CGST Amendment Act 2018- Series 7

Following are the Key amendments in Section 17, of the CGST Act 2017, amended vide CGST Amendment Act 2018 for which assent was given by President of India on 30th August 2018, but the provisions are expected to be notified on 1st February 2019.

1. Insertion of explanation to Sub section 3

‘Explanation.—For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule.’;

The above amedment ensure that items listed in Schedule III, (except item mentioned in para 5, i.e, Sale of building), is not considered as exempt supplies for the purpose of reversal of credit. For exempt supplies proportionate credits has to reversed.

2. Substitution of clauses (a) and (b) in Sub Section 5

“(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:—

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles;

Before the amendment there was a blanket general restriction on ITC for all motor vehicles and other conveyance not used for transportation of goods. However, post amendment the general restriction will be limited to transportation of persons having approved seating capacity of upto thirteen persons.

(aa) vessels and aircraft except when they are used––

(i) for making the following taxable supplies, namely:—

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

(ii) for transportation of goods;

ITC restrictions for vessels and aircraft are as above

(ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):

ITC on Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft will be restricted if it attracts the restrictions in clause (a) or (aa) above.

Provided that the input tax credit in respect of such services shall be available—

(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;

(ii) where received by a taxable person engaged—

(I) in the manufacture of such motor vehicles, vessels or aircraft; or

(II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;

Restrictions on ITC in clause (a) or (aa) will not be applicable if used for the supply of above services mentioned in the provisos.

(b) the following supply of goods or services or both—

(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:

Provided that the input tax credit in respect of such goods or service or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;

Above supply (Clause b(i) will normally be eligible as ITCs only to those registered persons who are making outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply

(ii) membership of a club, health and fitness centre; and

(iii) travel benefits extended to employees on vacation such as leave or home travel concession:

Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.”.

The supplies mentioned in Clause b(ii) and b(iii) is normally be a restricted credit. However if it is provided by employer is under a statutory obligation to provide the same for an employer then ITC on such services can be availed.