Central Tax Circulars

CGST Circular 88/2019

To,

The Principal Chief Commissioners / The Principal Directors General /
Chief Commissioners
/ Directors General (All) / Principal Commissioners / Commissioners of
Central Tax (All)

Madam/Sir,

Subject: Changes in Circulars issued earlier under the CGST Act, 2017 – Reg.

1) The CGST (Amendment) Act, 2018, SGST Amendment Acts of the respective States,
IGST (Amendment) Act, 2018, UTGST (Amendment) Act, 2018 and the GST
(Compensation to States) (Amendment) Act, 2018 (hereafter referred to as the GST
Amendment Acts) have been brought in force with effect from 01.02.2019.

2) Consequent to the GST Amendment Acts, the following circulars issued earlier under
the CGST Act, 2017 are hereby amended with effect from 01.02.2019, to the extent detailed
in the succeeding paragraphs.

3) Circular No. 8/8/2017 dated 04.10.2017

The circular is revised in view of the amendment carried out in section 2(6) of the
IGST Act, 2017 vide section 2 of the IGST (Amendment) Act, 2018 allowing realization of
export proceeds in INR, wherever allowed by the RBI. Accordingly, the original and the
amended relevant para of the circular are detailed hereunder.

3.1 Original Para 2(k)

Realization of export proceeds in Indian Rupee: Attention is invited to para A (v)
Part- I of RBI Master Circular No. 14/2015-16 dated 01stJuly, 2015 (updated as on 05th
November, 2015), which states that “there is no restriction on invoicing of export contracts in
Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under
the Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign
Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in
freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized
in rupees, provided it is through a freely convertible Vostro account of a non-resident bank
situated in any country other than a member country of Asian Clearing Union (ACU) or
Nepal or Bhutan”.

Accordingly, it is clarified that the acceptance of LUT for supplies of goods to countries
outside India Nepal or Bhutan or SEZ developer or SEZ unit will be permissible irrespective
of whether the payments are made in Indian currency or convertible foreign exchange as long
as they are in accordance with the applicable RBI guidelines. It may also be noted that the
supply of services to SEZ developer or SEZ unit under LUT will also be permissible on the
same lines. The supply of services, however, to Nepal or Bhutan will be deemed to be export
of services only if the payment for such services is received by the supplier in convertible
foreign exchange.

3.2 Amended Para 2(k)

Realization of export proceeds in Indian Rupee: Attention is invited
to para A (v)
Part- I of RBI Master Circular No. 14/2015-16 dated 01stJuly, 2015 (updated
as on 05th November, 2015), which states that “there is no restriction on
invoicing of export contracts in Indian Rupees in terms of the Rules,
Regulations, Notifications and Directions framed under the Foreign Exchange
Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade
Policy (2015-2020), all export contracts and invoices shall be denominated
either in freely convertible currency or Indian rupees but export proceeds
shall be realized in freely convertible currency. However, export proceeds
against specific exports may also be realized in rupees, provided it is
through a freely convertible Vostro account of a non-resident bank situated
in any country other than a member country of Asian Clearing Union (ACU) or
Nepal or Bhutan”. Further, attention is invited to the amendment to
section 2(6) of the IGST Act, 2017 which allows realization of export
proceeds of services in INR, wherever allowed by the RBI.

Accordingly, it is clarified that the acceptance of LUT for supplies of goods or services to
countries outside India or SEZ developer or SEZ unit will be permissible irrespective of
whether the payments are made in Indian currency or convertible foreign exchange as long as
they are in accordance with the applicable RBI guidelines.

4) Circular No. 38/12/2018 dated 26.03.2018

This circular is revised in view of the amendment carried out in section
143 of the
CGST Act, 2017 vide section 29 of the CGST (Amendment) Act, 2018
empowering the Commissioner to extend the period for return of inputs and
capital goods from the job worker. Further on account of amendment carried
out in section 9(4) of the CGST Act, 2017 vide section 4 of the
CGST (Amendment) Act, 2018 done in relation to reverse charge, certain
amendments to the Circular are required. Accordingly, the original and the
amended relevant para of the circular are detailed hereunder.

4.1 Original Para 2.

As per clause (68) of section 2 of the CGST Act, 2017………….. Subsequently,
on
completion of the job work (by the last job worker), the principal shall
either bring back the goods to his place of business or supply (including
export) the same directly from the place of business/premises of the job
worker within one year in case of inputs or within three years in case of
capital goods (except moulds and dies, jigs and fixtures or tools).

4.2 Amended Para 2.

As per clause (68) of section 2 of the CGST Act, 2017, “job work” means
any
treatment or process undertaken by a person on goods belonging to another
registered person and the expression “job worker” shall be construed
accordingly. The registered person on whose goods (inputs or capital goods)
job work is performed is called the “Principal” for the purposes of section
143 of the CGST Act. The said section which encapsulates the provisions
related to job work, provides that the registered principal may, without
payment of tax, send inputs or capital goods to a job worker for job work
and, if required, from there subsequently to another job worker and so on.
Subsequently, on completion of the job work (by the last job worker), the
principal shall either bring back the goods to his place of business or
supply (including export) the same directly from the place of
business/premises of the job worker within the time specified under section
143.

4.3 Original Para 3.

It may be noted ………. Moreover, if the time frame of one year / three
years for
bringing back or further supplying the inputs / capital goods is not adhered
to, the activity of sending the goods for job work shall be deemed to be a
supply by the principal on the day when the said inputs / capital goods were
sent out by him. Thus, essentially, sending goods for job work is not a
supply as such, but it acquires the character of supply only when the
inputs/capital goods sent for job work are neither received back by the
principal nor supplied further by the principal from the place of business /
premises of the job worker within one/three years of being sent out. ….
……cast on the principal.

4.4 Amended Para 3.

It may be noted that the responsibility of keeping proper accounts of the
inputs and
capital goods sent for job work lies with the principal. Moreover, if the
time frame specified under section 143 for bringing back or further
supplying the inputs / capital goods is not adhered to, the activity of
sending the goods for job work shall be deemed to be a supply by the
principal on the day when the said inputs / capital goods were sent out by
him. Thus, essentially, sending goods for job work is not a supply as such,
but it acquires the character of supply only when the inputs/capital goods
sent for job work are neither received back by the principal nor supplied
further by the principal from the place of business / premises of the job
worker within the specified time period (under section 143) of being sent
out. It may be noted that the responsibility for sending the goods for job
work as well as bringing them back or supplying them has been cast on the
principal.

4.5 Original Para 6.1

Doubts have been raised ………… It may be noted that the job worker is
required to
obtain registration only if his aggregate turnover, to be computed on all
India basis, in a financial year exceeds the specified threshold limit (i.e.
Rs 20 lakhs or Rs. 10 lakhs in case of special category States except Jammu
& Kashmir) in case both the principal and the job worker are located in the
same State. ……..…However, exemption from registration has been granted in
case the aggregate turnover of the inter-State supply of taxable services
does not exceed Rs 20 lakhs or Rs. 10 lakhs in case of special category
States except Jammu & Kashmir in a financial year vide notification No.
10/2017 – Integrated Tax dated 13.10.2017. Therefore, ….…. States.

4.6 Amended Para 6.1

Doubts have been raised about the requirement of obtaining registration
by job
workers when they are located in the same State where the principal is
located or when they are located in a State different from that of the
principal. It may be noted that the job worker is required to obtain
registration only if his aggregate turnover, to be computed on all India
basis, in a financial year exceeds the specified threshold limit as
specified in sub-section (1) of section 22 of the said Act, read with clause
(iii) of the Explanation to the said section in case both the principal and
the job worker are located in the same State. Where the principal and the
job worker are located in different States, the requirement for registration
flows from clause (i) of section 24 of the CGST Act which provides for
compulsory registration of suppliers making any inter-State supply of
services. However, exemption from registration has been granted in case the
aggregate turnover of the inter-State supply of taxable services does not
exceed the specified threshold limit as specified in sub-section (1) of
section 22 of the said Act, read with clause (iii) of the Explanation to the
said section in a financial year vide notification No. 10/2017 – Integrated
Tax dated 13.10.2017 as amended vide notification No 3/2019- Integrated Tax,
dated 29.01.19. Therefore, it is clarified that a job worker is required to
obtain registration only in cases where his aggregate turnover, to be
computed on all India basis, in a financial year exceeds the threshold limit
regardless of whether the principal and the job worker are located in the
same State or in different States.

4.7 Original Para 9.4.(i.)

(i) Supply of job work services: The job worker, …………….not
been included in
the price for such supply. Accordingly, it is clarified that the value of
such moulds and dies, jigs and fixtures or tools may not be included in the
value of job work services provided its value has been factored in the price
for the supply of such services by the job worker. It may be noted that if
the job worker is not registered, GST would be payable by the principal on
reverse charge basis in terms of the provisions contained in section 9(4) of
the CGST Act. However, the said provision has been kept in abeyance for the
time being.

4.8 Amended Para:9.4.(i)

(i.) Supply of job work services : The job worker, as a
supplier of services, is liable
to pay GST if he is liable to be registered. He shall issue an invoice at
the time of supply of the services as determined in terms of section 13 read
with section 31 of the CGST Act. The value of services would be determined
in terms of section 15 of the CGST Act and would include not only the
service charges but also the value of any goods or services used by him for
supplying the job work services, if recovered from the principal. Doubts
have been raised whether the value of moulds and dies, jigs and fixtures or
tools which have been provided by the principal to the job worker and have
been used by the latter for providing job work services would be included in
the value of job work services. In this regard, attention is invited to
section 15 of the CGST Act which lays down the principles for determining
the value of any supply under GST. Importantly, clause (b) of sub-section
(2) of section 15 of the CGST Act provides that any amount that the supplier
is liable to pay in relation to the supply but which has been incurred by
the recipient will form part of the valuation for that particular supply,
provided it has not been included in the price for such supply. Accordingly,
it is clarified that the value of such moulds and dies, jigs and fixtures or
tools may not be included in the value of job work services provided its
value has been factored in the price for the supply of such services by the
job worker.

4.9 Original Para 9.6

Thus, if the …………….. If such goods are returned by the job worker after
the
stipulated time period, the same would be treated as a supply by the job
worker to the principal and the job worker would be liable to pay GST if he
is liable for registration in accordance with the provisions contained in
the CGST Act read with the rules made thereunder. It may be noted that if
the job worker is not registered, GST would be payable by the principal on
reverse charge basis in terms of the provisions contained in section 9(4) of
the CGST Act. However, the said provision has been kept in abeyance for the
time being. Further, there is no requirement of either returning back or
supplying the goods from the job worker’s place of business/premises as far
as moulds and dies, jigs and fixtures, or tools are concerned.

4.10 Amended Para 9.6

Thus, if the inputs or capital goods are neither returned nor supplied
from the job
worker’s place of business / premises within the specified time period, the
principal would issue an invoice for the same and declare such supplies in
his return for that particular month in which the time period of one year /
three years has expired. The date of supply shall be the date on which such
inputs or capital goods were initially sent to the job worker and interest
for the intervening period shall also be payable on the tax. If such goods
are returned by the job worker after the stipulated time period, the same
would be treated as a supply by the job worker to the principal and the job
worker would be liable to pay GST if he is liable for registration in
accordance with the provisions contained in the CGST Act read with the rules
made thereunder. Further, there is no requirement of either returning back
or supplying the goods from the job worker’s place of business/premises as
far as moulds and dies, jigs and fixtures, or tools are concerned.

5 Circular No. 41/15/2018 dated 13.04.2018

This circular is revised in view of the amendment carried out in section
129 of the
CGST Act, 2017 vide section 27 of the CGST (Amendment) Act, 2018 allowing 14
days for owner/transporter to pay tax/penalty for seized goods. Accordingly,
the original and the amended relevant para of the circular are detailed
hereunder.

5.1 Original Para 2(k)

In case the proposed tax and penalty are not paid within seven days from
the date of
the issue of the order of detention in FORM GST MOV-06, the action under
section 130 of the CGST Act shall be initiated by serving a notice in FORM
GST MOV-10, proposing confiscation of the goods and conveyance and
imposition of penalty.

5.2 Amended Para 2(k)

In case the proposed tax and penalty are not paid within fourteen days
from the date
of the issue of the order of detention in FORM GST MOV-06, the action under
section 130 of the CGST Act shall be initiated by serving a notice in FORM
GST MOV-10], proposing confiscation of the goods and conveyance and
imposition of penalty.

5.3 Further, FORM GST MOV-08 and FORM GST MOV-09, annexed to the
circular
are revised as below:

FORM GST MOV-08 (para 4)

And if all taxes, interest, penalty, fine and other lawful charges
demanded by the
proper officer are duly paid within fourteen days of the date of detention
being made in writing by the said proper officer, this obligation shall be
void.

FORM GST MOV-09 (para 10)

You are hereby directed to make the payment forthwith/not later than
fourteen days
from the date of the issue of the order of detention in FORM GST MOV-06,
failing which action under section 130 of the Central/State Goods and
Services Tax Act /section 21 of the Union Territory Goods and Services Tax
Act or section 20 of the Integrated Goods and Services Act shall be
initiated

6) Circular No. 58/32/2018 dated 04.09.2018

This circular is revised in order to streamline the modes of recovery.
Accordingly, the
original and the amended relevant para of the circular are detailed
hereunder.

6.1 Original Para 3.

Currently, the functionality to record this liability in the electronic
liability register is
not available on the common portal. Therefore, it is clarified that as an
alternative method, taxpayers may reverse the wrongly availed CENVAT credit
under the existing law and inadmissible transitional credit through Table
4(B)(2) of FORM GSTR-3B. The applicable interest and penalty shall apply on
all such reversals which shall be paid through entry in column 9 of Table
6.1 of FORM GST-3B.

6.2 Amended Para 3.

It may be noted that all such liabilities may be discharged by the
taxpayers, either
voluntarily in FORM GST DRC-03 or may be recovered vide order uploaded in
FORM GST DRC-07, and payment against the said order shall be made in FORM
GST DRC-03. It is further clarified that the alternative method of reversing
the wrongly availed CENVAT credit under the existing law and inadmissible
transitional credit through Table 4(B)(2) of FORM GSTR-3B would no longer be
available to taxpayers. The applicable interest and penalty shall apply in
respect of all such amounts, which shall also be paid in FORM GST DRC-03.

7) Circular No. 69/43/2018 dated 26.10.2018

The circular is revised in view of the amendment carried out in section
29 of the
CGST Act, 2017 vide section 14 of the CGST (Amendment) Act, 2018 allowing
suspension of registration. Accordingly, the original and the amended
relevant para of the circular are detailed hereunder.

7.1 Original Para 11.

It is pertinent to mention here that section 29 of the CGST Act has been
amended by
the CGST (Amendment) Act, 2018 to provide for “Suspension” of registration.
The intent of the said amendment is to ensure that a taxpayer is freed from
the routine compliances, including filing returns, under GST Act during the
pendency of the proceedings related to cancellation. Although the provisions
of CGST (Amendment) Act, 2018 have not yet been brought into force, it will
be prudent for the field formations may not to issue notices for nonfiling
of return for taxpayers who have already filed an application for
cancellation of registration under section 29 of the CGST Act. However, the
requirement of filing a final return, as under section 45 of the CGST Act,
remains unchanged.

7.2 Amended Para 11.

It is pertinent to mention here that section 29 of the CGST Act has been
amended by
the CGST (Amendment) Act, 2018 to provide for “Suspension” of registration.
The intent of the said amendment is to ensure that a taxpayer is freed from
the routine compliances, including filing returns, under GST Act during the
pendency of the proceedings related to cancellation. Accordingly, the field
formations may not issue notices for non- filing of return for taxpayers who
have already filed an application for cancellation of registration under
section 29 of the CGST Act. Further, the requirement of filing a final
return, as under section 45 of the CGST Act, remains unchanged.

8) It is requested that suitable trade notices may be issued to publicize
the contents of this
circular.

9) Difficulty, if any, in implementation of this Circular may please be
brought to the notice of
the Board. Hindi version would follow.