Summary: The 54th GST Council Meeting introduced several important clarifications and procedural recommendations aimed at improving GST compliance. Key among them is the introduction of the Reverse Charge Mechanism (RCM) on metal scrap and commercial property rentals between unregistered and registered persons. Preferential Location Charges (PLC) will now follow the same tax treatment as construction services. Research and development services by government entities and select institutions, as well as import of services by foreign airlines, are granted exemptions. Clarifications were issued on ancillary services provided by GTA, treating them as composite supplies when integrated with transportation. The Council also proposed an amnesty scheme for waiving interest and penalties under certain tax demands and recommended procedures for rectifying orders under newly inserted sub-sections of section 16 of the CGST Act. Amendments were suggested for rules governing IGST refunds on exports. Finally, a pilot program for B2C e-Invoicing was recommended, along with the introduction of new ledgers like RCM and an Invoice Management System to streamline Input Tax Credit claims and reduce errors.
10 most important clarifications and procedure related recommendations of 54th GST Council Meeting
1. Reverse Charge Mechanism on metal scrap – Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit. A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.
2. Preferential Location Charges (PLC) – To clarify that Preferential Location Charges (PLC) is eligible for same tax treatment as the main supply that is, construction service.
3. Exemption to supply of research and development services – Council recommended to exempt supply of research and development services by a Government Entity; or a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 using Government or private grants
4. Exemption to import of services – It is also recommended to exempt import of services by an establishment of a foreign airlines company from a related person or any of its establishment outside India, when made without consideration
5. Renting of commercial property – To bring renting of commercial property by unregistered person to a registered person under Reverse Charge Mechanism (RCM) to prevent revenue leakage.
6. Ancillary/ intermediate services are provided by GTA – To clarify that when ancillary/ intermediate services are provided by GTA in the course of transportation of goods by road the same will be treated as part of the composite supply. If such services are not provided in the course of transportation of goods and invoiced separately, then these services will not be treated as composite supply of transport of goods.
7. Procedure and conditions for waiver of interest or penalty or both in respect of tax demands under section 73 of CGST Act, 2017 for FYs 2017-18, 2018-19 and 2019-20 as per section 128A of CGST Act, 2017 – The Council has recommended 01.11.2024 as the effective date for the amnesty scheme. The benefits of the scheme shall be available for payments done till 31-03-25. A detailed Circular for implementation of the scheme shall be issued by the Department.
8. Providing a mechanism for implementation of newly inserted sub-section (5) and sub-section (6) in section 16 of CGST Act, 2017 – The newly inserted sub-sections shall be notified at the earliest. The Council also recommended that a special procedure for rectification of orders may be notified which is to be followed by taxpayers against whom any order has been issued and where appeal against the said order has not been filed. The Council also recommended issuance of a circular to clarify the procedure and various issues related to implementation of the said provisions of sub-section (5) and sub-section (6) of section 16 of CGST Act, 2017.
9. Amendments in rule 89 and rule 96 of CGST Rules, 2017 and to provide clarification in respect of IGST refunds on exports where benefit of concessional/ exemption notifications specified under rule 96(10) of CGST Rules, 2017 has been availed on the inputs – The GST Council recommended to clarify that where the inputs were initially imported without payment of IGST and compensation cess but IGST and compensation cess on such imported inputs are subsequently paid, along with applicable interest, and the Bill of Entry in respect of the import of the said inputs is got reassessed, then the IGST paid on exports, refunded to the said exporter shall not be considered to be in contravention of provisions of sub-rule (10) of rule 96 of CGST Rules.
10. B2C invoicing and Invoice Management System and new ledgers – The GST Council recommended roll out of a pilot for B2C e-Invoicing. Further the Council also took note of the introduction of a Reverse Charge Mechanism (RCM) ledger, an Input Tax Credit Reclaim ledger and an Invoice Management System (IMS). Taxpayers can declare their opening balance for these ledgers by 31 October 2024. The IMS will allow the taxpayers to accept, reject, or to keep the invoices pending for the purpose of availment of Input Tax Credit. This will be an optional facility for taxpayers to reduce errors in claiming input tax credit and improve reconciliation.
Author: Tarun Kr. Gupta | +91 9830124482 | [email protected]
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