From Council to Citizen: Understanding the 53rd Meeting's GST Council Recommendations

If you are reading this in July, GST has just turned seven years old on July 1st. Happy birthday to our most dynamic law that brings something new every day; here is a bundle of new changes recommended in the latest council meeting.

In the 53rd GST Council meeting held on June 22, 2024, several significant recommendations were made. The previous council meeting took place on October 7, 2023. Following the change in government, Nirmala Sitharamanji, who has been appointed Finance Minister for the third consecutive time, introduced many welcome changes. These changes aim to avoid ongoing litigations, improve the tracking of returns to prevent fraudulent activities, tighten GST registration, and include rate changes and several upcoming circulars. These are currently recommendations and will be officially notified later, with effective dates to be announced.

We will review these changes in parts. A summary changes related to rate modifications, followed by Measures for Facilitation of Trade and after that or summary of upcoming circulars. The preparation of this article is based on the press release, with additional personal views. The link to the press release is provided at the end.

Summary of GST Rate Changes and Exemptions from the 53rd GST Council Meeting

Sr. No.	Item	Change
1	Imports of parts, components, testing equipment, tools and tool-kits of aircrafts	Uniform rate of 5% IGST
2	Milk cans (steel, iron, and aluminium)	12% GST
3	Carton, boxes, and cases of corrugated and non-corrugated paper or paper-board	GST rate reduced from 18% to 12%
4	Solar cookers (single or dual energy source)	12% GST
5	Parts of poultry keeping machinery	12% GST
6	All types of sprinklers including fire water sprinklers	12% GST
7	Imports of specified items for defence forces	IGST exemption extended till 30th June, 2029
8	Imports of research equipment/buoys under the RAMA programme	IGST exemption, subject to specified conditions
9	Imports in SEZ by SEZ Unit/developers	Compensation Cess exemption effective from 01.07.2017
10	Supply of aerated beverages and energy drinks to authorized customers	Compensation cess exemption for Unit Run Canteens under Ministry of Defence
11	Imports of technical documentation for AK-203 rifle kits	Adhoc IGST exemption for Indian Defence forces
12	Services provided by Indian Railways	GST exemption on services to the general public, regularization from 20.10.2023 onwards
13	Services by Special Purpose Vehicles (SPV) to Indian Railways	GST exemption, regularization from 01.07.2017 onwards
14	Accommodation services up to Rs. 20,000 per month per person	Exemption for a minimum continuous period of 90 days, similar benefits for past cases
15	Co-insurance premium	Declaration as non-supply under Schedule III of CGST Act, 2017, with regularization for past cases
16	Re-insurance commission	Declaration as non-supply under Schedule III of CGST Act, 2017, with regularization for past cases
17	Reinsurance services of specified insurance schemes	Regularization of GST liability for certain periods
18	Statutory collections by Real Estate Regulatory Authority (RERA)	Exemption from GST under entry 4 of notification No. 12/2017-CTR
19	Further incentives shared by acquiring banks under RuPay Debit Cards and BHIM-UPI transactions scheme	Clarification on non-taxability as defined by NPCI in consultation with participating banks

 

Measures for Facilitating Trade:

In the series of measures for facilitating trade, there are 28 items listed in part B. Point number 17 specifically covers circulars, which will be addressed separately. A summary of all other points is as follows:

B.1 Conditional waiver of interest or penalty: Under Section 128A of CGST Act for demands raised under Section 73, applicable from FY 2017-18 to FY 2019-20, if full tax amount is paid by 31.03.2025.

Impact on Taxpayers: Provides financial relief by allowing them to clear dues without additional interest or penalties, encouraging timely settlement.

Impact on Government: Promotes compliance and improves tax collection by providing an incentive to clear past dues.

B.2 Reduction of Government Litigation by Fixing Monetary Limits for GST Appeals:

Prescribed monetary limits for filing appeals in GST Appellate Tribunal (GSTAT), High Court, and Supreme Court: GSTAT - Rs. 20 lakhs, High Court - Rs. 1 crore, Supreme Court - Rs. 2 crores.

Impact on Taxpayers: Reduces litigation costs and burden for smaller cases, making it easier for taxpayers to focus on significant issues.

Impact on Government: Helps in managing caseloads more effectively and focusing on higher-value cases, improving judicial efficiency

B.3 Reduction in Pre-deposit for GST Appeal and Appellate Tribunal:

Reduction in maximum pre-deposit amounts for filing appeals under GST Appellate authority with a maximum of Rs. 20 crores each for CGST and SGST. Further, council recommended to reduce pre-deposit amount for filing appeal with Appellate Tribunal to 10% with a maximum of Rs.20 crores each for CGST and SGST.

Impact on Taxpayers: Lowers the financial barrier for filing appeals, making the appeals process more accessible.

Impact on Government: Encourages more taxpayers to appeal unjust demands, which may lead to more balanced judgments and improved trust in the tax system.

B.4 ENA and Alcohol Sector GST Amendment:

Exemption from GST on Extra Neutral Alcohol used in manufacture of alcoholic liquor for human consumption.

Impact on Taxpayers: Alcohol manufacturers benefit from reduced GST burden, potentially lowering costs.

Impact on Government: Simplifies tax structure and reduces disputes regarding GST applicability in this sector.

B.5 Reduction in Rate of TCS for E-commerce Operators:

Reduction in TCS rate from 1% to 0.5% (0.25% CGST and 0.25% SGST/UTGST, or 0.5% IGST) for supplies through E-commerce Operators.

Impact on Taxpayers: E-commerce operators and sellers benefit from reduced compliance costs and increased cash flow.

Impact on Government: May lead to increased voluntary compliance due to the lower rate, while fostering growth in the e-commerce sector.

B.6 Time Period Amendment for GST Appeals:

Amendment to Section 112 of CGST Act to extend appeal filing period to three months before GST Appellate Tribunal.

Impact on Taxpayers: Provides more time to prepare and file appeals, reducing the pressure and risk of missing deadlines.

Impact on Government: May result in more well-prepared appeals, leading to more fair and informed decisions.

B.7 Relaxation in Section 16(4) of CGST Act:

a) In respect of initial years of implementation of GST, i.e., financial years 2017-18,2018-19, 2019-20 and 2020-21:

The GST Council recommended that the time limit to avail input tax credit in respect of any invoice or debit note under Section 16(4) of CGST Act, through any return in FORM GSTR 3B filed up to 30.11.2021 for the financial years 2017-18, 2018-19, 2019-20 and 2020-21, maybe deemed to be 30.11.2021. For the same, requisite amendment in section 16(4) of CGST Act, retrospectively, w.e.f. 01.07.2017, has been recommended by the Council.

b) With respect to cases where returns have been filed after revocation:

The GST Council recommended retrospective amendment in Section 16(4) of CGST Act, to be made effective from July 1st, 2017, to conditionally relax the provisions of section 16(4) of CGST Act in cases where returns for the period from the date of cancellation of registration/effective date of cancellation of registration till the date of revocation of cancellation of the registration, are filed by the registered person within thirty days of the order of revocation.

Impact on Taxpayers: Allows taxpayers to claim input tax credit for earlier years, providing significant relief and improving cash flow.

Impact on Government: Enhances compliance and trust in the tax system by addressing past grievances and ensuring fairness.

B.8 GSTR-4 Filing Due Date Extension:

Extension of due date for filing GSTR-4 for composition taxpayers from April 30th to June 30th from FY 2024-25 onwards.

Impact on Taxpayers: Provides more time for composition taxpayers to comply with filing requirements, reducing stress and errors.

Impact on Government: Encourages timely and accurate filing, leading to better data and compliance rates.

B.9 Rule 88B Amendment in CGST Rules:

Amendment in Rule 88B of CGST Rules to calculate interest on delayed filing of returns based on Electronic Cash Ledger balance.

Impact on Taxpayers: Ensures interest is calculated only on the actual outstanding amount, reducing the financial burden.

Impact on Government: Promotes fairness and reduces disputes related to interest calculations, improving taxpayer relations.

B.10 Section 11A Insertion in CGST Act:

Insertion of Section 11A in CGST Act to allow regularization of non-levy or short levy of GST due to common trade practices.

Impact on Taxpayers: Regularizes minor issues due to common trade practices, reducing unexpected liabilities.

Impact on Government: Streamlines the tax process and reduces litigation over minor technicalities.

B. 11 Refund of Additional IGST on Upward Revision in Export Prices:

Mechanism proposed for claiming refund of additional IGST paid due to price revision post-export.

Impact on Taxpayers: Provides a mechanism to claim refunds on additional IGST paid, aiding in better cash management.

Impact on Government: Encourages accurate reporting and compliance, supporting exporters by addressing their concerns.

B.12 Valuation of Import of Services by Related Persons:

Clarification on considering open market value for services provided by foreign affiliates to related domestic entities eligible for full input tax credit.

Impact on Taxpayers: Clarifies the valuation method, reducing uncertainty and potential disputes.

Impact on Government: Ensures proper valuation and tax compliance, improving revenue assurance.

B.13 Input Tax Credit on Ducts and Manholes for OFCs:

Confirmation that input tax credit on ducts and manholes used in optical fiber cable networks is not restricted under specific clauses of section 17 of CGST Act.

Impact on Taxpayers: Confirms ITC eligibility, reducing costs for infrastructure development.

Impact on Government: Promotes investment in telecommunications infrastructure, supporting national development goals.

B.14 Place of Supply for Custodial Services by Banks to FPIs:

Determination of place of supply as per Section 13(2) of IGST Act for custodial services provided by Indian banks to Foreign Portfolio Investors.

Impact on Taxpayers: Clarifies the place of supply, reducing ambiguities and potential disputes.

Impact on Government: Ensures correct tax jurisdiction, improving compliance and revenue collection.

B.15 Valuation of Corporate Guarantees between Related Parties:

Retrospective amendment of Rule 28(2) of CGST Rules to clarify valuation of corporate guarantees, exempting exports and cases eligible for full input tax credit.

Impact on Taxpayers: Clarifies valuation rules, reducing compliance burdens and disputes.

Impact on Government: Ensures consistent valuation practices, supporting fair tax administration.

B.16 Applicability of Section 16(4) of CGST Act for RCM Invoices:

Clarification on financial year for availing input tax credit under section 16(4) for supplies under reverse charge mechanism from unregistered suppliers.

Impact on Taxpayers: Clarifies the timeline for ITC claims under RCM, reducing uncertainty.

Impact on Government: Promotes accurate and timely compliance with reverse charge provisions.

B.18 Amendment in Section 140(7) for Transitional Credit:

Retrospective amendment to allow transitional credit for services invoices received by Input Service Distributors before the appointed date.

Impact on Taxpayers: Allows ISDs to claim transitional credit, reducing the financial impact of GST implementation.

Impact on Government: Addresses transitional issues, promoting a smoother GST implementation process.

B.19 Introduction of FORM GSTR-1A:

Introduction of FORM GSTR-1A to amend or add details missed in FORM GSTR-1 before filing FORM GSTR-3B, enhancing reporting accuracy.

Impact on Taxpayers: Provides a mechanism to correct errors before final submission, improving accuracy.

Impact on Government: Enhances data accuracy, leading to better tax administration and compliance.

B. 20 Exemption from GSTR-9/9A for Small Taxpayers:

Proposed exemption from filing annual return for FY 2023-24 for taxpayers with turnover up to two crore rupees.

Impact on Taxpayers: Reduces compliance burden for small taxpayers, lowering costs and administrative workload.

Impact on Government: Simplifies tax administration for small taxpayers, improving overall compliance rates.

B.21 Amendment in Section 122(1B) of CGST Act:

Retroactive amendment effective from 01.10.2023 clarifying applicability of penal provision under Section 122(1B) to e-commerce operators mandated to collect tax under Section 52 of CGST Act.

Impact on Taxpayers: Clarifies penalties for e-commerce operators, reducing ambiguities and potential disputes.

Impact on Government: Ensures proper enforcement of tax collection responsibilities, supporting fair competition.

B.22 Amendment in Rule 142 of CGST Rules:

Issuance of circular to establish mechanism for adjusting payments made via FORM GST DRC-03 against pre-deposits required for filing appeals.

Impact on Taxpayers: Provides clarity on payment adjustments, reducing confusion and errors in appeals.

Impact on Government: Streamlines the appeals process, improving efficiency and compliance.

B. 23 Biometric Aadhaar Authentication for GST Registration:

Phased nationwide rollout recommended to strengthen GST registration process and counter fraudulent ITC claims through fake invoices.

Impact on Taxpayers: Strengthens the registration process, reducing the risk of fraud.

Impact on Government: Enhances security and integrity of the GST system, preventing misuse.

B.24 Amendments in Sections 73, 74, and Introduction of Section 74A:

Proposal to standardize time limits for issuing demand notices and orders irrespective of fraud or willful misstatement charges, effective FY 2024-25. Also, extension of time for reduced penalty benefit from 30 to 60 days.

Impact on Taxpayers: Standardizes time limits, providing clarity and reducing the risk of disputes.

Impact on Government: Improves enforcement efficiency and consistency, enhancing trust in the system.

B.25 Sunset Clause for Anti-profiteering Measures:

Proposed sunset date of 01.04.2025 for new anti-profiteering applications, with handling of cases by Principal bench of GST Appellate Tribunal (GSTAT).

Impact on Taxpayers: Provides certainty with a clear end date for new anti-profiteering applications, reducing long-term compliance burdens.

Impact on Government: Allows for a transition to a more stable tax regime post-sunset date, focusing on significant cases.

B.26 Curtailment of IGST Refund in Case of Export Duty:

The recommended amendments to the IGST Act and CGST Act related to the refund of export duty should include a restriction, irrespective of whether the goods are exported without payment of taxes or with payment of taxes. This restriction should also apply if the goods are supplied to an SEZ developer or an SEZ unit for authorized operations.

Impact on Taxpayers: Ensures compliance with export duty provisions, reducing the risk of non-compliance.

Impact on Government: Clarifies refund restrictions, preventing revenue leakage and ensuring proper tax administration.

B.27 Reduction in B2C Inter-State Supplies Reporting Threshold:

Recommendation to lower threshold for reporting B2C inter-State supplies invoice-wise in FORM GSTR-1 from Rs 2.5 lakh to Rs 1 lakh.

Impact on Taxpayers: Requires more detailed reporting for smaller transactions, potentially increasing compliance efforts.

Impact on Government: Enhances data accuracy and tracking of inter-State supplies, improving tax administration.

B. 28 Monthly Filing of FORM GSTR-7 for TDS Deductors:

Requirement for monthly filing of FORM GSTR-7 by registered persons under section 51, including nil returns without late fees, with invoice-wise details.

Impact on Taxpayers: Ensures timely and accurate filing of TDS returns, reducing penalties and late fees.

Impact on Government: Improves compliance and timely revenue collection, aiding in better tax administration.

Circulars in GST: Role and Importance

Circulars in GST serve as official clarifications issued by the tax authorities to address ambiguities, provide guidance on the interpretation of GST laws, and ensure uniformity in the implementation of tax policies. These clarifications help reduce litigation by resolving disputes, offering clear guidelines to trade and tax officers, and ensuring that businesses comply with the GST framework effectively.

Various Clarifications Recommended

1. Reimbursement of Securities/Shares as ESOP/ESPP/RSU: Clarification on the taxability of these reimbursements provided by a company to its employees.

2. Reversal of Input Tax Credit in Life Insurance Services: Clarification on the requirement of reversing input tax credit for the premium amount not included in the taxable value as per Rule 32(4) of CGST Rules.

3. Wreck and Salvage Values in Motor Insurance Claims: Clarification on the taxability of these values.

4. Warranty/Extended Warranty by Manufacturers: Clarification on the GST implications for warranties provided to end customers.

5. Input Tax Credit on Repair Expenses in Motor Vehicle Insurance: Clarification on the availability of input tax credit for repair expenses incurred by insurance companies in reimbursement settlements.

6. Loans between Related Persons or Group Companies: Clarification on the taxability of such loans.

7. Time of Supply on Annuity Payments under HAM Projects: Clarification on the determination of the time of supply for these payments.

8. Time of Supply for Allotment of Spectrum to Telecom Companies: Clarification in cases where licence fee and spectrum usage charges are paid in instalments.

9. Place of Supply for Goods Supplied to Unregistered Persons: Clarification where the delivery address differs from the billing address.

10. Compliance Evidence for Post-Sale Discounts: Clarification on the mechanism for suppliers to provide evidence that input tax credit has been reversed by the recipient as per Section 15(3)(b)(ii) of CGST Act, 2017.

11. Special Procedure for Manufacturers of Specified Commodities: Clarifications on various issues for manufacturers of items like pan masala, tobacco, etc.

In conclusion, the 53rd GST Council Meeting brought forth numerous recommendations aimed at refining the tax system. These changes, which await official notification and implementation, highlight the importance of staying informed in the ever-evolving landscape of GST. Since its inception on July 1, 2017, the GST law has undergone continuous updates and amendments, reflecting the dynamic nature of tax regulations. As taxpayers and businesses, it is mandatory to be adaptable to these ongoing developments to ensure compliance and optimize benefits.

Link: https://pib.gov.in/PressReleasePage.aspx?PRID=2027982