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F. No. CBIC-190354/316/2022-TRU Section-CBEC
Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)
*****
North Block, New Delhi
Dated the –13th January, 2023
Circular No. 190/02/2023 - GST: Clarification Regarding GST Rates and Classification of Certain Services.
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Subject: Clarifications regarding applicability of GST on certain services – reg.
Madam/Sir,
Representations have been received seeking clarifications on the following issues:
- Applicability of GST on accommodation services supplied by Air Force Mess to its personnel;
- Applicability of GST on incentive paid by Ministry of Electronics and Information Technology (MeitY) to acquiring banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
The above issues have been examined by Good Service and Tax Council in the 48th meeting held on 17th December 2022. The issue -wise clarifications are given below:
2. Applicability of GST on accommodation services supplied by Air Force Mess to its personnel:
2.1 Reference has been received requesting for clarification on whether Good Service and Tax is payable on accommodation services supplied by Air Force Mess to its personnel.
2.2 All services supplied by Central Government, State Government, Union Territory or local authority to any person other than business entities (barring a few specified services such as services of postal department, transportation of goods and passengers etc.) are exempt from Good Service and Tax vide Sl. No. 6 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017.
Therefore, as recommended by the Good Service and Tax Council, it is hereby clarified that accommodation services provided by Air Force Mess and other similar messes, such as, Army mess, Navy mess, Paramilitary and Police forces mess to their personnel or any person other than a business entity are covered by Sl. No. 6 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 provided the services supplied by such messes qualify to be considered as services supplied by Central Government, State Government, Union Territory or local authority.
3. Applicability of GST on incentive paid by MeitY to acquiring banks under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions:
3.1 Representations have been received requesting for clarification on whether GST is applicable on the incentive paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.
3.2 Under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM- UPI transactions, the Government pays the acquiring banks an incentive as a percentage of value of RuPay Debit card transactions and low value BHIM-UPI transactions up to Rs.2000/-.
3.3 The Payments and Settlements Systems Act, 2007 prohibits banks and system providers from charging any amount from a person making or receiving a payment through RuPay Debit cards or BHIM-UPI.
3.4 The service supplied by the acquiring banks in the digital payment system in case of transactions through RuPay/BHIM UPI is the same as the service that they provide in case of transactions through any other card or mode of digital payment. The only difference is that the consideration for such services, instead of being paid by the merchant or the user of the card, is paid by the central government in the form of incentive.
However, it is not a consideration paid by the central government for any service supplied by the acquiring bank to the Central Government. The incentive is in the nature of a subsidy directly linked to the price of the service and the same does not form part of the taxable value of the transaction in view of the provisions of section 2(31) and section 15 of the CGST Act, 2017.
3.5 As recommended by the Council, it is hereby clarified that incentives paid by MeitY to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.
4.Difficulties, if any, in implementation of this circular may be brought to the notice of the Board.
Yours faithfully,
(Anna Sosa Thomas)
Technical Officer, TRU II
Email: anna.thomas@gov.in
📚 Frequently Asked Questions (FAQs): Circular No. 190/02/2023 - GST
Q1. What is Circular No. 190/02/2023-GST?
Answer:
Circular No. 190/02/2023-GST clarifies the GST treatment of two important service-related issues examined during the 48th GST Council Meeting held on 17 December 2022. The circular explains whether GST applies to accommodation services provided by Air Force and similar messes and whether incentives paid by the Ministry of Electronics and Information Technology (MeitY) to acquiring banks under the RuPay and BHIM-UPI incentive scheme are taxable.
Q2. Is GST applicable on accommodation services provided by Air Force Mess?
Answer:
No, subject to certain conditions. Accommodation services provided by Air Force Mess to its personnel are exempt from GST if the services qualify as services supplied by the Central Government, State Government, Union Territory, or a local authority.
In simple terms, if the mess is considered part of the Government and supplies accommodation to personnel or any person other than a business entity, GST exemption is available under Entry No. 6 of Notification No. 12/2017-Central Tax (Rate).
Q3. Does this clarification apply only to Air Force Mess?
Answer:
No. The circular also extends the same clarification to Army Mess, Navy Mess, Paramilitary Forces Mess, and Police Forces Mess, provided they satisfy the conditions specified in the notification.
Many businesses actually misunderstand this point. The exemption is not based on the name of the organization alone but on whether the services are considered to be supplied by the Government or a qualifying public authority.
Q4. Who can avail the GST exemption for accommodation services?
Answer:
The exemption applies where accommodation services are supplied to personnel or any person other than a business entity, provided the supplier qualifies as the Central Government, State Government, Union Territory, or a local authority.
If the services are supplied to a business entity or the supplier does not satisfy the prescribed conditions, the exemption may not be available.
Q5. Why was this clarification regarding Air Force Mess issued?
Answer:
The CBIC received several representations seeking clarity on whether accommodation services provided by Air Force Mess and similar establishments were exempt from GST.
If you look at it practically, different tax authorities had adopted different interpretations. The circular ensures uniform implementation across the country and reduces unnecessary litigation for defence establishments and their personnel.
Q6. Is GST applicable on incentives paid by MeitY to acquiring banks?
Answer:
No. The circular clearly states that incentives paid by MeitY to acquiring banks under the Incentive Scheme for Promotion of RuPay Debit Cards and Low Value BHIM-UPI Transactions are not subject to GST.
These incentives are treated as subsidies and not as consideration for services supplied to the Central Government. Therefore, they are outside the scope of GST.
Q7. Why are MeitY incentives treated as subsidies instead of consideration?
Answer:
The circular explains that banks provide the same digital payment services irrespective of whether the transaction is carried out through RuPay, BHIM-UPI, or another payment method. The only difference is that the Government pays the incentive instead of merchants or users.
Let’s understand this with an example. A bank processes a ₹1,000 BHIM-UPI payment. Instead of charging the merchant, the Government provides an incentive. Since this payment is a subsidy directly linked to the price and not consideration for services rendered to the Government, GST does not apply.
Q8. Which legal provisions support this clarification on MeitY incentives?
Answer:
The circular refers to Section 2(31) and Section 15 of the CGST Act, 2017.
These provisions define "consideration" and prescribe the rules for determining the value of taxable supplies. Since the incentive paid by MeitY is treated as a subsidy directly linked to price and not consideration for a taxable supply made to the Government, it is excluded from the taxable value.
Q9. Why are acquiring banks not allowed to charge merchants for these transactions?
Answer:
The Payments and Settlement Systems Act, 2007 prohibits banks and system providers from charging any amount from persons making or receiving payments through RuPay Debit Cards or BHIM-UPI.
To encourage digital payments, the Government compensates acquiring banks through the incentive scheme instead of allowing charges to be collected from merchants or customers.
Q10. Does this circular introduce any new GST exemption?
Answer:
No. Circular No. 190/02/2023-GST is clarificatory in nature.
It does not amend the CGST Act or issue a new exemption notification. Instead, it explains the application of Notification No. 12/2017-Central Tax (Rate) and clarifies that MeitY incentives are subsidies that do not form part of the taxable value under the existing provisions of the CGST Act.
Related Resource:
GST Compliance: https://finodha.in/gst-compliance/
Download PDF: Circular No. 190/02/2023 - GST
More Information: https://taxinformation.cbic.gov.in/
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website: https://www.gst.gov.in/