Acting on the recommendations of the GST Council, the Central Board of Indirect Taxes and Customs (CBIC) has ‘regularized’ the earlier show cause notices for tax demands issued to foreign airlines. It also issued a circular regarding the applicability of GST on preferential location charges (PLC) for residential or commercial properties.

Meanwhile, the Council also provided detailed clarification on the concepts of “as is” and “as is, wherever”. This will be applied to regularize the tax demand in case of underpayment of taxes or non-payment of taxes based on the recommendations of the GST Council.

“On the recommendations of the 54^th GST Council, payment of GST on importation of services by an establishment of a foreign airline from a connected person or any of its establishments outside India, where it is carried out without compensation, is hereby regularized for the period from July 1, 2017 to October 9. , 2024 on an “as is” basis, says a CBIC circular.

The issue became controversial early this year when the DGGI (Director General of GST Investigations) issued show cause notices to 10 major foreign airlines with a demand of ₹10,000 crore. It has already been said that this service will be exempt from October 10.

Based on the recommendation of the Council, the same circular gave relief to buyers who wish to have an apartment with a privileged location, for example facing a poor or cornered swimming pool. From now on, “Preferential Location Charges” will no longer be considered as additional services but as part of the construction services. This means that there will be no separate GST rate (18 percent) for this election. This also means that the GST for the entire service, including PLCs, would be 1 per cent (affordable housing), 5 per cent (non-affordable) or 12 per cent (commercial construction). It should be noted that one third of the transaction value of a property is allocated to the land, which is excluded from the GST calculation.

This circular follows the recommendation of the GST Council which linked location charges or PLC to the consideration for construction services and called it a composite supply. A composite supply refers to two or more goods or services that are sold together as a set and cannot be sold separately. Such a supply has a main supply, which is the main product or service sought by the buyer. The rate applicable to the main supply will apply to the entire supply. In this scenario, the construction service constitutes the main supply and the CPL is naturally integrated into it. As a result, the PLC will benefit from the same tax treatment as the main supply, namely the construction service.

As is and “as is, where is” concept

Another circular states that in cases where matters have been regularized on “as is” and “as is, wherever” basis, two principles will be followed. If the dispute concerns a higher or lower rate, the payment at the lower rate will be treated as tax fully paid for the regularized period. This means there is no need to pay the difference between a higher rate and a lower rate. If paid at a higher rate, no refund will be made.