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June 18, 2021

GST issues 7 clarification today

by CA Shivam Jaiswal in GST

GST issues 7 clarification today

SEVEN GST Circulars issued today providing clarity on the following issues:

  1. Clarification regarding applicability of GST on supply of food in Anganwadis and Schools
  2. Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)
  3. Clarification regarding GST on supply of various services by Central and State Board (such as National Board of Examination)
  4. Clarification regarding GST rate on construction services provided to a Government Entity w.r.t construction of a Ropeway on turnkey basis
  5. GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS
  6. Clarification regarding GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans
  7. Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System

Read all Circulars below

1. Clarification regarding applicability of GST on supply of food in Anganwadis and Schools

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub– Clarification regarding applicability of GST on supply of food in Anganwadis and Schools -reg.

Representations have been received seeking clarification regarding applicability of GST on the issues as to whether serving of food in schools under Mid-Day Meals Scheme would be exempt if such supplies are funded by government grants and/or corporate donations. The issue was examined by GST Council in its 43rd meeting held on 28th May, 2021.

Entry 66 clause (b)(ii) of notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017, exempts Services provided to an educational institution, by way of catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory. This entry applies to pre-school and schools.

Accordingly, as per said entry 66, any catering service provided to an educational institution is exempt from GST. The entry further mention that such exempt service includes mid- day meal service as specified in the entry. The scope of this entry is thus wide enough to cover any serving of any food to a school, including pre-school. Further, an Anganwadi interalia provides pre-school non- formal education. Hence, aganwadi is covered by the definition of educational institution (as pre-school)

Accordingly, as per recommendation of the GST Council, it is clarified that services provided to an educational institution by way of serving of food ( catering including mid- day meals) is exempt from levy of GST irrespective of its funding from government grants or corporate donations [under said entry 66 (b)(ii)]. Educational institutions as defined in the notification include aganwadi. Hence, serving of food to anganwadi shall also be covered by said exemption, whether sponsored by government or through donation from corporates.

Difficulty if any, in the implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

(Rajeev Ranjan) Under Secretary, TRU

Email: rajeev.ranjan-as@gov.in

Tel: 011 2309 5558

2. Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub–Clarification regarding applicability of GST on the activity of construction of road where considerations are received in deferred payment (annuity)-reg.

  1. Certain representations have been received requesting for a clarification regarding applicability of GST on annuities paid for construction of road where certain portion of consideration is received upfront while remaining payment is made through deferred payment (annuity) spread over years.
  2. This issue has been examined by the GST Council in its 43rd meeting held on 28th May, 2021.
    • GST is exempt on service, falling under heading 9967 (service code), by way of access to a road or a bridge on payment of annuity [entry 23A of notification No. 12/2017-Central Tax]. Heading 9967 covers “supporting services in transport” under which code 996742 covers “operation services of National Highways, State Highways, Expressways, Roads & streets; bridges and tunnel operation services”. Entry 23 of said notification exempts “service by way of access to a road or a bridge on payment of toll”. Together the entries 23 and 23A exempt access to road or bridge, whether the consideration are in the form of toll or annuity [heading 9967].
    • Services by way of construction of road fall under heading 9954. This heading inter alia covers general construction services of highways, streets, roads railways, airfield runways, bridges and tunnels. Consideration for construction of road service may be paid partially upfront and partially in deferred annual payments (and may be called annuities). Said entry 23A does not apply to services falling under heading 9954 (it specifically covers heading 9967 only). Therefore, plain reading of entry 23A makes it clear that it does not cover construction of road services (falling under heading 9954), even if deferred payment is made by way of instalments (annuities).

3. Accordingly, as recommended by the GST Council, it is hereby clarified that Entry 23A of notification No. 12/2017-CT(R) does not exempt GST on the annuity (deferred payments) paid for construction of roads.

4. Difficulty if any, in the implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

(Rajeev Ranjan) Under Secretary, TRU

Email: rajeev.ranjan-as@gov.in

Tel: 011 2309 5558

3. Clarification regarding GST on supply of various services by Central and State Board (such as National Board of Examination)

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub– Clarification regarding GST on supply of various services by Central and State Board (such as National Board of Examination)–reg.

Certain representations have been received seeking clarification in respect of taxability of various services supplied by Centre and State Boards such as National Board of Examination (NBE). These services include entrance examination ( on charging a fee) for admission to educational institution, input services for conducting such entrance examination for students, accreditation of educational institutions or professional so as to authorise them to provide their respective services. The issue was examined by GST Council in its 43rd meeting held on 28th May, 2021.

Illustratively, NBE provides services of conducting entrance examinations for admission to courses including Diplomat National Board (DNB) and Fellow of National Board (FNB), prescribes courses and curricula for PG medical studies, holds examinations and grant degrees, diplomas and other academic distinctions. It carries out all functions as are normally carried out by central or state educational boards and is thus a central educational board.

According to explanation 3(iv) of the notification No. 12/ 2017 CTR, “Central and State Educational Boards” are treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students.

Therefore, NBE is an ‘Educational Institution’ in so far as it provides services by way of conduct of examination, including any entrance examination, to the students.

  • Following services supplied by an educational institution are exempt from GST vide sl. No. 66 of the notification No. 12/ 2017- Central Tax (Rate) dated 28.06.2017,

Services provided –

  • (a) by an educational institution to its students, faculty and staff;
  • (aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee;
  • Similarly, services provided to an educational institution, relating to admission to, or conduct of examination is also exempt from GST [sl. No. 66 (b)(iv)- 12/2017-CT(r)].
  • 3.3. Educational institutions are defined at 2(y) of the said notification as follows-
  • “(y) educational institution” means an institution providing services by way of, –
    • pre-school education and education up to higher secondary school or equivalent;
    • education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
    • education as a part of an approved vocational education course;”;

Further, clause (iv) of Explanation of said notification reads as below:

“(iv) For removal of doubts, it is clarified that the Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students”

  • Taking into account the above, the GST Council has recommended, to clarify as below:
    •   GST is exempt on services provided by Central or State Boards ( including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
    • GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017- CT(R)].
    • GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional ( accreditation fee or registration fee such as fee for FMGE screening test ) so as to authorise them to provide their respective services

Difficulty if any, in the implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

(Rajeev Ranjan) Under Secretary, TRU

Email: rajeev.ranjan-as@gov.in Tel: 011 2309 5558

4. Clarification regarding GST rate on construction services provided to a Government Entity w.r.t construction of a Ropeway on turnkey basis

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub– Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis-reg.

1. Reference has been received by the Board for a clarification whether services supplied to a Government Entity by way of construction such as of “a ropeway” are eligible for concessional rate of 12% GST under entry No. 3 (vi) of Notification No. 11/2017- CT (R) dt. 28.06.2017. On the recommendation of the GST Council, this issue is clarified as below.

2. According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated 28.06.2017, GST rate of 12% is applicable, inter alia, on-

“(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, a local authority a Governmental Authority or a Government Entity, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

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

2.1 Thus, said entry No 3 (vi) does not apply to any works contract that is meant for the purposes of commerce, industry, business of profession, even if such service is provided to the Central Government, State Government, Union Territory, a local authority a Governmental Authority or a Government Entity. The doubt seems to have arisen in the instant cases as Explanation to the said entry states, 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. However, this explanation does not apply to Governmental Authority or Government Entity, as defined in clause (ix) and (x) of the explanation to said notification. Further, civil constructions, such as rope way for tourism development shall not be covered by said entry 3(vi) not being a structure that is meant predominantly for purposes other than business. While road, bridge, terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification, structures like ropeway are not covered by these entries too. Therefore, works contract service provided by way of construction such as of rope way shall fall under entry at sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.

3. Difficulty if any, may be brought to the notice of the Board.

Yours faithfully,

(Rajeev Ranjan) Under Secretary, TRU

Email: rajeev.ranjan-as@gov.in

Tel: 011 2309 5558

5. GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub: GST on milling of wheat into flour or paddy into rice for distribution by State Governments under PDS –reg.

Certain representations have been received seeking clarification whether composite supply of service by way of milling of wheat into wheat flour, alongwith fortification, by any person to a State Government for distribution of such wheat flour under Public Distribution System is eligible for exemption under entry No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and also as regards the rate of GST on such milling, if it does not fall in said entry No. 3A. The issue has been examined by GST Council in its 43rd meeting held on 28th May, 2021.

Entry at Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution”.

As per the recommendation of the GST Council the issue is clarified as below.

Public Distribution specifically figures at entry 28 of the 11th Schedule to the constitution, which lists the activities that may be entrusted to a Panchayat under Article 243G of the Constitution. Hence, said entry No. 3A would apply to composite supply of milling of wheat and fortification thereof by miller, or of paddy into rice, provided that value of goods supplied in such composite supply (goods used for fortification, packing material etc) does not exceed 25% of the value of composite supply. It is a matter of fact as to whether the value of goods in such composite supply is up to 25% and requires ascertainment on case-to-case basis.

In case the supply of service by way of milling of wheat into flour or of paddy into rice, is not eligible for exemption under Sl. No. 3 A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 for the reason that value of goods supply in such a composite supply exceeds 25%, then the applicable GST rate would be 5% if such composite supply is provided to a registered person, being a job work service (entry No. 26 of notification No. 11/2017- Central Tax (Rate) dated 28.06.2017). Combined reading of the definition of job-work [section 2(68), 2(94), 22, 24, 25 and section 51] makes it clear that a person registered only for the purpose of deduction of tax under section 51 of the CGST Act is also a registered person for the purposes of the said entry No. 26, and thus said supply to such person is also entitled for 5% rate.

Difficulty if any, in the implementation of this circular may be brought to the notice of the Board.

Yours Faithfully,

Shashikant Mehta Technical Officer (TRU)

Email: shashikant.mehta@gov.in

6. Clarification regarding GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

The     Principal     Chief     Commissioners/     Chief     Commissioners/     Principal Commissioners/ Commissioner of Central Tax (All) / The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub: GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them –reg

Certain representations have been received requesting for clarification regarding applicability of GST on supply of service by State Govt. to their undertakings or PSUs by way of guaranteeing loans. The issue was examined by GST Council in its 43rd meeting held on 28th May, 2021.

Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.”

Accordingly, as recommended by the Council, it is re-iterated that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt under said entry No. 34A.

Difficulty, if any, in the implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

Shashikant Mehta Technical Officer (TRU)

Email: shashikant.mehta@gov.in

7. Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System

CBIC-190354/36/2021-TRU Section-CBEC

Government of India

Ministry of Finance

Department of Revenue

North Block, New Delhi,

Dated the 17th June, 2021

To,

Principal Chief Commissioners/ Principal Directors General, Chief Commissioners/ Directors General,

Principal Commissioners/ Commissioners of GST and Central Tax (AII),

Madam/Sir,

Subject: Clarification regarding GST rate on laterals/parts of Sprinklers or Drip Irrigation System–regarding.

Representations have been received seeking clarification regarding GST rate on parts of Sprinklers or Drip Irrigation System, when they are supplied separately ( i.e. not along with entire sprinklers or drip irrigation system). This issue was examined in the 43rd  meeting of GST Council held on the 28th May, 2021.

The GST rate on Sprinklers or Drip Irrigation System along with their laterals/parts are governed by S.No. ‘195B’ under Schedule II of notification No. 1/2017- Central Tax (Rate), dated 28th June, 2017 which has been inserted vide notification No. 6/2018- Central Tax (Rate), dated 25th January, 2018 and reads as below:

  S. No.Chapter Heading/ Sub-heading/Tariff Item  Description of Goods  CGST rate
  195B  8424Sprinklers; drip irrigation systems including laterals; mechanical sprayer  6%

The matter is examined. The intention of this entry has been to cover laterals (pipes to be used solely with with sprinklers/drip irrigation system) and such parts that are suitable for use solely or principally with ‘sprinklers or drip irrigation system’, as classifiable under heading 8424 as per Note 2 (b) to Section XVI to the HSN. Hence, laterals/parts to be used solely or principally with sprinklers or drip irrigation system, which are classifiable under heading 8424, would attract a GST of 12%, even if supplied separately. However, any part of general use, which gets classified in a heading other than 8424, in terms of Section Note and Chapter Notes to HSN, shall attract GST as applicable to the respective heading.

Difficulty, if any, may be brought to the notice of the Board immediately. Hindi version shall follow.

Yours faithfully

(Patil Sameer Shivajirao) OSD, TRU

Email: sameer.sp@gov.in

Tel: 011 2309 5543

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