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INTERPRETATION OF CIRCULAR NO.172/04/2022

Written by Hari Om & Rahul Dt. October 7th, 2022

Government has issued this circular regarding clarification on various issues Pertaining to GST

The issues on which Government clarify through this circular is mentioned below:

  • Refund claimed by recipients of supplies regarded as deemed export:
    Many people who deals in Deemed Export (“Deemed Exports” refers to supplies of goods manufactured in India (and not services) which are notified as deemed exports under Section 147 of the CGST/SGST Act, 2017. The supplies do not leave India. The payment for such supplies is received either in Indian rupees or in convertible foreign exchange) faces difficulty when comes to claim the refund of tax which they paid on such supplies. So to reduce the difficulty level Government clear that the ITC availed by recipient of deemed export supplies would not be subject to provision of section 17 CGST Act,2017. So there is no requirement of Net ITC for Computation of refund of Unutilized ITC.
  • Clarification on section 17(5) of the CGST Act:
    Section 17(5) deals with block credit (Block credit means the Supply of goods or services on which ITC is not allowed). So As per Section 17(5) of CGST Act ITC are not available on following supply of goods and services or both- food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft except when used for the purposes specified therein, life insurance and health insurance but it is not compulsory that ITC is not allowed to anyone on the supply of these Goods or Services Provided that the input tax credit shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply”.
  • Perquisites provided by employer to the employees as per contractual agreement:
    There is big confusion among the people about the GST applicability on Perquisites provided by employer to the employees as per contractual agreement. So to clarify the issue the CBIC has given the clarification by the Circular that any Perquisites provided by employer to their employees in terms of contractual agreement is termed as employee employer relationship So as per schedule III of CGST Act service provided by employee to its employer in the course of his employment will not considered as supply of goods or services. Hence no GST will attract.
  • Utilization of amounts available in the Electronic Credit Ledger and the Electronic Cash Ledger for payment of tax and other liabilities:
    Regarding this, we can understand it by dividing in three different issues:

    • Amount available in electronic credit ledger can be used for making payment of any tax under GST Law:
      It was clarified that any payment towards output tax, whether self -assessed in the return or payable as a consequence of any proceeding instituted under the provisions of GST Laws, can be made by utilization of the amount available in the electronic credit ledger of a registered person.
      Here output tax does not Includes the tax payable under reverse charge mechanism so the amount of electronic credit ledger does not use to pay the tax under reverse charge mechanism.
    • Amount available in the electronic credit ledger can be used for making payment of any liability other than tax under the GST Laws:
      In GST, the registered person has to pay various liability which is apart from the liability of output tax like interest, penalty fees or any other amount payable under GST Law. So as per sub-section (4) of section 49, the electronic credit ledger can be used for making payment of output tax only under CGST Act or IGST Act.
    • Amount available in the electronic cash ledger can be used for making payment of any liability under the GST Laws:
      As per sub – section (3) of section 49 of the CGST Act, the amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of the GST Laws.

Written by
Hari Om & Rahul
Articled Clerk

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