Clarifications on GST rates and exemptions applicable on 11 services

The Central Board of Indirect Taxes and Customs has issued a fresh GST Circular under the CGST Act on 6th October 2021. It is CGST Circular number 164/20/2021, clarifying the taxability of 11 services under the GST law.

The GST Council gave these clarifications at the 45th GST Council meeting held on 17th September 2021. These have been summarised as follows-

Cloud kitchens or central kitchen services

The definition of ‘restaurant service’ in the CGST (Rate) Notification 11/2017 covers food sold as takeaway, doorstep delivery, and room services. Accordingly, food that is cooked and supplied as takeaway or doorstep delivery which is prevalent in the current times will be chargeable at the same GST rates as any in-dine service.

Hence, food supplied by cloud kitchens and central kitchens attracts a GST rate of 5% without availing input tax credit on materials used for restaurant services.

Sale of ice cream by the ice cream parlours

The government has clarified that since ice cream parlours or outlets do not make ice cream to sell it, they do not provide ‘restaurant services’. Therefore, it takes the nature of goods and not services. Also, the nature remains the same even if a slight element of service is included in such a supply of ice cream. For instance, supplying ice cream adding few more ingredients such as chocolate sauce while serving the customer.

Accordingly, a GST rate of 18% becomes applicable on ice cream sold by parlours or outlets.

Services of coaching provided to students by the coaching institutions and NGOs under the “Scholarships for Students with Disabilities” scheme of the Central Government 

Here, the government provides 100% aid or grant for the benefit of students in the form of tuition fees and expenditures. It is given to the coaching institutes and can be from the central or state government. Such services are entirely exempted from GST.

Services of a satellite launch by M/s New Space India Limited (NSIL)

Many representations were received to recognise the services provided by the NSIL to international customers as exports. The benefit of a refund of IGST paid would then be available to the company. The same is similar to services provided by M/s ANTRIX Corporation Ltd that was clarified in the IGST Circular number 2/1/2017.

If the recipient is located outside India, it takes the nature of service export under zero-rated supply and is thus eligible for a refund. However, if it is a domestic transaction, then the satellite launch service becomes taxable under GST.  

Charges paid at the toll plaza for overloaded vehicles

It is well known that services of toll for access to roads or bridges are exempt from GST. Riders and drivers need not pay GST while paying toll charges. 

Additionally, representations were made to clarify whether the overloading charges paid at toll plazas are otherwise subject to GST. It has been established that no GST is leviable on such overload charges paid since they take the nature of a higher toll fee (2, 4, 6, 8, or 10 times the basic toll fare).

Vehicle renting by state transport undertakings and local authorities

The contention was whether renting vehicles by state transport undertaking or local authorities can be treated in the same manner as giving vehicles on hire to them. The CGST (Rate) Notification number 12/2017 exempts hiring services where passengers are more than 12. 

However, an advance ruling gave a contrasting viewpoint that renting is taxable despite hiring exempt, referring to the case law of the erstwhile service tax. The GST Council clarified that both are exempted at the 45th GST Council meeting, irrespective of rights available to the state transport undertaking or local authorities. 

Services of granting mining and mineral exploration rights

The next clarification also pertains to a contrasting stand maintained by the advance ruling giving rise to doubts among the taxpayers. 

While the GST rate for mineral exploration and mining rights after 1st January 2019 is undisputable at 18%, the issue pertains to the period between 1st July 2017 to 31st December 2018.

The GST Council referred to a general GST rate fixed for services at 18%. There is no specific mention of this supply in the rate notifications. Hence, a GST rate of 18% applies to granting of mining and mineral exploration rights.

Admission to amusement parks with rides, etc. 

The word ‘amusement park’ was defined in Central Tax (Rate) Notification number 11/2017. The same notification prescribed a GST rate of 18% on admission to amusement parks until 1st October 2021. In comparison, a 28% GST rate was chargeable on admission to race clubs, casinos or sporting events such as the Indian Premier League (IPL).

The GST Council clarified that the higher rate applies to admission into locations with casinos, race clubs, and IPL matches, even with other activities. 18% GST rate applies to admission into theme parks, amusement parks for games and rides if it’s in the exact location as the casino or race club upon a condition. The premise should not allow common access into the casino or race club. The clarification also applies to the period before 1st October 2021. 

Contractual services by manufacturers to brand owners for the making alcoholic liquor for human consumption.

The manufacturing of alcoholic drinks for human consumption as job work is subject to 18% and not 5%. Accordingly, it is also clarified that alcoholic beverage is not food or food product.

In addition to this circular, GST Circular number 163/2021 was also issued on the same day. It covered clarifications for GST rates on frozen, dried fruits, the difference between coconut and copra, batteries in the UPS system, specified renewable energy projects, etc. 

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For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in