Key CBIC Circulars Issued on 11 July 2024: GST Updates and Clarifications

Overview of Recent CBIC Circulars

The Central Board of Indirect Taxes and Customs (CBIC) issued several CBIC Circulars on 11 July 2024. These CBIC Circulars clarify the issues relating to recovery of outstanding dues and pre-deposit adjustments under CGST Act, taxability and valuation of supply 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 and refund of tax paid on inward supplies for Canteen Stores Department (CSD).

Circular No. 224/18/2024-GST: Recovery of Outstanding Dues under CGST Act

The authorities provide guidelines for recovery of outstanding dues, in cases wherein first appeal has been disposed of, till Appellate Tribunal comes into operation. 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 tax paid through Form GST DRC-03. To address these issues, the GST authorities have provided a mechanism for taxpayers to stay recovery proceedings by paying the required pre-deposit amount of GST and filing an undertaking. This aligns with the CBIC Circulars guidance on recovery of outstanding dues under CGST Act.

Appeal Process and Recovery Stay:

Furthermore, the authorities provide guidelines for recovery of outstanding dues, in cases wherein first appeal has been disposed of, till Appellate Tribunal comes into operation.

Payment of Pre-deposit and its procedure:

Additionally, taxpayers who intend to appeal and stay the recovery proceedings can make the pre-deposit via the Electronic Liability Register (ELL) Part-II on the GST portal. They navigate this by selecting Services >> Ledgers >> Payment towards demand. The authorities will then adjust the amount deposited by the taxpayer against the pre-deposit required at the time of filing the appeal before the Appellate Tribunal, as per CBIC Circulars norms.

Undertaking/Declaration Requirement:

Taxpayers must file an undertaking with the proper officer declaring their intent to file an appeal once the Tribunal is Upon payment of the pre-deposit and submission of the undertaking, recovery of the remaining demand amount will stand stayed in line with recovery of outstanding dues under CGST Act.

Consequences of Non-Compliance with above 2 points:

If the taxpayer does not make the pre-deposit payment or submit the undertaking/declaration, the authorities will presume that the taxpayer is not willing to file an appeal against the order of the appellate authority, and recovery proceedings will continue. Similarly, once the Tribunal is constituted, the authorities will initiate recovery of the remaining demand amount if the taxpayer fails to file an appeal within the prescribed timeline.

Adjustment of Payments Made through FORM GST DRC-03:

Taxpayers who have inadvertently paid the amount of tax intended for demand through Form GST DRC-03 can file Form GST DRC-03A to adjust these payments against the demand. The authorities will treat the amounts as paid towards the demand from the date of intimation through Form GST DRC-03. Additionally, this is covered under the Form GST DRC-03A clarification in the CBIC Circulars.

The government has provided a mechanism to adjust payments made inadvertently through Form GST DRC-03 vide Notification No. 12/2024-Central Tax dated 10.07.2024, by which sub-rule (2B) of Rule 142 and Form GST DRC-03A have been inserted in the Central Goods and Services Rules, 2017. This serves as a specific Form GST DRC-03A clarification.

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 GST portal. Once the functionality is available, taxpayers must file Form GST DRC-03A to formalize the adjustment as per the Form GST DRC-03A clarification.

Access the CBIC Circulars: CBIC Circular No. 224/18/2024-GST

Circular No. 225/19/2024-GST: GST Circular on Corporate Guarantee Between Related Persons

This CBIC Circulars clarifies various issues related to the taxability and valuation of corporate guarantee services under GST between related entities, aligning with the GST circulars on corporate guarantee.

Issue: Applicability to Corporate Guarantees Issued Prior to 26th October 2023

Clarification: GST was applicable to corporate guarantees even before the insertion of sub-rule (2) on 26th October 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) under the GST circular on corporate guarantee.

Issue: Valuation in case of Partly or Non- Availed Loans and eligibility of Input Tax Credit (ITC)

Clarification states that the supply of the service of providing a corporate guarantee does not link with the actual disbursal of the loan; therefore, authorities base the valuation of the corporate guarantee on the amount guaranteed, not on the actual loan disbursed. Furthermore, they clarify that the recipient’s ITC eligibility is independent of the actual loan disbursed.

Issue: Takeover of Existing Loans

Clarification explains that if a banking company or financial institution takes over a loan issued by another banking company or financial institution, this activity does not constitute the service of providing a corporate guarantee by the supplier to the recipient. Consequently, there is no GST impact on the takeover of loans unless the authorities issue or renew a fresh corporate guarantee. However, if the takeover is followed or accompanied by the issuance of a fresh corporate guarantee, then the authorities will apply GST.

Issue: Multiple Co-guarantors

Clarification states that when multiple related entities provide a corporate guarantee, the authorities determine the value of such services as the sum of the actual consideration paid or payable to the co-guarantors, provided this amount exceeds one percent of the guarantee amount. Conversely, if the total consideration is less than one percent of the guarantee amount, then each co-guarantor will pay GST proportionally on one percent of the amount guaranteed by them.

Issue: Intra-group Corporate Guarantees

Clarification:

• 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: Frequency of Tax Payment

Clarification: GST payable on 1% of the amount guaranteed per annum or actual consideration, whichever is higher. However, where the corporate guarantee is provided for a period less than a year, say 6 months), valuation may be done on Proportionate basis for the said period.

Issue: Valuation with Full Input Tax Credit (ITC)

Clarification: Value declared in the invoice deemed as open market value where full ITC is available to the recipient of services.

Issue: Export of Corporate Guarantee Services

Clarification: The provisions of the said Rule 28(2) shall not apply to the export of the services of providing corporate guarantee between related persons, where the recipient of the services of providing corporate guarantee between related persons is located outside India.

Access the CBIC Circulars: CBIC Circular No. 225/19/2024-GST

Circular No. 226/20/2024-GST: Refund of Additional IGST on Exports

This CBIC Circulars introduces a mechanism for exporters to claim refunds of additional IGST paid due to upward price revisions post-export, supporting refund of additional IGST on exports.

Filing of Refund Application:

Exporters can electronically file an application for a refund of the additional IGST paid in FORM GST RFD-01 on the common portal. Subsequently, the jurisdictional GST officer of the concerned exporter will process the application. Furthermore, CGST Rules have been amended vide Notification No. 12/2024-CT dated 10.07.2024 to allow the filing of such refund applications in FORM GST RFD-01, which the authorities will handle as per rule 89 of the CGST Rules.

Measures until separate category is developed on portal:

Until the portal develops a separate category for claiming refund of additional IGST, exporters should file their refund applications under the category “Any other” with remarks stating “Refund of additional IGST paid on account of increase in price subsequent to export of goods,” along with the relevant documents as prescribed in rule 89 of the CGST. This procedure ensures that the authorities properly handle refunds of additional IGST on exports.

Documentation required for the refund are copies of Shipping bill or bill of exports, original invoices, contract or other documents indicating the requirement for the price revision, Proof of payment of additional IGST and applicable interest, Proof of receipt of additional foreign exchange remittance (FIRC), a certificate from a practicing-chartered accountant or cost accountant certifying the additional foreign exchange remittance. and statement 9A and 9B of FORM GST RFD-01.

The taxpayer must file the refund application within two years from the relevant date as per section 54 of the CGST Act, according to Sub-rule (1B) of rule 89 of the CGST Rules, which the authorities inserted vide Notification No. 12/2024-CT dated 10.07.2024. Moreover, for cases where the relevant date was before the introduction of Sub-rule (1B) of rule 89, taxpayers can file the application within two years from the date the sub-rule came into force.

Processing the Refund Application:

The officer will verify the completeness and eligibility of the 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.

When the proper officer satisfies himself that the whole or any part of the amount claimed is payable as a refund, he will issue the refund sanction order in FORM GST RFD-06 and the payment order in FORM GST RFD-05. Additionally, the officer will upload a detailed speaking order along with the refund sanction order.

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, consistent with refund of additional IGST on exports requirements.

Access the CBIC Circulars: CBIC Circular No. 226/20/2024-GST

Circular No. 227/21/2024-GST: Canteen Stores Department GST Refund Mechanism

This CBIC Circulars actively simplifies the GST refund process for the Canteen Stores Department (CSD), which can claim a 50% refund of GST paid on inward supplies, commonly referred to as the Canteen Stores Department GST refund.

The CBIC Circulars have notified the Canteen Stores Department (CSD) 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. Furthermore, vide Circular No. 60/34/2018-GST dated 04.09.2018, the authorities specified the manner and procedure for filing and processing such refund claims to ensure that the CSD would apply for a refund by filing an application manually to the jurisdictional tax office.

Until the online utility for filing refund claims became available on the common portal, this manual process remained in place. Now, to enable the CSD to file refund applications electronically, the authorities have made a new functionality available on the common portal, allowing the CSD to submit applications electronically.

Filing of refund application:

The CSD shall electronically file an application for refund in FORM GST RFD-10A on the common portal, and the authorities will process the same. Furthermore, the refund 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 must apply for a refund once every quarter. Additionally, the CSD can opt to file a refund application for multiple quarters, clubbing multiple financial years, according to their preference, as part of the Canteen Stores Department GST refund procedure.

Eligibility for refund:

The CSD can claim a refund of the tax paid only if a registered person has supplied the inward goods against a tax invoice. Furthermore, the registered person must furnish the details of such supplies in their outward supply declaration in FORM GSTR-1. Additionally, the supplier must have filed their return in FORM GSTR-3B for the relevant tax period.

Documents to accompany the refund application:

The CSD must provide an undertaking stating that it has received the goods on which the refund is being claimed for the purposes of subsequent supply to its Unit Run Canteens or authorized customers. Additionally, the CSD must submit a declaration affirming that no refund has been claimed earlier against the invoices for which the refund is being sought.

Time Limit for Filing Refund:

The CSD must file the refund claim for 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 it received the supply. This timeline specifically applies to the Canteen Stores Department GST refund.

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 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 supplier has furnished the details of invoices for which the refund is claimed in FORM GSTR-1. Additionally, the officer will confirm that the supplier has filed their return in FORM GSTR-3B for the concerned tax period.

Sanction Amount:

Ensure that the authorities do not sanction a refund exceeding 50% of the central tax, state tax, Union territory tax, and integrated tax paid on the supplies received by the CSD. Moreover, the portal will validate the invoices uploaded by the CSD during filing against FORM GSTR-2B, allowing only validated invoices for the refund. Additionally, the system will flag invoices for which the CSD has already availed a refund, preventing their inclusion.

Furthermore, the portal will auto-populate the Table in Sl. No. 7 of FORM GST RFD-10A based on 50% of the respective tax amounts as per Columns 8, 9, and 10 of Table No. 6 in FORM GST RFD-10A. The Table in Sl. No. 7 will also be editable downwards, enabling the CSD to reduce but not increase the refund amount.

Additionally, the proper officer will verify whether the CSD has reversed the ITC in respect of inward supplies of goods received for subsequent supply to Unit Run Canteens or authorized customers, 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.

Access the CBIC Circulars: CBIC Circular No. 227/21/2024-GST