Highlights of CBIC Circulars from 50th GST CouncilMeet (17-07-2023)

• Interest on wrong availment and reversal of ITC: In case of wrong availment and subsequent
  reversal of IGST credit, interest under Sec 50(3) of CGST Act read with Rule 88B to be calculated
  based on the combined balance of IGST, CGST, and SGST. If the combined balance is higher than
  or equal to the total reversal, no interest needs to be paid. The circular also states that
  compensation cess shouldn’t be included in the combined balance calculation
• GSTR-3B vs. 2A reconciliation: It provides clarification on the debated issue of GSTR-3B vs. 2A
  reconciliation. Earlier issued Circular 183/15/2022 should be applied to fiscal year 19-20 until
  31.12.21. The restriction of 20%, 10%, and 5% imposed by R. 36(4) on different dates must be
  followed, and any differences can be resolved with an appropriate certificate in accordance
  with Circular 183.
• TDS deduction for multiple ECOs in a single transaction: If both the buyer and seller side ECOs are
  involved, the seller side ECO will be responsible for collecting and paying the TCS. However, if the
  seller side ECO is the ultimate supplier, then the buyer side ECO will be liable to collect the TCS.
• GST exemption for replacement or repair of goods with warranty: It clarifies that no GST needs to
  be paid when goods or parts are replaced or repaired by the manufacturer or distributor under
  warranty for a composite supply. In such cases, there is no requirement to reverse Input Tax Credit
  (ITC). However, if a separate consideration is charged for the warranty, it is considered a separate
  supply, and GST should be paid accordingly.
• Holding shares in subsidiary companies: When a parent company holds shares in its subsidiary
  companies, it does not qualify as a supply. Therefore, no GST is applicable in such cases.
• E-invoicing applicability for government supplies: It clarifies that e-invoicing is applicable when
  the turnover exceeds the threshold limit due to the supply of goods or services to government
  agencies registered solely for TDS deduction. As these government agencies are considered
  registered persons under the GST law, e-invoicing rules apply to them.
• Cross-charge invoice for common services: clarifies that ISD provisions are optional, and
  companies can issue cross charge invoices for common services when Input Tax Credit (ITC) is
  availed at the Head Office (HO) or any Branch Office (BO).

Further, in case of internally generated services between HO and BO, the salary cost should be excluded
from the transaction value. If the recipient is eligible for full ITC, non-issuance of any invoice will still be
compliant with the law. It will be deemed that the HO has issued a zero-value invoice to the BO in
accordance with the 2nd proviso to Rule 28.

Samyak Jain, Associate- Indirect Tax, SW India