The Central Board of Indirect Taxes and Customs ( CBIC ) notified the clarification on the time of supply for Goods and Service Tax ( GST ) payment of supply of spectrum allocation services.
The trade and the field formations seeking clarification regarding the time of supply for payment of GST in respect of the supply of spectrum allocation services in cases where the successful bidder for spectrum allocation ( i.e. the telecom operator ) opts for making payments in instalments under deferred payment option as per Frequency Assignment Letter ( FAL ) issued by Department of Telecommunication ( DoT ), Government of India.
To clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in the exercise of its powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) notified that ‘In cases of spectrum allocation where the successful bidder (i.e. ‘telecom operator’) opts for making payments in instalments as mentioned in the Notice Inviting Application ( NIA ) and Frequency Assignment Letter ( FAL ) issued by the Department of Telecommunications ( DoT ), the Government of India, what will be the time of supply for payment of GST on the said supply of spectrum allocation services? ‘
Under the spectrum allocation model followed by DoT, the bidder ( the telecom operator ) bids to secure the right to use the spectrum offered by the government. Here, the service provider is the Government of India ( through DoT ) and service recipient is the bidder/ telecom operator. The GST is to be discharged on the supply of spectrum allocation services by the recipient of services ( the telecom operator ) on reverse charge basis [Notification No. 13/2017-Central Tax ( Rate ) dated 28th June, 2017 referred].
In respect of the said supply of spectrum allocation services, if the telecom operator chooses the option to make payment in installments, the payment has to be made spread over the contract period in installments and payment for each installment is to be made after specified periods, as specified in the Frequency Assignment Letter of DoT, which is in the nature of contract. The same is a ‘continuous supply of services’ as defined under section 2(33) of the CGST Act, since the supply of services (spectrum usage) is agreed to be provided by the supplier ( DoT ) to the recipient ( telecom operator ) continuously for a period which is exceeding three months with periodic payment obligations.
It was clarified that in case where full upfront payment is made by the telecom operator, GST would be payable when the payment of the said upfront amount is made or is due, whichever is earlier, whereas in case where deferred payment is made by the telecom operator in specified instalments, GST would be payable as and when the payments are due or made, whichever is earlier.
It was also clarified that the similar treatment regarding the time of supply, as is discussed in the above paras, may apply in other cases also where any natural resources are being allocated by the government to the successful bidder/ purchaser for right to use the said natural resource over a period of time, constituting continuous supply of services as per the definition under section 2(33) of the CGST Act, with the option of payments for the said services either through an upfront payment or in deferred periodic installments over the period of time.
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