Important GST circulars issued by CBIC on 31st Dec 2024

Circular No. 240/34/2024-GST dated 31st December 2024, clarifying ITC provisions for electronic commerce operators (ECOs) supplying services notified under Section 9(5) of the CGST Act. Below are the key points:?

1. No ITC Reversal for Notified Supplies: ECOs are not required to reverse ITC on inputs and input services proportionately for supplies covered under Section 9(5) of the CGST Act, including services other than restaurant services.
2. Payment of Tax under Section 9(5): Tax liability for such notified supplies must be paid in cash, and ITC cannot be used for this purpose. ITC availed on inputs and input services can be utilized for other tax liabilities related to the ECO's own services, such as platform fees or commission.
3. This clarification aligns with the principles established in Circular No. 167/23/2021-GST, ensuring consistency in GST law implementation.

?Circular No. 241/35/2024-GST dated 31st December 2024, clarifying input tax credit (ITC) provisions under Ex-Works (EXW) contracts. Below are the key points:?

1. Deemed Receipt of Goods: Under clause (b) of sub-section (2) of Section 16 of the CGST Act, goods handed over by the supplier (OEM) to a transporter at the supplier's factory gate can be deemed "received" by the dealer, even if the goods are physically received later.
2. Eligibility for ITC: Dealers are eligible to claim ITC upon the transfer of goods at the supplier’s factory gate if: Transport is arranged by the supplier on behalf of the dealer. Insurance, if applicable, is also arranged on behalf of the dealer. Property in goods is transferred at the supplier’s location.
3. Applicability to Other Goods: The same principle applies to other goods under EXW contracts, where delivery and transfer of ownership occur at the supplier’s place of business.
4. Business Use Requirement: ITC is available only if goods are used or intended for business purposes. Diversion for non-business purposes or loss/disposal may disqualify ITC.

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Circular No. 242/36/2024-GST on December 31, 2024, to clarify the rules for determining the place of supply for online services provided to unregistered recipients. Below is a brief summary:?

1. Mandatory Details on Tax Invoices: For online services provided to unregistered recipients (e.g., OIDAR services, OTT subscriptions, e-newspapers, online gaming, etc.), suppliers must record the name of the recipient's State on tax invoices, regardless of the supply's value.
2. Place of Supply Determination: As per Section 12(2)(b)(i) of the IGST Act, if the recipient’s State is recorded on the invoice, the place of supply will be considered the recipient's location.
3. Liability of Suppliers: Suppliers are responsible for ensuring a mechanism to collect the recipient's State details before making the supply. Failure to comply may result in penalties under Section 122(3)(e) of the CGST Act.
4. Applicability: This rule applies to all online/digital services supplied to unregistered recipients, including services offered directly by suppliers or through e-commerce operators.
5. Actionable Steps: Review your invoicing mechanism to ensure compliance with these provisions. Record and declare the recipient's State in your GSTR-1/1A filings.

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Circular No. 243/37/2024-GST, dated December 31, 2024, to clarify the GST treatment of vouchers. Key highlights are as follows:

1. Transactions in Vouchers: Vouchers are treated as instruments creating an obligation to accept them as consideration for supply. Transactions in vouchers are not classified as supply of goods or services and are not subject to GST. GST applies only to the underlying goods or services redeemed using the vouchers.
2. Trading of Vouchers: Principal-to-Principal (P2P) Basis: Pure trading of vouchers is not taxable under GST. Agent/Commission Basis: GST is payable on the commission or fee earned by agents distributing vouchers.
3. Additional Services (e.g., Marketing, Technology Support): GST is applicable on charges for additional services provided by distributors or others to voucher issuers.
4. Unredeemed Vouchers (Breakage): No GST is payable on the value of unredeemed vouchers, as they do not constitute a supply of goods or services.

?For further guidance on how this may impact your business or to discuss tailored GST solutions, please feel free to reach out to us. We are here to assist you in navigating these changes effectively.