Executive Summary
Income Tax
- National Savings Scheme (Amendment) Rules, 2024 – Amendment in Rule 6.
- Section 35(1)(ii) of the income-tax act, 1961, read with rules 5C and 5E of the income-tax rules, 1962 – scientific research expenditure – approved scientific research association/institution
- Section 88 of the Finance Act, 2024 – Direct Tax Vivad se vishwasScheme, 2024 – Notified date of enforcement of said scheme.
Goods And Service Tax (GST)
- Press release recommendations during 54th meeting of GST Council dated 09-09-2024.
- Clarification in respect of Advertising Services provided to foreign clients Circular No. 230/24/2024-GST [F.NO. CBIC-20001/6/2024-GST], dated 10-09-2024.
- Clarification on availability of Input tax credit in respect of DEMO VECHICLES Circular No. 231/25/2024-GST [F. NO. CBIC-20001/6/2024-GST], dated 10-09-2024
- Clarification on Place of Supply of Data Hosting Services provided by service providers located in India to Cloud Computing Service Providers located outside India Circular No. 232/26/2024-GSTL [F.NO. CBIC-20001/6/2024-GST], dated 10-09-2024.
- Clarification regarding Regularization of refund of IGST availed in Contravention of Rule 96(10) OF CGST Rules, 2017, in cases where the exporters had imported certain inputs without payment of Integrated Taxes and compensation Cess Circular No. 233/27/2024-GST [F.NO. CBIC-20001/6/2024-GST], dated 10-09-2024.
Companies Act 2013/ Other Laws
- Notifying the National Bank for Financing Infrastructure and Development as a Public Financial Institution
- Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2024
- Companies (Indian Accounting Standards) Second Amendment Rules, 2024
- Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024
- Launching Company Adjudication (ADJ) Form
- Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024
- Clarification on the holding of Annual General Meeting (AGM) and EGM through Video Conference (VC) or Other Audio Visual Means (OAVM) and passing of Ordinary and Special resolutions by the companies under the Companies Act, 2013 read with Rules made thereunder -Extension of timeline
- Company e-Filing Form IEPF-1
- Liberalized Remittance Scheme (LRS) for Resident Individuals Discontinuation of Reporting of Monthly Return
- Foreign Exchange (Compounding Proceedings) Rules, 2024
- SEBI (Listing Obligations and Disclosure Requirements) Regulations
- SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2024
- National savings scheme (amendment) rules, 2024 – amendment in rule 6
In the National Savings Rules, 1992, in rule 6, in sub-rule (1), for clause (v), the following clauses shall be substituted, namely: –
“(v) For the period commencing from the 1st day of March, 2003 but before 1st day of October, 2024, the interest at the rate of seven-and-a-half per cent per annum shall be allowed for a calendar month on the lowest balance at credit of an account between the close of the tenth day and the end of the month and such interest shall be calculated and credited to the account at the end of each year.
(vi) The balances at the credit of the subscribers of the National Savings Scheme under these rules, on or after the 1st day of October 2024, shall bear no interest.
- Section 35(1)(ii) of the Income-Tax Act, 1961, read with rules 5C and 5E of the Income-Tax Rules, 1962 – Scientific Research Expenditure – Approved scientific research association/institution
- The Central Government approves ‘Advanced Manufacturing Technology Development Centre (PAN: AAEAA9272B), Chennai’ as ‘Other Institution’ under the category of ‘University, College or Other Institution’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 read with rules 5C and 5E of the Income-tax Rules, 1962.
- This Notification shall apply with effect from the date of publication in the Official Gazette and accordingly it shall be applicable for Assessment Years 2025-26 to 2029-30.
AND
- The Central Government hereby approves Auroville Foundation (PAN: AAATA0037B) as ‘Other Institution’ for research in social science or statistical research for the purposes of clause (iii) of sub-section (1) section 35 of the Income-tax Act, 1961 read with rules 5C and 5E of the Income-tax Rules, 1962.
This Notification shall apply with effect from the date of publication in the Official Gazette (i.e. from the Previous Year 2024-25) and accordingly it shall be applicable for Assessment Years 2025-26 to 2029-30.
- Press release recommendations during 54th meeting of GST Council dated 09-09-2024.
- The 54th GST Council met under the Chairpersonship of Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman in New Delhi on 09-09-2024.
- The meeting was also attended by Union Minister of State for Finance Shri Pankaj Chaudhary, Chief Ministers of Goa and Meghalaya; Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; besides Finance Ministers of States & UTs (with legislature) and senior officers of the Ministry of Finance & States/ UTs.
- GST Council recommends Group of Ministers (GoM) on following Services:
- Life and Health insurance related to GST
- GoM on Rate Rationalisation and asked to submit report by end of October 2024
- GST Council also recommends formation of a GoM to study the future of compensation cess
- GST Council recommends to exempt supply of research and development services by a Government Entity; or a research association, university, college or other institution notified u/s 35 of Income Tax Act using government or private grants.
- The GST Council inter-alia made the following recommendations:
- Relating to changes in GST tax rates,
- Provide relief to individuals and,
- Measures for facilitation of trade and measures for streamlining compliances in GST.
- Changes/Clarifications in GST Tax Rates: – Goods
- Namkeens and Extruded/Expanded Savoury food products:
- The GST rate of extruded or expanded products, Savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 to be reduced from 18% to 12% at par with namkeens, bhujia, mixture, chabena(prepackaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90.The GST rate of 5% will continue on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion.
- To also clarify that the reduced GST rate of 12% on extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 is applicable
- Cancer Drugs:
The GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab to be reduced from 12% to 5%.
- Metal Scrap:
- Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by an unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold.
- A TDS of 2% will be applicable on supply of metal scrap by registered person in B2B supply.
- Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways:
To clarify that Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways would be classified under HSN 8415 attracting a GST rate of 28%.
- Car and Motor cycle seats:
- To clarify that car seats are classifiable under 9401 and attract a GST rate of 18%.
- GST rate on car seats classifiable under 9401 to be increased from 18% to 28%. This uniform rate of 28% will be applicable prospectively for car seats of motor cars in order to bring parity with seats of motorcycles which already attract a GST rate of 28%.
- Changes/ Clarifications in GST Tax Rates: – Services
- Life and Health insurance:
- GST Council recommended to constitute a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on the life insurance and health insurance.
- The GoM members are Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat.
- The GoM is to submit the report by end of October 2024.
- Transport of passengers by helicopters:
- To notify GST @ 5% on the transport of passengers by helicopters on seat share basis and to regularise the GST for past period on ‘as is where is’ basis.
- To also clarify that the charter of helicopter will continue to attract 18% GST.
- Flying training courses:
To clarify by way of a circular that the approved flying training courses conducted by DGCA approved Flying Training Organizations (FTOs) are exempt from the levy of GST.
- Supply of research and development services:
- The GST Council recommended to exempt supply of research and development services by a Government Entity; or a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 using Government or private grants.
- Past demands to be regularised on ‘as is where is’ basis.
- Preferential Location Charges (PLC):
To clarify that location charges or Preferential Location Charges (PLC) paid along with the consideration for the construction services of residential/commercial/industrial complex before issuance of completion certificate forms part of composite supply where supply of construction services is the main service and PLC is naturally bundled with it and are eligible for same tax treatment as the main supply that is, construction service.
- Affiliation services:
- To clarify that affiliation services provided by educational boards like CBSE are taxable. However, to exempt affiliation services provided by State/Central educational boards, educational councils and other similarly placed bodies to Government Schools prospectively.
- The issue for the past period between 01.07.2017 to 17.06.2021 to be regularized on ‘as is where is’ basis.
- To clarify by way of circular that the affiliation services provided by universities to their constituent colleges are not covered within the ambit of exemptions provided to educational institutions in the notification No. 12/2017-CT(R) dated 28.06.2017 and GST at the rate of 18% is applicable on the affiliation services provided by the universities.
- Import of service by Branch Office:
To exempt import of services by an establishment of a foreign airlines company from a related person or any of its establishment outside India, when made without consideration. The council also recommended to regularise the past period on ‘as is where is ‘ basis.
- Renting of commercial property:
To bring renting of commercial property by unregistered person to a registered person under Reverse Charge Mechanism (RCM) to prevent revenue leakage.
- Ancillary/intermediate services are provided by GTA:
- To clarify that when ancillary/intermediate services are provided by GTA in the course of transportation of goods by road and GTA also issues consignment note, the service will constitute a composite supply and all such ancillary/intermediate services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as part of the composite supply.
- If such services are not provided in the course of transportation of goods and invoiced separately, then these services will not be treated as composite supply of transport of goods.
Other changes:
- To regularize the GST liability for the past period prior to 01.10.2021 on ‘as is where is’ basis, where the film distributor or sub-distributor acts on a principal basis to acquire and distribute films.
- To exempt supply of services such as application fees for providing electricity connection, rental charges against electricity meter, testing fees for meters/ transformers/capacitors, labour charges from customers for shifting of meters/service lines, charges for duplicate bills etc. which are incidental, ancillary or integral to the supply of transmission and distribution of electricity by transmission and distribution utilities to their consumers, when provided as a composite supply.
- GST for the past period to be regularized on ‘as is where is’ basis.
- Measures for facilitation of trade:
- Procedure and conditions for waiver of interest or penalty or both, in respect of tax demands under section 73 of CGST Act, 2017 for FYs 2017-18, 2018-19 and 2019-20 as per section 128A of CGST Act, 2017:
- The GST Council recommended insertion of rule 164 in CGST Rules, 2017, along with certain Forms, providing for the procedure and conditions for availment of benefit of waiver of interest or penalty or both, relating to tax demands under section 73 of CGST Act, pertaining to FYs 2017-18, 2018-19 and 2019-20, as per section 128A of CGST Act.
- The Council also recommended to notify under sub-section (1) of section 128A of CGST Act, 31-3-2025 as the date on or before which the payment of tax may be made by the registered persons, to avail the said benefit as per section 128A of the CGST Act.
- The Council also recommended the issuance of a circular to clarify various issues related to availment of waiver of interest or penalty or both as per section 128A of CGST Act.
- The Council also recommended that section 146 of Finance (No. 2) Act, 2024, which provides for insertion of section 128A in CGST Act, 2017, may be notified with effect from 1-11-2024.
- Providing a mechanism for implementation of newly inserted sub-section (5) and sub section (6) in section 16 of CGST Act, 2017:
- The GST Council recommended that sections 118 and 150 of the Finance (No. 2) Act, 2024, which provides for insertion of sub-section (5) and sub-section (6) in section 16 of CGST Act, 2017 retrospectively with effect from 1-7-2017, may be notified at the earliest.
- The Council also recommended that a special procedure for rectification of orders may be notified under section 148 of the CGST Act, to be followed by the class of taxable persons, against whom any order under section 73 or section 74 or section 107 or section 108 of the CGST Act has been issued confirming demand for wrong availment of input tax credit on account of contravention of provisions of sub-section (4) of section 16 of the CGST Act, but where such input tax credit is now available as per the provisions of sub-section (5) or subsection (6) of section 16 of the CGST Act, and where appeal against the said order has not been filed.
- The Council also recommended issuance of a circular to clarify the procedure and various issues related to implementation of the said provisions of sub-section (5) and subsection (6) of section 16 of CGST Act, 2017.
- Amendments in rule 89 and rule 96 of CGST Rules, 2017 and to provide clarification in respect of IGST refunds on exports where benefit of concessional/ exemption notifications specified under rule 96(10) of CGST Rules, 2017 has been availed on the inputs:
- The GST Council recommended to clarify that where the inputs were initially imported without payment of integrated tax and compensation cess by availing benefits under Notification No. 78/2017-Customs, dated 13-10-2017 or Notification No. 79/2017-Customs dated 13-1-2017, but IGST and compensation cess on such imported inputs are subsequently paid, along with applicable interest.
- the Bill of Entry in respect of the import of the said inputs is got reassessed through the jurisdictional Customs authorities to this effect, then the IGST paid on exports, refunded to the said exporter shall not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of CGST Rules.
- Considering the difficulty being faced by the exporters due to restriction in respect of refund on exports, imposed viderule 96(10), rule 89(4A) & rule 89(4B) of CGST Rules, 2017, in cases where benefit of the specified concessional/ exemption notifications is availed on the inputs, the Council recommended to prospectively omit rule 96(10), rule 89(4A) & rule 89(4B) from CGST Rules, 2017. This will simplify and expedite the procedure for refunds in respect of such exports.
- Issuance of clarifications through the circulars to remove ambiguity and legal disputes in certain issues:
The GST Council recommended issuance of circulars to provide clarity and to remove doubts and ambiguities arising in the following issues due to varied interpretations by the field formations:
- Clarification on the Place of Supply of advertising services provided by Indian advertising companies to foreign entities.
- Clarification regarding availability of Input Tax Credit on demo vehicles by the dealers of the vehicle manufacturers.
- Clarification on Place of Supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India.
- The Council also recommended amendments in some other provisions of CGST Rules, 2017.
- Other measures:
- B2C E-invoicing:
- The GST Council recommended roll out of a pilot for B2C e-Invoicing, following the successful implementation of e-invoicing in the B2B sector.
- The Council recognized potential benefits of e-invoicing in retail, such as improved business efficiency, environmentally friendly, cost efficiency to the business, etc.
- It would also provide an opportunity to the retail customers to verify the reporting of the invoice in the GST return. The pilot will be rolled out on voluntary basis in selected Sectors and States.
- Invoice Management System and new ledgers:
- The Council also took note of the agenda on the enhancements being made to the existing GST return architecture. These enhancements include the introduction of a Reverse Charge Mechanism (RCM) ledger, an Input Tax Credit Reclaim ledger and an Invoice Management System (IMS).
- Taxpayers would be given the opportunity to declare their opening balance for these ledgers by 31st October 2024.
- IMS will allow the taxpayers to accept, reject, or to keep the invoices pending for the purpose of availment of Input Tax Credit. This will be an optional facility for taxpayers to reduce errors in claiming input tax credit and improve reconciliation. This is expected to reduce notices issued on account of ITC mismatch in the returns.
- The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.
- Clarification in respect of Advertising Services provided to Foreign Clients
Circular No. 230/24/2024-GST [F.NO. CBIC-20001/6/2024-GST], dated 10-09-2024
- References have been received from the trade and industry requesting for clarification regarding advertising services being provided by Indian advertising companies/agencies to foreign entities, as some of the field formations are considering the place of supply of the said services as within India, thereby denying the export benefits to such advertising companies.
- In view of the difficulties being faced by the trade and industry and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the issues in succeeding paragraphs.
- Issue in Brief
- A foreign company or firm hires an advertising company/agency in India for advertisement of its goods or services and may enter into a comprehensive agreement with the advertising company/agency encompassing all the issues related to advertising services ranging from media planning, investment planning for the same, creating and designing content, strategizing for maximum customer reach, the identification of media owners, dealing with media owners, procuring media space, etc. for displaying/broadcasting/printing of advertisement including monitoring of the progress of the same. In such a case, the advertising agency provides a one stop solution to the client who outsources the entire activity to the agency.
- In this scenario, media owners raise invoice to the advertising agency for inventory costs, which are then paid by the advertising agency. Subsequently, the advertising agency raises invoice to the foreign client for the rendered advertising services and receives the payments in foreign exchange from the foreign client. In this regard, clarification has been sought as to:
- Whether the advertising company can be considered as an “intermediary” between the foreign client and the media owners in terms of section 2(13) of Integrated Goods and Services Tax Act, 2017 (herein after referred to as the “IGST Act”), thereby resulting in determination of place of supply under section 13(8)(b) of the IGST Act?
- Whether the representative of foreign client in India or the target audience of the advertisement in India can be considered as the recipient of the services being supplied by the advertising company under section 2(93) of CGST Act?
- Whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services as per section 13(3)of the IGST Act?
- Clarification
- Issue 1 -Whether the advertising company can be considered as an “intermediary” between the foreign client and the media owners as per section 2(13) of IGST Act?
- As per section 2(13) of IGST Act, read with Circular no. 159/15/2021-GST, dated 20-09-2021, a broker, agent or any other person who arranges or facilitates the main supply of goods or services or both or securities and has not involved himself in the main supply on his own account is considered as intermediary.
- In the instant scenario, it is observed that the foreign clients enter into a comprehensive agreement with advertising companies/agencies in India and outsource the entire activity of advertising services to the advertising companies/agencies. Further, these advertising companies/agencies enter into an agreement with the media owners in India for implementing the said media plan and procurement of media space for airing or releasing or printing advertisement
- The advertising agency, in this case, enters into two agreements:
- With the client located outside India for providing a one stop solution starting from designing the advertisement to its display in the media as agreed to with the client. The advertising company raises invoice to its foreign client for the above advertising services and the payments of the same is received from the foreign client in foreign exchange.
- With the media company to procure media space for display of the advertisement and to monitor campaign progress based on data shared by the media company. The media company bills the advertising agency and the payment for same is made by the advertising agency to the media company.
- Thus, the agreement, in the instant case, is in the nature of two distinct principal-to-principal supplies and no agreement of supply of services exists between the Media company and the foreign client. The advertising company is not acting as an agent but has been contracted by the client to procure and provide certain services. The advertising agency is providing the services to the client on its own account.
- Clarification: In view of above, in the present scenario the advertising company is involved in the main supply of advertising services, including resale of media space, to the foreign client on principal-to-principal basis as detailed above and does not fulfil the criteria of “intermediary” under section 2(13) of the IGST Act. Thus, the same cannot be considered as “intermediary” in such a scenario and accordingly, the place of supply in the instant matter cannot be linked with the location of supplier of services in terms of section 13(8)(b) of the 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” of the services being supplied by the advertising company under section 2(93) of CGST Act?
- As per Section 2(93)(a) of the CGST Act, the “recipient” of the services means the person who is liable to pay consideration where a consideration is payable for the supply of goods or services or both.
- In the instant scenario, the foreign client is liable to pay the consideration to advertising company for the supply of advertising and not the consumers or the target audience that watches the advertisement in India.
- In this case, even if a representative of the foreign client in India, such as a subsidiary or related person, interacts with the advertising company, the representative cannot be deemed the recipient of the service. If the agreement is between the foreign client and the advertising company, the invoice is issued to the foreign client, and payment is received directly from the foreign client, then the foreign client remains the true recipient of the service.
- Further, the target audience of the advertisements may be based in India but such target audience cannot be considered as recipient of the said advertising services being supplied by the advertising company as per the definition of the recipient under section 2(93) of CGST Act.
- Clarification: In view of above, it is clarified that the recipient of the advertising services provided by the advertising company in such cases is the foreign client and not the Indian representative of the foreign client based in India or the target audience of the advertisements, as per section 2(93) of the CGST Act, 2017.
- Issue-3 Whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services as per section 13(3) of the IGST Act?
- The place of supply of performance-based services is provided in sub-section (3) of section 13 of IGST Act. The provisions of clause (a) of the said sub-section pertain to the services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services.
- However, in the instant matter, there does not appear to be any such involvement of goods which are required to be physically available with supplier of advertising services. Therefore, the said provisions of clause (a) of the said sub-section cannot be made applicable for determination of place of supply of advertising services.
- Further, clause of (b) of sub-section (3) of section 13(3)(b) of IGST Act provides that the place of supply shall be the location where the services are actually performed in case, where,
- services are supplied to an individual,
- represented either as the recipient of services or a person acting on behalf of the recipient, and
- which requires the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services
- In the present scenario, the supply of advertising services does not require physical presence of the recipient (foreign client or representative or a person acting on his behalf) with the advertising company for availing the said advertising services. Thus, the said supply of advertising services cannot be considered as being covered under section 13(3)(b) of the IGST Act for being considered as the services actually performed in India in terms of the said section.
- Clarification: Accordingly, it is clarified that the place of supply of advertising services in such cases can neither be determined as per the provision of section 13(3)(a) nor as per the provisions of section 13(3)(b) of IGST Act.
- Observations:
- Further, it is observed that in the present scenario, the place of supply of the above-mentioned advertising services does not appear to be covered under any other provisions of sub-sections (3) to (13) of Section 13 of the IGST Act.
- Therefore, in view of foregoing discussion, it appears that the place of supply of the said advertising service being supplied by the advertising company to the foreign clients can only be determined as per the default provision, i.e. sub-section (2) of section 13 of IGST Act, e.the place of location of the recipient of the services.
- Since the recipient of the advertising services in such scenario is the foreign client, who is located outside India, the place of supply of the said services appears to be the location of the said foreign client e.outside India as per Section 13(2) of IGST Act, and the said service can be considered to be export of services, subject to the fulfilment of conditions mentioned in section 2(6) of IGST Act
- In cases where an advertising company in India acts as an agent for a foreign client in securing media space, the contract for media space and ad broadcast is directly between the media owner and the foreign client. The media owner invoices the foreign client and receives payment directly from them. The media services are thus provided directly by the media owner to the foreign client. The advertising company merely facilitates this arrangement and does not provide the media space services itself. The advertising company charges the foreign client only for its facilitation services.
- Consequently, in such cases, the advertising company is an “intermediary” in accordance with Section 2(13) of the CGST Act, 2017, as elucidated in Circular No. 159/15/2021-GST, dated 20.09.2021, in respect of the said services of facilitating the foreign client and accordingly, the place of supply in respect of the said services provided by the advertising company to the foreign client is determinable as per section 13(8)(b) of IGST Act, e.the location of the supplier, i.e. the location of the advertising company.
- It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
- Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board.
- Clarification on availability of Input tax credit in respect of Demo Vehicles Circular No. 231/25/2024-GST [F. NO. CBIC-20001/6/2024-GST], dated 10-09-2024
- The demo vehicles are the vehicles which the authorized dealers for sale of motor vehicles are required to maintain at their sales outlet as per dealership norms and are used for providing trial run and for demonstrating features of the vehicle to the potential buyers.
- These vehicles are purchased by the authorized dealers from the vehicle manufacturers against tax invoices and are typically reflected as capital assets in books of account of the authorized dealers.
- As per dealership norms, these vehicles may be required to be held by the authorized dealers as demo vehicle for certain mandatory period and may, thereafter, be sold by the dealer at a written down value and applicable tax is payable at that point of time.
- Reference has been received to issue clarification regarding availability of input tax credit in respect of demo vehicles on the following issues:
- Availability of input tax credit on demo vehicles, which are motor vehicles for transportation of passengers having approved seating capacity of not more than 13 persons (including the driver), in terms of clause(a) of section 17(5) of Central Goods & Services Tax Act, 2017 (hereinafter referred to as the ‘CGST Act”).
- Availability of input tax credit on demo vehicles in cases where such vehicles are capitalized in the books of account by the authorized dealers.
- In order to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168(1) of the CGST Act, hereby clarifies the above issues as below.
- Availability of input tax credit on demo vehicles, which are motor vehicles for transportation of passengers having approved seating capacity of not more than 13 persons (including the driver), in terms of clause(a) of section 17(5) of CGST Act.
- Clause (a) of Section 17(5) of CGST Act provides that input tax credit shall not be available in respect of motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including the driver), except when they are used for making following taxable supplies, namely:
- further supply of such motor vehicles; or
- transportation of passengers; or
- imparting training on driving such motor vehicles
- The law’s intention, as indicated by the phrase “when they are used for making the following taxable supplies” in section 17(5)(a) of the CGST Act, is to exclude certain cases from the restriction on input tax credit for specified motor vehicles, specifically those used for transporting up to thirteen persons (including the driver). The taxable supplies that are exempt from this input tax credit blockage include the further supply of such motor vehicles, transportation of passengers, and providing driving training for these vehicles.
- As demo vehicles are used by authorized dealers to provide trial run and to demonstrate features of the vehicle to potential buyers, it is quite apparent that demo vehicles cannot be said to be used by the authorized dealer for providing taxable supply of transportation of passengers or imparting training on driving such motor vehicles.
Therefore, demo vehicles are not covered in the exclusions specified in sub-clauses (B) and (C) of clause (a) of section 17(5) of CGST Act. Accordingly, it is to be seen whether or not the Demo vehicles in question can be said to be used for making “further supply of such motor vehicles”, as specified in the sub-clause (A) of the clause (a) of section 17(5) of CGST Act.
- The use of the phrase “such motor vehicles” in section 17(5)(a)(A) of the CGST Act indicates that lawmakers intended to exclude from input tax credit (ITC) blockage not only the motor vehicle being further supplied but also those used for promoting the sale of similar vehicles. Since demo vehicles are used to promote the sale of similar motor vehicles, they can be considered part of the “further supply” of such vehicles. Therefore, ITC on demo vehicles is not blocked under section 17(5)(a) of the CGST Act, as it qualifies for exclusion from the blockage.
- There may be some cases where motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver) are used by an authorized dealer for purposes other than for making further supply of such motor vehicles, say for transportation of its staff employees/ management etc. In such cases, the same cannot be said to be used for making ‘further supply of such motor vehicles’ and therefore, input tax credit in respect of such motor vehicles would not be excluded from blockage in terms of sub-clause (A) of clause (a) of section 17(5) of CGST Act.
- In cases where an authorized dealer acts as an agent or service provider for the vehicle manufacturer, facilitating marketing services such as test drives, and is not involved in direct vehicle sales, the manufacturer issues the sale invoice directly to the customer. The dealer may purchase demo vehicles for test drives and later sell them, charging applicable GST. Since the dealer provides marketing services rather than supplying vehicles on their own account, the demo vehicle is not used for further vehicle supply. Therefore, input tax credit (ITC) on such demo vehicles is blocked under section 17(5)(a) of the CGST Act and is not available to the dealer.
- Availability of input tax credit on demo vehicles in cases where such vehicles are capitalized in the books of account by the authorized dealers.
- As per provisions of section 16(1) of CGST Act, every registered taxpayer is entitled to take input tax credit charged on any supply of goods and services made to him, where such goods or services are used in the course or furtherance of business of such person, subject to such conditions and restrictions as may be prescribed and in the manner which is specified.
- Further, “goods” has been defined in section 2(52) of CGST Act, as,
“Goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
- Also, section 2(19) of CGST Act defines “capital goods” as,
“Capital goods” means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business.
- Demo vehicles used by authorized dealers to promote sales are considered to be used in the course or furtherance of their business. If these vehicles are capitalized in the dealer’s books, they qualify as “capital goods” under section 2(19) of the CGST Act. According to section 16(1) of the CGST Act, the recipient of goods, including capital goods, is entitled to claim input tax credit (ITC) on the tax paid for the inward supply of those goods. Therefore, ITC on demo vehicles remains available, even if the vehicles are capitalized, subject to other provisions of the Act.
- However, it is to be mentioned that in case of capitalization of demo vehicles, availability of input tax credit would be subject to provisions of section 16(3) of CGST Act, which provides that where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. It is further mentioned that in case demo vehicle, which is capitalized, is subsequently sold by the authorized dealer, the authorized dealer shall have to pay an amount or tax as per provisions of section 18(6) of CGST
Act read with rule 44(6) of the Central Goods and Service Tax Rules, 2017.
- It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
- Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board.
- Clarification on Place of Supply of Data Hosting Services provided by service providers located in India to Cloud Computing Service Providers located outside India Circular No. 232/26/2024-GSTL [F.NO. CBIC-20001/6/2024-GST], dated 10-09-2024.
- Representations have been received from the trade and industry seeking clarification on the place of supply in case of data hosting services provided by service providers located in India to cloud computing service providers located outside India.
- Issue
- It has been represented that some field formations are of the view that the place of supply of data hosting services provided by the service providers located in India to cloud computing service providers located outside India is the location of data hosting service provider in India and therefore, the benefit of export of services is not available on such supply of data hosting services.
- Thus, clarification has been sought in respect of the following issues-
- Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud computing service provider and their end customers/users/subscribers as per Section 2(13) of the Integrated Goods and Services Tax Act, 2017 (herein after referred to as the “IGST Act”) and whether the services provided by data hosting service provider to cloud computing service providers are covered as intermediary services and whether the place of supply of the same is to be determined as per section 13(8)(b) of IGST Act
- Whether the data hosting services are provided in relation to goods “made available” by recipient of services to service provider for supply of such services and whether the place of supply of the same is to be determined as per section 13(3)(a) of the IGST Act
- Whether the data hosting services are provided directly in relation to “immovable property” and whether the place of supply of the same is to be determined as per section 13(4) of the IGST Act.
- Clarification
- Whether data hosting service provider qualifies as ‘Intermediary’ between the cloud computing service provider and their end customers/users/subscribers as per Section 2(13) of the IGST Act and whether the services provided by data hosting service provider to cloud computing service providers are covered as intermediary services and whether the place of supply of the same is to be determined as per section 13(8)(b) of IGST Act.
- As per section 2(13) of the IGST Act, read with Circular no. 159/15/2021-GST, dated 20-09-2021, a broker, agent or any other person who arranges or facilitates the main supply of goods or services or both or securities and has not involved himself in the main supply on his own account is considered as ‘intermediary’. Persons who supply goods or services, or both on their own account are not covered in the definition of “intermediary”.
- Cloud computing service providers typically contract with data hosting service providers to use their data centers for hosting services. The data hosting provider, either owning or leasing the premises, manages the infrastructure, human resources, monitoring, IT management, and equipment maintenance. They oversee all aspects of the data center, including rent, hardware, software, power, connectivity, security, and personnel. Importantly, data hosting providers do not interact with or have knowledge of the end users of the cloud computing services.
- Observation:
In this scenario, the data hosting service provider delivers services to the cloud computing provider via a web platform using computing and networking equipment for data storage, processing, and access. The provider operates independently on a principal-to-principal basis, not as a broker or agent between the cloud computing provider and its end users. The cloud computing provider offers services like data storage, AI, machine learning, and analytics to its customers, who access these services online. There is no direct interaction between the data hosting provider and the end users of the cloud computing service.
- Clarification: Accordingly, it is clarified that in such a scenario, the services provided by data hosting service provider to its overseas cloud computing service providers cannot be considered as intermediary services and hence, the place of supply of the same cannot be determined as per section 13(8)(b) of IGST Act.
- Whether the data hosting services are provided in relation to goods “made available” by recipient of services to service provider for supply of such services and whether the place of supply of the same is to be determined as per section 13(3)(a) of the IGST Act, 2017.
- Section 13(3)(a) of the IGST Act provides that in cases where the services are supplied in respect of goods which are made physically available by the recipient of services to service provider, the place of supply will be location of service provider.
- Observation: In this scenario, a data hosting service provider independently offers services to overseas cloud computing providers. The service provider manages and maintains the entire data center infrastructure, including hardware, software, cooling systems, power supply, network, and security, all through their personnel. They either own or lease the premises and are solely responsible for its operation. The cloud computing providers pay for these services based on agreements. Since the infrastructure is entirely managed by the data hosting provider, it is not considered owned or physically available to the cloud computing providers.
- Clarification: In view of above, it is clarified that data hosting services provided by data hosting service provider to the said cloud computing service providers cannot be considered in relation to the goods “made available” by the said cloud computing service providers to the data hosting service provider in India and hence, the place of supply of the same cannot be determined under section 13(3)(a) of the IGST Act.
- In cases where the cloud computing service provider supplies some hardware to the data hosting service provider, the latter still manages all aspects of the data center, including premises, software, power, connectivity, security, and maintenance. Therefore, despite using hardware provided by the cloud computing provider, the data hosting services are not considered to be “in relation to” those goods. As a result, the place of supply cannot be determined under section 13(3)(a) of the IGST Act in such cases.
- Whether the data hosting services are provided directly in relation to “immovable property” and whether the place of supply of the same is to be determined as per section 13(4) of the IGST Act.
- Section 13(4) of the IGST Act provides for the place of supply where services supplied are directly in relation to immovable property.
- Observation: In this scenario, data hosting service providers use either owned or leased premises and manage all necessary infrastructure such as hardware, power supplies, cooling systems, network connectivity, security, and personnel. They also handle operations like server monitoring, IT management, and equipment maintenance. These services are not merely passive or directly related to immovable property but involve a comprehensive range of activities necessary for data hosting. This ensures that cloud computing providers can offer uninterrupted services to their end users, making the data hosting services essential to their operations.
- Clarification: Accordingly, it is clarified that in such a scenario, the data hosting services cannot be considered as the services provided directly in relation to immovable property or physical premises and hence, the place of supply of such services cannot be determined under section 13(4) of IGST Act.
- Further, the place of supply for the data hosting services provided by data hosting service provider located in India to overseas cloud computing service providers does not appear to fit into any of the specific provisions outlined in sections 13(3) to 13(13) of the IGST Act. Therefore, the place of supply in such cases needs to be determined according to the default provision under section 13(2) of the IGST Act, e.the location of the recipient of the services. Where the cloud computing service provider receiving the data hosting services are located outside India, the place of supply will be considered to be outside India according to section 13(2) of the IGST Act.
- Accordingly, supply of data hosting services being provided by a data hosting service provider located in India to an overseas cloud computing entity can be considered as export of services, subject to the fulfilment of the other conditions mentioned in section 2(6) of IGST Act.
- It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
- Difficulty, if any, in the implementation of this Circular may be brought to the notice of the Board.
- Circular No. 233/27/2024-GST [F.NO. CBIC-20001/6/2024-GST] clarification regarding Regularization of refund of IGST availed in Contravention of Rule 96(10) OF CGST Rules, 2017, in cases where the exporters had imported certain inputs without payment of Integrated Taxes and compensation Cess Circular No. 233/27/2024-GST], dated 10-09-2024.
- Sub-rule (10) of rule 96 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”) provides for a bar on availment of the refund of integrated tax (IGST) paid on export of goods or services, if benefits of certain concessional/exemption notifications, as specified in the said sub-rule, have been availed on inputs/raw materials imported or procured domestically.
In this regard, references have been received from the field formations and trade/ industry wherein clarification has been sought on whether refund of integrated tax paid on exports of goods by a registered person can be regularized in a case where the registered person had initially imported inputs without payment of integrated tax and compensation cess, by availing the benefits under Notification No. 78/2017-Customs, dated 13-10-2017 or Notification No. 79/2017-Customs, dated 13-10-2017, but subsequently, at a later date, the said person has either paid the IGST and compensation cess, along with interest, on such imported inputs or is now willing to pay such IGST and compensation cess, along with interest.
- The issue has been examined and in order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby clarifies the following:
- Vide Notification No. 16/2020-CT, dated 23-3-2020, an Explanation was inserted in sub-rule (10) of rule 96 of CGST Rules retrospectively with effect from 23-10-2017, which reads as follows:
“Explanation. – For the purpose of this sub-rule, the benefit of the notifications mentioned therein shall not be considered to have been availed only where the registered person has paid Integrated Goods and Services Tax and Compensation Cess on inputs and has availed exemption of only Basic Customs Duty (BCD) under the said notifications.”
- The explanation, inserted with retrospective effect, clarifies that if exemption benefits for IGST and compensation cess have not been availed, it will be deemed that the notifications’ benefits were not availed for the purpose of sub-rule (10) of rule 96 of the CGST Rules. This implies that if inputs were initially imported without paying IGST and compensation cess, but these taxes are later paid with interest, it can be considered that the exemption benefits were not availed. Consequently, claiming a refund of IGST on exports with tax payment in such cases would not violate sub-rule (10) of rule 96.
- In view of the above, it is clarified that where the inputs were initially imported without payment of integrated tax and compensation cess by availing benefits under Notification No. 78/2017-Customs, dated 13-10-2017 or Notification No. 79/2017-Customs, dated 13-10-2017, but subsequently, IGST and compensation cess on such imported inputs are paid at a later date, along with interest, and the Bill of Entry in respect of the import of the said inputs is got reassessed through the jurisdictional Customs authorities to this effect, then the IGST, paid on exports of goods, refunded to the said exporter shall not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of CGST Rules.
- It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
- Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board.
- Ministry of Finance (Department of Revenue) (Central Board of Indirect Taxes and Customs) Notification New Delhi, the 27th September, 2024 No. 17/2024–Central Tax
In exercise of the powers conferred by clause (b) of sub-section (2) of section 1 of the Finance (No. 2) Act, 2024 (15 of 2024), the Central Government hereby appoints.—(a)the date of publication of this notification in the Official Gazette, as the date on which the provisions of sections (118, 142, 148 and 150 of the said Act shall come into force; and(b)the 1st day of November, 2024, as the date on which the provisions of sections (114 to 117, 119 to 141, 143 to 147, 149 and 151 to 157) of the said Act shall come into force.
- Notifying National Bank for Financing Infrastructure and Development as Public Financial Institution
Ministry of Corporate Affairs in consultation with the Reserve Bank of India, hereby notifies National Bank for Financing Infrastructure and Development as a public financial institution.
- Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2024
The Ministry of Corporate Affairs has notified amendments in Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 wherein Schedule II, Schedule III and Schedule IV are substituted as per the notification. These rules shall be called Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2024 and come into force with immediate effect.
- Companies (Indian Accounting Standards) Second Amendment Rules, 2024
Ministry of Corporate Affairs has notified amendments in Companies (Indian Accounting Standards) Rules, 2015 wherein various new paragraphs has been inserted. These rules shall be called Companies (Indian Accounting Standards) Second Amendment Rules, 2024 and come into force with immediate effect.
- Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024
The Ministry of Corporate Affairs has notified amendments in Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 wherein new sub rule 25A(5) has been inserted as specified therein. These rules shall be called Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2024 and come into force from September 17, 2024.
- Launching Company Adjudication (ADJ) Form
The Ministry of Corporate Affairs is launching Company Adjudication (ADJ) form on 16th September 2024 at 12:00 AM and has advised stakeholders to note the following points to facilitate implementation of this form in V3 MCA21 portal:
- ADJ form on V2 portal will be disabled from 12th September 2024 12:00 AM to 15th September 11:59 pm which is planned for roll-out on 16th September 2024 at 12:00 AM
- All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status
- Offline payments in V2 using Pay later option would be stopped from 04th September 12:00 AM
- V3 portal will not be available for filing of Company/LLP forms on 15th September due to ADJ form roll-out
- V2 Portal for company filing will remain available for all the forms which are currently in V2 system. Stakeholders may plan accordingly.
- Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024
The Ministry of Corporate Affairs has notified Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024 wherein in Rule 9B (2) a new proviso shall be inserted. These Rules shall come in force on September 20, 2024.
- Clarification on holding of Annual General Meeting (AGM) and EGM through Video Conference (VC) or Other Audio Visual Means (OAVM) and passing of Ordinary and Special resolutions by the companies under the Companies Act, 2013 read with Rules made thereunder -Extension of timeline
The Ministry of Corporate Affairs has issued clarification on holding of Annual General Meeting (AGM) and Extraordinary General Meeting (EGM) through Video Conference (VC) or Other Audio Visual Means (OAVM) and passing of Ordinary and Special resolutions by the companies under the Companies Act, 2013 upto September 30, 2025. It is further clarified that General Circular shall not be construed as conferring any extension of statutory time for holding of AGMs by the companies under the Companies Act, 2013 (the Act) and the companies which have not adhered to the relevant statutory timelines shall be liable to legal action under the appropriate provisions of the Act.
- Company e-Filing Form IEPF-1
The Ministry of Corporate Affairs (MCA) has issued the User Guide for the Procedure to fill the details in the Company e-Filing Form IEPF-1. The objective of Company e-Filing Form IEPF-1 is to make statement of amount credited and transfer of amounts process simplified.
RBI |
- Liberalised Remittance Scheme (LRS) for Resident Individuals Discontinuation of Reporting of Monthly Return
The Reserve Bank of India has announced that, effective from September 2024, AD Category-I banks will no longer be required to submit the Liberalised Remittance Scheme (LRS) monthly return (Return code: R089). Instead, these banks will need to upload transaction-wise information under the LRS daily return (CIMS return code: R010) by the close of business on the next working day via the CIMS platform (URL: https://sankalan.rbi.org.in). If there are no transactions to report, banks must upload a ‘NIL’ report. Additionally, certain circulars related to the monthly return requirement has been withdrawn.
- Foreign Exchange (Compounding Proceedings) Rules, 2024
The Department of Economic Affairs has issued a notification with respect to Foreign Exchange (Compounding Proceedings) Rules, 2024 read with Foreign Exchange Management Act, 1999 and in supersession of the Foreign Exchange (Compounding Proceedings) Rules, 2000, such rules shall be effective on the date of their publication in the Official Gazette.
- SEBI (Listing Obligations and Disclosure Requirements) Regulations
The National Stock Exchange of India has issued a Circular in respect of Disclosure for utilization of issue proceeds for Listed Entities on NSE EMERGE.This circular shall be applicable with immediate effect and shall not apply to the listed entity wherein the monitoring agency has been appointed.
- SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2024
The Securities and Exchange Board of India has notified amendments in the SEBI (Foreign Venture Capital Investors) Regulations, 2000 wherein various regulations has been subsituted and these regualtions may be called SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2024. They shall come into force from January 01, 2025.
Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication. Updates are for the period 30.09.2024.