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Alerts:

Indirect Tax Alert - Clarification regarding GST rates on goods and services

11 October 2021

Clarification regarding GST rates & classification on certain goods

The CBIC has issued a circular based on the recommendations made in the 45th GST council meeting, clarifying the tax position regarding supply of certain goods as under:

GST rates applicable on external batteries sold along with UPS Systems/ Inverter  

It is clarified that, if the external batteries are sold along with the UPS system in a single invoice (where the prices of the both the products are known individually), then the GST rate of respective products shall be appliable. The same has been illustrated as below.  

Illustration 1: When UPS and batteries are supplied as two separate items in a single invoice by assigning respective prices.

Products in single invoice

GST rate

UPS system

18%

Batteries (other than lithium-ion batteries)

28%

 

Illustration 2: When UPS and batteries are supplied at a single price.

Products in single invoice

GST rate

UPS system along with batteries

28%

 

However, the minutes of the 45th GST council meeting is yet to be uploaded in the GST council website which may have further insights about the reasoning for the clarification issued.

Applicability of GST rates on solar PV power projects:

  • Earlier, CBIC had inserted an explanation in notification no:1/2017 and 11/2017-CT(R), allowing the taxpayer to determine the value of supply of goods and supply of services in case of supply of specified renewable energy projects as 70% towards value of goods and 30% towards value of services. The said explanation was inserted with effect from 01 January 2019;
  • With this circular, CBIC has clarified that the said methodology of 70:30 can be adopted for the period July 2017 to December 2018 as well. However, the taxpayer will not be allowed to claim a refund of excess GST already paid (if the amount already paid is more than the amount determined using this methodology).

GST Rate on all pharmaceutical goods falling under heading 3006:

  • As per entry no:65 of notification no:1/2017–CT(R) dated 28 June 2017, pharmaceutical goods which are covered under HSN 3006 is chargeable to tax at the rate of 12%, further the said entry refers to the Note 4 to Chapter 30 of the First schedule of the Customs Tariff Act, 1975 while mentioning an illustrative list. In this regard, the authorities had received certain representations seeking clarification on applicability of the tax rate that is not specifically mentioned in the Entry 65; 
  • It is clarified vide this circular irrespective of the fact whether such goods are specifically mentioned or not, entry no:65 covers all goods as specified in chapter note 4 and further the said chapter covers all the goods covered under heading 3006. Therefore, all the goods falling under heading 3006 are chargeable to tax at the rate of 12%. 

Clarification regar​ding all the laboratory reagents and other goods falling under heading 3822:

As per entry 80 of schedule II of notification no:1/2017- IGST(R) dated 28 June 2017, all diagnostic kits and reagents are chargeable to tax at the rate of 12%. Representations were received seeking clarifications on whether the benefit of concessional rate of 12% would be available to laboratory agents and other goods falling under heading 3822. In this regard, it is clarified that such concessional rate is applicable to all the goods i.e., diagnostic or laboratory reagents falling under heading 3822.

GST Rates on Fibre Drums, whether corrugated or non-corrugated:

  • Corrugated boxes and cartons, falling under heading 4819 attract GST rate of 12%, while other cartons falling under this heading attracted GST rate of 18%. The issue clarified in this circular is w.r.t to fibre drums which is partly corrugated. In this regard, it is resolved that a uniform GST rate of 18% shall be levied on all goods classifiable under heading 4819 w.e.f., 01 October 2021; 
  • Further, it is clarified that if any supply of fibre drums (covered under 4819) made at the rate of 12% during the period of 01 July 2017 to 30 September 2021 will be treated as full GST paid and the issue of recovery of differential tax would not arise. It is also clarified that taxpayers who have already paid 18% will not be eligible to claim refund.

Requirement of Original/ import Essentiality certificate, issued by the Directorate General of Hydrocarbons (DGH) on each inter-State stock transfer of goods imported at concessional GST rate for petroleum operations 

  • Notification no:3/2017-CT(R) prescribes concessional rate of 5% for specified goods which are used in connection with specified petroleum operations. Further, one of the conditions prescribed in this notification is that when such goods are transferred to other licensee or sub-contractor a certificate from Directorate General of Hydrocarbons (DGH) is to be produced that the goods may be transferred to the transferee;
  • Representations have been received seeking clarification whether the original/ import essentiality certificate can be used for inter-state stock transfers between the distinct persons or a fresh essentiality certificate would be required from DGH for each inter-state stock transfer;
  • In this regard, it is clarified that the original import essentiality certificate, issued by the DGH is sufficient when there is inter-state movement of goods within the same company i.e., stock transfer so long as the goods are the same as those imported by the company at concessional rate. Further, the importer is required to maintain records and should be able to establish nexus between the stock transfer of goods and the description in the essentiality certificate.

Clarification regarding tax rates in case of Other Goods covered in this Circular:

Sl. No

Goods

Clarification

1.

Applicability of GST on fresh and dried fruits and nuts

Fresh nuts (almond, walnut, hazelnut, pistachio etc.) falling under heading 0801 and 0802 are exempt from GST, while dried nuts under these headings attract GST at the rate of 5%/ 12%. It is clarified that exemption from GST to fresh fruits and nuts covers only such products which are not frozen or dried in any manner or otherwise processed. Supply of dried fruits and nuts will attract tax rate of 5%/12%.

2.

Applicability of GST on tamarind seeds

Tamarind seeds, falling under heading 1209, meant for any use other than sowing is chargeable to tax at the rate of 5% and when such seed are used for sowing purposes then it will attract nil rate of tax w.e.f. 01 October 2021.

3.

Clarification of definition of Copra

Copra is dried flesh of coconut generally used for the extraction of coconut oil. Coconut kernel turns into copra, when it separates from the shell skin, while still being inside the shell. It is clarified that heading 0801 covers coconut fresh or dried but excludes copra. Thus, exemption is available to coconut, fresh or dried, whether or not shelled or peeled and is not available to copra. Accordingly, copra is chargeable to tax at the rate of 5%.

4.

Applicability of GST on pure henna powder and leaves

Pure henna powder and henna leaves, having no additives, is classifiable under tariff item 1404 90 90 and shall attract GST rate of 5%. The GST rate on mehndi paste in cones falling under heading 1404 and 3305 shall be 5%.

5.

Applicability of GST on scented sweet supari & flavored and coated illaichi

It is clarified that flavored and coated illaichi is a value-added product and falls under sub-heading 2106. Accordingly, it shall attract the tax rate of 18%.

6.

Applicability of GST on Brewers' Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues

Brewers' spent grain (BSG), Dried distillers' grains with soluble [DDGS] and other such residues are classifiable under heading 2303, attracting GST at the rate of 5%.

[Circular no:163/19/2021-GST dated 6 October 2021]

 

Clarifications regarding applicable GST rates & exemptions on certain services

The Central Board of Indirect Taxes and Customs (CBIC) has issued certain clarifications regarding applicable GST rates & exemptions on certain services, as per the recommendations of 45th GST Council meeting:

  • Services by cloud kitchens/central kitchens are covered under ‘restaurant service’ and would attract 5% GST without ITC;
  • Ice cream parlors that sell manufactured ice-cream and do not cook/prepare ice-cream for consumption like a restaurant, is supply of ice cream as goods and not as a service, even if the supply has certain ingredients of service. Accordingly, it is clarified that ice cream sold by a parlor or any similar outlet would attract GST at the rate of 18%;
  • Services provided by any institutions/ NGOs under the central scheme of “scholarships for students with disabilities” where total expenditure is borne by the Government is covered under entry 72 of notification no:12/2017-CT(R) dated 28 June 2017 and hence exempt from GST;
  • Satellite launch services provided by M/s. New Space India Limited (NSIL) are clarified to be similar to those supplied by ANTRIX Corporation Ltd. Place of Supply (PoS) of satellite launch services supplied by ANTRIX Corporation Ltd to customers located outside India, is outside India and such supply which meets the requirements of section 2(6) of IGST Act, 2017 constitutes export of service and shall be zero rated. However, in case the service recipient is located in India, the satellite launch services would be taxable;
  • Overloading charges at toll plazas would get the same treatment as given to toll charges, i.e. exempted;
  • Renting of vehicle by state transport undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption. Hence, renting of prescribed vehicles to State Transport Undertakings and Local Authorities are exempted, irrespective of whether such vehicles are run on routes, timings as decided by the said undertakings or authorities;
  • Service by way of grant of mining rights, post 1 January 2019 (undisputed period), is taxable at 18%. Likewise, it is clarified that during the period 1 July 2017 to 31 December 2018 (disputed period) also such services would attract the same rate, even if the rate schedule did not specifically mention;
  • Admission to amusement parks having rides etc. attracts GST rate of 18%. GST rate of 28% applies only to admission to such facilities that have casinos or race club[even if it provides certain other activities] or admission to a sporting event like IPL;
  • Services by way of job work in relation to manufacture of alcoholic liquor for human consumption are not eligible for the GST rate of 5%. It will attract GST at the rate of 18%.

[Circular no:164/20/2021-GST dated 6 October 2021]