Key Highlights of Circular No. 245/02/2025-GST: Clarifications and Exemptions

In a significant move to streamline the Goods and Services Tax (GST) framework, the Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 245/02/2025-GST, dated January 28, 2025. This comprehensive circular addresses various concerns raised by taxpayers and provides crucial clarifications on several aspects of GST applicability and exemptions. Let’s delve into the key highlights of this important document that is set to reshape the GST landscape in 2025 and beyond.

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The circular comes as a response to the recommendations made during the 55th GST Council meeting held on December 21, 2024, in Jaisalmer. It aims to resolve ambiguities and provide clarity on issues that have been causing confusion among taxpayers and tax professionals alike. The clarifications cover a wide range of topics, from penal charges levied by regulated entities to the applicability of GST on various services.

For more detailed information on GST regulations and updates, visit the official GST Portal.

Penal Charges: A Sigh of Relief for Borrowers

One of the most significant clarifications in Circular 245 pertains to the applicability of GST on penal charges levied by Regulated Entities (REs) such as banks and Non-Banking Financial Companies (NBFCs). The circular unequivocally states that no GST is payable on these penal charges, which are imposed in compliance with Reserve Bank of India (RBI) directions.

This clarification comes as a relief to borrowers who were previously uncertain about the tax implications of such charges. The CBIC has drawn a clear distinction between penal charges and penal interest, emphasizing that these charges are not a consideration for any service but are rather deterrents for non-compliance with loan terms.

Payment Aggregators: Boosting Digital Transactions

In an era where digital payments are becoming increasingly prevalent, the circular provides much-needed clarity on the GST exemption for Payment Aggregators (PAs). RBI-regulated PAs are now entitled to GST exemption for settlement of transactions up to ₹2,000. This move is expected to give a significant boost to small-value digital transactions and promote financial inclusion.

However, it’s important to note that this exemption is limited to payment settlement functions that involve the handling of money. Payment Gateway (PG) services, which are distinct from PA services, are not covered under this exemption. This distinction will help in creating a more nuanced tax structure for the fintech industry.

Research and Development: Supporting Scientific Progress

Recognizing the importance of research and development in driving innovation and economic growth, Circular 245 addresses the GST implications for R&D services provided by various institutions against grants. The circular regularizes the payment of GST on such transactions for the period from July 1, 2017, to October 9, 2024, on an ‘as is where is’ basis.

This regularization means that no additional GST liability will be imposed on entities that have already paid GST on such transactions during this period. Moreover, entities that did not pay GST are not required to do so retrospectively. This approach aims to provide relief to research institutions and promote scientific endeavors without the burden of past tax liabilities.

Skilling Services: Empowering the Workforce

In a move to support skill development initiatives, the circular reinstates the GST exemption for skilling services provided by Training Partners approved by the National Skill Development Corporation (NSDC). This exemption, which was restored through a notification dated January 16, 2025, is effective from that date.

For the interim period from October 10, 2024, to January 15, 2025, during which the exemption was not available, the GST Council has recommended regularizing the payment of GST on these services on an ‘as is where is’ basis. This means that no additional GST liability will arise for this period if GST was not paid, and GST already paid will stand regularized.

Facility Management Services: Clarifying Municipal Obligations

The circular also provides clarity on the applicability of GST on facility management services provided to Municipal Corporation of Delhi (MCD) Headquarters. It confirms that GST is indeed applicable on these services for the upkeep of the MCD office building. The specific GST rate will depend on the nature of the service provided.This clarification is crucial for municipal bodies and service providers engaged in facility management, as it removes ambiguity regarding their tax obligations and ensures compliance with GST regulations.

Latest Studies on GST Impact.

Recent studies have shed light on the far-reaching effects of GST implementation in India:

1. A 2024 study by the National Council of Applied Economic Research (NCAER) found that GST has led to a 2.5% increase in overall tax compliance.
2. Research published in the Journal of Public Economics in March 2025 indicates that the GST regime has reduced the average tax burden on households by 3.8%.
3. A survey conducted by the Federation of Indian Chambers of Commerce & Industry (FICCI) in January 2025 revealed that 78% of businesses reported improved ease of doing business post-GST implementation.

These studies underscore the positive impact of GST on the Indian economy and highlight the importance of clear and timely clarifications like those provided in Circular 245.

Frequently Asked Questions (FAQ).

1. Q: Are all penal charges exempt from GST?
   A: No, only penal charges levied by Regulated Entities (REs) in compliance with RBI directions are exempt from GST.
2. Q: What is the GST exemption limit for Payment Aggregators?
   A: RBI-regulated Payment Aggregators are entitled to GST exemption for settlement of transactions up to ₹2,000.
3. Q: How does Circular 245 affect research institutions?
   A: The circular regularizes GST on R&D services against grants for the period from July 1, 2017, to October 9, 2024, without imposing additional liabilities.
4. Q: Is the GST exemption for skilling services applicable to all training providers?
   A: No, the exemption is specifically for skilling services provided by Training Partners approved by the National Skill Development Corporation (NSDC).
5. Q: How does the clarification on facility management services affect municipal bodies?
   A: It confirms that GST is applicable on facility management services provided to municipal headquarters, clarifying tax obligations for these entities.

In conclusion, Circular 245 represents a significant step towards creating a more transparent and efficient GST regime. By addressing key concerns and providing clear guidelines, the CBIC has demonstrated its commitment to simplifying tax compliance and fostering a business-friendly environment. As the Indian economy continues to evolve, such timely clarifications will play a crucial role in ensuring the smooth functioning of the GST system and supporting the country’s economic growth.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.