The CBIC has issued Circulars dated 31.12.2024, clarifying on various issues as discussed in the 55th GST Council Meet held on 21st December, 2024. 

The Circulars issued were relating to – 

A. Taxability Issues pertaining to Gift Vouchers (Circular No. 243/37/2024-GST)
B. Place of Supply for Supply of Online Services to Unregistered Recipients (Circular No. 242/36/2024-GST)
C. Availability of Input Tax Credit u/s 16(2)(b) in respect of goods which have been delivered by the supplier at his (supplier’s) place of business (Circular No. 241/35/2024-GST)
D. Reversal of Input Tax Credit by Electronic Commerce Operators (ECOs) in respect of supplies made under section 9(5) (Circular No. 240/34/2024-GST)

The Key points of the Clarifications are discussed as under:

A. Circular No. 243/37/2024-GST – Issues pertaining to GST treatment of vouchers – To address long-standing ambiguities regarding the taxability of vouchers under GST and provide clarity on their treatment.

Clarifications on Various Aspects of Vouchers under GST:

I. Nature of Voucher Transactions: Vouchers are instruments that create an obligation for a supplier to accept them as full or partial consideration for goods or services. If vouchers are recognized as pre-paid instruments by the Reserve Bank of India (RBI) and used to settle obligations, they are treated as “money” under Section 2(75) of the CGST Act and are excluded from GST. If not considered as “money,” vouchers may qualify as actionable claims, which are also excluded from GST unless specified under Section 2(102A).

• When vouchers are classified as money:- They are excluded from the definition of goods (Section 2(52)) and services (Section 2(102)). Transactions in such vouchers are neither supply of goods nor services and hence not taxable under GST.
• When vouchers are not classified as money but represent a promise for goods/services :- They are considered actionable claims (as per Section 2(1) of CGST Act, read with Section 3 of the Transfer of Property Act, 1882).Transactions in actionable claims (other than specified actionable claims, such as betting or gambling) are categorized under Schedule III, meaning they are neither a supply of goods nor services.
• Underlying Goods/Services: – While the transactions in vouchers themselves are not taxable, the supply of goods or services for which vouchers are redeemed may be subject to GST.

II. GST on Voucher Distribution by distributors/ sub-distributors/ agents etc.:  

• Principal-to-Principal Model (P2P): Distributors/sub-distributors purchase vouchers from the issuer at a discounted price and sell them to end customers, sub-distributors, or corporates. Distributor/dealer assumes ownership of the vouchers and operates independently. Pure trading of vouchers in this case is not taxable under GST.
• Distribution on Commission/Fee Basis (Principal-Agent Relationship): Distributors/sub-distributors/agents act on behalf of the voucher issuer, without owning the vouchers. Their role involves marketing, promotion, or other support activities for voucher distribution. Revenue is earned as a commission/fee (or equivalent remuneration) from the voucher issuer. The commission or fee earned by the distributor/sub-distributor/agent is treated as a supply of services to the voucher issuer. GST is payable on this commission/fee amount as per the applicable GST rate for services.

III. Additional Services Related to Vouchers: GST applies to services such as advertising, co-branding, marketing, customization, and technology support provided to voucher issuers.

IV. Unredeemed Vouchers (Breakage):  Breakage refers to the value of unredeemed vouchers that remain unused at the end of their expiry period. Section 9(1) of CGST Act, provides that GST is chargeable only on the supply of goods and/or services. In the case of breakage, there is no redemption of the voucher and consequently, there is no supply of the underlying goods and/or services. Breakage amounts are not considered consideration under GST as there is no express or implied agreement between the issuer and redeemer for payment in such cases. No GST is applicable on unredeemed vouchers as there is no underlying supply of goods or services. 

To read the complete Circular https://taxo.online/wp-content/uploads/2025/01/Circular-No-243-2024.pdf

B. Circular No. 242/36/2024-GST – Place of supply of Online Services supplied by the suppliers of services to unregistered recipients – This clarification emphasizes the mandatory requirement for suppliers of online services to record the correct place of supply and the state name of unregistered recipients on invoices, ensuring compliance with the GST law.  It emphasizes that all online/digital service suppliers, including OIDAR service providers and electronic commerce operators, must adhere to the requirements for recording and reporting recipient details. Non-compliance could attract penalties, and suppliers are encouraged to establish systems to ensure proper invoicing and reporting.

• Mandatory Recording of the Recipient’s State Name on Tax Invoices: The name of the State of the unregistered recipient must be recorded on the tax invoice, irrespective of the value of the supply. 
• Impact on Place of Supply:  Recording the recipient's State name on the invoice is treated as the address on record. Under Section 12(2)(b)(i) of the IGST Act, the place of supply for these services is deemed to be the location of the recipient.
• Supplier Obligations:  Suppliers must implement mechanisms to collect and record the recipient’s State name before making supplies. The recorded State name serves as the deemed address of the recipient for GST compliance.
• Penalties for Non-Compliance: Failure to include mandatory particulars, such as the recipient's State name, on tax invoices can result in penal action under Section 122(3)(e) of the CGST Act.
• Filing and Reporting: The supplier must report the recipient’s State as the place of supply in FORM GSTR-1/1A for outward supplies.

To read the complete Circular https://taxo.online/wp-content/uploads/2025/01/Circular-No-242-2024.pdf

C. Circular No. 241/35/2024-GST – Availability of input tax credit as per Section 16(2)(b) in respect of goods which have been delivered by the supplier at his place of business under Ex-Works Contract:  The clarification addresses references received from the automobile sector, regarding the conditions under which a registered person can avail Input Tax Credit u/s 16(2)(b) of the CGST Act, especially in the context of Ex-Works (EXW) contracts. 

Condition for ITC Claim(Section 16(2)(b): As per clause (b) of sub-section (2) of section 16 of the CGST Act, a registered person can claim ITC only if they have “received” the goods or services. The Explanation to this clause deems goods to be received when the goods are delivered to the recipient or a person directed by the recipient, either by transfer of title documents or otherwise. The CGST Act does not mandate physical receipt of goods at a specific location for ITC eligibility. This is unlike earlier excise laws where physical receipt at the factory was required. 

Deemed Receipt of Goods Under EXW Contracts: In EXW contracts, Ownership of goods passes to the dealer (recipient) at the supplier’s (OEM’s) factory gate when handed over to the transporter. Transport and insurance may be arranged by the supplier on behalf of the dealer. The dealer is liable for claims in case of loss during transit.

It is now clarified that for ITC purposes goods are deemed received when handed over to the transporter at the supplier's factory gate, as per the terms of the contract.

Eligibility Based on Business Use: ITC is available only for goods used or intended to be used in the course or furtherance of business as per Section 16(1) of the CGST Act, 2017. If goods are diverted for non-business purposes or subsequently lost, stolen, destroyed, or disposed of as gifts/free samples, ITC on such goods is disallowed.

Implications of the Circular:

• Dealers can claim ITC as soon as the goods are handed over to the transporter, provided ownership passes at that point.
• Show-cause notices issued for ITC claims based on physical receipt at the business premises are unwarranted in light of this clarification.
• Dealers must ensure compliance with other conditions under sections 16 and 17 of the CGST Act.

To read the complete Circular https://taxo.online/wp-content/uploads/2025/01/Circular-No-241-2024.pdf

D. Circular No. 240/34/2024-GST – Input tax credit availed by Electronic commerce operators (ECOs)where services specified under Section 9(5) of Central Goods and Services Tax Act, 2017 are supplied through their platform

The Circular addresses the Input Tax Credit and tax payment responsibilities of ECOs under section 9(5).

ITC Reversal Not Required: As per Circular No. 167/23/2021 dated 17.12.2021, ECOs do not need to reverse ITC for inputs or input services related to supplies on which they pay tax under section 9(5), on account of restaurant services. It has also been clarified that the input tax credit will not be allowed to be utilized for payment of tax liability under section 9(5) and whole of the tax liability under section 9(5) will be required to be paid in cash. 

It is now clarified that this principle also applies to other services notified under section 9(5), apart from restaurant services.

Utilization of ITC: The ITC availed by ECOs cannot be used to pay tax liability under section 9(5). The entire tax liability under section 9(5) must be discharged using the electronic cash ledger. However, ITC can be utilized for tax liability on the ECO's own services (e.g., platform fees or commissions).

To read the complete Circular https://taxo.online/wp-content/uploads/2025/01/Circular-No-240-2024.pdf