Comprehensive Analysis of Notification No. 12/2024–Central Tax

Introduction-

The Central Board of Indirect Taxes and Customs (CBIC) has released Notification No. 12/2024–Central Tax to amend the Central Goods and Services Tax (CGST) Rules, 2017. This detailed article covers every aspect of the notification, with a particular focus on the valuation of corporate guarantees.

Key Amendments and Provisions

1. Valuation of Corporate Guarantees:

• Primary Amendment: The value of services provided by a supplier to a recipient who is a related person, by way of a corporate guarantee to any Banking company or financial institution, shall be deemed to be 1% of the amount guaranteed per annum or the actual consideration, whichever is higher. This change is effective retrospectively from October 26, 2023.

• Eligibility for Input tax credit: When the recipient is eligible for full Input tax credit, the value declared in the invoice is deemed to be the value of the said supply of services.

• The phrase ‘who is a related person located in India’ has now been inserted in the sub-rule, thereby narrowing its scope to guarantees provided to related parties situated within India.

• This amendment ensures that the service recipient should be located in India, rendering the valuation prescribed in the sub-rule, inapplicable for guarantees provided to offshore entities.

2. Specific Rules on Input Service Distribution:

• Rule 39 of the CGST Rules is substituted to provide for a mechanism for distribution of credit by an ISD.

• An additional sub-rule is inserted in rule 39 of the CGST Rules to provide for issuing an invoice or, as the case may be, a credit or Debit note as per the provisions of sub-rule(1A) of rule 54 to transfer the credit of such common input services to the Input Service Distributor, and such credit shall be distributed by the said Input Service Distributor in the manner as provided in sub-rule (1)

3. Amendments to GSTR Forms:

• GSTR-1 and GSTR-1A: The amendments allow the filing of additional details or amendments in GSTR-1A after filing GSTR-1 but before filing GSTR-3B for the same period. This provides businesses with the flexibility to correct or update their Outward supply details.

• It is an additional facility provided to add any particulars the of current Tax period missed out in reporting in Form GSTR-1 of the current Tax period or amend any particulars already declared in Form GSTR-1 of the current Tax period [including those declared in invoice furnishing facility (IFF), for the first and second months of a quarter, if any, for quarterly taxpayers].

• Since the instructions to Form GSTR-1A mention that amendments will be reflected in Form GSTR-2B of next Tax period, this will lead to practical difficulties for recipients to undertake reconciliation for availing ITC in Form GSTR-3B.

• Sub-rule (4) of Section 59 has been amended to reduce the threshold from "two and a half lakh rupees" to "one lakh rupees" for the requirement of invoice-wise details for inter-State supplies made to unregistered persons (Inter State B2C Supplies). Consequently, amendments are made in Table 5 and 7 of Form GSTR-1.

• A similar threshold is prescribed for Form GSTR-1A.

4. Reduction in rate of Tax Collected at Source (TCS) for supplies being made through electronic commerce operator (ECOs):

• Notifications providing rate of TCS amended to reduce the rate of TCS from present 1% [CGST + State GST (SGST) or IGST or Union Territory GST (UTGST)] to 0.5% (CGST + SGST or IGST or UTGST)

5. Rule 88B Adjustments:

• Interest Calculation: The rules specify conditions under which interest on delayed tax payments is calculated, considering balances in the Electronic cash ledger. This ensures that interest is not levied on amounts already credited but not debited due to filing delays​.

6. Additional Provisions:

• Rule 62: Specifies the deadline for filing GSTR-4 by composition taxpayers for a financial year as June 30th following the end of the financial year.

• Rule 89: Allows for claiming refunds on account of upward revision in the price of exported goods, provided the refund application is filed within two years from the relevant date​.

7. Appeal before GSTAT:

Rule 110/111/113A: The newly inserted/substituted Rules 110, 111 and 113A provides for procedure of filling Appeal before the GSTAT-

“110 Appeal to the Appellate Tribunal.– (1) An appeal to the Appellate Tribunal under sub-section (1) of section 112 shall be filed in FORM GST APL-05, along with the relevant documents, electronically and provisional acknowledgement shall be issued to the appellant immediately:

Provided that an appeal to the Appellate Tribunal may be filed manually in FORM GST APL-05, along with the relevant documents, only if the Registrar allows the same by issuing a special or general order to that effect, subject to such conditions and restrictions as specified in the said order, and in such case, a provisional acknowledgement shall be issued to the appellant immediately.

(2) A memorandum of cross-objections to the Appellate Tribunal under sub-section (5) of section 112, if any, shall be filed electronically in FORM GST APL-06:

Provided that the memorandum of cross-objections may be filed manually in FORM GST APL-06, only if the Registrar allows the same by issuing a special or general order to that effect, subject to such conditions and restrictions as specified in the said order.

(3) The appeal and the memorandum of cross objections shall be signed in the manner specified in rule 26.

(4) Where the order appealed against is uploaded on the Common portal, a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 on removal of defects, if any, and the date of issue of the provisional acknowledgement shall be considered as the date of filing of appeal under sub-rule (1):

Provided that where the order appealed against is not uploaded on the Common portal, the appellant shall submit or upload, as the case may be, a self-certified copy of the said order within a period of seven days from the date of filing of FORM GST APL-05 and a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 on removal of defects, if any, and the date of issue of the provisional acknowledgment shall be considered as the date of filing of appeal:

Provided further that where the said self-certified copy of the order is submitted or uploaded after a period of seven days from the date of filing of FORM GST APL-05, a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 on removal of defects, if any, and the date of submission or uploading of such self-certified copy shall be considered as the date of filing of appeal.

Explanation.—For the purposes of this rule, the appeal shall be treated as filed only when the final acknowledgement, indicating the appeal number, is issued.

(5) The fees for filing of appeal or restoration of appeal shall be one thousand rupees for every one lakh rupees of tax or Input tax credit involved or the difference in tax or Input tax credit involved or the amount of fine, fee or penalty determined in the order appealed against, subject to a maximum of twenty five thousand rupees and a minimum of five thousand rupees:

Provided that the fees for filing of an appeal in respect of an order not involving any demand of tax, interest, fine, fee or penalty shall be five thousand rupees.

(6) There shall be no fee for application made before the Appellate Tribunal for rectification of errors referred to in sub-section (10) of section 112.”.

“111 Application to the Appellate Tribunal.– (1) An application to the Appellate Tribunal under sub-section (3) of section 112 shall be filed in Form GST APL-07, along with the relevant documents, electronically and a provisional acknowledgement shall be issued to the appellant immediately:

Provided that an application to the Appellate Authority may be filed manually in FORM GST APL-07, along with the relevant documents, only if the Registrar allows the same by issuing a special or general order to that effect, subject to such conditions and restrictions as specified in the said order, and in such case, a provisional acknowledgement shall be issued to the appellant immediately.

(2) A memorandum of cross-objections to the Appellate Tribunal under sub-section (5) of section 112, if any, shall be filed electronically in FORM GST APL-06:

Provided that the memorandum of cross-objections may be filed manually in FORM GST APL-06, only if the Registrar allows the same by issuing a special or general order to that effect, subject to such conditions and restrictions as specified in the said order.

(3) The appeal and the memorandum of cross objections shall be signed in the manner specified in rule 26.

(4) Where the order appealed against is uploaded on the Common portal, a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 on removal of defects, if any, and the date of issue of the provisional acknowledgement shall be considered as the date of filing of appeal under sub-rule (1):

Provided that where the order appealed against is not uploaded on the Common portal, the appellant shall submit or upload, as the case may be, a self-certified copy of the said order within a period of seven days from the date of filing of FORM GST APL-07 and a final acknowledgment, indicating appeal number shall be issued in Form GST APL-02 on removal of defects, if any, and the date of issue of the provisional acknowledgment shall be considered as the date of filing of appeal:

Provided further that where the said self-certified copy of the order is submitted or uploaded after a period of seven days from the date of filing of FORM GST APL-07, a final acknowledgement, indicating appeal number, shall be issued in FORM GST APL-02 on removal of defects, if any, and the date of submission or uploading of such self-certified copy shall be considered as the date of filing of appeal.

Explanation 1.—For the purposes of this rule, the appeal shall be treated as filed only when the final acknowledgement, indicating the appeal number, is issued.

Explanation 2.—For the purposes of Rule 110 and 111, ‘Registrar’ shall mean a Registrar appointed by the Government for this purpose, and shall include Joint Registrar, Deputy Registrar and Assistant Registrar. ”.

“113A Withdrawal of Appeal or Application filed before the Appellate Tribunal:-The appellant may, at any time before the issuance of the order under sub-section (1) of section 113, in respect of any appeal filed in FORM GST APL-05 or any application filed in FORM GST APL-07, file an application for withdrawal of the said appeal or the application, as the case may be, by filing an application in FORM GST APL-05/07W:

Provided that where the final acknowledgment in FORM GST APL-02 has been issued, the withdrawal of the said appeal or the application, as the case may be, would be subject to the approval of the Appellate Tribunal and such application for withdrawal of the appeal or application, shall be decided by the Appellate Tribunal within fifteen days of filing of such application:

Provided further that any fresh appeal or application, as the case may be, filed by the appellant pursuant to such withdrawal shall be filed within the time limit specified in sub-section (1) or sub-section (3) of section 112, as the case may be.”.