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Notification No. 15/2023 – IT(R): ITC Restriction on Motor

by Shakshi Bharti | Jan 23, 2024 | GST, 2023 Notifications, Integrated Tax (Rate) 2023 Notifications, Notifications | 0 comments

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Important Keyword: Notification No. 15/2023 - Integrated Tax (Rate), ITC restriction, GST on motor cab services, GST Notification 15/2023, ITC motor cab input, Section 5(4)(3)(1) IGST Act 2017, Section 6(1) IGST Act 2017, Section 20(xxv)(iv)(iii) IGST Act 2017, Section 15(5) CGST Act 2017, Section 16(1) CGST Act 2017, Section 148(6) CGST Act 2017,

Words: 1491; Read time: 8 minutes.

[F. No. CBIC-190354/195/2023-TO (TRU-II)-CBEC]
Government of India
Ministry of Finance
(Department of Revenue)

New Delhi, the 19 October, 2023

Notification No. 15/2023 - Integrated Tax (Rate): Seeks to Amend Notification No 8/2017- Integrated Tax (Rate) Dated 28.06.2017.

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUBSECTION (i)]

G.S.R (E).-In exercise of the powers conferred by sub-sections (1), (3) and (4) of section 5, subsection (1) of section 6 and clauses (iii), (iv) and (xxv) of section 20 of the IGST Act, 2017 (13 of 2017), read with sub-section (5) of section 15, sub-section (1) of section 16 and section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council,

And on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 8/2017- Integrated Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 683(E), dated the 28th June, 2017, namely:-

In the said notification, -

(A) in the Table,

(i). against serial number 8, in column (3), in item (vi), after the condition in column (5) against the rate of 5 percent, the following condition shall be inserted, namely:-

“Provided further that where the supplier of input service in the same line of business charges integrated tax at a rate higher than 5%, credit of input tax charged on the input service in the same line of business in excess of the tax paid or payable at the rate of 5%, shall not be taken.

Illustration: ‘A’ engages ‘B’ for transport from New Delhi to Jaipur in a motor cab for Rs. 1000. ‘B’, for supplying the said service, hires a motor cab with operator from ‘C’ for Rs. 800. ‘C’ charges ‘B’ integrated tax at the rate of 12% (Rs. 96). If ‘B’ charges ‘A’ integrated tax at the rate of 5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 40 (5% of Rs. 800) and not Rs. 96.”;

(ii). against serial number 10, in column (3), in item (i), after the condition in column (5) against the rate of 5 percent , the following condition shall be inserted, namely:-

integrated tax at the rate of 5%, he shall be entitled to take input tax credit on the input service in the same line of business supplied by ‘C’ only to the extent of Rs. 40 (5% of Rs. 800) and not Rs. 96.”;

(iii). against serial number 34,-

in column (3), in item (iv), for the words “totalisator or a license to” , the words “licensing a” shall be substituted;
in column (3), item (v) and the entries relating thereto shall be omitted;

(B) in the Annexure: Scheme of Classification of Services,-

serial number 696 and the entries relating thereto shall be omitted;
serial number 698 and the entries relating thereto shall be omitted.

2. This notification shall come into force with effect from the 20^th day of October, 2023.

(Rajeev Ranjan)
Under Secretary to the Government of India

Note: - The principal notification number 08/2017 - Integrated Tax (Rate), dated the 28th June, 2017 was published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) , vide number G.S.R. 683 (E), dated the 28th June, 2017 and was last amended vide notification number 11/2023-Integrated Tax (Rate), dated the 26^th September, 2023 published in the Gazette of India, Extraordinary, Part II , Section 3 , Sub-section (i) vide number G.S.R. 689(E), dated the 26^th September, 2023.

📚 Frequently Asked Questions (FAQs): Notification No. 15/2023 - Integrated Tax (Rate)

Q1: What is the objective of Notification No. 15/2023 - Integrated Tax (Rate)?

Answer:
The primary objective of Notification No. 15/2023 is to amend Notification No. 8/2017 - Integrated Tax (Rate) to restrict the input tax credit (ITC) for services in the same line of business (especially motor cab transport) where GST is charged at a concessional 5% rate. The intention is to avoid dual benefits of reduced GST and full ITC, thus aligning with GST Council recommendations.

Q2: What specific services are impacted by this notification?

Answer:
This notification affects motor cab transport services falling under:
Sr. No. 8 (vi): Passenger transport by motor cab
Sr. No. 10 (i): Renting of motor vehicle
Under these, a new condition has been inserted that limits ITC if the input service is also from the same line of business but is taxed at a rate higher than 5%.

Q3: Can you explain the ITC restriction with an example?

Answer:
Certainly! 🚖
Suppose 'A' hires 'B' for motor cab transport for ₹1000.
‘B’ hires another operator 'C' for ₹800, and 'C' charges 12% GST (₹96).
Now, if 'B' charges 'A' 5% GST, ‘B’ can only avail ITC of ₹40 (5% of ₹800), not the full ₹96.
This ensures consistency and fairness in claiming input credit under GST.

Q4: What are the implications of this notification on transport operators?

Answer:
Transport operators using subcontracting models must now adjust their invoicing and ITC claims. If they opt for a 5% GST rate, they must restrict their ITC claim to match that rate, even if they pay higher GST on inward supplies. This may impact costing and pricing strategies.

Q5: When did Notification No. 15/2023 - Integrated Tax (Rate) come into effect?

Answer:
The notification is effective from 20th October 2023.

Q6: Which entries have been removed from the service classification annexure?

Answer:
The following entries from the Scheme of Classification of Services have been omitted:
Sr. No. 696
Sr. No. 698
This may relate to services that have either been discontinued or merged under other heads.

Q7: What changes were made to Sr. No. 34 in the main table of Notification No. 8/2017?

Answer:
For item (iv) under Sr. No. 34, the phrase “totalisator or a license to” was replaced with “licensing a.”
Item (v) and its corresponding entries have been entirely removed.
These changes aim to streamline the language and reduce ambiguity.

Q8: Who should consult a GST professional regarding this notification?

Answer:
👉 Businesses offering transport services
👉 Aggregators using subcontracted fleets
👉 Logistics firms claiming ITC on input services
For professional guidance, visit GST Experts at www.Finodha.in or consult for GST Compliance.

Q9: Does this amendment apply to inter-state transport services only?

Answer:
Yes, as it falls under Integrated Tax (Rate), it is applicable primarily to inter-state supplies of services. However, businesses must ensure correct GST application based on place of supply rules.