Gist of Circulars issued as on 17 July 2023.

Recently, it was provided under Section 50(3) read with Rule 88B(3) of CGST Rules that interest on wrong availment of ITC shall be applicable only for the period for which balance of ITC in credit ledger falls below the amount of ITC wrongly availed i.e. interest shall be applicable only when ITC is wrongly availed and utilized as well.

Having stated as above, question arises whether interest would be applicable where IGST has been wrongly availed and balance of IGST is lesser but total credit available under IGST, CGST, and SGST cumulatively is more than wrongly availed IGST.

It is to be noted that ITC of IGST can be used for making payment of not only IGST but CGST and SGST as well and thus, interest would be computed only where the consolidated amount of IGST, CGST and SGST falls below the IGST credit availed wrongly.

However, balance of compensation Cess shall not be considered for computation of interest as mentioned above.

Circular No 183/15/2022 dated 27 December 2022 was issued to provide clarification regarding mismatch in ITC availed as per GSTR-3B vis-à-vis ITC appearing in GSTR-2A during FY 2017-18 and FY 2018-19.

Advantages provided under the aforesaid circular in the form of filing declaration/ CA certificate for mismatch in ITC shall be applicable in the same way (i.e., as it is) for the mismatch in ITC during the period from 01-04-2019 to 08-10-2019.

However, aforesaid advantages of filing declaration/ certificates shall be restricted for the period starting with 09- 10-2019 as given below:

No advantage given under Circular 183/15/2022 – GST can be taken where difference is more than 20%/ 10%/ 5% as given in aforesaid table.

1. Where manufacturer offers warranty and provide replacement of parts or repair services:

2. Where replacement of parts or repair services provided by distributor on behalf of manufacturer:

No GST applicable as securities are considered neither supply of goods nor supply of services. Further, any activity shall be treated as supply of goods or services only where it fulfil the conditions defined under Section 7 of the CGST Act. Taxability cannot be defined solely on the basis of SAC entry ‘997171’ appearing in scheme of classification mentioning:

“the services provided by holding companies, i.e. holding securities of (or other equity interests in) companies and enterprises for the purpose of owning a controlling interest.”

1. Refund of unutilized ITC shall be restricted to the amount of ITC available under GSTR-2B w.e.f. 01-01-2022. However, if Refund has already been filed and disposed off for the period January 2022 onwards, the same shall not be reopened.

Given above, copy of GSTR-2A and self-certified copies of invoices not appearing in GSTR-2A are also not required to be submitted as supporting documents along with refund claim.

2. Undertaking, pertaining to refund sanctioned but need to be paid back to the Government if requirement of Section 16(2)(c) read with Section 42 has not been complied, has been amended to exclude the reference of Section 42 thereof as Section 42 has been omitted from the GST law w.e.f. 01-10-2022.

3. Value of export of goods for computation of adjusted total turnover shall be taken as per amended definition of value of goods exported out of India as per Rule 89(4) of CGST Rules.

4. Benefit of zero-rated supply cannot be denied even if goods are exported or the payments are realized in case of services after the time limits prescribed under Rule 96A i.e., refund of unutilized ITC shall be allowed to be filed.

Further, if taxpayer has made payment of IGST along with interest in terms of Rule 96A, refund of IGST paid can be filed as “Excess Payment of Tax” after the goods are actually exported or payments for export of services are realized at later date. (For the time being, refund can be filed under “Any other” category since facility to file refund under excess payment category for IGST paid in terms of Rule 96A is not available)

1. Common input services procured by HO but attributable to both HO and BOs or exclusively to one or more BOs – Common ITC attributable to both HO and BOs or exclusively to one or more BOs can be distributed through either ISD mechanism or by cross charge i.e., by issuance of a tax invoice from HO to BOs

2. Issuance of invoice for internally generated services by one office to another office (where full input tax credit is available to recipient state) – Rule 28(a) provides that value of supply should be open market value in case of supply between distinct persons. Further, second proviso to Rule 28A provides that any value declared in the invoice shall be open market value.

Given above, any value declared in the invoice to be issued by HO to BOs for internally generated service shall be acceptable even if it does not cover the cost of any particular component. Further, non-issuance of invoice shall also be acceptable.

3. Issuance of invoice for internally generated services by one office to another office (where full input tax credit is not available to recipient state) – In such case, employee cost is not mandatory to be included in the invoice to be generated by one office to another office.