CBIC circular No. 206 dated 31.10.2023 regarding the Clarifications regarding applicability of GST on certain services as per recommendations of the GST Council in 52nd meeting held  on 7th October, 2023

This circular provides clarification on the GST levy in relation to the following matters, based on the recommendations made by the GST Council at its 52nd meeting, which was held in New Delhi on October 7, 2023.

• Whether the same line of business’ in the case of passenger transport and motor vehicle rental covers leasing motor vehicles without operators.
• Whether GST applies to the reimbursement of electricity prices collected from lessees/occupants by real estate businesses, malls, airport operators, and so on.
• Whether job work for processing “Barley” into “Malted Barley” attracts GST at 5% as suitable for “job work in relation to food and food products” or 18% as applicable to “job work in relation to the manufacture of alcoholic liquor for human consumption”. 
• Whether District Mineral Foundation Trusts (DMFTs) established by State Governments are Governmental Authorities and hence entitled to the same GST exemptions as any other Governmental Authority.
• Whether supplies of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods does not exceed 25% of the total value of supply) made to CPWD are eligible for GST exemption under Sr. No. 3 and 3A of Notification No. 12/2017-CTR dated 28.06.2017.

Whether the same line of business’ in the case of passenger transport and motor vehicle rental covers leasing motor vehicles without operators.

• Services of passenger transport by any motor vehicle (SAC 9964) and renting of motor vehicle designed to carry passengers with operator (SAC 9966), where the cost of fuel is included in the consideration charged to the service recipient, attract 5% GST with input tax credit of services in the same line of business.
• The same line of business as defined in Notification No. 11/2017- Central Tax (Rate) means “service procured from another service provider of transporting passengers in a motor vehicle or renting a motor vehicle.”
• It is hereby clarified that input services in the same line of business include passenger transport (SAC 9964) or motor vehicle renting with operator (SAC 9966), but not motor vehicle leasing without operator (SAC 9973), which attracts GST and/or compensation cess at the same rate as supply of motor vehicles by sale. 

Whether GST applies to the reimbursement of electricity prices collected from lessees/occupants by real estate businesses, malls, airport operators, and so on.

• There have been questions raised about the applicability of GST on the supply of electricity by real estate companies, malls, airport operators, and so on to their lessees or occupants.
• It is clarified that when electricity is supplied in conjunction with the renting of immovable property and/or the maintenance of premises, it is considered a composite supply and is taxed accordingly. The primary supply is the rental of immovable property and/or the maintenance of premises, as applicable, and the supply of electricity is an ancillary supply, as applicable. Even if electricity is billed separately, the supplies will constitute a composite supply, and thus the rate of the principal supply, i.e., GST rate on renting immovable property and/or maintaining immovable property, will apply.
• However, where electricity is supplied as a pure agent by Real Estate Owners, Resident Welfare Associations (RWAs), Real Estate Developers, and so on, it will not be included in the value of their supply. Furthermore, they will be deemed to be acting as pure agent for this supply if they charge for electricity on an actual basis, that is, if they charge the same amount for electricity from their lessees or occupants as the State Electricity Boards or DISCOMs charge from them.

Whether job work for processing “Barley” into “Malted Barley” attracts GST at 5% as applicable to “job work in relation to food and food products” or 18% as applicable to “job work in relation to the manufacture of alcoholic liquor for human consumption”.

• References have been received to determine whether services by job work for the conversion of barley into malt are subject to GST at the 5% rate prescribed for “job work in relation to all food and food products falling under Chapter 1 to 22 of the customs tariff” or at the 18% rate prescribed for “services by job work in relation to the manufacture of alcoholic liquor for human consumption.”
• Malt is a type of food. It can be consumed directly as part of food preparations or used as an ingredient in food products. It is also used in the production of beer and alcoholic liquor for human consumption. Regardless of end-use, the conversion of barley into malt is considered work in the food industry.
• It is hereby clarified that job work services in relation to malt manufacture are covered by the entry at Sl. No. 26 (i) (f), which covers “job work in relation to all food and food products falling under chapters 1 to 22 of the customs tariff” regardless of end use and attracts 5% GST. 

Whether District Mineral Foundation Trusts (DMFTs) established by State Governments are Governmental Authorities and thus entitled to the same GST exemptions as any other Governmental Authority.

• DMFTs regulate receipt and expenditure from the respective Mineral Development Funds established in the concerned district in the interest and benefit of persons and areas affected by mining-related operations. They provide services such as drinking water supply, environmental protection, health care facilities, education, women’s and children’s welfare, medical equipment supply, and so on.
• These activities are similar to those listed in the Eleventh and Twelfth Schedules of the Constitution. Individuals, families, women and children, farmers/producer groups, SHGs in mining-affected areas, and so on are the ultimate beneficiaries of the various DMF schemes. DMF fund services/supplies are provided free of charge, and DMF receives no compensation from the beneficiaries in exchange for such services.
• As a result, it is clarified that DMFT established by State Governments are Governmental Authorities and thus eligible for the same GST exemptions as any other Governmental Authority.

Whether supply of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods constitutes not more than 25 per cent of the total value of supply) made to CPWD are eligible for exemption from GST under Sr. No. 3 and 3A of Notification no 12/2017-CTR dated 28.06.2017. 

• The CPWD develops and maintains public parks in government residential colonies, government offices, and other public areas.
• Maintenance of community assets, urban forestry, environmental protection, and promotion of ecological aspects are functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the constitution, as read with Sr. No. 29 of the 11th Schedule and Sr. No. 8 of the 12th Schedule.
• Sr. No. 3 and 3A of notification No. 12/2017-CTR exempt pure services and composite supply of goods and services in which the value of goods does not exceed 25%, that are provided to the Central Government, State Government, Union territory, or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243W of the Constitution.
• As a result, it is clarified that supplies of pure services and composite supplies by way of horticulture/horticulture works (where the value of goods does not exceed 25% of the total value of supply) made to CPWD are exempt from GST under Sr. No. 3 and 3A of Notification No. 12/2017-CTR dated 28.06.2017.

Any difficulties encountered in implementing this circular should be brought to the Board’s attention.