The Union finance ministry on Wednesday released a package of circulars granting assistance to the automotive industry, advertising firms providing services to international clients, data hosting services providers and exporters of commodities.
“As demo vehicles are used by authorised dealers to provide trial runs and to demonstrate features of the vehicle to potential buyers, it helps the potential buyers to make a decision to purchase a particular kind of motor vehicle. Therefore, as demo vehicles stimulate sale of similar types of motor vehicles, they might be deemed to be used by the dealer for making further supply of such motor vehicles,” said a circular issued by the Central Board of Indirect Taxes and Customs (CBIC).
The circular further noted that even if automobiles are capitalised in the book of account, availability of Goods and Services Tax (GST) deductions should not get impacted.
“The circular has rightly analysed the concept of ‘goods being used for making taxable supplies’ and concluded that as demo vehicles are used for test drives, display of features, they enhance the sales and hence are eligible for credit,” said Harpreet Singh, Partner, Indirect Tax, Deloitte India.
Another circular on provision of data hosting services was issued if such services are given by enterprises in India to cloud computing service providers situated outside India. Such services were not being considered as exports by tax authorities, thereby resulting in GST liabilities.
Various calcifications have been issued on this point, noting that generally such services, subject to fulfillment of specific conditions constitute as exports and consequently there would not be any GST duty.
“Supply of data hosting services being provided by a data hosting service provider located in India to an overseas cloud computing entity can be considered as export of services, subject to the fulfillment of the other conditions mentioned in section 2(6) of IGST Act,” the circular held after analysing various aspects.
Another circular on offering relief to exporters highlighted that when inputs were imported by availing any benefit under customs, but subsequently, taxes are paid on them at a later stage, the output GST paid on export of such items would be available as reimbursement.
“Refund of IGST claims on exports made with payment of integrated tax in such cases may not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of CGST Rules,” said the CBIC circular.
Clarification was also offered with relation to advertising services provided to overseas clients. Various issues have been studied in the circular to determine, if advertising agencies qualify as a “intermediary”, whether overseas clients qualify as beneficiaries and if such services are performance based services. The consideration of such issues in the Circular is likely to result in services qualifying as exports and consequently not payable to GST.