OCTOBER 16, 2024

By Vijay Kumar

IN Jest GST dated 11 09 2024, titled As is where is GST, I raised certain issues on what this 'as is where is' basis is? as:

What is this 'as is where is' basis? This is a new phrase that has crept into the GST lingua franca. In sale, auction, contract etc., you know what a transfer on 'as is where is' basis.

The phrase 'as is where is' is a clause in any agreement which implies that the thing so contracted is transferred, by one person to another in its existing condition and the transferee has accepted it with all its faults and defects, whether or not immediately apparent.

Is the Board authorised/competent to regularise the GST on 'as is where is' basis? And what is that regularisation? Was there anything irregular earlier? What provisions of the GST Act permit the Board to regularise something that was obviously irregular? And what about the States as is where is?

Remember Section 11C of the Central Excise Act, under which the Government could grant retrospective exemption with the rider - if you didn't pay the tax, good, you need not pay now, but if you have already paid it, forget refund; you lost the game.

This "as is where is" must be the GST version of Section 11C.

If you were smart enough not to pay the tax, you will not be asked to pay it now, but if you were not shrewd enough and paid the tax, don't ask for a refund. Regularised as is where is!

Why am I going back to this "as is where is"?

The Government in F.No. CBIC - 190354/149/2024 - TO (TRU-II)-CBEC; Circular No. 236/30/2024-GST, Dated the 11th October 2024, clarified what this "as is where is" is. The Circular states:

Instances were brought to the notice of the Board pertaining to the prevailing doubts among the field formations/trade as regards the scope of regularization on "as is" or "as is, where is basis" vide various GST Circulars issued for clarification regarding applicable GST rates and appropriate classification of specified goods or service or both on the basis of recommendation of the GST Council in its various meetings.

The phrase 'as is where is' is generally used in the context of transfer of property and means that the property is being transferred in its current condition, whatever this condition happens to be and the transferee of property has accepted it with all its faults and defects, whether or not immediately apparent. In the context of GST, the phrase 'regularized on as is where is' basis means that the payment made at lower rate or exemption claimed by the taxpayer shall be accepted and no refund shall be made if tax has been paid at the higher rate.

The intention of the Council is to regularize payment at a lower rate including nil rate due to the tax position taken by taxable person, as full discharge of tax liability. The tax position of a taxable person is reflected in the returns filed by the person where the applicable rate of tax (or relevant exemption entry) on a transaction/supply is declared.

Thus, in cases where the matters have been regularized on "as is" or " as is, where is basis", in case of two competing rates and the GST is paid at lower of the two rates, or at nil rate where one of the competing rates was nil under notification entry, by some suppliers while other suppliers have paid at higher rate, payment at lower rate shall be treated as tax fully paid for the period that is regularized.

The Circular gives some illustrations like,

Illustration 1

In a situation where certain tax payers have paid 5% GST on supply of "X", while some have paid 12% and the GST Council recommends to reduce the rate to 5% prospectively and regularize the past on "as is where is basis" which is notified on 1.12.2023, this means that for the period prior to 1.12.2023, the 5% GST paid by tax payer will be treated as tax fully paid and they would not be required to pay duty differential of 7% between 5% and 12%. For those tax payers who have paid 12% GST, no refund would be allowed.

This is what I mentioned,

if you didn't pay the tax, good, you need not pay now, but if you have already paid it, forget refund; you lost the game.

Board says, This Circular is being issued in exercise of power under Section 168 of CGST Act to clarify scope of "as is" or "as is, where is basis".

Now, I have another doubt. Is the Circular issued or being issued? And what is CBEC in the Circular reference CBIC-190354/149/2024-TO(TRU-II)-CBEC? Is it not CBIC now?

What is the duty differential in the illustration above? Has GST become GSD?

And who has issued this Circular?

The Circular states, it is from

Government of India
Ministry of Finance
Department of Revenue
(Tax Research Unit)

And is signed by a Joint Secretary (TRU). Is this Joint Secretary (TRU), the Board? The Circular is issued in exercise of power under Section 168 of CGST Act, which states that the Board may issue such circulars.

Section 168. Power to issue instructions or directions.-

(1) The Board may, if it considers it necessary or expedient so to do for the purpose of uniformity in the implementation of this Act, issue such orders, instructions or directions to the central tax officers as it may deem fit, and thereupon all such officers and all other persons employed in the implementation of this Act shall observe and follow such orders, instructions or directions.

It is not easy to understand what the Board is.

There is a Government of India which is run by various Ministries and there is a Finance Ministry. Each Ministry has several Departments. Our Finance Ministry has a Revenue Department (inter alia) headed by the Revenue Secretary. This Revenue Department has two statutory Boards - the CBDT (Central Board of Direct Taxes) and CBIC (Central Board of Indirect Taxes and Customs). The Chairman and Members of the Board are almost equal to the Secretary.

So, perhaps the Government means the Revenue Secretary and the Board means the CBIC.

Somewhere in this maze, there is a Tax Research Unit (TRU) headed by a Joint Secretary from the IRS. This Circular says it is being issued in exercise of power under Section 168 of CGST Act, under which the Board is competent to issue this kind of circulars. Is the TRU, the Board? Or is it the Government?

The BJP leader Pramod Mahajan once explained Indian Democracy to a Chinese audience like this:

I am a Member of Lok Sabha. I belong to the single largest party and I am in the opposition.

The Chinese were looking aghast. 'Is your party the single-largest party?' I said, 'Yes, we are the single largest party in the House and we are in the opposition.

Then I pointed out to Shri Sriballav Panigrahi and told them he belongs to the second-largest party. Though he is outside the government, yet he is supporting the government.

Then I pointed towards Shri M.A. Baby and told them that he is the third-largest party. He is inside the Front but outside the government.

And then I said, he is Mr Ramakant Khalap. He is the only Member of his party and he is the government.

Okay, TRU or Board or Government issued a Circular clarifying what "as is where is" means. Shouldn't we be happy?

Now that we know the meaning of "as is where is", why these "as is where is" circulars?

Is the Government or Board or TRU (assuming they are not one) competent to issue such circulars? Is the Board authorised/competent to regularise GST on 'as is where is' basis? And what is that regularisation? Was there anything irregular earlier? What provisions of the GST Act permit the Board to regularise something that was obviously irregular? And what about the States as is where is? Will this generate litigation? Not really, because nobody will challenge the Government's benevolence in exempting something retrospectively.

This is not positively the end of the story.

An interesting new Section 11A was inserted in the CGST Act by the Finance Act (2) of 2024.

11A. Notwithstanding anything contained in this Act, if the Government is satisfied that-

(a) a practice was, or is, generally prevalent regarding levy of central tax (including non-levy thereof) on any supply of goods or services or both; and

(b) such supplies were, or are, liable to, -

(i) central tax, in cases where according to the said practice, central tax was not, or is not being, levied, or

(ii) a higher amount of central tax than what was, or is being, levied, in accordance with the said practice,

the Government may, on the recommendation of the Council, by notification in the Official Gazette, direct that the whole of the central tax payable on such supplies, or, as the case may be, the central tax in excess of that payable on such supplies, but for the said practice, shall not be required to be paid in respect of the supplies on which the central tax was not, or is not being levied, or was, or is being, short-levied, in accordance with the said practice..

So, this exemption from payment of tax has to be by a notification by the government on the recommendation of the GST Council, not by a circular by the TRU regularising the non-payment of tax during a past period. But there is a problem. This new Section 11A will come into effect only from 1st November 2024. Until then, the brilliant bureaucrats have found a way of circulars from TRU to regularise on "as is where is basis".

Obviously, this Section 11A was absolutely required to grant a retrospective waiver/exemption of tax. If they could do it with circulars, why would they make Parliament to amend the GST Act to insert the new Section 11A? Maybe the power to tax includes the power to untax, but that seems to be with the Parliament.

Hats off to the superlative ingenuity.

GST is fun.

Until next week