The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 206/18/2023-GST dated October 31, 2023, providing essential clarifications concerning the applicability of Goods and Services Tax (GST) on specific services. These clarifications are in response to recommendations made during the 52nd meeting of the GST Council on October 07, 2023.
Clarification 1: Same Line of Business
The first issue addressed in the circular pertains to whether ‘same line of business’ in the context of passenger transport service and renting of motor vehicles includes leasing of motor vehicles without operators. The circular clarifies that GST at a rate of 5% with input tax credit applies to transport of passengers and renting of motor vehicles with operators in the ‘same line of business.’ However, leasing of motor vehicles without operators, categorized differently, attracts GST and/or compensation cess at the rate applicable to the sale of motor vehicles.
Clarification 2: GST on Electricity Charges
Doubts were raised concerning the GST applicability on reimbursement of electricity charges received by real estate companies, malls, airport operators, etc., from their lessees or occupants. The circular clarifies that when electricity supply is bundled with renting immovable property or maintenance of premises, it is considered a composite supply. In such cases, the GST rate applicable is based on the principal supply, which is the renting of immovable property and/or maintenance of premises.
Clarification 3: GST on Job Work for “Malted Barley”
The third clarification pertains to job work for the conversion of barley into malt and whether it attracts GST at 5% as applicable to food products or 18% as applicable to alcoholic liquor production. The circular explains that irrespective of the end use, converting barley into malt falls under “job work in relation to all food and food products” and attracts 5% GST.
Clarification 4: District Mineral Foundations Trusts (DMFTs)
The circular addresses whether District Mineral Foundations Trusts (DMFTs) set up by State Governments are considered Governmental Authorities, making them eligible for GST exemptions. It is clarified that DMFTs work for the welfare of individuals, families, and communities affected by mining operations, similar to functions entrusted to Panchayats and Municipalities. Therefore, DMFTs are eligible for the same GST exemptions as other Governmental Authorities.
Clarification 5: Exemption for Services to CPWD
The final clarification pertains to the exemption from GST for services and composite supplies related to horticulture works when the value of goods constitutes less than 25% of the total supply value, provided to the Central Public Works Department (CPWD). Such services and supplies are eligible for exemption as they relate to functions entrusted to Panchayats and Municipalities under the Constitution.
These clarifications provide guidance on the GST treatment of various services and aim to reduce ambiguity and ensure uniform compliance within the tax framework.
