CBIC Issues Various Clarificatory Circulars On GST; Prescribes Procedure For Handling ITC Mismatch In FORM GSTR-3B and FORM GSTR-2A

The Central Board of Indirect Taxes and Customs (CBIC)has recently issued a series of circulars clarifying various GST related issues.

The CBIC, in its circular dated 27.12.2022, noted that during the initial period of implementation of GST, i.e., the financial years 2017-18and 2018-19, many suppliers had failed to furnish the correct details in FORMGSTR-1, which led to certain deficiencies or discrepancies in FORM GSTR-2A.However, it observed that the concerned recipients in their FORM GSTR-3B, had availed input tax credit on the said supplies.

"The discrepancies between the amount of ITC availed by the registered persons in their returns in FORM GSTR3B and the amount as available in their FORM GSTR-2A are being noticed by the tax officers during proceedings such as scrutiny/ audit/ investigation etc. due to such credit not flowing to FORM GSTR-2A of the said registered persons”, the Circular said.

While taking note that various representations were received by the CBIC, seeking clarification regarding the manner of dealing with such discrepancies, the CBIC in its Circular No. 183/15/2022-GST has issued a slew of clarifications, prescribing the procedure for handling the ITC mismatch in FORM GSTR-3B and FORM GSTR-2A.

Further, the Board has directed that the said procedure/instruction shall apply only to the ongoing proceedings for F/Y 2017-18 and 2018-19 or in cases where, for the F/Y 2017-18and 2018-19, any adjudication or appeal proceedings are still pending. The CBIC thus added that the said instructions are not applicable to the completed proceedings.

In its Circular No.184/16/2022-GST, the CBIC has also issued clarifications regarding availment of ITC, in cases of supply of services by way of transportation of goods outside India. In its Circular dated 27.12.2022, the CBIC has provided that if the good sare transported to a place outside India, and the supplier and recipient of the said supply are located in India, then the place of supply would be the concerned foreign destination where the goods are transported, in accordance with the proviso to Section 12 (8) of the IGST Act. Also, the said supply of services would be considered as inter-State and thus, it would attract IGST.

Further, the CBIC added that in such a case, the recipient of service of transportation of goods shall be eligible to avail ITC in respect of the IGST so charged by the supplier.

In cases where the appellate authority, appellate tribunal or the court concludes that the notice issued against the tax payer under Section 74 (1) of the CGST Act is not sustainable, directing the proper officer to re-determine the amount of tax payable, the Board, in its Circular No. 185/17/2022-GST, has clarified the time limit within which the proper officer is required to re-determine the amount of tax.

As per the said Circular, the proper officer is required to issue the order of re-determination of tax, interest and penalty within the time limit specified under Section 75(3) of the CGST Act, i.e., within a period of 2 years from the direction/ order issued by appellate authority, appellate tribunal or the court.

Regarding the issue on taxability of 'No Claim Bonus' offered by the Insurance Companies, the CBIC in its Circular No.186/18/2022-GST has held that 'No Claim Bonus' cannot be considered as a consideration for any supply provided by the insured to the Insurance Company.

The CBIC took note that the Insurance Companies deduct 'No Claim Bonus' from the gross insurance premium amount, when no claim is made by the insured during the previous insurance period.

The Board reckoned that in lieu of the 'No Claim Bonus', the insured is not under any contractual obligation to not raise an insurance claim during the period covered under the policy.

"It is, therefore, clarified that there is no supply provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s) and No Claim Bonus cannot be considered as a consideration for any supply provided by the insured to the insurance company", the Circular said.

Further, the CBIC added that ‘No Claim Bonus' is a permissible deduction under Section 15 (3) (a) of the CGST Act, for the purpose of calculating the value of supply of the insurance services provided to the insured. "Accordingly, where the deduction on account of No claim bonus is provided in the invoice issued by the insurer to the insured, GST shall be leviable on actual insurance premium amount, payable by the policy holders to the insurer, after deduction of No Claim Bonus mentioned on the invoice", the CBIC said.

In its Circular No.187/19/2022-GST, the Board has issued clarifications regarding treatment of statutory dues under GST law, with respect to taxpayers for whom proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) have been finalized.

The CBIC noted that proceedings conducted under IBC also adjudicate the government dues pending against the corporate debtor under the CGST Act and thus, they are covered under the term 'other proceedings' in Section 84 of CGST Act.

Thus, the Board concluded that in cases where a confirmed demand for recovery has been issued by the tax authorities against the corporate debtor, for which a summary has been issued in FORM GST DRC-07/DRC 07A, and where the proceedings under IBC have been finalized against the corporate debtor, reducing the amount of statutory dues payable to the government under CGST Act or under other existing laws, the Commissioner must issue an intimation in FORM GST DRC-25 to the taxable personas well as the appropriate authority with whom the recovery proceedings are pending, intimating the reduction of such government dues.

The CBIC, in its Circular No. 188/20/2022-GST, has prescribed the manner of filing an application for refund of tax borne by unregistered home buyers and policy buyers, in cases where the contract or agreement for construction of flat or building has been cancelled, or where the long-term insurance policy has been terminated. Noting that the time period for issuing credit note under Section 34 of the CGST Act may have already expired, the Board reckoned that the suppliers/ insurance companies had refunded the amount to the buyers, only after deducting the amount of GST collected from them.

"In order to enable such unregistered person to file application for refund under subsection (1) of section 54, in cases where the contract/agreement for supply of services of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated, a new functionality has been made available on the common portal which allows unregistered persons to take a temporary registration and apply for refund under the category 'Refund for Unregistered person' ", the CBIC said.

The unregistered person, who wants to file an application for refund under Section 54 (1) of the CGST Act, has to obtain a temporary registration on the common portal using his Permanent Account Number (PAN). While specifying that the application for refund must be filed in FORM GST RFD-01 on the common portal under the category ‘Refund for unregistered person', the Circular has further provided that separate applications for refund would have to be filed in respect of invoices issued by different suppliers. Also, where the suppliers are registered indifferent States or UTs, the applicant is required to obtain a temporary registration in each of the concerned States or UTs, where the said supplier is registered. Additionally, as per the said Circular, no refund can be claimed if the refund amount is less than one thousand rupees.