CBIC issues clarificatory Circulars post 45th GST Council Meeting

by | Sep 23, 2021 | Insight

We shared our views on recommendations of GST Council in 45th GST Council (‘Council’) Meeting (update available at https://nityatax.com/changes-proposed-in-45th-gst-council-meeting). There were various issues on which Council proposed issuance of clarifications. Pursuant to that, CBIC has issued multiple Circulars on such issues. Key clarifications provided in these Circulars are discussed as under: 

A. Intermediary services

CBIC has issued Circular No. 159/15/2021-GST dated September 20, 2021, clarifying scope of Intermediary services and cleared air surrounding its coverage. Various pre-requisites for a person to qualify as Intermediary under GST law, have been provided along with illustrations. Such pre-requisites along with other clarifications have been tabulated as under:

Pre-requisites and Illustrations


Minimum three Parties


Intermediary transaction must involve minimum three parties – Principal Supplier, Recipient and Intermediary (facilitating supply between Supplier and Recipient).


Two parties must transact in supply of goods or services (‘Main Supply’) and third party should facilitate supply of goods or services (‘Ancillary Supply’). An Intermediary essentially arranges or facilitates Main Supply.


Two distinct supplies

Main Supply: Transaction between two Principals.


Ancillary Supply (Intermediary Service): Arranging / facilitating Main Supply between two Principals. Such Ancillary Supply should be clearly identifiable and distinguished from Main Supply.


Character of agent, broker, or any other person


Service of Intermediary is subsidiary to Main Supply and Intermediary should not take character as Principal.

Not engaged in supply of goods or services on his own account


The usage of term ‘such’ implies’ person supplying Main supply either partly or fully on principal-to-principal basis, does not qualify as Intermediary.

Sub-contracting of service excluded


Sub-contracting / outsourcing does not qualify as Intermediary service.


Determination of Intermediary under different scenarios

Various illustrations have been provided to clarify who qualifies as Intermediary under GST law on transactions involving BPOs, Selling Agent, Insurance Agent etc.


NITYA Comments: 

CBIC via earlier Circular No. 107/26/2019-GST dated July 18,2019, clarified whether Information Technology enabled Services (‘ITeS’) and Back-end support services will qualify as Intermediary service or not. The aforesaid Circular ignored statutory provisions & jurisprudence in erstwhile regime and in turn created confusion in industry. This Circular was subsequently withdrawn via Circular dated 127/46/2019-GST dated December 4, 2019. 

This Circular is a welcome-step and clears confusion on multiple issues on coverage of various transactions under Intermediary services.

B. Input Tax Credit on Debit notes and Requirement to carry E-Invoice 

CBIC has issued Circular No. 160/16/2021-GST dated September 20, 2021 (‘Circular 160’) clarifying as under:

B.1 Input Tax Credit on Debit Notes

  • The amended Section 16(4) (effective January 2021) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) provided that a registered person cannot take ITC on any invoice or debit note after due date of furnishing of GSTR-3B of September of following Financial Year (‘FY’) to which such invoice or debit note pertains or furnishing of relevant annual return, whichever is earlier.
  • The amendment removed linkage of Debit Notes with Original Invoices for computing time limit to avail ITC on Debit Notes. Accordingly, ITC on Debit Notes can be availed till September of succeeding FY or furnishing of annual return of FY in which Debit Notes are issued, whichever is earlier.
  • Circular 160 has clarified as follows for availment of ITC on Debit Notes post-amendment:
  • Debit Notes on which ITC was availed prior to amendment – Old provisions applicable
  • Debit Notes on which ITC not availed prior to amendment – Amended provisions applicable
  • Circular 160 provided illustrations which is tabulated as under: 

Date of Original Invoice

Date of Debit Note

ITC availed

Relevant FY for Section 16(4)

March 16, 2021

July 7, 2021

Not availed


July 15, 2019

November 10, 2020

Not availed


July 15, 2019

November 10, 2020

Availed on December 15, 2020



NITYA Comments: 

This clarification is welcome. In the case of I-Tech Plast India, 2021-VIL-205-AAR, the Gujarat Authority for Advance Ruling (‘AAR’) held that even after amendment in Section 16(4), ITC on Debit Notes shall be available basis date of Original Invoice only. The Circular rightly clarifies that relevant date for availing ITC on Debit Notes shall be determined based on date of issuance of Debit Note 

On a related note, Circular proposes to revive dead claims (where Debit Notes were issued prior to amendment, ITC was not taken thereon and relevant FY for claiming ITC passed as per unamended provision). Circular has done that by providing date of availing ITC as relevant date. Under law, date of issuance of Debit Note is relevant date. Resultantly, Circular treats two set of Debit Notes issued prior to amendment differently viz. taxpayers who claimed ITC and taxpayers who did not claim ITC which is impermissible. For these reasons, Circular is incorrect. As Circular is beneficial in nature, taxpayers can take commercial call whether to claim ITC in such cases or not. 

B.2 Requirement to carry physical tax invoice

Circular 160 clarifies as under:

  • There is no requirement to carry physical copy of tax invoice during movement of goods where E-Invoice is generated; and
  • QR code having an embedded Invoice Reference Number (IRN) is produced for verification. 

C. Interpretation of ‘mere establishments of a distinct person’ for export of services

CBIC has issued Circular No. 161/16/2021-GST dated September 20, 2021, on interpretation of phrase ‘merely establishment of a distinct person’ under Explanation 1 to Section 8 of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’), clarifying as under:

  • Section 2(6)(v) of IGST Act defines ‘export of services’ and places a condition that supplier of service and recipient of service are not merely establishments of a distinct person in terms of Explanation 1 to Section 8. If supplier and recipient are merely establishments of distinct person, then services do not qualify as export.
  • Explanation 2 of Section 8 clarifies that a person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.
  • Circular clarifies that two different companies incorporated under different laws (one in India and one outside India) will be considered as separate legal entities and not mere establishment of distinct persons. A Sister Concern / Holding Company / Subsidiary Company / Group Concern of a foreign company incorporated in India, will not be treated as an establishment of distinct person. Hence, such services will qualify as export of service. 

NITYA Comments:

This Circular is in line with the Gujarat High Court ruling in the case of Linde Engineering India Private Limited v. UOI, 2020-VIL349-GUJ-ST rendered in Service Tax regime wherein the Court held that the supply of service by subsidiary company incorporated in India to its holding company incorporated outside India will not qualify as establishment of distinct person being different legal persons. Also, FAQ dated December 15, 2018, issued by CBIC, clarifies the same.