Amendments w.r.t. Rate Rationalization to remove IDS and other changes in GST rates on supply of certain services

By:

Background:

Earlier, the CBIC issued Notification No.11/2017- Central Tax (Rate), dated June 28, 2017 (“Services Rate Notification”) w.r.t. the applicable GST rate for various supply of services under the Central Goods and Services Act, 2017 (“the CGST Act”).

Further, the GST Council’s 47th meeting was held in Chandigarh on June 28-29, 2022 under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman, wherein, recommendations were made w.r.t. Rate Rationalization to remove inverted duty structure and other changes in GST rates on supply of certain services.

Accordingly, the recommendation has been notified vide following notification:

Notification:

The CBIC vide Notification No. 03/2022- Central Tax (Rate) dated July 13, 2022 has issued amendments in Services Rate Notification, so as to remove inverted duty structure and notify applicable GST rates on supply of certain services, in a following manner:

SI. No. Heading  Description of Service Rate Condition

3

Heading 9954 

(Construction services)

(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied  to the Central Government, State Government, Union territory or a local authority] by way of constructionerection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, –

  • a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
  • canal, dam or other irrigation works;

pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.

6  
    (iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and  (if) above, supplied by way of constructionerection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a)  a road, bridge, tunnel, or terminal for road transportation for use by general public;

(b)  a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c) a civil structure or any other original works pertaining to the “ln-situ redevelopment of existing slums using land as a resource, under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);

(d)  a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana;

 (da) a civil structure or any other original works pertaining to the “Economically Weaker Section (EWS) houses” constructed under the Affordable Housing in partnership by State or Union territory or local authority or urban development authority under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);

(db) a civil structure or any other original works pertaining to the “houses constructed or acquired under the Credit Linked Subsidy Scheme for Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle Income Group-1 (MlG-1)/ Middle Income Group-2 (MlG-2)” under the Housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban);]

(e)  a pollution control or effluent treatment plant, except located as a part of a factory; or

(f)  a structure meant for funeral, burial or cremation of deceased.

 Provided that during the period beginning from the 14th June, 2021 and ending with the 30th September, 2021, the central tax on service of description as specified in clause (f), shall, irrespective of rate specified in column (4), be levied at the rate of 2.5 per cent.]

 (g) a building owned by an entity registered under section 12AA  or 12AB] of the Income Tax Act, 1961 (43 of 1961), which is used for carrying out the activities of providing, centralised cooking or distribution, for mid-day meals under the mid-day meal scheme sponsored by the Central Government, State Government, Union territory or local authorities.]

6

 

(v) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017  other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and  (if) above], supplied  by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)   railways,  including] monorail and metro;

(b)  a single residential unit otherwise than as a part of a residential complex;

(c)  low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d)  low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under-

(1)  the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; 

(2)   any housing scheme of a State Government;

 (da) low-cost houses up to a carpet area of 60 square metres per house in an affordable housing project which has been given infrastructure status vide notification of Government of India, in Ministry of Finance, Department of Economic Affairs vide F. No. 13/6/2009-INF, dated the 30th March,2017;]

(e) post harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or

(f)  mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages.

6  
     (va) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of affordable residential apartments covered by sub- clause (a) of clause (xvi) of paragraph 4 below, in a project which commences on or after 1st April, 2019, or in an ongoing project in respect of which the promoter has not exercised option to pay central tax on construction of apartments at the rates as specified for item (ie) or (if), as the case may be, in the manner prescribed therein, 6

Provided that carpet area of the affordable residential apartments as specified in the entry in column (3) relating to this item, is not less than 50 per cent. of the total carpet area of all the apartments in the project;

Provided also that for the purpose of determining whether the apartments at the time of supply of the service are affordable residential apartments covered by sub- clause (a) of clause (xvi) of paragraph 4 below or not, value of the apartments shall be the value of similar apartments booked nearest to the date of signing of the contract for supply of the service specified in the entry in column (3) relating to this item;

Provided also that in case it finally turns out that the carpet area of the affordable residential apartments booked or sold before or after completion, for which gross amount actually charged was forty five lakhs rupees or less and the actual carpet area was within the limits prescribed in sub- clause (a) of clause (xvi) of paragraph 4 below, was less than 50 per cent. of the total carpet area of all the apartments in the project, the recipient of the service, that is, the promoter shall be liable to pay such amount of tax on reverse charge basis as is equal to the difference between the tax payable on the service at the applicable rate but for the rate prescribed herein and the tax actually paid at the rate prescribed herein

   

 (vi)  Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017,  other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and  (if) above provided] to the Central Government, State Government,  Union territory or a local authority] by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or

(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.

 Explanation. – For the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.]

6  
     (ix) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) above to the Central Government, State Government, 129 Union territory or a local authority]. 6

   

 (vii)Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75per cent. of the value of the works  contract) provided to the Central Government, State Government,  Union territory or a local authority

6  
(x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government,  Union territory or a local authority 6

   

(xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (vii), (viii), (x) and (xi) above.  

9

 

7

Heading  9963  (Accommodation, food and beverage services) (i) Supply of ‘hotel accommodation’ having value of supply of a unit of accommodation above one thousand rupees but less than or equal to seven thousand five hundred rupees per unit per day or equivalent. 6

8

Heading 9964 (Passenger transport services) (via) Transport of passengers, with or without accompanied belongings, by ropeways. 2.5 The credit of input tax charged on goods used in supplying the service has not been taken.
(vii) Passenger transport services other than (i), (ii)  (iii), (iv), (iva), (v) and (vi), (via) above. 9

9

Heading  9965 (Goods transport services)

(iii) Services of Goods Transport Agency (GTA) in relation to transportation of goods (including used house hold goods for personal use) supplied by a GTA where,-    
(a) GTA does not exercise the option to itself pay GST on the services supplied by it; 2.5

The credit of input tax charged on goods and services used in supplying the service has not been taken.

Please refer to Explanation no. (iv)]

 

(b) GTA exercises the option to itself pay GST on services supplied by it. 2.5 or 6

(1) In respect of supplies on which GTA pays tax at the rate of 2.5%, GTA shall not take credit of input tax charged on goods and services used in supplying the service.  Please refer to Explanation no. (iv)]

(2) The option by GTA to itself pay GST on the services supplied by it during a Financial Year shall be exercised by making a declaration in Annexure V on or before the 15th March of the preceding Financial Year:

Provided that the option for the Financial Year 2022-2023 shall be exercised on or before the 16th August, 2022:

Provided further that invoice for supply of the service charging Central tax at the rates as applicable to clause (b) may be issued during the period from the 18th July,2022 to 16th August, 2022 before exercising the option for the financial year 2022-2023 but in such a case the supplier shall exercise the option to pay GST on its supplies on or before the 16th August,2022.”;

(via) Transport of goods by ropeways.

2.5 The credit of input tax charged on goods used in supplying the service has not been taken.

Please refer to Explanation no. (iv)”;

 

  (vii) Goods transport services other than (i), (ii), (iii), (iv), (v), (vi) and (via) above 9

10 Heading  9966

(Rental services    of transport vehicles with operators)

(ia) Renting of goods carriage where the cost of fuel is included in the consideration charged from the service recipient. 6

(iii) Rental services of transport vehicles with operators, other than (i), (ia) and (ii) above.

9

11 Heading 9967

(Supporting services  in transport)

 

“Supporting services in transport.

Explanation: This entry does not include goods transport service involving Goods Transport Agency (GTA) service, which falls under Heading 9965.

 

9

15 Heading  9971 (Financial and related services) (i) Services provided by a foreman of a chit fund in relation to chit.

Explanation.-

(a) “chit” means a transaction whether called chit, chit fund, chitty, kuri, or by whatever name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to a prize amount;

(b) “foreman of a chit fund” shall have the same meaning as is assigned to the expression “foreman” in clause (j) of section 2 of the Chit Funds Act, 1982 (40 of 1982).

6 Provided that credit of input tax charged on goods used in supplying the service has not been taken
Please refer to Explanation no. (iv)

(vii) Financial and related services other than (i), (ii), (iii), (v), and (vi) above

9

26

Heading  9988

(Manufacturing services on physical inputs (goods) owned by others)

(e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);

(ea) manufacture of leather goods or foot wear falling under Chapter 42 or 64 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) respectively;]

(h) manufacture of clay bricks falling under tariff item 69010010 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975);]

2.5

31A

Heading 9993 Services provided by a clinical establishment by way of providing room  other than Intensive Care Unit (ICU)/Critical Care Unit (CCU)/Intensive Cardiac Care Unit (ICCU)/Neo natal Intensive Care Unit (NICU)] having room charges exceeding Rs. 5000 per day to a person receiving health care services. 2.5

The credit of input tax charged on goods and services used in supplying the service has not been taken

Please refer to Explanation no. (iv)]”;

 

32

Heading 9994 (ia) Services by way of treatment or disposal of biomedical waste or the processes incidental thereto by a common bio-medical waste treatment facility to a clinical establishment. 6

  • Clause (xxxvii) – (xxxx) has been inserted in Explanations to the Services Rate Notification for providing the definitions w.r.t. print media’ clinical establishment, health care services, Goods Transport Agency (“GTA”).
  • New Form has been introduced for exercising the option by a GTA for payment of GST under forward charge, before the commencement of any financial year.

Similar notifications have been passed under the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).

CGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009433/ENG/Notifications

IGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009453/ENG/Notifications

UTGST (Rate) Notification: https://taxinformation.cbic.gov.in/view-pdf/1009450/ENG/Notifications

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.

We have recently released the 7th Edition (May, 2022) of our book on Goods and Services Tax, titled, “GST LAW AND COMMENTARY – WITH ANALYSIS AND PROCEDURES”, updated with the Finance Act, 2022 in a set of 4 Volumes. We thank you all for the support and your enduring response.

Have a look at the complete tour of the Book at: https://cutt.ly/nF6O0oN

Order your copy now and be a part of the GST learning excursion in the most comprehensive and lucid form !!

For more details and purchase online at: https://cutt.ly/RFMox8D