GST Circular dated 11.10.2024-clarification about "of “as is / as is, where is basis” in regularisation of GST Rates!

On October 11, 2024, the Ministry of Finance, through the Central Board of Indirect Taxes and Customs (CBIC), issued a crucial circular (Circular No. 236/30/2024-GST) to address widespread confusion regarding the scope of the term "as is / as is, where is basis" in the regularization of Goods and Services Tax (GST) rates. This clarification comes after the GST Council's 54th meeting, where concerns were raised about the application of this phrase in past GST circulars.

The primary issue at hand revolves around the differing interpretations of GST rates applied to goods and services under various circumstances. In situations where taxpayers have paid a lower GST rate or claimed exemptions due to genuine doubts or competing rate structures, the Council's recommendation now provides a clear framework to regularize these payments. 

Let’s understand the notification!

Circular No. 236/30/2024-GST dated 11th October, 2024

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GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

(TAX RESEARCH UNIT)

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F. No. CBIC-190354/149/2024-TO(TRU-II)-CBEC                              

Dated: 11.10.2024

Circular No. 236/30/2024-GST

To,

The Principal Chief Commissioners/ Principal Directors General,

The Chief Commissioners/ Directors General,

The Principal Commissioners/ Commissioners of Central Excise & Central Tax

Subject: Clarification regarding the scope of "as is / as is, where is basis" mentioned in the GST Circulars issued based on the recommendation of the GST Council in its meetings

1. Instances were brought to the notice of the Board about the prevailing doubts among the field formations/trade as regards the scope of regularization on "as is" or "as is, where is basis" vide various GST Circulars issued for clarification regarding applicable GST rates and appropriate classification of specified goods or service or both based on the recommendation of the GST Council in its various meetings.

2. The GST Council in its 54th Meeting held on 9th September 2024 has recommended issuance of clarification to clarify the intent behind the regularization done in the past meetings. Therefore, this Circular is being issued in the exercise of power under Section 168 of CGST Act 2017 to clarify the scope of "as is" or "as is, where is basis".

3. Circulars have been issued based on the recommendation of the GST Council wherein GST non-payment/ short-payments for past periods have been regularized "As is" or As is, where is basis" in certain cases for the supply of goods or services or both. Regularization for the past period has been done, on the recommendations of the Council, in situations, such as, where genuine doubts have arisen as there are two competing entries with different rates in the notifications or issues have arisen due to diverse interpretations resulting in a situation where some suppliers have paid a lower rate of GST (including nil rate on account of an exemption entry) and some suppliers have paid a higher rate of GST. It has also been clarified that where taxpayers had paid at the higher GST rate, in such situations they shall not be entitled to any refund.

4. The phrase 'as is where is' is generally used in the context of the 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 the 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 a 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 Council intends to regularize payment at a lower rate including nil rate due to the tax position taken by the taxable person, as a 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.

5. Thus, in cases where the matters have been regularized on "as is" or " as is, where is basis", in case of two competing rates and the GST is paid at the lower of the two rates, or at nil rate where one of the competing rates was nil under notification entry, by some suppliers while other suppliers have paid at a higher rate, payment at lower rate shall be treated as tax fully paid for the period that is regularized.

Illustration 1:

In a situation where certain taxpayers have paid 5% GST on supply of "X", while some have paid 12% and the GST Council recommends reducing the rate to 5% prospectively and regularizing the past on "as is where is basis" which is notified on 1.12.2023, this means that for the period prior to 1.12.2023, the 5% GST paid by the taxpayer will be treated as tax fully paid and they would not be required to pay duty differential of 7% between 5% and 12%. For those taxpayers who have paid 12% GST, no refund would be allowed.

Illustration 2:

In a situation where certain taxpayers have paid 5% GST on the supply of "X" while some have paid nil duty due to the genuine doubt that there was an exemption entry for "X", the GST Council recommends clarifying that the applicable rate is 5% and to regularize the past on "as is where is basis", in view of prevailing genuine doubts, which is notified on 1.12.2023, this means that for the period prior to 1.12.2023, non payment of GST and declaring such transactions as exempted supply in their return by the taxpayer will be treated as a full discharge of tax liability and they would not be required to pay duty differential of 5 % between Nil and 5%. For those taxpayers who have paid 5%, no refund would be made.

Illustration 3:

In a situation where the interpretational issue is between 5% and 12% rates and some taxpayers have paid 5 % , others have paid 12% while certain taxpayers have not paid GST on supply of "X", and the GST Council recommends clarifying that the applicable rate is 12% and regularize the past on "as is where is basis" which is notified on 1.12.2023, this means that for the period prior to 1.12.2023, the 5% GST paid by the taxpayer will be treated as tax fully paid and they would not be required to pay duty differential between 5% and 12% . For those taxpayers who have paid 12%, no refund would be made. However, the regularization would not apply to situations where no tax has been paid. In such cases, the applicable tax i.e. 12% shall be recovered.

6. Accordingly, suitable instructions shall be passed on to the field formations under your charge.

7. Difficulty, if any, in the implementation of this circular may be brought to the notice of the Board.

(Limatula Yaden)

Joint Secretary (TRU)

Tel: 011 -2309 2687

Key Highlights of the notification GST dated 11th October 2024

1. Clarification on "As Is / As Is, Where Is Basis": The circular provides clarity on how the phrase "as is / as is, where is basis" is applied to the regularization of GST rates, ensuring that lower GST payments or exemptions due to genuine doubts are accepted without requiring additional payments or refunds.
2. GST Regularization Process: In cases where there were competing GST rates or interpretation issues leading to lower payments, the lower rate or exemption claimed will be treated as a full discharge of the tax liability. No additional tax payments or refunds will be required for those who paid a lower rate, even if the rate is subsequently clarified or adjusted.
3. Illustrative Scenarios for Regularization:

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4. Field Instructions for Implementation: The circular mandates the issuance of instructions to field officers to ensure proper implementation of the regularization process and to address any difficulties in its application.
5. General Impact: This clarification is designed to offer relief and certainty to businesses that may have overpaid or underpaid GST due to confusion over competing rate structures, streamlining compliance with the GST regime.

Conclusion

The clarification issued in Circular No. 236/30/2024-GST on October 11, 2024, provides much-needed guidance for businesses and tax professionals navigating the complexities of GST rate application. By defining the scope of "as is / as is, where is basis," the GST Council aims to resolve issues arising from competing GST rates and interpretational uncertainties, offering a fair approach to regularizing past payments.

With the circular's focus on accepting lower payments made in good faith as full discharge of tax liabilities, businesses can now operate with greater confidence, knowing they won’t be penalized for earlier misinterpretations. However, the key takeaway is that no refunds will be issued to those who paid higher GST rates, reinforcing the principle of fairness in tax compliance.

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