Union Finance Minister Nirmala Sitharaman (File Photo: PTI)
The Union Finance Ministry on Wednesday issued a series of circulars providing relief to the automobile industry, advertising agencies serving foreign clients, data hosting service providers and exporters of goods.
“Since demonstration vehicles are used by authorised dealers to offer trial runs and demonstrate the features of the vehicle to potential buyers, this helps potential buyers to make a decision to purchase a particular type of motor vehicle. Therefore, as demonstration vehicles promote sale of similar types of motor vehicles, they can be considered as used by the dealer for making further offers of such motor vehicles,” a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) said.
The circular also notes that even if vehicles are capitalised in the book of accounts, the availability of Goods and Services Tax (GST) deductions should not be affected.
“The circular has rightly analysed the concept of ‘goods used for making taxable supplies’ and concluded that as demo vehicles are used for test drives and display of features, they enhance sales and are therefore eligible for credit,” said Harpreet Singh, Partner, Indirect Tax, Deloitte India.
Another circular was issued on supply of data hosting services, stating that such services are provided by Indian companies to cloud computing service providers located outside India. Such services were not considered as exports by the tax authorities, giving rise to GST liabilities.
Several assessments have been issued on this point, indicating that generally such services, subject to compliance with certain conditions, qualify as exports and therefore there would be no obligation to pay GST.
“Supply of data hosting services provided by a data hosting service provider located in India to a foreign cloud computing entity may be considered as export of services, subject to compliance with the other conditions mentioned in section 2(6) of the IGST Act,” the circular said after analysing various aspects.
Another circular on granting relief to exporters clarified that where inputs were imported availing any customs benefit but duty was subsequently paid on them at a later stage, the output GST paid on export of such goods would be available as refund.
“Refund of IGST claims on exports made against integrated tax in such cases cannot be considered as contravention of the provisions of sub-rule (10) of rule 96 of the CGST Rules,” the CBIC circular said.
A clarification has also been issued with respect to advertising services provided to foreign clients. Various aspects have been analysed in the circular to conclude whether advertising agencies qualify as “intermediaries”, whether foreign clients qualify as recipients and whether such services are performance-based services. The analysis of such aspects in the Circular is likely to result in services that qualify as exports and therefore are not subject to GST.
First published: September 11, 2024 | 22:45 IS
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