CBIC Issued Clarifications Regarding Applicability Of GST On Certain Services As Recommended By GST Council

The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 245/02/2025-GST, offering significant clarifications and updates on Goods and Services Tax (GST) applicability to various sectors. The circular, dated January 28, 2025, addresses critical areas such as penal charges by financial institutions, GST exemptions on research services, and changes in tax liabilities for certain industries.

The circular clarifies that no GST will be levied on penal charges imposed by banks and non-banking financial companies (NBFCs), in accordance with the Reserve Bank of India’s (RBI) instructions. This exemption, which replaces penal interest with penal charges, came into effect on January 1, 2024.

Payment Aggregators (PAs) are entities that facilitate e- commerce sites and merchants to accept various payment instruments from their customers without the need for the e-commerce sites and merchants to create a separate payment integration system of their own. In the process, PAs receive payments from customers, pool and transfer them on to the merchants within a specified time period.

The exemption on skilling services by National Skill Development Corporation (NSDC)-approved Training Partners has been reinstated (effective from January 16, 2025). GST is also regularized for services provided between October 10, 2024, and January 15, 2025.

Further the circular specifies that GST is applicable when unregistered persons rent out commercial properties to registered persons under the Reverse Charge Mechanism (RCM).

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