GST Circular dated 28.01.2025 on various services!

Recently, the CBIC has issued a circular related to the applicability of Goods and Services Tax (GST) on certain services. It is based on the recommendations of the 55th GST Council meeting held on December 21, 2024. The Circular addresses concerns from stakeholders regarding the taxability of services such as penal charges by regulated entities, payment aggregation services, research and development services, and facility management services, among others. 

Let's understand the details!

Key issues addressed in the circular:

The circular addresses various issues related to the applicability of GST on specific services, based on the recommendations of the 55th GST Council. The key points are as follows:

1. Penal Charges by Regulated Entities (REs):
   
   • Clarifies that no GST is applicable on penal charges levied by banks and NBFCs in compliance with RBI's instructions (18.08.2023) replacing penal interest with penal charges.
2. GST Exemption for Payment Aggregators (PAs):
   
   • Payment Aggregators (PAs) regulated by RBI, involved in settling transactions via cards up to Rs. 2,000 in a single transaction, are eligible for GST exemption under certain conditions.
3. Research and Development Services Provided by Government Entities:
   
   • By way of Notification No. 08/2024-CT(Rate) dated 08.10.2024, Research and development services against consideration received in the form of grants supplied by a Government Entity or a research association, university, college, or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 was exempted from GST w.e.f. 10.10.2024.
   • However, there was no clarity about the taxability of such grants received from 01.07.2017 till 09.10.2024.
   • It is now clarified that the payment of GST on the supply of research and development services by Government Entities against grants received from the Government Entities is regularized for the period 01.07.2017 to 09.10.2024, on an 'as is where is' basis.
   • This means that GST paid on such grants before the date of this notification will not be refunded. Also, demands raised for GST on such grants for earlier periods will now be nullified.
4. Skilling Services by NSDC-Approved Training Partners:
   
   • Vide Notification No. 06/2025 - Central Tax (Rate) dated 16.01.2025, any services provided by a training partner approved by the National Skill Development Corporation (NSDC) in relation to skill development courses under specified schemes were exempted from GST.
   • However, there was no clarity about the taxability of such grants received from 10.10.2024 to 15.01.2025.
   • Therefore, it is clarified that the payment of GST on services provided by Training Partners approved by the National Skill Development Corporation, which were exempt prior to 10.10.2024, is regularized for the period 10.10.2024 to 15.01.2025, on 'as is where is' basis.
   • This means that GST paid on such amounts for the said will not be refunded. Also, demands raised for GST on such grants for earlier periods will now be nullified.

5. Facility Management Services to MCD:
   
   • It is clarified that GST applies to facility management services provided to MCD for office upkeep, as they are not linked to municipal functions under Article 243W; therefore GST is applicable thereon.
6. Delhi Development Authority (DDA) as Local Authority:
   
   • Clarifies that DDA is not a "local authority" under GST law.
7. GST on Commercial Property Rental from Unregistered to Registered Person:
   
   • Vide Notification No.09/2024-CTR dated 08.10.2024 effective from 10.10.2024, GST is payable on an RCM basis for renting of commercial property by an unregistered person to the registered person.
   • However, vide Notification No. 07/2025-CT(Rate) dated 16.01.2025, persons registered under the composition levy were exempted from the requirement of paying GST under RCM for such cases.
   • Now, it is clarified that for the period of 10.10.2024 to 15.01.2025, payment of GST on Reverse Charge (RCM) basis on renting of immovable property other than a residential dwelling (commercial property) by an unregistered person to a registered person under composition levy is hereby regularized for the period from 10.10.2024 to 15.01.2025 on 'as is where is' basis.
   • This means that GST paid by composition taxpayers on such services will not be refunded. Also, demands raised for GST on such grants for such a period will now be nullified.
8. GST on Ancillary Services by Electricity Transmission/Distribution Utilities:
   
   • Vide notification No. 08/2024-CTR dated 08.10.2024, with effect from 10.10.2024, services by way of providing metering equipment on rent, testing for meters/ transformers/ capacitors etc., releasing electricity connection, shifting of meters/service lines, issuing duplicate bills etc., which are incidental or ancillary to the supply of transmission and distribution of electricity provided by electricity transmission and distribution utilities to their consumers were exempted from GST.
   • Thereafter, vide Notification No. 6/2025-CTR dated 16.01.2025, these incidental or ancillary services to the supply of transmission or distribution of electricity supplied by transmission or distribution utilities are now covered under the said exemption entry.
   • The payment of GST on certain incidental or ancillary services to the supply of transmission or distribution of electricity supplied by an electricity transmission or distribution utility is regularized for the period 10.10.2024 to 15.01.2025, on an 'as is where is' basis.
9. GST on Services by Goethe Institute/Max Mueller Bhawans:
   
   • Goethe Institute/Max Mueller Bhawan has six institutes across India that provide linguistic and cultural training to young Indians preparing for their stay in Germany.
   • Before 1st April 2023, the Institutes did not collect GST from their students nor did they pay GST to the Government as they were under the bonafide belief that their activities are exempt from GST.
   • It is clarified that payment of GST on services supplied by Goethe Institute/Max Mueller Bhawans is hereby regularized for the period from 01.07.2017 to 31.03.2023 on an 'as is where is' basis.

Here is the link to the circular-  

https://taxinformation.cbic.gov.in/view-pdf/1003261/ENG/Circulars

Conclusion

The GST circular dated 28.01.2025 provides much-needed clarity on the applicability of GST across various services, addressing concerns raised by stakeholders. From penal charges by regulated entities to payment aggregation services, research and development exemptions, and GST implications on facility management and rental services, the circular ensures a well-defined tax structure. Additionally, the regularization of past tax payments on an 'as is where is' basis helps mitigate uncertainties for businesses and taxpayers.

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