 "Nirmala Sitharaman, Nirmala, Finance Minister")
Union Finance Minister Nirmala Sitharaman (File Photo: PTI)
The Union finance ministry on Wednesday issued a set of circulars giving relief to the automotive industry, advertising agencies providing services to foreign clients, data hosting services providers and exporters of goods.
“As demo vehicles are used by authorised dealers to provide trial runs and to demonstrate features of the vehicle to potential buyers, it helps the potential buyers to make a decision to purchase a particular kind of motor vehicle. Therefore, as demo vehicles promote sale of similar types of motor vehicles, they can be considered to be used by the dealer for making further supply of such motor vehicles,” said a circular issued by the Central Board of Indirect Taxes and Customs (CBIC).
The circular further said that even if vehicles are capitalised in the book of account, availability of Goods and Services Tax (GST) deductions should not get impacted.
“The circular has rightly analysed the concept of ‘goods being used for making taxable supplies’ and concluded that as demo vehicles are used for test drives, display of features, they enhance the sales and hence are eligible for credit,” said Harpreet Singh, Partner, Indirect Tax, Deloitte India.
Another circular on supply of data hosting services was issued where such services are provided by companies in India to cloud computing service providers located outside India. Such services were not being treated as exports by tax authorities, thus resulting in GST liabilities.
Various calcifications have been issued on this point, stating that generally such services, subject to fulfillment of certain conditions qualify as exports and hence there would not be any GST liability.
“Supply of data hosting services being provided by a data hosting service provider located in India to an overseas cloud computing entity can be considered as export of services, subject to the fulfillment of the other conditions mentioned in section 2(6) of IGST Act,” the circular held after analysing various aspects.
Another circular on providing relief to exporters clarified that where inputs were imported by availing any benefit under customs, but subsequently, taxes are paid on them at a later stage, the output GST paid on export of such goods would be available as refund.
“Refund of IGST claims on exports made with payment of integrated tax in such cases may not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of CGST Rules,” said the CBIC circular.
Clarification was also issued with respect to advertising services provided to foreign clients. Various aspects have been analysed in the circular to conclude, whether advertising agencies qualify as an “intermediary”, whether foreign clients qualify as recipients and if such services are performance based services. The analysis of such aspects in the Circular is likely to result in services qualifying as exports and hence not liable to GST.
First Published: Sep 11 2024 | 10:45 PM IS