This circular provides clarification on the effective date of the explanation inserted at Serial No. 3(vi) of Notification No. 11/2017–Central Tax (Rate) dated 28 June 2017, through Notification No. 17/2018–CTR dated 26 July 2018.

Representations were received seeking clarity on whether the explanation, which excludes activities or transactions undertaken by the Government and local authorities from the scope of the term “business”, is applicable prospectively or retrospectively. The circular explains that section 11(3) of the CGST Act empowers the Government to insert an explanation to clarify the scope or applicability of a notification within one year, and such explanation is deemed to have been in force from the date of the original notification.

It is clarified that the explanation was inserted within the prescribed time limit and, therefore, takes effect from the inception of the concessional rate entry, i.e. 21 September 2017, and not from 27 July 2018 as mentioned in the last paragraph of the amending notification. The reference to the later date does not alter the legal position under section 11(3) of the CGST Act.

Accordingly, the explanation excluding Government and local authority activities from the ambit of “business” for the purpose of the said entry shall be treated as effective from 21 September 2017, ensuring consistent interpretation and uniform implementation across field formations.