The 50th meeting of the GST Council, presided over by Union Finance & Corporate Affairs Minister Nirmala Sitharaman, marked a significant milestone in the ongoing journey of Goods and Services Tax (GST). This pivotal gathering focused on deliberating and proposing changes to GST tax rates, as well as devising measures to foster trade facilitation and streamline compliance processes. In this blog post, we present the key highlights from this important meeting.
Changes in GST Tax Rates
1. Recommendations for changes in GST rates on Goods
- Revised GST rates for goods:
Sr. No Description of goods From To 1 Uncooked/Unfried Snack Pellets 18% 5% 2 Imitation Zari Thread or Yarn 12% 5% 3 LD Slag 18% 5% 4 Fish Soluble Paste 18% 5%
- Other changes concerning goods:
- Dinutuximab (Quarziba) Medicine: An exemption from IGST will be provided for imported Dinutuximab (Quarziba) medicine for personal use.
- Medicines and Food for Special Medical Purposes (FSMP): Imported medicines and FSMP used in the treatment of rare diseases listed under the National Policy for Rare Diseases will be eligible for IGST exemption, subject to existing conditions. This exemption will also apply to FSMP imported by Centers of Excellence for Rare Diseases or recommended institutions.
- Supply of Raw Cotton: The supply of raw cotton, including kala cotton, by agriculturists to cooperatives will be taxable under the RCM, and issues related to past periods will be regularized.
- Utility Vehicles: Entry 52B in the compensation cess notification will be amended to include all utility vehicles meeting specified parameters.
- Implants: Issues related to trauma, spine, and arthroplasty implants prior to 18.07.2022 will be regularized due to genuine interpretational issues.
- Desiccated Coconut: Issues related to desiccated coconut for the period 1.7.2017 to 27.7.2017 will be regularized due to genuine interpretational issues.
- Pan Masala and Tobacco Products: It was decided that on pan masala, tobacco products etc, where it is not legally required to declare the retail sale price, the ad valorem rate applicable on 31st March 2023 may be notified for the levy of compensation cess.
- Banks for IGST Exemption: RBL Bank and ICBC Bank will be included in the list of specified banks eligible for IGST exemption on imports of gold, silver, or platinum. .
- Notifications: Consequential changes will be made in notifications to align with the new Foreign Trade Policy 2023.
- Plates and Cups made of Areca Leaves: Issues related to GST on plates and cups made of areca leaves prior to 01.10.2019 will be regularized.
- Biomass Briquettes: Issues related to GST on biomass briquettes for the period 01.7.2017 to 12.10.2017 will be regularized.
2. Recommendations relating to GST rates on Services
- Revised GST rates for services: Satellite Launch Services: GST exemption would be provided on satellite launch services supplied by ISRO, Antrix Corporation Limited and New Space India Limited (NSIL). This exemption may be extended to such services supplied by other private organisations too.
- Other changes concerning services:
- Goods Transport Agencies (GTAs): GTAs will be relieved from the requirement of filing a declaration for paying GST under the forward charge mechanism for every year. If this option is exercised for a particular FY, it shall be deemed to have been exercised for future FYs, unless they file a declaration to revert to RCM. The option to pay GST under forward charge must be exercised by the 31st of March of the preceding financial year.
- Services Provided by Directors: Services rendered by a director of a company in their personal capacity, such as renting property to company by director, will not be subject to tax under RCM. GST will be payable by the director himself. Only services provided by a director in their capacity as a director of the company or body corporate will be taxable under RCM.
- Food and Beverages in Cinema Halls: The supply of food and beverages in cinema halls will be taxable as a restaurant service if provided independently of the cinema exhibition service.
3. Group of Ministers (GoM) recommendation on casinos, race courses and online gaming
Recommendations on Measures for Facilitation of Trade
The GST Council has put forward significant recommendations aimed at facilitating trade and streamlining GST processes. Here are the key highlights:
- Establishment of GST Appellate Tribunal:
The Council suggested the appointment and conditions for the President and Members of the proposed GST Appellate Tribunal. Provisions related to the Tribunal will be notified by the Centre from 1st August 2023. State Benches will be set up in a phased manner.
- Simplification of Annual Returns & Exemption from Filing:
To ease the compliance burden, relaxations provided in FY 2021-22 for FORM GSTR-9 and FORM GSTR-9C will continue in FY 2022-23. Small taxpayers with an annual turnover of up to two crore rupees will be exempt from filing the annual return for FY 2022-23.
- Input Services Distributor (ISD) Mechanism:
Clarifications will be made regarding the distribution of ITC of common input services procured from third parties to distinct persons, making it non-mandatory. The ISD mechanism may be made mandatory prospectively for such common input services through an amendment in the GST law.
- Clarifications on Various GST Issues:
a) Warranty Replacement and Repair Services: Manufacturers will not be required to charge GST on warranty replacement and repair services without consideration from customers, and ITC need not be reversed on such parts by the manufacturer
b) Refund-related Issues: A circular will address refund-related issues, such as-
- Refund of accumulated ITC for a tax period is to be restricted to the ITC on inward supplies reflected in the GSTR-2B of the said tax period or any previous tax period,
- Value of export goods is to be included while calculating the “adjusted total turnover” in case of exports made without payment of integrated tax
- Admissibility of refund in cases where the export of goods or the realisation of payment for the export of services is made after the provided time limit.
c) TCS Liability in E-commerce: A circular will clarify TCS liability when multiple E-commerce Operators are involved in a single transaction.
Simplification of Compliance Requirements
- Simplifying Tax Invoice Requirements: The Council proposed amending rule 46(f) of CGST Rules, 2017 to allow mentioning only the recipient’s state name, instead of the full address,.on tax invoices in cases of supply of taxable services by/through an ECO or OIDAR supplier to an unregistered recipient.
- Issuance of Clarification Circulars: Several clarification circulars will be issued to address ambiguities and legal disputes, benefiting taxpayers. These circulars will cover the following topics:
- E-invoice requirement for supplies made to government departments, establishments, agencies, local authorities, and public sector undertakings registered solely for TDS purposes.
- Calculation of interest liability under section 50(3) of the CGST Act, 2017 for wrongly availed and utilized IGST credit.
- Clarification that holding securities of a subsidiary company by a holding company does not constitute a supply of services and is not subject to GST.
- Verification of ITC: A circular will be issued to provide a procedure for verifying ITC in cases where differences exist between FORM GSTR-3B and FORM GSTR-2A for the period from 01/04/2019 to 31/12/2021.
- Special procedures will be introduced under section 148 of the CGST Act, 2017 to allow manual filing of appeals against orders related to TRAN-1/TRAN-2 claims of registered persons, as directed by the Hon’ble Supreme Court.
- Amendments will be made to Rule 108(1) and Rule 109(1) of CGST Rules, 2017 to permit manual filing of appeals under specific circumstances.
- Amnesty schemes notified through notifications dated 31.03.2023 will be extended until 31/08/2023. These schemes include non-filing of FORM GSTR-4, FORM GSTR-9, and FORM GSTR-10 returns, revocation of registration cancellations, and deemed withdrawal of assessment orders issued under Section 62 of CGST Act, 2017.
- Due dates for filing FORM GSTR-1, FORM GSTR-3B, and FORM GSTR-7 for April, May, and June 2023 will be extended until 31/07/2023 for registered persons in Manipur due to prevailing law and order situations.
Recommendations for Streamlining Compliance & Simplifying GST Processes
- E-way Bill Requirement for Gold and Precious Stones:
To enhance tracking and transparency, the Council recommended the introduction of an e-way bill requirement for intra-state movement of gold and precious stones under Chapter 71.
- Capacity-based Taxation and Special Composition Scheme:
Following recommendations were made by Council
- Notification to be issued for special procedure to be followed by the manufacturers of tobacco, pan masala and other similar items for registration and return filing.
- special penalty for non-registration of machines by such manufacturers.
- restriction of IGST refund route in respect of exports of tobacco, pan masala, mentha oil, and other similar items.
- Strengthening Registration Process:
Amendments to the CGST Rules were suggested to strengthen the registration process and combat fraudulent registrations. These amendments include mandatory bank account details, system-based suspension of registration, and elimination of physical verification requirements.
- Risk-based Biometric-based Aadhaar Authentication:
A pilot project in Puducherry was proposed to test a risk-based biometric-based Aadhaar authentication system for registration applicants, aiming to prevent identity-related frauds.
- Recovery of Tax and Interest:
Provisions were recommended to recover unpaid tax and interest when the output tax liability in GSTR-1 exceeds the liability reported in the GSTR-3B by a specified threshold.
- Mechanism to Address ITC Differences:
To reduce discrepancies in ITC claims, a system-based mechanism was proposed to notify taxpayers when there are differences between their ITC claimed in GSTR-3B and the ITC available in GSTR-2B, ensuring accurate reporting.
- Discipline in Annual Return Filing:
Amendments to FORM GSTR-3A were suggested to issue notices to registered taxpayers who fail to furnish their Annual Return by the due date.
- Amendments for OIDAR Service Providers:
OIDAR service providers will have to provide details of supplies made to registered taxpayers in India in Form GSTR-5A to help the tracking of due payments of tax on reverse charge basis by such taxpayers on supplies received from OIDAR service providers.
- Duty-Free Shops and Exempt Supplies:
Value of supply of goods from Duty Free shops at arrival terminals in international airports is to be included in the value of exempt supplies for the purpose of reversal of ITC.
- Consent based Information Sharing:
Measures were recommended to facilitate consent-based sharing of information of registered persons available on the GST portal with other systems.
- Clarification on Place of Supply for Goods to Unregistered Persons:
A clarification was proposed to determine the correct place of supply for goods supplied to unregistered persons, ensuring compliance with tax regulations.
- State Level Coordination Committee:
To enhance knowledge sharing and coordination, the formation of a State level coordination committee was proposed, consisting of GST officers from State and Central administrations.
The 50th meeting of the GST Council introduced noteworthy recommendations aimed at enhancing the efficiency and effectiveness of the GST system in India. These recommendations encompassed various aspects such as uniform taxation for casino, horse racing, and online gaming, the establishment of the GST Appellate Tribunal, exemptions for critical medical items, rate reductions on specific goods, and measures to streamline compliance processes. These initiatives have been implemented to foster uniformity, simplify procedures, and foster economic growth, all while prioritizing the well-being of taxpayers and the preservation of the environment.
An amnesty scheme for delayed GST return filing and a reduction in late fees were introduced during the 49th GST Council meeting, which took place on February 18, 2023, in New Delhi. Reach out to us today for an automated and seamless GST software solution!
The information provided in this presentation does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This presentation is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi-judicial authorities may not take a position contrary to the views mentioned herein.