S. No.

Issue

Clarification

Refund claimedby the recipients of supplies regarded as deemed export

1.

Whether the Input Tax Credit (ITC) availedby the recipient of deemed exportsupply for claiming refund of tax paid on supplies regarded as deemedexports would be subjected to provisionsof Section 17 of the CGST Act, 2017.

The refund in respect of deemed exportsupplies is the refund of tax paid on such supplies. However, the recipients of deemed exportsupplies were facing difficulties on the portal to claim refund of tax paid due torequirement of the portal to debitthe amount so claimed from theirelectronic credit ledger. Consideringthis difficulty, the tax paid on suchsupplies, has
been made available as ITC to the recipients vide Circular No. 147/03/2021-GST dated 12.03.2021 onlyfor enabling themto claim suchrefunds on the portal. The ITC of tax paid on deemed export supplies, allowed to the recipientsfor claiming refund of such tax paid, isnot ITC in terms of the provisions of Chapter V of the CGST Act,2017. Therefore, the ITC so availed by the recipient of deemed exportsupplies would notbe subjected to provisions ofSection 17 of the CGST Act, 2017.

2

Whether the ITC availed by the recipient of deemed exportsupply for claiming refund of tax paidon supplies regarded as deemed exportsis to be included in the"Net ITC" for computation of refund of unutilisedITC under rule 89(4) & rule 89 (5) of the CGST Rules, 2017.

The ITC of tax paid on deemed exportsupplies, allowed to therecipients for claiming refund of such tax paid, is not ITC in termsof the provisions of Chapter V of the CGST Act,2017. Therefore, such ITCavailed by the recipient of deemed exportsupply for claiming refund of taxpaid on supplies regarded as deemed exports is not tobe included in the "Net ITC" for computation of refund of unutilised ITC on account of zero-rated supplies underrule 89(4) or on account ofinverted rated structure under rule 89(5) of the CGST Rules,2017.

Clarification on various issuesof 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 entireclause
(b)or the said proviso is applicable onlyto sub-clause
(iii) of clause (b)?

1. Vide the Central Goods and Service Tax (AmendmentAct) 2018, clause (b) of sub-section (5) of section17 of the CGST Act wassubstituted with effect from 01.02.2019. After the said substitution, the proviso aftersub-clause (iii) of clause(b) of sub-section (5) of section17 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 anemployer to provide the same to its employees under any law for thetime being in force."

The said amendment in sub-section (5) of section 17 of the CGST Act wasmade based on the recommendations of GSTCouncil in its 28th meeting. Theintent of the said amendment in sub-section (5) of section 17, as recommended by the GST Council in its 28th meeting, was made knownto the trade and industry throughthe Press Noteon Recommendations made during the 28th meetingof the GST Council,dated 21.07.2018. It had been clarified "that scope of input tax credit isbeing widened, and it would now be madeavailable in respect of Goods or services whichare obligatory for an employer to provide to its employees, underany 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 wholeof clause (b)of sub-section (5) of section 17 ofthe CGST Act.

4

Whether the provisions of sub- clause (i) of clause (b) of sub- section (5) of section 17 of the CGSTAct bar availment of ITC on input services by way of "leasing of motor vehicles, vessels or aircraft" or ITCon input services by way of anytype 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 shallnot be available in respect of following supply of goodsor services or both-
"(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, rentingor hiring of motor vehicles, vessels or aircraft referred to in clause (a) orclause (aa) exceptwhen used for the purposes specified therein, life insurance and health insurance:
Provided thatthe input taxcredit in respect of suchgoods or services or both shall beavailable where an inward supply of such goodsor 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 taxablecomposite or mixed supply"

2. It is clarified that "leasing" referredin 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 ITCis not barred undersub-clause (i) of clause
(b) of sub-section (5) of section17 of the CGST Act incase of leasing, other than leasingof 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 intobetween the employer and the employee are liable for GST?

1. ScheduleIII 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 andhence GST is not applicable on services rendered by employee to employer provided they are in the courseof or in relation to employment.
2. Any perquisites provided by the employerto its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services providedby employee to the employer inrelation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered intobetween the employer and the employee, will not be subjectedto GST when the same are provided in terms of the contract between the employer and employee.

Utilisation of the amountsavailable in the electronic creditledger and the electronic cashledger for payment of tax and other liabilities

6

Whether the amount available in the electronic credit ledgercan be used for makingpayment of any tax under the GST Laws?

1. Interms of sub-section (4) of section 49 of CGST Act,the amount available in the electroniccredit ledger may be used formaking any payment towards output tax under theCGST Act or the Integrated Goods and Services Tax Act, 2017 (hereinafterreferred to as "IGST Act"), subjectto the provisions relating to the orderof utilisation of input tax credit as laiddown in section 49B of the CGST Actread with rule 88A of the CGST Rules.
2. Sub-rule (2) of rule 86 of the CGSTRules provides for debiting of the electronic credit ledger to the extentof discharge of any liability inaccordance with the provisions of section 49 or section49A or section49B of the CGST Act.
3. Further, outputtax in relation to a taxableperson (i.e. a person who is registered or liable to be registered under section 22or section 24 of the CGST Act) isdefined in clause (82) of section 2of 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. Itis further reiterated that as output tax does not include tax payable underreverse charge mechanism, implying thereby thatthe electronic creditledger

cannot be used for making paymentof any tax whichis payable underreverse charge mechanism.

7

Whether the amount available in the electronic credit ledgercan be used for makingpayment of any liability other than tax under the GST Laws?

As per sub-section (4) of section49, the electronic credit ledger can be used formaking payment of output tax only underthe CGST Actor the IGST Act. It cannot be used for making payment of any interest, penalty, fees or any otheramount payable underthe said acts.Similarly, electronic creditledger cannot be used for payment of erroneous refundsanctioned to the taxpayer, where such refund was sanctioned incash.

8

Whether the amount available in the electronic cash ledger can beused for making payment of any liability under the GST Laws?

As per sub-section (3) of section 49 of the CGST Act, the amountavailable in the electroniccash ledger may be used for making anypayment towards tax, interest, penalty, feesor any otheramount payable underthe provisions of the GST Laws.