Circular No. 172/04/2022-GST
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F. No. CBIC-20001/2/2022-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 6
th
July, 2022
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/
Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)
Madam/Sir,
Subject: Clarification on various issue pertaining to GST- reg.
Various representations have been received from the field formations seeking
clarification on certain issues with respect to –
i. refund claimed by the recipients of supplies regarded as deemed export;
ii. interpretation of section 17(5) of the CGST Act;
iii. perquisites provided by employer to the employees as per contractual agreement; and
iv. utilisation of the amounts available in the electronic credit ledger and the electronic
cash ledger for payment of tax and other liabilities.
2. In order to clarify the issue and to ensure uniformity in the implementation of the
provisions of law across the field formations, the Board, in exercise of its powers conferred by
section 168 (1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as
“CGST Act”), hereby clarify the issues as under:
S. No. Issue Clarification
Refund claimed by the recipients of supplies regarded as deemed export
1. Whether the Input Tax Credit
(ITC) availed by the recipient of
deemed export supply for
claiming refund of tax paid on
supplies regarded as deemed
exports would be subjected to
provisions of Section 17 of the
CGST Act, 2017.
The refund in respect of deemed export supplies
is the refund of tax paid on such supplies.
However, the recipients of deemed export
supplies were facing difficulties on the portal to
claim refund of tax paid due to requirement of
the portal to debit the amount so claimed from
their electronic credit ledger. Considering this
difficulty, the tax paid on such supplies, has
been made available as ITC to the recipients
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vide Circular No. 147/03/2021-GST dated
12.03.2021 only for enabling them to claim such
refunds on the portal. The ITC of tax paid on
deemed export supplies, allowed to the
recipients for claiming refund of such tax paid,
is not ITC in terms of the provisions of Chapter
V of the CGST Act, 2017. Therefore, the ITC so
availed by the recipient of deemed export
supplies would not be subjected to provisions of
Section 17 of the CGST Act, 2017.
2. Whether the ITC availed by the
recipient of deemed export
supply for claiming refund of
tax paid on supplies regarded as
deemed exports is to be
included in the “Net ITC” for
computation of refund of
unutilised ITC under rule 89(4)
& rule 89 (5) of the CGST
Rules, 2017.
The ITC of tax paid on deemed export supplies,
allowed to the recipients for claiming refund of
such tax paid, is not ITC in terms of the
provisions of Chapter V of the CGST Act, 2017.
Therefore, such ITC availed by the recipient of
deemed export supply for claiming refund of tax
paid on supplies regarded as deemed exports is
not to be included in the “Net ITC” for
computation of refund of unutilised ITC on
account of zero-rated supplies under rule 89(4)
or on account of inverted rated structure under
rule 89(5) of the CGST Rules, 2017.
Clarification on various issues of section 17(5) of the CGST Act
3. Whether the proviso at the end
of clause (b) of sub-section (5)
of section 17 of the CGST Act
is applicable to the entire clause
(b) or the said proviso is
applicable only to sub-clause
(iii) of clause (b)?
1. Vide the Central Goods and Service Tax
(Amendment Act) 2018, clause (b) of
sub-section (5) of section 17 of the
CGST Act was substituted with effect
from 01.02.2019. After the said
substitution, the proviso after sub-
clause (iii) of clause (b) of sub-section
(5) of section 17 of the CGST Act
provides as under:
“Provided that the input tax credit in
respect of such goods or services or both
shall be available, where it is obligatory
for an employer to provide the same to
its employees under any law for the time
being in force.”
2. The said amendment in sub-section (5)
of section 17 of the CGST Act was
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made based on the recommendations of
GST Council in its 28
th
meeting. The
intent of the said amendment in sub-
section (5) of section 17, as
recommended by the GST Council in its
28
th
meeting, was made known to the
trade and industry through the Press
Note on Recommendations made
during the 28
th
meeting of the GST
Council, dated 21.07.2018. It had been
clarified “that scope of input tax credit
is being widened, and it would now be
made available in respect of Goods or
services which are obligatory for an
employer to provide to its employees,
under any law for the time being in
force.”
3. Accordingly, it is clarified that the
proviso after sub-clause (iii) of clause
(b) of sub-section (5) of section 17 of
the CGST Act is applicable to the whole
of clause (b) of sub-section (5) of
section 17 of the CGST Act.
4. Whether the provisions of sub-
clause (i) of clause (b) of sub-
section (5) of section 17 of the
CGST Act bar availment of ITC
on input services by way of
“leasing of motor vehicles,
vessels or aircraft” or ITC on
input services by way of any
type of leasing is barred under
the said provisions?
1. Sub-clause (i) of clause (b) of sub-
section (5) of section 17 of the CGST
Act provides that ITC shall not be
available in respect of following supply
of goods or services or both—
“(i) food and beverages,
outdoor catering, beauty treatment,
health services, cosmetic and plastic
surgery, leasing, renting or hiring of
motor vehicles, vessels or aircraft
referred to in clause (a) or clause
(aa) except when used for the
purposes specified therein, life
insurance and health insurance:
Provided that the input tax credit
in respect of such goods or services
or both shall be available where an
inward supply of such goods or
services or both is used by a
registered person for making an
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outward taxable supply of the same
category of goods or services or both
or as an element of a taxable
composite or mixed supply”
2. It is clarified that “leasing” referred in
sub-clause (i) of clause (b) of sub-section
(5) of section 17 refers to leasing of
motor vehicles, vessels and aircrafts
only and not to leasing of any other
items. Accordingly, availment of ITC is
not barred under sub-clause (i) of clause
(b) of sub-section (5) of section 17 of the
CGST Act in case of leasing, other than
leasing of motor vehicles, vessels and
aircrafts.
Perquisites provided by employer to the employees as per contractual agreement
5. Whether various perquisites
provided by the employer to its
employees in terms of
contractual agreement entered
into between the employer and
the employee are liable for
GST?
1. Schedule III to the CGST Act provides
that “services by 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 to employment.
2. Any perquisites provided by the
employer to its employees in terms of
contractual agreement entered into
between the employer and the employee
are in lieu of the services provided by
employee to the employer in relation to
his employment. It follows therefrom
that perquisites provided by the
employer to the employee in terms of
contractual agreement entered into
between the employer and the employee,
will not be subjected to GST when the
same are provided in terms of the
contract between the employer and
employee.
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Utilisation of the amounts available in the electronic credit ledger and the electronic
cash ledger for payment of tax and other liabilities
6. Whether the amount available
in the electronic credit ledger
can be used for making
payment of any tax under the
GST Laws?
1. In terms of sub – section (4) of section
49 of CGST Act, the amount available in
the electronic credit ledger may be used
for making any payment towards output
tax under the CGST Act or the Integrated
Goods and Services Tax Act, 2017
(hereinafter referred to as “IGST Act”),
subject to the provisions relating to the
order of utilisation of input tax credit as
laid down in section 49B of the CGST
Act read with rule 88A of the CGST
Rules.
2. Sub-rule (2) of rule 86 of the CGST
Rules provides for debiting of the
electronic credit ledger to the extent of
discharge of any liability in accordance
with the provisions of section 49 or
section 49A or section 49B of the CGST
Act.
3. Further, output tax in relation to a
taxable person (i.e. a person who is
registered or liable to be registered under
section 22 or section 24 of the CGST
Act) is defined in clause (82) of section
2 of the CGST Act as the tax chargeable
on taxable supply of goods or services or
both but excludes tax payable on reverse
charge mechanism.
4. Accordingly, it is 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.
5. It is further reiterated that as output tax
does not include tax payable under
reverse charge mechanism, implying
thereby that the electronic credit ledger
cannot be used for making payment of
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any tax which is payable under reverse
charge mechanism.
7. Whether the amount available
in the electronic credit ledger
can be used for making
payment of any liability other
than tax under the GST Laws?
As per sub-section (4) of section 49, the
electronic credit ledger can be used for making
payment of output tax only under the CGST Act
or the IGST Act. It cannot be used for making
payment of any interest, penalty, fees or any
other amount payable under the said acts.
Similarly, electronic credit ledger cannot be
used for payment of erroneous refund
sanctioned to the taxpayer, where such refund
was sanctioned in cash.
8. Whether the 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.
3. It is requested that suitable trade notices may be issued to publicize the contents of this
Circular.
4. Difficulty, if any, in implementation of this Circular may please be brought to the notice
of the Board. Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)
