Finance Ministry issues Clarification w.r.t scope of “as is / as is, where is basis” mentioned in GST Circulars [Read Circular]

The Ministry of Finance has issued a circular to clarify the use of the terms “as is” and “as is, where is basis” in the context of Goods and Services Tax (GST) circulars. This clarification was needed due to concerns from both businesses and tax authorities about the regularization of past GST payments where there were uncertainties in classification and applicable rates.

The term “as is” or “as is, where is basis” is commonly used in property transactions to indicate that the asset is accepted in its current state, with all defects included. In GST, this concept is applied to regularize payments made in the past at lower or nil rates without demanding any additional tax or refund for differential amounts.

Essentially, it allows businesses that paid a lower rate of GST in cases of doubt to settle their past tax liability without paying any further amounts. Similarly, businesses that paid a higher GST rate will not be entitled to any refund for the excess payment.

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The circular clarifies that this regularisation applies where there were genuine doubts about the applicable GST rates, often due to competing interpretations. Where two GST rates were applicable and taxpayers opted for the lower rate, their payments will be accepted as full tax discharge for the period under review. No additional tax will be collected from these taxpayers, and no refunds will be issued to those who paid a higher rate.

The circular words reads as follows:

“The phrase ‘as is where is’ is generally used in the context of transfer of property and means that the property is being transferred in its current condition, whatever this condition happens to be and the transferee of property has accepted it with all its faults and defects, whether or not immediately apparent. In the context of GST, the phrase ‘regularized on as is where is’ basis means that the payment made at lower rate or exemption claimed by the taxpayer shall be accepted and no refund shall be made if tax has been paid at the higher rate. The intention of the Council is to regularize payment at a lower rate including nil rate due to the tax position taken by taxable person, as full discharge of tax liability. The tax position of a taxable person is reflected in the returns filed by the person where the applicable rate of tax (or relevant exemption entry) on a transaction/supply is declared.”

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Three illustrations are provided to demonstrate how the “as is, where is basis” regularisation works:

1. Illustration 1: If some taxpayers paid 5% GST on the supply of “X” while others paid 12%, and the GST Council later recommends reducing the rate to 5% prospectively (effective from 1.12.2023), for the period before that date, the 5% GST paid will be treated as full settlement. Taxpayers who paid 12% will not be refunded the 7% difference.
2. Illustration 2: In cases where some taxpayers paid 5% GST while others paid no GST due to doubts about an exemption, the Council may clarify the rate as 5% (effective from 1.12.2023). Nonpayment of GST during the earlier period will be treated as full tax discharge, and those who paid 5% will not receive any refund for the difference.
3. Illustration 3: In cases where some taxpayers paid 5%, others 12%, and some paid no GST, and the Council clarifies the rate as 12% (effective from 1.12.2023), taxpayers who paid 5% will not need to pay additional tax, while no refunds will be provided to those who paid 12%. However, businesses that paid no tax will need to pay the 12% GST.

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