Key GST Circulars based on Recommendations of the 53^rd GST Council Meeting

Circular No.

Clarifications

• Rule 28 (1) of the CGST Rules is applicable in even in the cases of import of goods/ services from related persons, where full Input Tax Credit (ITC) is available to the recipient
• Accordingly, value of services in case of supply by a foreign affiliate to its related domestic entity (Reverse Charge Mechanism), where full ITC is available the domestic entity, would be as under:

• • Value as declared in the self-invoice by the said domestic entity would be deemed as open market value
  • If self-invoice is not issued by the domestic entity, the value may be deemed to be Nil

(regarding supplier’s obligation of proving reversal of input tax credit by recipient pertaining to supplier’s credit notes)

• Currently, there is no system functionality available on GST portal to enable a supplier or tax officers to verify reversal of ITC by the recipient where a Tax Credit Note (TCN) is issued by the supplier
• Till the time an appropriate mechanism is notified, the following guidelines should be followed:

• • Supplier should produce a CA/ CMA certificate bearing Unique Document Identification Number certifying that the recipient has carried out ITC reversal
  • Alternatively, where tax component pertaining to such TCN is not exceeding INR 5 lakhs, seller may produce an undertaking/ certificate from the recipient that ITC has been reversed

(regarding taxability of ESOP/ ESPP/ RSU)

• Purchase or sale of securities/shares is neither a supply of goods nor service since such transaction is a part of compensation package to employees
• Further, purchase or sale of securities/ shares is neither a supply or goods nor service
• Accordingly, issue of securities/shares as ESOP/ESPP/RSU to employees of a domestic subsidiary and reimbursed by the domestic subsidiary on a cost-to-cost basis, cannot be treated as an import of service by the domestic subsidiary
• In case the foreign holding company charges any additional fee/ markup/ commission, the domestic subsidiary would be liable to pay GST under reverse charge basis on import of said services

(regarding taxability of providing loan by overseas related persons)

• Under the GST legislation, supply of goods/ services between related persons is considered as supply even if made without consideration
• Service of extending deposits/ loans/ advances where the consideration is only in the form of interest or discount, are exempt from GST
• In case of loans provided between related parties (including foreign affiliates), where no consideration is charged (other than by way of interest or discount), it cannot be construed as deemed supply of service in the form of processing/ facilitating/ administering the loan that is subject to GST
• GST to apply only where any fee in the form of processing fee/ administrative charges/ service fee/ loan granting charges etc., is charged (over and above the amount of interest or discount)