GST Circular No. 172/04/2022-GST: Key Clarifications on ITC, Refunds, Perquisites & Ledger Utilization

2025-03-03 05:53:11 02March

02March

GST Circular No. 172/04/2022-GST: Key Clarifications on ITC, Refunds, Perquisites & Ledger Utilization

The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 172/04/2022-GST on 6th July 2022, addressing multiple GST-related issues raised by businesses and tax professionals. The circular provides crucial clarifications on:<ol><li>Refund claims for deemed exports</li><li>Interpretation of Section 17(5) of the CGST Act (Input Tax Credit restrictions)</li><li>GST applicability on perquisites provided to employees</li><li>Utilization of electronic credit and cash ledger for GST payments</li></ol><hr><h2>Key Highlights & Clarifications</h2><h3>1. Refund on Deemed Exports</h3>Issue: Can ITC availed by recipients of deemed export supplies be subjected to Section 17 restrictions? ✔ Clarification: ITC on deemed export supplies is allowed only for refund purposes and does not fall under Chapter V of the CGST Act. ✔ ITC for deemed exports should not be included in the "Net ITC" calculation under Rule 89(4) or Rule 89(5) for refund claims on zero-rated or inverted duty structure supplies.<hr><h3>2. Clarifications on Section 17(5) – ITC Restrictions</h3>? Scope of Proviso in Clause (b) of Section 17(5) ✔ The proviso after sub-clause (iii) applies to the entire Clause (b), not just sub-clause (iii). ✔ Employers can avail ITC on goods/services provided to employees if legally mandated (e.g., health and safety provisions under labor laws).? Leasing of Motor Vehicles, Vessels, and Aircraft ✔ ITC restriction only applies to leasing of motor vehicles, vessels, and aircraft. ✔ Leasing of other assets (e.g., machinery, land, buildings, etc.) is not restricted under this clause.<hr><h3>3. GST on Perquisites Provided to Employees</h3>✔ Perquisites given as per the employment contract are not taxable under GST. ✔ As per Schedule III of the CGST Act, services provided by an employee to an employer do not constitute a supply and thus are not subject to GST.<hr><h3>4. Utilization of Electronic Credit & Cash Ledger</h3>? Use of the Electronic Credit Ledger ✔ Can be used only for payment of output tax (CGST & IGST). ✔ Cannot be used to pay interest, penalty, late fees, or reverse charge tax liability.? Use of the Electronic Cash Ledger ✔ Can be used to pay any liability under GST, including tax, interest, penalties, and fees.<hr><h2>Impact on Businesses</h2>✅ Exporters & Businesses claiming refunds must correctly categorize ITC under deemed exports to avoid refund issues. ✅ Employers can claim ITC on employee benefits only if legally required. ✅ Businesses engaged in leasing should note that ITC on leasing non-motor assets is allowed. ✅ GST payments using ledgers should be carefully managed to avoid errors in tax payments.<a href="https://cms.plasament.com/storage/cir-172-04-2022-cgst.pdf">cir-172-04-2022-cgst</a> <a href="https://cms.plasament.com/storage/cir-172-04-2022-cgst.pdf">cir-172-04-2022-cgst</a>