48th GST Council Meeting Highlights

The 48th GST Council meeting was held on 17th December 2022, Saturday, virtually from New Delhi. The meet being chaired by Finance minister Smt. Nirmala Sitharaman. Here are some key highlights of the meeting:

1. Decriminalization of three kinds of offences under GST

2. Few GST rate rationalization matters were taken up

Clarifications were given on a few taxation matters, such as:

1. how to deal with mismatches of invoices in GSTR-1 vs GSTR-3B in the early years

2. Higher cess of 22% is applicable to motor vehicles fulfilling certain conditions.

3. Incentives paid to banks by CG under scheme of promotion of RuPay Debit Cards and low value BHIM-UPI are non-taxable.

4. Refund to tax borne by unregistered persons in few cases.

5. Unregistered suppliers & composition dealers are allowed to make intra-state supply of Good through E-commerce operators, subject to certain conditions.

6. The council also recommends to insert few new rules in CGST Rules,2017 and form GST DRC-01B.

The Details of above highlights are explained below:

1. GST Rates reduced & clarified

1. Reduced Rates( for Goods):

2. Clarification on tax rates:

1. Rab, also called Rab-salawat is categorized under HSN code 1702, and GST rate of 18% gets charged on it.

2. Fryums manufactured using the process extrusion, particularly covered under HSN code 19059030 and GST rate of 18% gets charged on it.

3. 5% GST is charged on imported equipment for petroleum operations on goods falling under lower rate category under Schedule I and the rate 12% shall be applicable only if the general rate is more than 12%.

4. No GST on rentals of residential dwelling if it is rented to a registered person in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

5. No GST on incentives paid to banks by the Central Government as a subsidy under the promotion of RuPay Debit Cards and low-value BHIM-UPI transaction scheme, since the same are in the nature of subsidy..

6. The higher rate of compensation cess of 22% is applicable to motor vehicle fulfilling all the conditions as mentioned below:

a. It is popularly known as SUV, and

b. Has engine capacity exceeding 1500 cc, and

c. Length exceeding 4000 mm, and

d. a ground clearance of 170 mm or above.

2.Measures for facilitation of Trade & Business

1. The GST council recommended some amendments for Decriminalization under GST:

a. The minimum threshold of tax amount for launching prosecution under GST is increased from Rs.1 crore to Rs.2 crores, except for the offences w.r.t issuance of fake invoices.#

b. Reduced the compounding amount from the current tax range of 50%-150% to the range of 25%-100

c. Decriminalize certain offences specified under clause (g), (j) and (k) of sub-section (1) of section 132 of CGST Act, 2017,

i. Obstruction or preventing any officer in discharge of his duties;

ii. Deliberate tempering of material evidence;

iii. Failure to supply the information.

# [i.e, offences In relation to the issuance of fake invoices  (issuance of invoice without any further supply of goods/services) continue to be prosecuted if the tax amount is more than Rs.1 crore.]

2. There is no procedure for claim of refund of tax borne by the unregistered buyers in cases:

a. where the contract/ agreement for supply of services, like construction of flat/house, and

b. long-term insurance policy, is cancelled and time for revision through credit note is lapsed.

Now, the Council has decided to amend the CGST Rules and directed CBIC to issue a Circular to prescribe the procedure for filing a refund application by such unregistered buyers in above mentioned cases.

3. A big relief for unregistered dealers and composition taxpayers, who wants to sell their good through E-Commerce operators (ECOs), the council, has allowed unregistered dealers and compositions taxpayers to make intra-state supply of goods through ECOs, subject to fulfillment of certain conditions.

Since, development of requisite functionality on the portal required time, the council has recommended that the scheme may be implemented w.e.f 01.10.2023.

4. New entries were added in Schedule III from 1st February 2019 to keep certain transactions mentioned below outside the preview GST;

1. supplies of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales and

2. supply of warehoused goods before their home clearance, outside the purview of GST

Confusion arose regarding taxability of such transactions/ activities during the period 01.07.2017 to 31.01.2019, the Council has recommended to make the said paras effective from 01.07.2017.   However, no refund of tax paid shall be available in cases where any tax has already been paid in respect of such transactions.

5. Amendment in provisions of rule 37(1) and insertion of new rule 37(A):

CGST Rule 37(1) will be amended retrospectively from 1st October 2022 for ITC reversal to provide for reversal of input tax credit as per the second proviso to Section 16 of CGST Act, only to the extent of the invoice amount unpaid to the supplier versus the value of the supply, along with tax payable.

Council recommends to insert Rule 37A in CGST Rules, 2017 to prescribe the mechanism for reversal of input tax credit by a registered person in the event of nonpayment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently.

6. Some small amendments for timely and proper compliance;

1.Rule 108 and rule 109 of the CGST Rules, 2017 to be amended to provide clarity on the requirement of submission of certified copy of the order appealed against and the issuance of final acknowledgment by the appellate authority.

2. Rule 109C and FORM GST APL-01/03 W to be inserted in the CGST Rules, 2017 to gives facility for withdrawing an appeal application up to a certain defined stage, avoiding litigations at the level of appellate authorities.

3. No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for valuation of insurance services

4.CGST Rule 12(3) will be amended to introduce a facility to the GST-registered TDS deductor and TCS collectors for applying for the cancellation of GST registration.

3. Streamlining Compliances

1. Proposed to conduct a pilot in State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants. Amendment in rule 8 and rule 9 of CGST Rules, 2017 to be made to facilitate the same.

2. PAN-linked mobile number and e-mail address (fetched from CBDT database) to be captured and recorded in FORM GST REG-01 and OTP-based verification to be conducted at the time of registration on such PAN-linked mobile number and email address to restrict misuse of PAN of a person by unscrupulous elements without knowledge of the said PAN-holder.

3. Amendments in Form GSTR-1to allow e-commerce operators and sellers to report their supplies through e-commerce operators, covered under Sections 52 and 9(5) of the CGST Act.

4. Rule 88C and FORM GST DRC-01B to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liabilities reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period if diff. exceeds a specified amount. This will enable the taxpayer to either pay the differential tax liability or explain the difference.

5. Further, clause (d) to be inserted in sub-rule (6) of rule 59 of CGST Rules, 2017 to restrict furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid.

6. Amendment in definition of “non-taxable online recipient” under section 2(16) of IGST Act, 2017 and definition of “Online Information and Database Access or Retrieval Services (OIDAR)” under section 2(17) of IGST Act, 2017 so as to reduce interpretation issues and litigation on taxation of OIDAR Services.

7. Some other topics were also discussed and circulars for the same will be issued soon.