Clarifications regarding applicability of GST on certain services.

Circular No.: 245/02/2025-GST
Date of Circular: 28th January 2025
Relevant Sections and Rules:

• Section 168(1), CGST Act, 2017
• Section 2(69), Section 9(3)/(4), Section 7, Section 12
• Notifications: 12/2017-CTR, 13/2017-CTR, 06/2025-CT(R), 07/2025-CT(R), 08/2024-CT(R), 09/2024-CT(R)

Clarifications Provided:

1. GST on Penal Charges by Regulated Entities (REs) such as Banks/NBFCs:
   As per RBI’s instructions dated 18.08.2023, penal interest is to be replaced with penal charges effective 01.01.2024.
   Clarification: Penal charges imposed for breach of loan terms are not taxable under GST, as they are not consideration for tolerating an act. This aligns with Circular No. 178/10/2022-GST.
2. GST Exemption for Payment Aggregators (PAs) on Card Transactions ≤ ₹2,000:
   Clarified that RBI-regulated PAs involved in the settlement of card transactions up to ₹2,000 qualify as ‘acquiring banks’, and are thus exempt under Sl. No. 34 of Notification 12/2017-CTR.
   PGs (who do not handle funds) are not eligible.
3. R&D Services by Government Entities Against Grants:
   R&D services provided by notified Govt. Entities against grants are exempt from 10.10.2024 via Notification No. 08/2024-CT(R).
   GST paid earlier (01.07.2017 to 09.10.2024) is regularized on ‘as is where is’ basis.
4. Skilling Services by NSDC-Approved Training Partners:
   Earlier exemption withdrawn from 10.10.2024, now restored from 16.01.2025 via Notification No. 06/2025-CT(R).
   GST paid for 10.10.2024 to 15.01.2025 is regularized on ‘as is where is’ basis.
5. Facility Management Services to MCD HQ (Delhi):
   Services like housekeeping and horticulture for MCD’s own office are taxable, as they are not related to functions under Article 243W of the Constitution.
   Hence, no exemption under Sl. No. 3A of Notification 12/2017-CTR.
6. DDA is Not a Local Authority:
   Delhi Development Authority (DDA) does not meet the criteria under Section 2(69) of the CGST Act.
   Hence, services provided by DDA to business entities are not liable to RCM under Notification 13/2017-CTR.
7. RCM on Renting of Commercial Property by Unregistered to Composition Taxpayers:
   Initially brought under RCM via Notification 09/2024-CTR (effective 10.10.2024).
   But later, composition taxpayers were excluded from RCM via Notification 07/2025-CT(R).
   GST paid by composition taxpayers under RCM during 10.10.2024 to 15.01.2025 is regularized on ‘as is where is’ basis.
8. Support Services by Electricity Utilities (e.g., Metering, Shifting Lines):
   Exempted from GST w.e.f. 10.10.2024 under Sl. No. 25A of Notification 12/2017-CTR.
   GST paid from 10.10.2024 to 15.01.2025 is regularized on ‘as is where is’ basis.
9. Services by Goethe Institute / Max Mueller Bhawan:
   Linguistic and cultural training services supplied from 01.07.2017 to 31.03.2023 are regularized on ‘as is where is’ basis, due to earlier bona fide belief of exemption.

Source: Circular No.: 245/02/2025-GST