CBIC issued Clarification on GST Rates and Classification of Certain Services

The Central Board of Indirect Taxes and Customs(CBIC) has issued Clarification regarding GST Rates and Classification of Certain Services via issuing Circular.

Various Representations have been received seeking clarifications on the following issues:

1. Applicability of GST on accommodation services supplied by Air Force Mess to its personnel;

2. Applicability of GST on incentive paid by Ministry of Electronics and Information Technology (MeitY) to acquiring banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.

These issues have been examined by Council in the 48th GST Council meeting held on 17th December, 2022. After the issues examining in GST Council, the issues wise clarifications are released.

Applicability of GST on accommodation services supplied by Air Force Mess to its personnel:

A representation for clarification on whether GST is payable on accommodation services provided by Air Force Mess to its personnel has been received.

All services supplied by Central Government, State Government, Union Territory or local authority to any person other than business entities (barring a few specified services such as services of postal department, transportation of goods and passengers etc.) are exempt from GST vide Sl. No. 6 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017. Therefore, as recommended by the GST Council, it is hereby clarified that accommodation services provided by Air Force Mess and other similar messes, such as, Army mess, Navy mess, Paramilitary and Police forces mess to their personnel or any person other than a business entity are covered by Sl. No. 6 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 provided the services supplied by such messes qualify to be considered as services supplied by Central Government, State Government, Union Territory or local authority.

Applicability of GST on incentive paid by MeitY to acquiring banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions:

Representations have been received requesting for clarification on whether GST is applicable on the incentive paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.

The government pays acquiring banks an incentive as a percentage of the value of RuPay Debit Card transactions and low value BHIM-UPI transactions up to Rs.2000/- under the Incentive Scheme for Promotion of RuPay Debit Cards and Low Value BHIM-UPI Transactions.

The Payments and Settlements Systems Act of 2007 prohibits banks and system providers from charging any amount to someone who makes or receives a payment using a RuPay Debit card or BHIM-UPI.

The service provided by acquiring banks in the digital payment system in the case of transactions via RuPay/BHIM UPI is the same as the service provided by acquiring banks in the case of transactions via any other card or mode of digital payment. The only difference is that the consideration for such services is paid by the central government in the form of an incentive rather than by the merchant or the card user. However, it is not a consideration paid by the central government for any service provided to the central government by the acquiring bank.

According to Sections 2(31) and 15 of the CGST Act, 2017, the incentive is in the form of a subsidy directly related to the price of the service and does not form part of the taxable value of the transaction.

As recommended by the Council, it is hereby clarified that incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.

For Official Circular Download PDF Given Below: