CBIC Clarifies GST Applicability on certain Services: Circular 190/2/2023

The CBIC has clarified the issues concerning the applicability of GST to certain services, such as Air Force Mess accommodations and MeitY incentives to acquiring banks for RuPay Debit Cards and low-value BHIM-UPI transactions, vide Circular 190/2/2023.

CBIC Clarification on GST applicability on Air Force Mess accommodations and MeitY incentives for RuPay Debit Cards/ BHIM-UPI transactions

Applicability of GST on Air Force Mess Accommodations:

The CBIC has been asked to clarify whether or not GST is payable on accommodation services provided by the Air Force Mess to the personnel of the Air Force.

After examining the issue, the CBIC has issued a clarification based on the recommendations of the GST Council stating that accommodation services provided by Air Force Mess and other similar messes, such as Army Mess, Navy Mess, Paramilitary Mess, and Police Force Mess, to their personnel or any person who is not a business entity are covered by Item Number 6 of Central Tax Rate Notification 12/2017 dated June 28, 2017, subject to the condition that such services qualify to be considered as supplied by the Central or State Government, Union Territory, or local authority.

Applicability of GST on MeitY incentives to acquiring banks for RuPay Debit Cards and low-value BHIM-UPI transactions:

CBIC also received representations asking for clarification on whether or not GST is applicable to an incentive paid by MeitY to acquiring banks as part of an incentive scheme for promotion of low-value BHIM-UPI transactions and RuPay Debit Cards.

The CBIC has examined the issue and offered clarification, based on the recommendations of the GST Council, that the incentives paid by the MeitY to acquiring banks as part of the incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are of the nature of subsidies and are therefore exempt from taxation.

As part of the incentive programme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions, the government pays an incentive to the acquiring banks in the form of a percentage of the value of transactions made with RuPay Debit Cards and low-value BHIM-UPI up to Rs. 2,000. This incentive is intended to encourage more people to use these payment methods.

A person who makes or receives a payment using BHIM-UPI or a RuPay debit card is not allowed to be charged any kind of fee, according to the Payments and Settlements Systems Act that was passed in 2007.

The service that is provided by the acquiring banks in the digital payment system in the case of transactions using RuPay or BHIM UPI is the same service that they provide in the case of transactions using any other card or method of digital payment. This includes the service that is provided in the case of transactions using any other card or method. The one and only distinction is that the consideration for such services is paid for by the central government in the form of an incentive rather than being paid for by the merchant or the user of the card. On the other hand, this is not a consideration that is paid by the central government to the acquiring bank in exchange for any function that the acquiring bank performs for the central government.

Because the incentive takes the form of a subsidy that is directly proportional to the cost of the service, it is specifically excluded from the calculation of the taxable value of the transaction in accordance with the terms of Section 2(31) and Section 15 of the Central Goods and Services Tax Act of 2017.

CBIC GST Circular 190/2/2023 dt. 13/01/2023: Clarification on GST applicability on Air Force Mess accommodations and MeitY incentives to acquiring banks for RuPay Debit Cards and low-value BHIM-UPI transactions

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