Clarification on certain issues (sale by government departments to unregistered person; leviability of penalty under section 73(11) of the CGST Act; rate of tax in case of debit notes / credit notes issued under section 142(2) of the CGST Act; applicability of notification No. 50/2018-Central Tax; valuation methodology in case of TCS under Income Tax Act and definition of owner of goods) related to GST

Circular No.: 76/50/2018-GST
Date of Circular: 31st December 2018
Relevant Sections and Rules:

• CGST Act, 2017:
  • Section 22 & 24: Registration requirements
  • Section 29: Cancellation of registration
  • Section 34: Credit/Debit Notes
  • Section 51: TDS applicability
  • Section 73(11): Penalty for non-payment of tax
  • Section 125: General penalty
  • Section 142(2): Transitional pricing adjustments
  • Section 129(1): Detention and seizure of goods
  • Section 15(2): Value of supply
• Notifications Referenced:
  • Notification No. 36/2017-CT(R), 37/2017-IT(R) – Reverse charge on supply from Government
  • Notification No. 50/2018-CT – TDS applicability

Summary of Circular:

This circular provides a set of clarifications on key GST issues raised by stakeholders, covering sales by government departments, penalty imposition, debit/credit note taxation, TCS valuation, TDS applicability, and the definition of owner of goods under detention provisions.

1. Sale by Government Departments to Unregistered Persons:

• Sale of used vehicles, scrap, seized goods etc. by Government (Centre/State/UT/Local Authority) to unregistered persons is taxable under GST.
• Such transactions are not covered under reverse charge, hence Government must register and pay GST if crossing thresholds under Sections 22 or 24.

2. Penalty under Section 73(11) for Late GSTR-3B Filing:

• No penalty under Section 73(11) is applicable if GSTR-3B is filed late but tax and interest are paid.
• However, a general penalty under Section 125 may still be imposed after due process of law.

3. Debit/Credit Notes under Section 142(2):

• In case of price revision post-GST (for supplies made before 01.07.2017), the applicable GST rate (not pre-GST) is to be used in the debit/credit note.

4. TDS Applicability – Clarification on Notification 50/2018-CT:

• The condition of 51% government ownership/control applies to both items (i) and (ii) in clause (a) of the notification.
• Thus, only those boards/bodies with ≥51% Govt. equity/control are liable to deduct TDS under Section 51.

5. GST Valuation – Inclusion of TCS under Income Tax Act:

• TCS collected under Income Tax Act (Section 206C) is part of transaction value if charged separately.
• Therefore, TCS must be included in taxable value under Section 15(2) of the CGST Act.

6. Who is ‘Owner of Goods’ under Section 129(1):

• If the consignment is accompanied by an invoice or valid document:
  • The consignor or consignee shall be deemed the owner.
• If no such document exists:
  • The proper officer will determine the ownership based on facts.

Source: Circular No.: 76/50/2018-GST