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| Highlights of the 50th GST Council Meeting |
The Hon’ble Finance Minister chaired the milestone 50th GST Council meeting in New Delhi. The meeting dealt with long-pressing issues, including the taxability of online gaming, setting up of the Appellate Tribunals, tightening of procedures for registration and claiming of Input Tax Credit (ITC). The Council also recommended a few measures for trade facilitation and streamlining GST compliances. The key decisions taken by GST Council in the said meeting are as follows:
| Changes relating to GST rate on goods and services |
- GST rate on goods, namely uncooked/unfired snack pellets, imitation zari thread or yarn and fish soluble paste, has been reduced to 5% from the current applicable rate and for the past period, it has been decided to regularize the rates for these goods on as-is basis.
- It has been decided to regularize the matters relating to GST on trauma, spine and arthroplasty implants, plates and cups of areca leaves, biomass briquettes and desiccated coconut on as-is basis for the past period/s (prior to change in rate for respective goods) on account of genuine interpretational issues.
- GST Council has widened the ambit of levy of compensation cess on all utility vehicles by removing the condition that the vehicle should be popularly known as ‘SUV,’ as long as it comes with engine capacity above 1500 cc, exceeding 4000 mm in length, and having (unladen) ground clearance of 170 mm.
- It has been decided to levy 28% GST on the full value of bets/face value of chips incase of online gaming, casinos, and horse racing.
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Our Comments
However, it could only be a matter of time before the doors of the judiciary are knocked upon to seek relief against such a move.
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- Supply of food and beverages in cinema halls is to be treated at par with restaurant services and taxable at 5%, provided they are supplied independent of cinema exhibition service. However, where cinema tickets and food and beverages are supplied together as a composite supply, the GST rate of cinema exhibition service being the principal supply shall apply.
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Our Comments
This could pose a risk of reversal of common ITC for theatre operators and could be quite significant in terms of value.
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- Services supplied by a director to the company in their personal capacity, such as renting of immovable property, will not be taxable under Reverse Charge Mechanism (RCM).
- One-time declaration to be filed by Goods Transport Agency (GTA) to opt-in to pay GST under forward charge and the same shall be applicable for all future years unless the GTA files a declaration to revert to RCM.
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Our Comments
This eases out the compliance efforts at GTA’s end, where they had to opt forforward charge every year.
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| Measures for facilitation of trade |
- The GST Council has taken steps to speed up the setting up and functionality of the GST Appellate Tribunal. The State Benches would be started in a phased manner. The Council has also recommended that provisions in the Finance Act 2023 relating to the setting up and operation of the Tribunal be notified from 1 August 2023.
- Relaxations provided for disclosures in Form GSTR-9 and Form GSTR-9C for FY 21-22 be continued for FY 22-23 as well. There is no change in the limit of INR 20 million for the applicability of Form GSTR-9.
- The GST Council has recommended that for distributing ITC pertaining to third-party services, Input Service Distribution (ISD) mechanism would be made mandatory in future with specific amendments in GST Law. Furthermore, it has also been recommended to clarify that the ISD mechanism shall be non-mandatory for the past period to rest the debates and interpretational issues.
- Tax invoice issued to unregistered recipient in case of services supplied by or through an E-commerce Operator or by the supplier of OIDAR services to include only the name of the State of the recipient instead of full name and address.
- Circular 183/15/2022-GST dated 27 December 2022, which was issued for providing relaxations in case of non-matching of ITC between Form GSTR-2A/B vis-à-vis Form GSTR-3B, has been recommended to be applicable even for FY 2019-20 and FY 2020-21 (in line with the judgment of Hon’ble Karnataka High Court in the case of Wipro Ltd.).
- It has been recommended to amend provisions of Rule 108(1) and 109(1) of CGST Rules, 2017 to allow manual filing of appeals under certain specified circumstances, including appeals to be filed against orders passed in TRAN-1/TRAN-2 matter where revised / fresh transitional returns were filed in light of the judgment of Hon’ble Supreme Court in the case of M/s Filco Trade Centre Pvt. Ltd.
- Benefits of various amnesty schemes notified in March 2023 regarding non-filing of returns viz. Form GSTR-4, Form GSTR-9 and Form GSTR-10, revocation of cancellation of registration and deemed withdrawal of assessment orders to be extended till 31 August 2023.
| Clarification/Circular to be issued for |
- Taxability of internally generated services provided by one distinct person to another distinct person.
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Our Comments
There exists an area of ambiguity whether the salary cost of an employee located in a corporate office should also be cross charged to other GST registrations of the taxpayer (i.e., distinct person) – the debate being whether the employee is of the entity or the State where the corporate office is located. This is a breeding ground of huge litigation and one of the matters is currently awaiting the decision of the Hon’ble Karnataka High Court in the case of Columbia Asia Hospitals Pvt Ltd.
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- Applicability of GST and ITC reversal on warranty supplies/replacement of parts and repair services during the warranty period, clarifying that no GST is payable by the manufacturer on such replacements/repair services and also the manufacturer doesn’t need to reverse ITC.
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Our Comments
This should provide a much-needed respite to the manufacturers. There were debates after the Hon’ble Supreme Court judgment in the case of Mohd. Ekram Khan & Sons vs. [CTT [(2004) 6 SCC 183], pertaining to the erstwhile State Value Added Tax regime, about taxing such supplies. It is heartening that the GST Council has taken a very pragmatic view of the matter and clarified the issue in favor of the trade, thus, saving huge amount of time and cost in litigation on this issue.
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- Refund of accumulated ITC under Section 54(3) of the CGST Act, 2017, to be restricted to only those inward supplies which are appearing in Form GSTR-2B.
- Value of export goods is to be considered as lower of Free on Board (FOB) value declared in Shipping Bill or the value declared in the tax invoice or Bill of Supply, while calculating adjusted total turnover for computing refund as per Rule 89(4) of CGST Rules, 2017.
- Admissibility of refund for supplies made under Letter of Undertaking where the condition to export goods within three months from the invoice date or receiving convertible foreign exchange in case of services exported within one year from the invoice date is not fulfilled as per Rule 96A of the CGST Rules, 2017. It is proposed to clarify admissibility of refund upon fulfilling the above conditions after the stipulated time.
- TCS liability under Section 52 of CGST Act, 2017 in cases where multiple E-commerce Operators (ECOs) are involved in a single transaction of supply of goods or services or both.
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Our Comments
The same is already covered by way of response in one of the FAQs on TCS released by CBIC in September 2018 (post earlier Council meeting); however, to make the same legally binding, the said recommendation appears to have been made.
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- Requirement to generate e-invoices even in case of supplies made to government departments or establishments/government agencies/local authorities/PSUs. etc., who are registered under GST solely for the purpose of TDS if the supplier is crossing the threshold of E-invoicing applicability.
- Manner to compute interest under Section 50(3) of the CGST Act, 2017 in case of wrongly availed and utilized IGST credit. The Circular to clarify that the balance of ITC in Electronic Credit Ledger under the heads of IGST, CGST and SGST taken together must be considered while calculating interest.
- Clarification that mere holding of securities of subsidiary company by holding company cannot be treated as supply of services and accordingly there shall be no GST implications on the same.
| Measures for streamlining GST compliances |
- A new Rule 138F to be inserted in CGST Rules, 2017 and respective State GST rules, by virtue of which the states who want to mandate the generation of E-way bill for the movement of Gold/Precious stones can do the same.
- To strengthen the GST registration process, the GST Council has recommended that the details of the bank account, in name and PAN of the registered person, shall be furnished within 30 days of grant of such registration or before filing of Form GSTR-1/IFF, whichever is earlier. Non-compliance will entail system-based suspension of the registration.
- Manner of recovery of tax and interest in case of difference in liability as per Form GSTR-1 and Form GSTR-3B to be prescribed in cases where intimation has been issued and no satisfactory explanation has been furnished by the taxpayer by introducing Form DRC-01D.
- The GST Council has also decided to bring in a system-based intimation mechanism to deal with differences in ITC between Form GSTR-3B and Form GSTR-2B above a certain threshold, along with the procedure for auto-compliance on the part of the taxpayers.
- An amendment in Form GSTR-3A is proposed to provide for issuance of notice to the defaulters who fail to furnish annual return within due date to improve discipline in filing annual returns by taxpayers.
- OIDAR service providers will now also be mandated to provide details of supplies made to registered recipients in India while filing returns in Form GSTR-5A.
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Our Comments
Such reporting will help the government track GST payments under RCM by such registered recipients.
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- Value of supply of goods from duty-free shops at arrival terminals in international airports to the incoming passengers to be included in the value of exempt supplies for the purpose of computation of proportionate ITC reversal as per Rule 42 and 43 of CGST Rules, 2017.
- A new clause is to be inserted in the IGST Act, 2017, for the determination of place of supply in respect of goods supplied to unregistered persons.
- “Account Aggregators,” i.e., systems with which GSTIN may share the information, to be notified. Furthermore, the manner and conditions of consent-based sharing of information of registered persons are also to be prescribed.
- The Group of Ministers has recommended various measures to curb fraud in GST through system-based measures for strengthening the registration process, use of third-party data for risk management, and controlling the flow of ITC down the supply chain.
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