Blog on Circular No. 16/16/2017-GST: Clarifications on GST Applicability for Specific Services
<h4><strong>Introduction</strong></h4><p>The <strong>Central Board of Indirect Taxes and Customs (CBIC)</strong> issued <strong>Circular No. 16/16/2017-GST</strong> on <strong>November 15, 2017</strong>, providing <strong>clarifications on the applicability of GST and Input Tax Credit (ITC) for specific services</strong>. This circular addresses important issues related to <strong>warehousing of agricultural produce, inter-state transfers of aircraft parts, and general insurance policies provided by State Governments</strong>.</p><hr><h3><strong>Key Highlights of the Circular</strong></h3><h4><strong>1. GST on Warehousing of Processed Agricultural Produce</strong></h4><ul><li><strong>Warehousing services for raw agricultural produce are GST-exempt</strong>, but processed agricultural products do not qualify for exemption.</li><li>Products such as <strong>tea (black, white, green), processed coffee, jaggery, dehusked pulses (dal), processed spices, dry fruits, and cashew nuts</strong> <strong>are not considered agricultural produce</strong> under GST.</li><li><strong>Only raw produce like green tea leaves and whole pulse grains (gram, rajma, etc.) qualify for GST exemption</strong>.</li><li><strong>Loading, packing, and warehousing services for processed products attract GST</strong>.</li></ul><h4><strong>2. GST on Inter-State Transfer of Aircraft Parts</strong></h4><ul><li><strong>Inter-state stock transfers between distinct entities (within the same airline) attract GST</strong> as per <strong>Schedule I of the CGST Act</strong>.</li><li>However, <strong>GST paid on such transactions is eligible for ITC</strong>, allowing airlines to offset GST liability.</li><li>This clarification ensures that airlines can <strong>claim ITC on aircraft engines, parts, and accessories</strong>, even though <strong>economy-class air transport services have restricted ITC benefits</strong>.</li></ul><h4><strong>3. GST on General Insurance Policies by State Governments</strong></h4><ul><li><strong>If a State Government pays the premium for general insurance policies (e.g., for government employees, police personnel, electricity department employees, or students), the service is exempt from GST</strong> under <strong>Sl. No. 40 of Notification No. 12/2017-CT(R)</strong>.</li><li>Similarly, <strong>State-run insurance schemes for individuals are GST-exempt</strong> under <strong>Entry 6 of Notification No. 12/2017-CT(R)</strong>.</li><li><strong>If individuals (employees, students) pay the premium themselves, GST is applicable</strong>.<a href="https://cms.plasament.com/storage/nisha/circular-17.pdf">circular-17</a><br> </li></ul>