CBEC clarifies GST in respect of Certain Services like Bus Body Building, Tyre Retreading [Read Circular]

The Central Board of Excise and Customs (CBEC) has today clarified the applicability of Goods and Services Tax (GST) in respect of certain services such as bus body building, retreading of tyres, Priority Sector Lending Certificates (PSLCs) and the activities carried by DISCOMS against recovery of charges from consumers under State Electricity Act.

With regard to the bus body building, the Board clarified that such activity comprises of supply of goods and services. “Thus, classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case,” the Board said.

In case of retreading of tyres, which is a composite supply, the Board confirmed that the predominant element is the process of retreading which is a supply of service. The rubber used for retreading is an ancillary supply. “Which part of a composite supply is the principal supply, must be determined to keep in view the nature of the supply involved. The value may be one of the guiding factors in this determination, but not the sole factor. The primary question that should be asked is what is the essential nature of the composite supply and which element of the supply imparts that essential nature to the composite supply. Supply of retreaded tyres, where the old tyres belong to the supplier of retreaded tyres, is a supply of goods (retreaded tyres under heading 4012 of the Customs Tariff attracting GST @ 28%),” it said.

The Board further said that there is no exemption to trading in PSLCs under GST regime. Thus, PSLCs are taxable as goods at the standard rate of 18% under the residuary S. No. 453 of Schedule III of notification No. 1/2017-Central Tax(Rate). GST payable on the certificates would be available as ITC to the bank buying the certificates.

The service provided by Central Government/State Government to any business entity including PSUs by way of guaranteeing the loans taken by them from financial institutions against consideration in any form including Guarantee Commission is taxable.