GST Updates: Key Clarifications from Circular No. 245/02/2025-GST

GST Updates: Key Clarifications from Circular No. 245/02/2025-GST

 

The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 245/02/2025-GST on January 28, 2025, providing important clarifications on GST applicability for various services. These clarifications are based on recommendations made by the 55th GST Council Meeting held on December 21, 2024, in Jaisalmer. Below are the key takeaways from the circular in an easy-to-understand format.

1. No GST on Penal Charges by Banks and NBFCs

What’s the Update?

- The Reserve Bank of India (RBI) issued guidelines on August 18, 2023, directing banks and NBFCs to charge penal charges instead of penal interest for non-compliance with loan terms.

- Some tax authorities were considering these charges as a payment for tolerating an act, which could attract GST.

 Clarification

- Penal charges are not a consideration for tolerating an act but are levied to enforce credit discipline.

- No GST is applicable on such charges.

2. GST Exemption for Payment Aggregators (PAs) on Small Transactions

What’s the Concern?

- Whether Payment Aggregators (PAs) qualify for GST exemption under Sl. No. 34 of Notification No. 12/2017-CTR, which allows exemption for acquiring banks on small transactions (up to Rs, 2,000 per transaction).

 

Clarification

- RBI-regulated Payment Aggregators (PAs) fall under the definition of acquiring banks.

- Therefore, GST exemption applies to them for transactions up to ₹2,000 using credit/debit/charge cards.

- However, this exemption does not apply to Payment Gateway (PG) services.

 

3. GST on Research and Development (R&D) Services by Government Entities

What’s the Issue?

- From October 10, 2024, R&D services provided by government entities against grants were exempted from GST.

-  However, there was confusion about GST payments for such services before this exemption was announced.

 Clarification

- The GST Council has decided to regularize past GST payments (from July 1, 2017, to October 9, 2024) on an ‘as is where is’ basis.

- Future supplies remain GST-exempt from October 10, 2024.

 

4. Restoration of GST Exemption on Skilling Services by NSDC-Approved Training Partners

What’s the Change?

- The GST exemption for skilling services by National Skill Development Corporation (NSDC) approved Training Partners was withdrawn in October 2024.

- This created concerns over its impact on the skilling ecosystem.

 

Clarification

- The GST exemption has been restored from January 16, 2025.

- Past GST payments (from October 10, 2024, to January 15, 2025) are regularized.

 

5. GST Applicability on Facility Management Services to MCD

What’s the Concern?

- The Municipal Corporation of Delhi (MCD) sought clarification on whether facility management services (housekeeping, maintenance, horticulture) provided to its headquarters are GST-exempt.

 

Clarification

- These services are not exempt from GST as they do not fall under activities related to municipal functions under Article 243W of the Constitution.

- Thus, GST is applicable on such services at the prescribed rates.

6. Delhi Development Authority (DDA) Not a Local Authority Under GST

What’s the Concern?

- DDA sought clarification on whether it qualifies as a local authority under Section 2(69) of the CGST Act, 2017.

 

Clarification

- DDA does not meet the criteria of a local authority since it is not an elected self-governing body.

- Consequently, DDA is not considered a local authority for GST purposes.

 

7. GST on Renting of Commercial Property Under Reverse Charge for Composition Taxpayers

What’s the Change?

- From October 10, 2024, renting commercial properties by unregistered persons to registered persons was brought under Reverse Charge Mechanism (RCM).

- Composition taxpayers were initially covered under this provision, causing compliance issues.

 

Clarification

- The 55th GST Council excluded composition taxpayers from RCM for renting of commercial properties.

- Past GST payments (from October 10, 2024, to January 15, 2025) are regularized.

 

8. GST Exemption for Certain Electricity-Related Services

What’s the Concern?

- The 54th GST Council exempted services like meter testing, transformer maintenance, and electricity connection shifting.

- There was confusion about aligning exemptions for such services.

 

Clarification

- The 55th GST Council aligned entries 25 and 25A in Notification No. 12/2017-CTR, ensuring uniform exemption.

- GST exemption applies to these incidental services related to electricity transmission and distribution.

 

Conclusion

The clarifications issued in Circular No. 245/02/2025-GST help resolve key GST concerns across banking, digital payments, research, skill development, municipal services, real estate, and power sectors. These updates provide much-needed clarity for businesses and taxpayers while ensuring smoother compliance with GST laws.

 

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