The Central Board of Indirect Taxes and Customs (CBIC) has recently issued two important circulars (244 & 245) with clarifications on GST-related matters. Here’s a simplified breakdown of the updates with examples to help you understand the changes:
1. No GST on Co-Insurance & Reinsurance Commission
Circular No. 244/01/2025-GST (28th Jan 2025)
What’s New?
Co-insurance Premium: If a lead insurer splits the co-insurance premium among co-insurers, it won’t be treated as a supply of service, provided the lead insurer has already paid GST on the full premium.
Example: If an insurer collects ₹1,00,000 premium and distributes it among co-insurers, no additional GST is required as long as the lead insurer has already paid GST on the ₹1,00,000.
Reinsurance Commission: GST won’t apply on the commission that a reinsurer deducts from the reinsurance premium if they have paid GST on the gross premium.
Example: If a reinsurer receives ₹50,000 in premium, and deducts ₹5,000 as commission, no additional GST is applicable as long as GST has been paid on the ₹50,000.
Retroactive Relief: These changes apply from 01.07.2017 to 31.10.2024, meaning past liabilities won’t be reopened.
2. No GST on Penal Charges by Banks & NBFCs
Circular No. 245/02/2025-GST (28th Jan 2025)
What’s New?
Penal Charges: Since penal charges are levied to maintain credit discipline, they won’t attract GST.
Example: If a bank charges ₹1,000 as a penalty for delayed payment on a loan, no GST is applicable on this amount.
3. GST Exemption for Payment Aggregators
What’s New?
Payment Aggregators (regulated by the RBI) will not be charged GST for settling transactions of up to ₹2,000 via credit, debit, or charge cards.
Example: If a customer pays ₹1,500 using a debit card through a payment aggregator, no GST is applied.
Important: Payment Gateways (PGs) are not exempt.
4. Regularization of GST on R&D Services Funded by Government Entities
What’s New?
Government-funded research and development services (from bodies like DRDO, CSIR, SERB) are now exempt from GST starting 10.10.2024.
Example: If a government agency funds a research project, the GST paid on the service is exempt from 10.10.2024 onwards.
Retroactive Relief: GST paid for the period 01.07.2017 to 09.10.2024 will not be reopened but will be regularized.
5. Relief for Skill Development Training Providers
What’s New?
The GST exemption for skilling services provided by NSDC-approved training partners, which was withdrawn in October 2024, has been restored from 16.01.2025.
Example: A training institute that provides skill training under NSDC will now be exempt from GST again starting from 16.01.2025.
Retroactive Relief: GST for the period 10.10.2024 to 15.01.2025 will be regularized.
6. GST on Facility Management Services to MCD
What’s New?
Services like housekeeping, maintenance, and horticulture for the Municipal Corporation of Delhi (MCD) are taxable, as they don’t relate to essential municipal functions.
7. DDA is NOT a Local Authority Under GST
What’s New?
The Delhi Development Authority (DDA) cannot claim the status of a local authority under the CGST Act. This means services received from DDA are taxable.
8. GST on Renting of Commercial Property
What’s New?
The Reverse Charge Mechanism (RCM) on rent paid for commercial properties (from an unregistered landlord to a registered tenant) has been removed for composition taxpayers starting 16.01.2025.
Example: If a composition taxpayer rents property from an unregistered landlord after 16.01.2025, they won’t have to pay GST under RCM.
Retroactive Relief: GST paid between 10.10.2024 and 15.01.2025 will be regularized.
9. Exemption for Certain Electricity Distribution Services
What’s New?
Services like metering, testing, connection release, and bill issuance by electricity utilities are exempt from GST starting 10.10.2024.
Retroactive Relief: GST paid between 10.10.2024 and 15.01.2025 will be regularized.
10. Max Mueller Bhavan (Goethe Institute) – GST Relief
What’s New?
The linguistic and cultural training services provided by Max Mueller Bhavan (Goethe Institute) were previously believed to be GST-exempt but were later found to be taxable.
Retroactive Relief: GST paid from 01.07.2017 to 31.03.2023 is now regularized.
These clarifications bring much-needed relief and clarity for businesses and taxpayers across various sectors. Keep these updates in mind to ensure smooth compliance with the latest GST regulations!
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