Clarification on "As Is" Basis in GST: Key Insights from Circular No. 236/30/2024

Clarification on the Application of “As Is” or “As Is, Where Is” Basis in GST

This circular addresses uncertainties surrounding the “as is” or “as is, where is” basis within the Goods and Services Tax (GST) framework. The clarification stems from discussions held during the GST Council's 54th meeting on September 9, 2024, which underscored the need for guidelines to regularize past GST payments.

Purpose of the Circular

The circular aims to clarify the circumstances in which taxpayers have encountered confusion due to inconsistent GST rates or misinterpretations, leading to discrepancies in payment amounts. Key points include:

Taxpayers who paid a lower GST rate or claimed exemptions in good faith (based on prior ambiguous tax positions) will have their payments considered fully settled for the relevant periods.
Taxpayers who paid higher rates will not receive refunds.

This measure applies specifically in cases where genuine doubts existed about the applicable tax rates. Various scenarios, showcasing different GST rates for the same goods, illustrate this point.

Provisions for Regularization

The circular is issued under Section 168 of the CGST Act, 2017, to enhance understanding of the "as is" or "as is, where is" basis. It states:

Regularization Context: Following the GST Council's recommendation, GST non-payment or short-payment for prior periods under the “as is” or “as is, where is” basis has been regularized for specific goods or services. This includes cases where uncertainties arose due to differing notifications or interpretations.
Tax Payment Status: Suppliers who paid a lower GST rate or claimed exemptions, such as a nil rate, shall have their payments recognized as fully satisfying their tax obligations for the corresponding periods. However, taxpayers who paid at higher rates will not be entitled to refunds.
Meaning of “As Is, Where Is”: This term typically refers to the transfer of property in its existing condition. In the GST context, it indicates that payments made at lower rates or exemptions claimed by the taxpayer will be accepted, with no provision for refund if higher rates were paid.

Applicability of the Circular

The circular establishes that in cases with competing GST rates where taxpayers have opted for the lower rate or have claimed exemptions, the payments shall be recognized as fully settled. Below are illustrative scenarios:

Example 1: If some taxpayers paid 5% GST on supply of good “X” while others paid 12%, and the GST Council subsequently lowers the rate to 5% effective December 1, 2023, those who paid 5% will be considered compliant for the earlier periods. No refunds will be granted to those who paid 12%.
Example 2: In a situation where some taxpayers paid 5% and others claimed nil duty due to a perceived exemption, and the Council clarifies a 5% GST, the previous non-payment will be treated as fulfilling their tax liability. Those who paid 5% will not receive refunds.
Example 3: If a dispute arose between 5% and 12% rates but some taxpayers did not remit any GST on supply “X”, once the Council clarifies the applicable rate as 12%, those who paid 5% will not owe additional payment, while those who paid 12% will not recover any funds.

Implementation and Reporting

Field formations are instructed to disseminate these guidelines and report any implementation challenges to the Board.