Issues

Clarifications

1. Whether the ITC availed by recipient of deemed export supply for claiming refund of tax would be subject to provisions related to blocked credits under Section 17 of the CGST Act, 2017?

•  Due to difficulties faced by the recipients at the time of filing refund of tax paid on deemed exports, the CBIC vide Circular No. 147/03/2021- GST dated 12 March 2021 clarified that said tax paid on deemed exports would be available as ITC to the recipients only for enabling them to claim refund
• ITC availed by recipient for tax paid on deemed exports is not ITC as per Chapter V of the CGST Act, 2017 and, therefore, would not be subject to Section 17 of the CGST Act, 2017

• ITC availed by recipient for tax paid on deemed exports is not ITC as per Chapter V of the CGST Act, 2017 and, therefore, not to be included in ‘Net ITC’ for computation of refund of unutilised ITC on account of ‘zero rated supplies’ or ‘inverted duty structure’

1. Section 17(5)(b) of the CGST Act, 2017 provides for list of specific goods and services on which ITC is not available under clause (i) to (iii). A proviso is provided under section 17(5)(b) after sub clause (iii)  to provide ITC on goods and services which are mandatorily provided by employer to employee under any any law for the time being in force.

Whether the proviso after Section 17(5)(b) of             the CGST Act, 2017 is applicable to entire                   clause (b) or only to sub clause (iii) of clause              (b) as it is provided after the sub clause (iii)?

• Introduction of the said proviso was based on the recommendations of GST Council in its 28th meeting to widen the scope of GST on goods and services which are mandatorily provided by employer to employee under any any law for the time being in force. Hence, the proviso after section 17(5)(b)(iii) of the CGST Act, 2017 would be applicable to entire clause (b) of section 17(5) of the CGST Act, 2017

• Section 17(5)(b)(i) restricts the ITC in respect of leasing, renting or hiring of motor vehicles, vessels or aircraft. It is clarified that “leasing” refers to leasing of motor vehicles, vessels, and aircrafts only and not leasing of any other items. Therefore, ITC in case of leasing, other than leasing  of motor vehicles, vessels and aircrafts is allowed

1. Whether various perquisites provided by the employer to its employees in terms of contractual agreement entered between the employer and the employee are liable for GST?

• Schedule III of the CGST Act, 2017 provides that “services by the employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence, GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation of employment
• Further, any perquisites provided to the employee by the employer in terms of contractual agreement entered between the employer and the employee are in lieu of services provided by employee to employers. Therefore, they would not be subject to GST

• Electronic credit ledger can be used for making payment of output tax whether self-assessed in return or payable as a consequence of any proceeding under GST  except for tax payable on reverse charge mechanism
• Further, electronic credit ledger cannot be used for payment of interest, fee or penalty under GST or for payment of erroneous refund sanctioned, where such refund was sanctioned in cash

• 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