CBIC notifies GST Council’s ITC Conditions for Same-Line Businesses; Restricts it to 2.5% when Supplier Charges a Higher Tax Rate [Read Notification]

The Central Board of Indirect Taxes and Customs (CBIC), vide notification no. 12/2023 has notified the Input Tax Credit conditions for the same line of businesses according to the recommendations of the Goods and Services Tax (GST) Council with effect from October 20, 2023.

Exercising the authority conferred by subsection (1), subsection (3), and subsection (4) of section 9, subsection (1) of section 11, subsection (5) of section 15, subsection (1) of section 16, and section 148 of the Central Goods and Services Tax Act, 2017, the Central Government, upon determining that it is essential in the public interest to do so and based on the Council’s recommendations, hereby introduces the subsequent revisions to the notification issued by the Government of India. The original notification was No. 11/2017-Central Tax (Rate), dated June 28, 2017, as published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), under reference number G.S.R. 690(E), also dated June 28, 2017.

In the said notification, –

(A) in the Table,

i. against serial number 8, in column (3), in item (vi), after the condition in column (5) against the rate of 2.5 percent, the following condition shall be inserted, namely:-

“Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.

1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at the rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs. 48.”;

ii. against serial number 10, in column (3), in item (i), after the condition in column (5) against the rate of 2.5 percent, , the following condition shall be inserted, namely:-

“Provided further that where the supplier of input service in the same line of business charges central tax at a rate higher than 2.5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 2.5%, shall not be taken.

Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs. 1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ central tax at the rate of 6% (Rs. 48). If ‘B’ charges ‘A’ central tax at the rate of 2.5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 20 (2.5% of Rs. 800) and not Rs. 48.”;

(iii)  against serial number 34, –

(a) in column (3), in item (iv), for the words “totalisator or a license to” , the words “licensing a” shall be substituted;

(b) in column (3), item (v) and the entries relating thereto shall be omitted;

(B) in the Annexure: Scheme of Classification of Services,-

(i) serial number 696 and the entries relating thereto shall be omitted;

(ii) serial number 698 and the entries relating thereto shall be omitted.

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