr. No. 29 of 11th Schedule and Sr. No. 8 of 12th Schedule of the constitution.

Sr. No. 3 and 3A of notification No. 12/2017-CTR exempt pure services and composite supply of goods and services in which value of goods does not constitute more than 25%, that are provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Accordingly, it is clarified that supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017.

To Read & Download Circular 206/18/2023 CLICK HERE

To Read & Download Circular 205/17/2023 CLICK HERE

To Read & Download Circular 204/16/2023 CLICK HERE

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