CBIC has issued various Circulars dated 10.09.2024, to give effect to the recommendations made in 54th GST Council Meeting held on 09th September, 2024. These Clarifications aims to provide clarity to trade and tax officers and to reduce litigations. 

These Circulars are summarized as under:

A. Circular No. 233/27/2024-GST – Clarification regarding the refund of IGST paid on the export of goods, in cases where inputs were initially imported without the payment of IGST and compensation cess under certain exemption notifications), but later the exporter has paid the IGST and compensation cess along with interest.

Existing Provisions :

• Sub-rule (10) of Rule 96 of the CGST Rules, 2017: This sub-rule imposes a bar on claiming a refund of IGST paid on exports of goods or services if the benefits of certain concessional/exemption notifications have been availed on the inputs/raw materials that were imported or procured domestically.
• Explanation Introduced by Notification No. 16/2020-CT: An explanation was inserted into sub-rule (10) of Rule 96, with retrospective effect from 23.10.2017. This explanation clarifies that if a registered person has paid IGST and compensation cess on inputs and only availed the exemption of Basic Customs Duty (BCD) under the said notifications, it would not be considered as availing the benefit of the exemption notifications for the purposes of sub-rule (10) of Rule 96.

The explanation leads to a broader understanding that in cases where inputs were imported without payment of IGST and compensation cess initially, but the exporter subsequently pays the IGST and compensation cess on these inputs along with interest, it would be considered that the benefit of the exemption notifications has not been availed, for the purposes of sub-rule (10) of Rule 96.

Clarification: It is clarified that if an exporter who initially imported inputs without paying IGST and compensation cess under the benefit of the said exemption notifications, later pays IGST and compensation cess along with interest, and gets the Bill of Entry reassessed through Customs authorities, then the refund of IGST paid on exports will not be considered in contravention of sub-rule (10) of Rule 96 of the CGST Rules

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/09/cir-cgst-233-2024.pdf

B. Circular No. 232/27/2024-GST: Clarification regarding the place of supply in relation to data hosting services provided by service providers in India to overseas cloud computing service providers – The primary concerns were whether these services would be classified as intermediary services, or related to goods or immovable property, and how their place of supply should be determined.

• Whether considered as Intermediary Services:  Data hosting service providers are not intermediaries under Section 2(13) of the IGST Act. They provide services directly to cloud computing service providers on a principal-to-principal basis, and not as facilitators or brokers between the cloud computing service provider and their end users. Therefore, the place of supply cannot be determined as per Section 13(8)(b) of the IGST Act.
• Whether considered Services in Relation to Goods “Made Available”: Data hosting services provided by Indian service providers to overseas cloud computing service providers are not considered to be in relation to goods “made available” by the cloud computing service providers. Even if some hardware is provided by the cloud computing service provider, the data hosting provider manages the entire infrastructure. Therefore, Section 13(3)(a) does not apply, and the place of supply cannot be determined under this section.
• Whether considered Services in Relation to Immovable Property:  The services provided by data hosting providers are not directly related to immovable property, as they involve comprehensive services (such as server maintenance, network connectivity, and infrastructure management) rather than the mere use of physical premises. As a result, Section 13(4) does not apply for determining the place of supply.

Clarification: Since the services do not fall under specific provisions of Sections 13(3) to 13(13), the place of supply is determined as per the default provision of Section 13(2) of the IGST Act, which is the location of the recipient. For services provided to cloud computing providers outside India, the place of supply is considered to be outside India.

The supply of data hosting services by an Indian provider to an overseas cloud computing service provider can be classified as export of services, provided that other conditions under Section 2(6) of the IGST Act are fulfilled.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/09/cir-cgst-232-2024.pdf

C. Circular No. 231/27/2024-GST: Clarification on availability of input tax credit (ITC) for demo vehicles used by authorized dealers of motor vehicles

1. Blocked ITC u/s 17(5) of the CGST Act As per Section 17(5)(a) of the CGST Act, ITC on motor vehicles for passenger transportation (with seating capacity not more than 13, including the driver) is restricted unless the vehicle is used for:

• • Further supply (i.e., sale) of such motor vehicles,
  • Passenger transportation, or
  • Imparting driving training.

Clarification: Since demo vehicles are used to promote the sale of similar vehicles (i.e., further supply), ITC is allowed. They are considered part of the further supply chain, exempting them from ITC blockage under Section 17(5)(a).

2. Other Uses of Demo Vehicles

• • If a dealer uses demo vehicles for purposes other than further supply, such as transporting staff – No ITC, as it does not qualify as further supply under the CGST Act.
  • If the dealer acts only as a service provider to the vehicle manufacturer (e.g., offering test drives without involvement in the sale) – No ITC

3. Capitalization of Demo Vehicles – ITC is available on demo vehicles used for furthering the sale of motor vehicles, even when capitalized, provided no depreciation is claimed on the tax component. However, when a capitalized demo vehicle is sold, the dealer must comply with Section 18(6) of the CGST Act, which requires payment of an amount based on the sale price.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/09/cir-cgst-231-2024.pdf

D. Circular No. 230/24/2024-GST: Clarification regarding treatment for advertising services provided by Indian companies to foreign clients

Related Clarifications are as under:

Issue 1 : Whether Advertising  company  can  be  considered  as  an  “intermediary”:

The advertising company in India, which enters into two separate agreements—one with the foreign client and another with media owners—cannot be classified as an “intermediary. The relationship is considered principal-to-principal, and the advertising company is supplying services directly to the foreign client. Consequently, the place of supply in such cases is not determined based on the intermediary provisions under Section 13(8)(b).

However, In cases where the advertising company only facilitates transactions between the foreign client and media owners without providing the main service itself, the company acts as an intermediary. For such cases, the place of supply will be the location of the supplier (i.e., the advertising company in India) as per Section 13(8)(b) of IGST Act.

Issue 2: Whether  the  representative  of  foreign  client  in  India  or  the  target audience  of  the  advertisement  in  India  can  be  considered  as  the  “recipient”

The recipient of advertising services is the foreign client who pays for the service. Neither the representative of the foreign client in India nor the target audience in India can be considered the recipient. The foreign client remains the recipient regardless of whether a representative in India interacts with the advertising company on their behalf.

Issue 3: Whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services

The provisions for performance-based services (Section 13(3)(a) and (b)) do not apply to advertising services in this context. Advertising services do not require the physical presence of the recipient with the supplier. Therefore, the place of supply is not determined based on where services are performed in India.

POS: Place of supply is determined as per the default provision, i.e Section 13(2), i.e., the location of the recipient, which is outside India for foreign clients. Therefore, the service qualifies as an export of services if other conditions of Section 2(6) are fulfilled.

The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/09/cir-cgst-230-2024.pdf