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Circular No. 190/02/2023-GST

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

To,

The Principal Chief Commissioners/Chief Commissioners/  Principal Commissioners/ Commissioner of Central Tax (All) /The Principal Director Generals/ Director Generals (All)

Subject: Clarifications regarding the applicability of GST on certain services –reg.

Madam/Sir,

Representations have been received seeking clarifications on the following issues:

1. Applicability of GST on accommodation services supplied by Air Force Mess to its personnel;

2. Applicability of GST on incentive paid by the Ministry of Electronics and Information Technology (MeitY) to acquiring banks under the Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions.

The above issues have been examined by GST 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 GST is payable on accommodation services supplied by Air Force Mess to its personnel.

2.2 All services supplied by the 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 the postal department, transportation of goods and passengers, etc.) are exempt from GST vide Sl. No. 6 of notification No. 12/2017 –Central Tax (Rate) dated 28.06.2017. Therefore, as recommended by the GST 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 the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions.

3.2 Under the Incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions, the Government pays the acquiring banks an incentive as a percentage of the 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 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 an 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 the 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 the 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