9 August 2022
GIST of Circulars issued by CBIC on 3 August 2022

The Central Board of Indirect Taxes and Customs (CBIC) issued various circulars on 3 August 2022 to clarify the recommendations made in the 47th GST Council meeting held on 28 and 29 June 2022 and also clarified various other issues. Please find below a summary of the clarifications issued vide such circulars:

A) Circular No. 177/09/2022-TRU dated 3 August 2022

Sr. No. Issue Clarification
1. Rate of GST on supply of ice-cream by ice-cream parlours during the period 1 July 2017 to 5 October 2021
  • Circular 164/20/2021-GST, dated 6 October 2021, clarified that GST will be applicable on the sale of ice-cream by ice-cream parlors at 18% with Input Tax Credit (ITC).
  • Due to a lack of specific clarity on the date of said levy, the same was considered as a retrospective from 1 July 2017. Accordingly, the ice-cream parlours started receiving retrospective demands of GST owing to the view provided in the aforesaid Circular.
  • The New Circular clarifies that GST charged and paid at 5% without claiming ITC during the period 1 July 17 to 5 October 2021 will be considered as GST paid in full, in order to avoid unnecessary litigation. It is further clarified that, no refund will be allowed for GST if already paid at 18%.
2. Applicability of GST on the following services provided by the educational institution:
  • Application fees charged for entrance for admission
  • Fees charged for eligibility certificate for admission
  • Issuance of migration certificate
  • As per Entry 66 of Notf. no. 12/2017 Central Tax (Rate) dated 28 Jun 2017 ('Exemption notification), entrance fees for the conduct of entrance examination charged by an educational institution are exempt from GST.
  • The New Circular clarifies that this exemption notification covers the application fees charged for entrance or fees charged for eligibility certificate for admission of prospective students and fees charged for issuance of migration certificate to leaving or ex-student. Hence, considered exempt under GST.
3. GST rate on the selling of space for advertisement in souvenirs
  • As per Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017, the selling of space for advertisement in print media attracts GST at 5%.
  • This Circular clarifies that 'print media includes souvenir books and accordingly, selling space for advertisement in souvenir books will attract GST at 5%.
4. GST on Location Charges (LC) or Preferential Location Charges (PLC) collected in addition to the lease premium for a long-term lease of land
  • Vide Entry 41 of exemption notification, upfront amount (called as premium, etc.) collected for a long-term lease of plots is exempt from GST.
  • It is clarified that the choice of location of the plot is an integral part of the supply of long-term lease of the plot; therefore, location charge is part of the consideration charged for long-term lease of the plot. Since it is charged upfront, the same is exempt from the GST levy.
5. GST on additional toll charges collected for not having FASTAG on vehicle
  • As per Entry 23 of the exemption notification, toll charges are exempt from GST.
  • It is clarified that the additional fee in the form of higher toll charges collected for not having FASTAG is in the nature of toll charges and, accordingly, would be exempt from the GST levy.
6. Tax applicability on sale of land after leveling, laying down of drainage lines, etc.
  • As per schedule III, the sale of land is neither a supply of goods nor a supply of services.
  • It is clarified that the sale of developed land after undertaking activities like leveling, laying down of drainage lines, water lines, electricity lines, etc. (development services) is also a sale of land and accordingly will not attract GST levy.
  • However, development services as above will attract GST at applicable rates.
7. Reverse Charge Mechanism (RCM) applicability on service of transportation of passengers (Heading 9964) or on renting of a motor vehicle designed to carry passengers (Heading 9966)
  • Where a body corporate hires the motor vehicle for a period of time, during which the motor vehicle shall be at the disposal of the body corporate, the service would fall under Heading 9966, the body corporate shall be liable to pay GST on the same under RCM.
  • Where a body corporate avails the passenger transport service over pre-determined routes on pre-determined schedules for specific journeys or voyages and does not take the vehicle on rent for any particular period of time, the service would fall under Heading 9964, the body corporate shall not be liable to pay GST on the same under RCM.
  • The aforesaid Circular clarifies that RCM will be applicable only if a body corporate 'rents' or 'hires' a motor vehicle and not when it avails service of transportation of passengers.
8. GST on the hiring of non-air-conditioned contract carriage for transportation of employee from/to work by the firm
  • As per Entry 15(b) of the exemption notification, transportation of passengers by non-air-conditioned contract carriage is exempt from GST. However, 'charter or hire' is excluded from this exemption.
  • Accordingly, it is clarified that exemption shall not be applicable where contract carriage is hired for a period of time, during which the contract carriage is at the disposal of the service recipient, and the recipient is thus free to decide the manner of usage (route and schedule), subject to the conditions of the agreement entered.


B) Circular No. 178/10/2022-GST dated 3 August 2022

GST law provides for a levy on the "supply of goods and services made for consideration and which are in the course or furtherance of business."

Litigations/disputes were prevailing from the service tax regime on the matter of whether the contractual agreement of "Agreeing to the obligation to refrain from an act or to tolerate an act or a situation, or to do an act" can qualify as supply and liable to tax or not.

To address this, the CBIC has provided the below factors for determining taxability for the purpose of these acts:
  • There should be an independent contractual obligation to either refrain from an act or tolerate an act/situation, or perform an act;
  • Consideration for the above must flow for an independent activity of the above acts under a separate arrangement;
  • An agreement in these cases cannot be imagined or presumed to exist just because there is a flow of money from one party to another unless there is an express promise to it.
The Circular further provides clarifications on GST implications on the below issues:

Sr. No. Issue Clarification
1. Liquidated damages
  • The parties to the contract have an agreement for the performance of an act or execution of the agreement and not to tolerate the non-performance or breach of contract.
  • In case of breach of contract, the aggrieved party receives compensation for loss or damages due to breach, referred to as "Liquidated damages."
  • Acceptance of liquidated damages is only compensation for loss or injury, not a consideration for a supply and hence not taxable under GST.
2. Compensation for cancellation of coal blocks
  • Pursuant to the order of the Supreme Court for the cancellation of allocation of coal blocks/mines, old allottees of mines were given compensation by the government for the transfer of their rights to new allottees.
  • There was no agreement between old allottees and the government to give away their rights, neither the old allottees had an option but to accept the cancellation as ordered by Supreme Court.
  • Therefore, the compensation paid for the cancellation of coal blocks pursuant to the order in the above case is not taxable under GST.
3. Cheque dishonour fine/penalty
  • The supplier never intends to receive a dishonored cheque.
  • Also, there is never an implied or express offer by the supplier to accept a dishonored cheque or instrument.
  • The fine imposed by a supplier or a banker is not for tolerating the act but rather a fine to discourage such act, hence not taxable under GST.
4. Penalty imposed for violation of laws
  • Levy of fines and penalties are not for tolerating violations but for penalizing against the misconduct of law and hence not taxable under GST.
  • The same was clarified vide Circular No 192/02/2016 - Service Tax dated 13 April 2016 under Service Tax and holds true under GST as well.
5. Forfeiture of salary or payment of the bond amount in the event of the employee leaving the employment before the minimum agreed period
  • In case of an early exit of the employee without serving the notice period, the employer suffers disruption of work and hindrance to smooth transition.
  • The act of recovery from employees doesn't serve any benefit to the employer and is rather to discourage the non-serious employees from premature quitting.
  • Therefore, such amounts recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an act or a situation.
6. Compensation for not collecting toll charges
  • National Highways Authority of India (NHAI) directed toll operators to allow free access to toll roads to users from 8 November 2016 to 1 December 2016 during the demonetization period, and the loss suffered to them was compensated by the NHAI.
  • During this period, the service of access to a road or bridge continued to be provided without the collection of tolls from users. Consideration came from the project authority.
  • The fact that for this period, for the same service, consideration came from a person other than the actual user of the service does not mean that the service has changed.
7. Late payment surcharges or fees
  • A facility of accepting late payment with interest or late fees, fine or penalty is a facility granted to accept late payment and the it is naturally bundled with principal supply.
  • Therefore, such payments should be assessed at the same rate as the principal supply.
8. Fixed capacity charges for power
  • Price charged by State Electricity Boards from individual customers has two components, i.e., fixed charges and variable charges per unit.
  • Both the components are charged for the sale of electricity and not taxable since electricity is exempt under GST.
9. Cancellation charges
  • The Services provider provides an option of cancellation of intended supplies within the period of time of payment of cancellation fees.
  • The facility of allowing cancellation of intended supply shall be assessed as principal supply and will attract GST at the same rate as applicable to principal supply.


C) Circular No.179/02/2022-GST dated 3 August 2022

Sr. No. Subject Clarification
1. This Circular seeks to clarify regarding GST rates and classification (goods) based on the 47th GST Council meeting recommendations
  • Electric vehicles (with or without battery) to be classified under HSN 8703 shall attract GST at 5%.
  • Minor polished stones, specifically Napa Stone, is ready to use stones that are not subject to extensive mirror polishing, however, the same would also be eligible to get a concessional rate benefit at 5%.
  • Supply of treated sewage water is exempt under GST.
  • Nicotine Polacrilex gum, commonly applied orally and intended to assist tobacco use cessation, shall attract GST at 18%.
  • Clarification received on GST rate applicability on different forms of mangoes:
    Goods HSN Rate of Tax
    Fresh Mangoes 0804 Exempt
    Mangoes, sliced and dried 0804 5% (Concessional Rate)
    All other forms of dried Mangoes, including Mango Pulp 0804 12%
  • Fly ash bricks or fly ash aggregate with 90 percent. or more fly ash content and fly ash blocks levied at the GST rate of 12%. Confusion was prevailing about the applicability of the 90% condition pursuant to recommendations by the GST council to restrict this condition only to fly ash aggregate.
    It has now been clarified that 90% of the criteria are not applied in the case of fly ash bricks and fly ash blocks and will be applicable only to fly ash aggregates before 18 July 2022. Thereafter the condition has been omitted.
  • By-products of milling of pulses/ dal such as Chilka, Khanda, and Churi, which are used as a cattle feed ingredient, shall attract a GST of 5%. Further, the issue for past periods would be regularized on an as-is basis.
Our Comments
  • Though the circulars might help in ending litigations and disputes on the various issues clarified, the nature of the transactions will need to be analyzed by the assesses in detail.
  • An introspection of contracts would also be required to essentially analyze the essence of the contract, whether in the form or substance and captures the true characteristics of the transactions identified to determine the appropriate GST applicability.
  • For assesses who were paying GST due to ambiguity in the law to avoid litigation in these cases, whether a refund of such taxes can be claimed (unless specifically negated) will need to be analyzed on a case-to-case basis.
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