Goods And Services Tax : Summary of CGST Circulars Issued in 2025

 

📌 Circular 244 Issued on 28^th January 2025 CGST:

This circular clarifies the GST treatment of co-insurance premiums and reinsurance commissions.  Effective November 1, 2024, apportionment of co-insurance premiums between lead and co-insurers is not a supply of goods or services, provided the lead insurer pays GST on the entire premium. Similarly, services from insurers to reinsurers, where ceding/reinsurance commission is deducted, are not supplies, provided the reinsurer pays GST on the gross premium (including commission).  The circular also regularizes past GST payments for these transactions from July 1, 2017, to October 31, 2024, on an "as is where is" basis.  Sachin Jain, Joint Secretary of TRU-II, has sent a letter to the Board.

📌 Circular 245 Issued on 28^th January 2025 CGST:

This Indian Ministry of Finance circular clarifies the GST applicability on penal charges levied by Regulated Entities (REs like banks and NBFCs) due to RBI instructions.  These instructions, effective from 01.01.2024 (excluding credit cards and certain other financial products), mandate penal charges instead of penal interest for loan term non-compliance.  The circular clarifies that these charges, like liquidated damages, are not consideration for tolerating an act but rather deterrents for breach of contract and therefore not subject to GST.  This reinforces a previous circular (178/10/2022-GST) which established that such payments relate to contract breaches, not performance, and are thus not taxable events.

 This document clarifies two GST (Goods and Services Tax) related issues:

 1. **Penalties on Loan Defaults:** No GST is payable on penalties levied by regulated entities (following RBI directives from August 18, 2023) on borrowers for non-compliance with loan terms.

 2. **GST Exemption for Payment Aggregators:** Payment Aggregators (PAs) *are* eligible for the GST exemption (Sl. No. 34 of notification No. 12/2017- CTR dated 28.06.2017) on settlements up to ₹2,000 per transaction made via credit/debit/other payment cards. This is because PAs, by transferring funds to merchants, function as "acquiring banks" as defined in the notification, making them eligible for the exemption.  The document distinguishes PAs from Payment Gateways, emphasizing the PA's role in the settlement process.

 This document clarifies two GST (Goods and Services Tax) related issues.

 First, it clarifies that RBI-regulated Payment Aggregators (PAs), who handle funds, are exempt from GST on settlement amounts up to ₹2000 per transaction via cards.  This exemption is specifically for the payment settlement function and doesn't apply to Payment Gateways (PGs), which only provide the technology infrastructure.

 Second, it addresses the GST applicability on research and development (R&D) services provided by Government Entities funded by government grants.  Such services are now exempt from GST effective October 10, 2024.  For the period between July 1, 2017, and October 9, 2024, GST payment on these services is regularized on an "as is where is" basis.

 GST on skilling services provided by NSDC-approved Training Partners was briefly revoked (10/10/2024-15/01/2025) due to a regulatory change aligning with NCVET. This removal negatively impacted the skilling ecosystem, so the exemption was reinstated from 16/01/2025.  For the period between revocation and reinstatement, GST payment is being regularized "as is where is."  The document also mentions a request for clarification on GST applicability for facility management services (housekeeping, maintenance, etc.) provided to the Municipal Corporation of Delhi (MCD).

 Two GST clarifications are provided:

 1. **Facility Management Services to Municipal Corporation of Delhi (MCD):**  While a GST exemption exists for certain composite supplies to government/local authorities relating to functions entrusted under Articles 243G and 243W of the Constitution, facility management services (housekeeping, maintenance, etc.) for MCD headquarters *do not* qualify for this exemption.  Therefore, GST *is applicable* to these services.

 2. **Delhi Development Authority (DDA) as a Local Authority:** DDA sought clarification on its status as a "local authority" under GST law.  The clarification states DDA *is not* a local authority as defined in the CGST Act, as it doesn't meet the criteria of controlling/managing a municipal or local fund similar to an elected self-governing body.  Therefore, services supplied by DDA are *not* subject to reverse charge mechanism (RCM).

 Initially, GST on renting commercial property from unregistered to registered persons was put under reverse charge from October 10, 2024. After receiving feedback, composition levy taxpayers were excluded from this reverse charge mechanism from January 16, 2025.  The period between October 10, 2024, and January 15, 2025, for these composition levy taxpayers is regularized "as is where is."  Additionally, certain support services provided by electricity utilities were initially exempted from GST, and later, related entries were aligned for clarity.

 This circular addresses two GST regularization decisions from the 55th GST Council:

 1. **Incidental services related to electricity transmission/distribution:**  GST payments for certain ancillary services provided by electricity utilities between October 10, 2024, and January 15, 2025, are regularized "as is where is." This covers services previously exempt but now falling under a revised exemption entry.

 2. **Services by Goethe Institute/Max Mueller Bhawans:** GST payments for services provided by these institutes between July 1, 2017, and March 31, 2023, are also regularized "as is where is."  The institutes previously did not collect or pay GST believing their services were exempt.

 📌 Circular CGST -246-Issued on 30^th January 2025:

This circular from the Indian Ministry of Finance clarifies the application of late fees for delayed filing of FORM GSTR-9C (reconciliation statement).  Previously, GSTR-9C, along with audited accounts, was mandatory for taxpayers exceeding a certain turnover threshold.  However, changes from August 1, 2021, made self-certification and filing optional for some, leading to confusion about late fees.  The circular clarifies that late fees under section 47 of the CGST Act apply if GSTR-9C is not filed by the due date, even if the annual return (GSTR-9) is filed on time.  This clarification aims to ensure uniform implementation of the law across all tax offices.

 Businesses required to file an annual GST return (GSTR-9) must also file a reconciliation statement (GSTR-9C) if their aggregate turnover exceeds a specified threshold.  Both forms are considered part of the complete annual return under section 44 of the CGST Act.  Late fees apply to the entire annual return (both GSTR-9 and GSTR-9C, if required), calculated from the due date until both forms are filed.  Late fees are not levied separately for each form.

 This document clarifies the due date for annual GST returns.  The relevant date is the filing date of GSTR-9 if GSTR-9C (reconciliation statement) isn't required, or if both are filed simultaneously. If GSTR-9C is filed *after* GSTR-9, the GSTR-9C filing date is the relevant one.

 

Additionally, late fees for filing GSTR-9C after GSTR-9 are waived for financial years up to 2022-23, provided GSTR-9C was filed by March 31, 2025.  No refunds will be issued for previously paid late fees.  The circular requests dissemination of this information via trade notices and invites feedback on implementation challenges.

 📌 Circular-No-247-04-2025:

This circular from the Government of India (Ministry of Finance, Department of Revenue) clarifies various aspects related to the Goods and Services Tax (GST) based on the recommendations made by the GST Council during its 55th meeting held on December 21, 2024, in Jaisalmer.

 

·         Pepper Classification and GST Rate: **  Pepper of the genus Piper (green, white, or black) is covered under HS code 0904 and attracts 5% GST. Supplying dried pepper by an agriculturist is exempt from GST registration and taxation.

·         Raisins Supplied by Agriculturist: An agriculturist supplying raisins is not liable to be registered under GST.

·         Ready-to-Eat Popcorn GST Rate: Ready-to-eat popcorn mixed with salt and spices is classified under HS 2106 90 99 and attracts 5% GST if sold un-packaged and labelled and 12% if packaged and labelled. Caramel popcorn (mixed with sugar) is classified as sugar confectionery and attracts 18% GST.

 

·         Fly Ash Based Autoclaved Aerated Concrete (AAC) Blocks:** AAC blocks containing more than 50% fly ash content will fall under HS 6815 and attract 12% GST.

*   **Ground Clearance Amendment Date: **  The amendment for determining compensation cess on Utility Vehicles (SUVs) will apply on or after 26.7.2023

 The circular aims to ensure uniform implementation of GST regulations across the country. Any difficulties in implementing the circular can be brought to the notice of the Board.

📌 Circular-No-248-05-2025.pdf:

This circular (248/05/2025-GST) from the Indian Ministry of Finance clarifies the application of Section 128A of the CGST Act, 2017.  This section, effective November 1, 2024, waives interest and/or penalties on demands under Section 73 for the period of July 1, 2017, to March 31, 2020.  The circular addresses confusion arising from businesses paying taxes via GSTR-3B instead of DRC-03 before Section 128A's enactment and clarifies whether such cases are eligible for the waiver.  It also addresses how withdrawn appeals against consolidated adjudication orders (covering periods both within and outside the scope of Section 128A) are treated for waiver eligibility.  This clarification follows a previous circular (238/32/2024-GST) and aims to ensure uniform implementation of Section 128A.

 Payments made towards a specific tax demand before November 1, 2024, will be credited towards the amount due under Section 128A, as long as the payment was intended for that demand.  After November 1, 2024, payments must be made through FORM GST DRC-03 (for demands related to notices/statements) or by crediting the electronic liability register (for orders).  However, payments made through FORM GSTR-3B *before* November 1, 2024, are also eligible for benefits under Section 128A, subject to verification.  Finally, if a demand covers periods both before and after the applicability of Section 128A, taxpayers can partially avail themselves of its benefits by paying the tax due for the periods covered under Section 128A (FY 2017-18 to 2019-20) and withdrawing their appeal for those periods only.

 An appellate authority or tribunal can adjust the time period referred to in a specific sub-section (not specified here).  Clarification point 6 from circular 238/32/2024-GST (dated 15th October 2024) is withdrawn.  Trade notices will publicize this new circular, and any implementation difficulties should be reported to the board.