Acting on the recommendations of GST Council, the Central Board of Indirect Taxes & Customs (CBIC) has ‘regularised’ past show cause notices for tax demand issued to foreign airlines. It has also issued circular regarding applicability of GST on Preferential Location Charges (PLC) for residential or commercial properties.

Meanwhile, the Board has also come out with a detailed clarification on the concepts of ‘as is’ and ‘as is where is’ basis. This will be applied to regularise the tax demand for short payment of taxes or no payment of taxes based on the recommendations of GST Council.

“On recommendations of the 54th GST Council, the payment of GST on import of services by an establishments of a foreign airlines company from a related person or any of its establishment outside India, when made without consideration, is hereby regularised for the period from July 1, 2017 to October 9, 2024 on ‘as is where is’ basis,” a CBIC circular said.

The issue became contentious early this year with the DGGI (Director General of GST Investigation) issuing show-cause notices to 10 major foreign airlines with a demand of ₹10,000 crore. It has already been said that such service will be exempted from October 10.

Based on the recommendation of the Council, the same circular has given relief to homebuyers who want to have flat with preferred location such as facing swimming poor or cornered one. Now, ‘Preferential Location Charges’ will not be considered as additional services but as part of construction services. This means there will be no separate rate of GST (18 per cent) for such choice. This also means that GST for entire service, including PLC would be 1 per cent (affordable housing), 5 per cent (non-affordable) or 12 per cent (commercial construction). It may be noted that one-third of the transaction value of an immovable property is attributed to land, which is excluded from GST calculation.

This circular is a follow-up to the GST Council’s recommendation which clubbed location charges or PLC with the consideration for the construction services and called this as 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 supply has a principal supply, which is the primary product or service the buyer is seeking. The rate applicable to the principal supply will apply to the entire supply. In this scenario, the construction service is the main supply, and the PLC is naturally bundled with it. As a result, the PLC will receive the same tax treatment as the main supply, which is the construction service.

As is’ and ‘As is, where is’ concept

Another circular said that in cases where the matters have been regularised on ‘As is’ and ‘As is, where is’ basis, two principles will be followed. If the dispute is over higher and lower rate, then payment at lower rate shall be treated as tax fully paid for the period that is regularised. This means no requirement to pay the difference between higher and lower rate. In case of payment was made at higher rate, then no refund will be made.

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