The CBIC has issued various Circulars on 11th July, 2024 to give effect to the recommendations made in 53rd GST Council Meeting held on 22nd June, 2024. These Clarifications addresses the issues relating to Recovery of Outstanding Dues and Pre-Deposit Adjustments under CGST Act, taxability and valuation of services of providing corporate guarantee between related persons, Refund of Additional IGST Paid on Account of Upward Revision in Price of Goods Subsequent to Exports, Refund of Tax paid on inward supplies for Canteen Stores Department (CSD). 

These Circulars are summarized as under:

A. Circular No. 224/18/2024-GST:  Clarifications on Recovery of Outstanding Dues and Pre-Deposit Adjustments under CGST Act

Due to the non-constitution of the GST Appellate Tribunal, taxpayers are unable to file appeals against the decisions of the first appellate authority. This situation has raised questions regarding the recovery of outstanding dues and the adjustment of amounts paid through FORM GST DRC-03. To address the non-constitution of the GST Appellate Tribunal, the GST authorities have provided a mechanism for taxpayers to stay recovery proceedings by paying the required pre-deposit amount and filing an undertaking. 

Clarifications:

1. Appeal Process and Recovery Stay: Currently, taxpayers cannot file appeals to the GST Appellate Tribunal due to its non-operation. Recovery proceedings are initiated if the due amount is not paid within three months of the order. If an appeal is filed with the required pre-deposit, recovery proceedings are stayed until the appeal is resolved.
2. Payment of Pre-deposit and its procedure: Taxpayers intending to appeal and stay the recovery can make pre-deposit payments via the Electronic Liability Register (ELL) Part-II on the GST portal. This can be navigated by Services >> Ledgers>> Payment towards demand.  The pre-deposit amount paid will be mapped against the specific outstanding demand order and adjusted accordingly.
3. Undertaking/Declaration Requirement:  Taxpayers must file an undertaking with the proper officer declaring their intent to file an appeal once the Tribunal is operational. Upon payment of the pre-deposit and submission of the undertaking, recovery of the remaining demand amount will stand stayed.
4. Consequences of Non-Compliance with above 2 points:  If the taxpayer does not make the pre-deposit payment or submit the undertaking/ declaration, then it will be presumed that taxpayer is not willing to file appeal against the order of the appellate authority and recovery proceedings will commence. Similarly, after the Tribunal is constituted, failure to file an appeal within the prescribed timeline will result in the recovery of the remaining demand amount.
5. Adjustment of Payments Made through FORM GST DRC-03:  Taxpayers who have inadvertently paid amounts intended for demand through FORM GST DRC-03 can file FORM GST DRC-03A to adjust these payments against the demand. The amounts will be treated as paid towards the demand from the date of intimation through FORM GST DRC-03.
   Mechanism to adjust payments made inadvertently through FORM GST DRC-03 has been provided vide Notification No. 12/2024-Central Tax dated 10.07.2024 vide which sub-rule (2B) of Rule 142 and FORM GST DRC-03A has been inserted in Central Goods and Services Rules, 2017. – 
6. Functionality of FORM GST DRC-03A:  Currently, the functionality for FORM GST DRC-03A is not available on the GST portal. Until this functionality is available, taxpayers should inform the proper officer about the inadvertent payments through FORM GST DRC-03 , and on such intimation, the proper officer may not insist on recovery for the remaining amount payable by the concerned taxpayer, till the time the said functionality of FORM GST DRC-03A is made available on the portal. Once the functionality is available, taxpayers must file FORM GST DRC-03A to formalize the adjustment.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/07/Circular-No-224-2024.pdf

 

B. Circular No. 225/19/2024-GST – Issues relating to taxability and valuation of services of providing corporate guarantee between related persons:

These guidelines provide clarity on the taxability and valuation of corporate guarantees, ensuring uniform implementation across field formations. The key changes include the valuation method, applicability to previous and new guarantees, and the treatment of intra-group and exported services.

Clarifications 

Issue A: Applicability to Guarantees Issued Prior to 26th October 2023 –  GST was applicable to corporate guarantees even before the insertion of sub-rule (2) on 26thOctober 2023. Rule 28(2) of CGST Rules is only for determination of the value of the taxable supply and not regarding the taxability of the said supply itself. Valuation before 26th October 2023 to be done as per the then-existing Rule 28.

However, if the corporate guarantee is issued or renewed on or after 26th October 2023 i.e. Post 26th October 2023, valuation to be done as per Rule 28(2).

Issue B: Valuation Based on Partly or Non-availed Loans:  Supply of the service of providing a corporate guarantee is not linked with the actual disbursal of the loan, then Valuation of corporate guarantee to be based on the amount guaranteed, not on the actual loan disbursed. Further, clarified that the ITC eligibility for the recipient is independent of the actual loan disbursed. 

Issue C: Takeover of Existing Loans: If the loan issued by the banking company/ financial institution is taken over by another banking company/ financial institution, the said activity of taking over of the loan does not fall under the service of providing corporate guarantee to any banking company or financial institution by a supplier to a recipient. In such cases, there is No GST impact on the takeover of loans unless a fresh corporate guarantee is issued or renewed. However, if the takeover of the loan is followed/ accompanied by issuance of fresh corporate guarantee, then the same would attract GST.

Issue D: Multiple Co-guarantors:  Where corporate guarantee is being provided by multiple related entities, the value of such services of providing corporate guarantee shall be the sum of the actual consideration paid/ payable to co-guarantors, if the said amount of total consideration is higher than one per cent of the amount of such guarantee offered. However, where the sum of the actual consideration is less than one per cent of the amount of such guarantee offered, GST payable by each co-guarantor proportionately on 1% of the amount guaranteed by them. 

Issue E: Intra-group Corporate Guarantees:  

Domestic Corporates issues intra-group guarantees: GST paid under forward charge mechanism.

Foreign guarantees for Indian entities: GST payable under reverse charge mechanism by the Indian entity.

Issue F: Frequency of Tax Payment:

Rule 28(2) of CGST Rules has been amended retrospectively with effect from 26th October 2023, vide notification No.12/2024 -CT dated 10.07.2024, therefore GST payable on 1% of the amount guaranteed per annum or actual consideration, whichever is higher.

However, where he corporate guarantee is provided for a period less than a year, say 6 months (half a year), valuation may be done on Proportionate basis for the said period i.e., in this case, the value of the said supply of services may be taken as half of one per cent of the amount of such guarantee offered (6/12 * one per cent), or the actual consideration, whichever is higher. 

Issue 7: Valuation with Full Input Tax Credit (ITC): In this regard Proviso has been inserted in sub-rule (2) of Rule 28 of CGST Rules, retrospectively with effect from 26thOctober 2023 vide notification No.12/2024 -CT dated 10.07.2024. Value declared in the invoice deemed as open market value where full ITC is available to the recipient of services. 

Issue 8: Export of Corporate Guarantee Services: Rule 28(2) does not apply to exports where the recipient of services is located outside India. Similar amendment done in sub-rule (2) of rule 28 of CGST Rules retrospectively w.e.f. 26thOctober2023 vide notification No. 12/2024 -CT dated 10.07.2024. 

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/07/Circular-No-225-2024.pdf

 

C. Circular No. 226/20/2024-GST: Refund of Additional IGST Paid on Account of Upward Revision in Price of Goods Subsequent to Exports

By following these guidelines, exporters can effectively claim refunds for additional IGST paid due to upward price revisions and ensure compliance with the CGST Rules.

Clarifications for Refund Application Process

1. Filing of Refund Application: Exporters can file an application for a refund of the additional IGST paid in FORM GST RFD-01 electronically on the common portal. The application will be processed by the jurisdictional GST officer of the concerned exporter. CGST Rules have been amended vide Notification No. 12/2024-CT dated 10.07.2024, to provide for filing such refund applications in FORM GST RFD-01, which will be dealt with as per rule 89 of the CGST Rules.
2. Measures until separate category is developed on portal:  Until a separate category for claiming refunds of additional IGST is developed on the portal, exporters should file their refund applications under the category “Any other” with remarks “Refund of additional IGST paid on account of increase in price subsequent to export of goods”, along with the relevant documents as prescribed in clause (bb) of sub-rule (2) of rule 89 of the CGST Rules. 
3. Documentation Required:  

• • Copy of the shipping bill or bill of exports.
  • Copy of original invoices.
  • Copy of the contract or other documents indicating the requirement for the price revision.
  • Copy of original invoices and relevant debit notes/supplementary invoices.
  • Proof of payment of additional IGST and applicable interest.
  • Proof of receipt of additional foreign exchange remittance (FIRC).
  • A certificate from a practising chartered accountant or cost accountant certifying the additional foreign exchange remittance.
  • Statement 9A and 9B of FORM GST RFD-01.

4. Minimum Refund Amount:  No refund will be paid if the amount claimed is less than one thousand rupees, as per sub-section (14) of section 54 of the CGST Act.

5. Time Limit for Filing Refund:  Refund applications must be filed within two years from the relevant date as per clause (a) of Explanation (2) of section 54 of the CGST Act, for this Sub-rule (1B)of rule 89 of CGST Rules, inserted vide Notification No. 12/2024-CT dated 10.07.2024. For cases where the relevant date was before the introduction of sub-rule (1B) of rule 89, the application can be filed within two years from the date the sub-rule came into force.

6. Processing the Refund Application:  The officer will verify the completeness and eligibility of the application. Ensure that the exporter has duly reported the details of the export invoice and debit note in FORM GSTR-1 and has paid the additional IGST and interest in FORM GSTR-3B. Verify the revised value declared by the exporter and the details of foreign exchange remittances received.

Where, the proper officer is satisfied that the whole or any part of the amount claimed is payable as refund, he will issue the refund sanction order in FORM GST RFD-06 and the payment order in FORM GST RFD-05. A detailed speaking order will be uploaded along with the refund sanction order.

7. Downward Revision in Price:  In cases of downward price revision of goods exported with IGST payment, the exporter must deposit the refund of the IGST received in proportion to the price reduction, along with applicable interest. The proper officer will verify the deposit of excess refund amounts during the relevant tax period when processing new refund applications.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/07/Circular-No-226-2024.pdf

 

D. Circular No. 227/21/2024-GST: Refund of Tax paid on inward supplies for Canteen Stores Department (CSD):

The Canteen Stores Department (CSD) has been notified under section 55 of the CGST Act, entitling it to claim a refund of fifty percent of the applicable central tax, integrated tax, and Union territory tax paid on all inward supplies of goods received for subsequent supply to its Unit Run Canteens or authorized customers. Further, vide Circular No. 60/34/2018-GST dated 04.09.2018, the manner and procedure for filing and processing of such refund claims was specified so as to ensure that the CSD shall apply for refund by filing an application manually to the jurisdictional tax office till the time the online utility for filing such refund claim is made available on the common portal. Now, to enable such CSD to file application for refund electronically, a new functionality has been made available on the common portal which allows CSD to apply for refund by filing an application electronically on the common portal.

The provisions of Circular No. 60/34/2018-GST dated 04.09.2018 will continue to apply for all refund applications filed manually before the amendments in CGST Rules and before the said functionality being available on the common portal. These manually filed applications shall continue to be processed manually, as per the earlier circular.

Clarifications :

1. Filing of refund application: The CSD shall file an application for refund in FORM GST RFD-10A electronically on the common portal and the same shall be processed electronically. The refund to be granted to the CSD shall be based on the invoices of the inward supplies of goods. As per rule 95B of the CGST Rules, the CSD is required to apply for a refund once every quarter. The CSD can also opt to file a refund application for multiple quarters, clubbing multiple financial years, as per their preference.
2. Eligibility for refund: The refund of the tax paid by the CSD is available only if the inward supplies of goods were received from a registered person against a tax invoice. The details of such supplies must be furnished by the registered person in their details of outward supply in FORM GSTR-1. The supplier must have furnished their return in FORM GSTR-3B for the concerned tax period.
3. Documents to Accompany the Refund Application: An undertaking stating that the goods on which the refund is being claimed have been received by the CSD for the purposes of subsequent supply to its Unit Run Canteens or authorized customers. A declaration stating that no refund has been claimed earlier against the invoices on which the refund is being claimed.
4. Time Limit for Filing Refund:  The CSD can file the refund of fifty percent of the tax paid on such inward supplies before the expiry of two years from the last day of the quarter in which such supply was received.
5. Processing and Sanction of the Refund Claim:

• • Filing and Validation: The proper officer shall process the refund claim filed by the CSD similarly to the claims filed in FORM GST RFD-01 under rule 89 of the CGST Rules. The officer will validate the GSTIN details of the CSD on the common portal to ensure that all returns in FORM GSTR-1 and FORM GSTR-3B, due before the date of the refund application, have been filed. The officer will scrutinize the details in FORM RFD-10A, FORM GSTR-3B, and FORM GSTR-2B.
  • Verification of Invoices: The officer will verify that the details of invoices for which the refund is claimed have been furnished by the supplier in FORM GSTR-1 and the supplier has filed his return in FORM GSTR-3B for the concerned tax period.
  • Sanction Amount: Ensure the refund sanctioned is not more than 50% of the central tax, state tax, Union territory tax, and integrated tax paid on the supplies received by the CSD. The invoices uploaded by the CSD while filing will be validated on the portal with FORM GSTR-2B, and only validated invoices will be allowed. Invoices for which the refund has already been availed by the CSD will be flagged in the system and will not be allowed for the refund. The Table in Sl. No. 7 of FORM GST RFD-10A will be auto-populated on the portal based on 50% of the amount of respective tax as per Col 8, 9, and 10 of the Table in Sl. No. 6 of FORM GST RFD-10A. The Table in Sl. No. 7 will be editable downwards, allowing the CSD to make a downward revision but not enhance the amount.

Also, the proper officer will verify whether the ITC in respect of inward supplies of goods received for subsequent supply to Unit Run Canteens or authorized customers has been reversed by the CSD as clarified in Circular No. 170/02/2022-GST dated 06-Jul-2022.

• • Issuance of Refund Order: The proper officer shall scrutinize the application for completeness and eligibility and issue the order in FORM GST RFD-06 accordingly. The officer shall also upload a detailed speaking order along with the refund order in FORM GST RFD-06.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/07/Circular-No-227-2024.pdf