Bullet point of 53rd GST Council Meeting

The 53rd GST Council Meeting convened on June 22, 2024, introduced sweeping reforms aimed at easing tax burdens and enhancing compliance for businesses. From amnesty schemes to revised GST rates, the recommendations promise significant relief and operational simplification.

1. The GST Council has recommended waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19, and 2019-20. This waiver applies to cases that do not involve fraud, suppression of facts, or wilful misstatement. To benefit from this waiver, taxpayers must pay the full tax amount demanded by March 31, 2025.

2. The GST Council recommends that the deadline to avail input tax credit for any invoice or debit note under Section 16(4) of the CGST Act, through any GSTR-3B return filed up to November 30, 2021, for the fiscal years 2017-18, 2018-19, 2019-20, and 2020-21, be considered as November 30, 2021.

3. The GST Council has recommended setting monetary thresholds for the Department to file appeals, aimed at reducing litigation. The proposed limits are Rs. 20 lakh for the GST Appellate Tribunal, Rs. 1 crore for the High Court, and Rs. 2 crore for the Supreme Court.

4. The GST Council recommends reducing the amount of pre-deposit required for filing appeals under GST.

5. The GST Council recommends amending the CGST Act to specify that the three-month period for filing appeals with the GST Appellate Tribunal will begin from a date to be announced by the Government.

6. To reduce the interest burden on taxpayers, the GST Council recommends that no interest under Section 50 of the CGST Act be charged for delayed return filing on the amount available in the Electronic Cash Ledger (ECL) as of the due date for filing the return.

7. The GST Council has recommended a sunset clause starting April 1, 2025, which would cease the acceptance of any new applications related to anti-profiteering.

8. The GST Council has recommended exempting SEZ units and developers from paying Compensation Cess on imports for authorized operations, effective from July 1, 2017.

9. The GST Council has recommended applying a 12% GST rate to the following items regardless of their specific use:

• Milk cans made of steel, iron, or aluminum.
• Cartons, boxes, and cases made of both corrugated and non-corrugated paper or paperboard.
• Solar cookers, whether they operate with a single or dual energy source.
• Sprinklers, including fire water sprinklers.

10. The GST Council has recommended exempting certain services provided by Indian Railways to the general public, as well as intra-railway supplies.

11. The GST Council has recommended certain exemptions related to accommodation services, aimed at providing relief to students and working professionals.

12. The GST Council recommends implementing biometric-based Aadhaar authentication for registration applicants nationwide in a phased manner.

The GST Council has recommended several changes and exemptions pertaining to GST tax rates and import duties, aiming to facilitate various sectors and streamline compliance.

A. Changes in GST Tax Rates:

I. Recommendations relating to GST rates on Goods

A. Changes in GST rates of goods

1. A uniform IGST rate of 5% will apply to imports of parts, components, testing equipment, tools, and tool-kits of aircraft, irrespective of their HS classification, to boost MRO (Maintenance, Repair, and Overhaul) activities, subject to specified conditions.

2. All milk cans made of steel, iron, and aluminium, regardless of their use, will attract a 12% GST rate.

3. GST rate on cartons, boxes, and cases made of both corrugated and non-corrugated paper or paperboard (HS codes 4819 10 and 4819 20) will be reduced from 18% to 12%.

4. Solar cookers, whether single or dual energy source, will attract a 12% GST rate.

5. Amend the existing entry for poultry keeping machinery attracting 12% GST to specifically include “parts of poultry keeping machinery” and regularize past practices on an ‘as is where is’ basis due to genuine interpretational issues.

6. Clarify that all types of sprinklers, including fire water sprinklers, will attract a 12% GST rate and regularize past practices on an ‘as is where is’ basis due to genuine interpretational issues.

7. Extend IGST exemption on imports of specified items for defence forces for a further period of five years until June 30, 2029.

8. Extend IGST exemption on imports of research equipment/buoys imported under the Research Moored Array for African-Asian-Australian Monsoon Analysis and Prediction (RAMA) programme subject to specified conditions.

9. Exempt Compensation Cess on imports in SEZ by SEZ units/developers for authorized operations from July 1, 2017.

Additional miscellaneous changes recommended by the GST Council are:

10. Exempt Compensation Cess on the supply of aerated beverages and energy drinks to authorized customers by Unit Run Canteens under the Ministry of Defence.

11. Provide ad-hoc IGST exemption on imports of technical documentation for AK-203 rifle kits imported for the Indian Defence forces.

Recommendations from the GST Council regarding GST rates on services are as follows:

1. Exempt services provided by Indian Railways to the general public, including the sale of platform tickets, facility of retiring rooms/waiting rooms, cloak room services, and battery-operated car services. Intra-Railway transactions will also be exempted. The issue for the past period will be regularized from October 20, 2023, to the date of issue of the exemption notification.

2. Exempt GST on services provided by Special Purpose Vehicles (SPVs) to Indian Railways, allowing Indian Railways to use infrastructure built and owned by SPVs during the concession period, and maintenance services supplied by Indian Railways to SPVs. Past issues will be regularized on an ‘as is where is’ basis from July 1, 2017, until the date of issue of the exemption notification.

3. Create a separate entry in Notification No. 12/2017-CTR dated June 28, 2017, under heading 9963 to exempt accommodation services with a value of supply up to Rs. 20,000 per month per person, provided the accommodation service is supplied for a minimum continuous period of 90 days. Similar benefits will be extended for past cases.

Changes related to services:

4. Declare the co-insurance premium apportioned by the lead insurer to the co-insurer for the supply of insurance services in co-insurance agreements as ‘no supply’ under Schedule III of the CGST Act, 2017. Past cases may be regularized on an ‘as is where is’ basis.

5. Declare transactions of ceding commission/re-insurance commission between insurers and re-insurers as ‘no supply’ under Schedule III of the CGST Act, 2017. Past cases may be regularized on an ‘as is where is’ basis.

6. Regularize GST liability on reinsurance services of specified insurance schemes covered by Sr. Nos. 35 & 36 of Notification No. 12/2017-CT (Rate) dated June 28, 2017, on an ‘as is where is’ basis for the period from July 1, 2017, to January 24, 2018.

7. Regularize GST liability on reinsurance services of insurance schemes where the total premium is paid by the Government, covered under Sr. No. 40 of Notification No. 12/2017-CTR dated June 28, 2017, on an ‘as is where is’ basis for the period from July 1, 2017, to July 26, 2018.

8. Issue a clarification that retrocession is considered ‘re-insurance of re-insurance’ and therefore eligible for exemption under Sl. No. 36A of Notification No. 12/2017-CTR dated June 28, 2017.

9. Issue a clarification that statutory collections made by the Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of Notification No. 12/2017-CTR dated June 28, 2017.

10. Issue a clarification that further sharing of incentives by acquiring banks with other stakeholders, as defined under the Incentive Scheme for Promotion of RuPay Debit Cards and low-value BHIM-UPI transactions, and decided in proportion and manner by NPCI in consultation with participating banks, is not taxable.

B. Measures to facilitate trade:

1. Insertion of Section 128A in CGST Act for Conditional Waiver of Interest or Penalty on Demands under Section 73 for FY 2017-18 to FY 2019-20:

Acknowledging the challenges faced by taxpayers during the initial GST implementation years, the GST Council recommends the insertion of Section 128A into the CGST Act. This provision aims to provide a conditional waiver of interest or penalty, or both, pertaining to demands raised under Section 73 for the fiscal years 2017-18, 2018-19, and 2019-20. Taxpayers can avail this waiver if they pay the full tax amount demanded in the notice by March 31, 2025. It’s important to note that this waiver excludes demands related to erroneous refunds.

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

To streamline and reduce government litigation, the GST Council proposes monetary limits for filing appeals under GST. The recommended limits are as follows:

• • GST Appellate Tribunal (GSTAT): Rs. 20 lakhs
  • High Court: Rs. 1 crore
  • Supreme Court: Rs. 2 crores

These monetary thresholds, with specified exclusions, are aimed at minimizing litigation efforts and promoting efficient dispute resolution.

3. Amendment in Section 107 and Section 112 of CGST Act to Reduce Pre-deposit Amounts for GST Appeals:

In a move to ease cash flow challenges and reduce working capital blockages for taxpayers, the GST Council suggests amending Section 107 and Section 112 of the CGST Act. The amendments propose a reduction in the pre-deposit amounts required for filing appeals under GST:

• • Appellate Authority: Maximum reduced from Rs. 25 crores CGST and Rs. 25 crores SGST to Rs. 20 crores CGST and Rs. 20 crores SGST
  • Appellate Tribunal: Maximum reduced from 20% with a cap of Rs. 50 crores CGST and Rs. 50 crores SGST to 10% with a cap of Rs. 20 crores CGST and Rs. 20 crores SGST

These amendments aim to make the appeal process more accessible and financially viable for taxpayers.

4. Exclusion of Extra Neutral Alcohol (ENA) from GST for Manufacture of Alcoholic Liquor:

Responding to industry needs, the GST Council recommends amending Section 9(1) of the CGST Act to exempt Extra Neutral Alcohol (ENA) used for manufacturing alcoholic liquor for human consumption from GST. This amendment is intended to clarify and streamline the taxation of ENA under GST laws.

5. Reduction of Tax Collected at Source (TCS) Rates by Electronic Commerce Operators (ECOs):

To alleviate the financial burden on suppliers using Electronic Commerce Operators (ECOs), the GST Council proposes reducing the Tax Collected at Source (TCS) rates. The current rate of 1% (0.5% CGST + 0.5% SGST/UTGST or 1% IGST) is recommended to be lowered to 0.5% (0.25% CGST + 0.25% SGST/UTGST or 0.5% IGST), aiming to support suppliers making supplies through ECOs.

6. Extension of Time for Filing Appeals in GST Appellate Tribunal:

Recognizing the need for flexibility in filing appeals, the GST Council recommends amending Section 112 of the CGST Act. This amendment proposes that the three-month period for filing appeals before the GST Appellate Tribunal starts from a date notified by the Government, particularly beneficial for pending cases requiring additional time for appeal filing.

7. Relaxation in Section 16(4) of CGST Act for Input Tax Credit:

To address compliance challenges, the GST Council recommends retrospective amendments in Section 16(4) of the CGST Act. It proposes deeming the time limit for availing input tax credit on invoices or debit notes filed through FORM GSTR-3B up to November 30, 2021, for FY 2017-18, 2018-19, 2019-20, and 2020-21 as November 30, 2021. Additionally, the amendment aims to relax conditions for filing returns after registration revocation, enhancing procedural flexibility.

8. Change in Due Date for Filing FORM GSTR-4 for Composition Taxpayers:

To simplify compliance for composition taxpayers, the GST Council recommends amending Rule 62(1)(ii) of the CGST Rules, 2017, and FORM GSTR-4. The due date for filing FORM GSTR-4 is proposed to be extended from April 30 to June 30 following the end of the financial year, effective from FY 2024-25 onwards. This extension provides additional time for taxpayers opting for the composition levy to furnish their returns.

9. Amendment of Rule 88B of CGST Rules for Interest Calculation:

To facilitate clearer interest calculations under Section 50 of the CGST Act, the GST Council recommends amending Rule 88B of the CGST Rules, 2017. The amendment proposes that amounts available in the Electronic Cash Ledger on the due date of filing FORM GSTR-3B, debited during filing, shall not be included in interest calculations for delayed filing. This amendment aims to enhance procedural clarity and reduce undue financial burdens on taxpayers.

10. Insertion of Section 11A in CGST Act for Duties Not Levied or Short-levied:

In response to common trade practices impacting levy of GST, the GST Council recommends inserting Section 11A into the CGST Act. This provision grants powers to the Government, on Council recommendations, to regularize non-levy or short levy of GST due to these practices, promoting consistency and fairness in tax administration.

11. Refund Mechanism for Additional IGST on Revised Export Prices:

To facilitate exporters facing upward revisions in goods’ export prices, the GST Council recommends establishing a mechanism for claiming refunds of additional IGST paid due to such revisions. This mechanism aims to support exporters in recovering excess tax payments arising from price adjustments post-export.

12. Clarification on Valuation of Import of Services by a Related Person Eligible for Full Input Tax Credit:

The GST Council recommends clarifying the valuation of services imported by a related domestic entity from its foreign affiliate, where full input tax credit is available to the domestic entity. In such cases:

• • The value of these imported services, as declared in the invoice by the related domestic entity, shall be deemed to be the open market value. This clarification aligns with the second proviso to Rule 28(1) of the CGST Rules.
  • If the related domestic entity does not issue an invoice for any service received from its foreign affiliate, despite full input tax credit eligibility, the value of such services shall be deemed as Nil. This interpretation also follows the open market value principle under the second proviso to Rule 28(1) of the CGST Rules.

13. Clarification on Availability of Input Tax Credit (ITC) on Ducts and Manholes Used in Optical Fiber Cable (OFC) Networks:

To remove ambiguity, the GST Council recommends clarifying that input tax credit is fully available for ducts and manholes used in the network of optical fiber cables (OFCs). This clarification ensures that restrictions under clause (c) or (d) of sub-section (5) of Section 17 of the CGST Act do not apply to such infrastructure components crucial for OFC networks.

14. Clarification on Place of Supply for Custodial Services Provided by Banks to Foreign Portfolio Investors:

The GST Council proposes clarifying the determination of the place of supply for custodial services offered by Indian Banks to Foreign Portfolio Investors (FPIs). According to the recommendation, the place of supply for such custodial services shall be determined as per Section 13(2) of the IGST Act, 2017. This clarification aims to provide certainty and consistency in the tax treatment of custodial services in the context of international financial transactions involving FPIs.

15. Clarification on Valuation of Corporate Guarantees Between Related Persons:

In response to industry needs, the GST Council recommends amending Rule 28(2) of the CGST Rules, 2017, with retrospective effect from October 26, 2023. This amendment aims to clarify the valuation principles applicable to services involving the provision of corporate guarantees between related parties. Key clarifications include:

• • The valuation under Rule 28(2) of the CGST Rules shall not apply in cases where such services are exported.
  • The rule also does not apply if the recipient is eligible for full input tax credit, ensuring that valuation remains aligned with open market conditions.

16. Clarification on Applicability of Section 16(4) of CGST Act in Reverse Charge Mechanism (RCM) Scenarios:

The GST Council recommends providing clarity on the application of Section 16(4) of the CGST Act, 2017, in instances where supplies are received from unregistered suppliers and tax liability falls under the reverse charge mechanism (RCM). Specifically:

• • The relevant financial year for calculating the time limit to avail input tax credit under Section 16(4) is the financial year in which the recipient issues the invoice for such supplies.
  • This clarification ensures that compliance requirements are clear for taxpayers involved in transactions subject to the RCM under GST provisions.

17. Clarifications to Reduce Litigation:

i. Taxability of reimbursement of securities/shares (ESOP/ESPP/RSU) provided by companies to employees.

ii. Reversal of input tax credit on life insurance premium not included in taxable value per Rule 32(4) of CGST Rules.

iii. Tax treatment of wreck and salvage values in motor insurance claims.

iv. Warranty/extended warranty provided by manufacturers to end customers.

v. Availability of input tax credit on repair expenses in motor vehicle insurance claims under reimbursement mode.

vi. Taxability of loans between related persons or group companies.

vii. Time of supply for annuity payments under HAM projects.

viii. Time of supply for spectrum allotment to telecom companies with installment payments.

ix. Place of supply for goods delivered to unregistered persons with differing delivery and billing addresses.

x. Mechanism for suppliers to prove compliance with Section 15(3)(b)(ii) of CGST Act for post-sale discounts.

xi. Issues regarding special procedures for manufacturers of commodities like pan masala and tobacco.

These clarifications aim to provide clear guidelines to trade and tax officers, reducing disputes and facilitating smoother compliance with GST regulations.

18. Amendment proposed in section 140(7) of CGST Act from 01.07.2017 to allow transitional credit for invoices on services provided before the appointed date and received by Input Service Distributor (ISD) before that date.

19. Introduction of FORM GSTR-1A recommended to enable taxpayers to amend or add details in FORM GSTR-1 before filing FORM GSTR-3B. This helps in rectifying missed particulars or revising already declared information, ensuring accurate auto-population of liability.

20. Proposal to exempt taxpayers with aggregate annual turnover up to two crore rupees from filing annual return in FORM GSTR-9/9A for FY 2023-24.

21. Retroactive amendment suggested in section 122(1B) of CGST Act effective from 01.10.2023, clarifying penal provisions apply only to e-commerce operators required to collect tax under section 52 of CGST Act, excluding others.

22. Retroactive amendment suggested in section 122(1B) of CGST Act effective from 01.10.2023, clarifying penal provisions apply only to e-commerce operators required to collect tax under section 52 of CGST Act, excluding others.

Other measures pertaining to Law and Procedures

23. Introduction of biometric-based Aadhaar authentication nationwide recommended by GST Council to bolster GST registration process and counter fraudulent input tax credit claims.

24. Proposed amendments in Sections 73, 74, and new Section 74A of CGST Act to standardize time limits for issuance of demand notices and orders, effective FY 2024-25. Additionally, the window for taxpayers to avail reduced penalty by paying tax and interest may extend from 30 to 60 days.

25. Recommendation to amend Sections 171 and 109 of CGST Act to introduce a sunset clause for anti-profiteering under GST and transfer anti-profiteering case handling to Principal Bench of GST Appellate Tribunal (GSTAT). The sunset date for new anti-profiteering applications is suggested as 01.04.2025.

26. Proposed amendments in Section 16 of IGST Act and Section 54 of CGST Act to restrict IGST refunds for goods subject to export duty, including supplies to SEZ developers or units for authorized operations.

27. GST Council’s suggestion to lower the threshold for reporting B2C inter-State supplies invoice-wise in Table 5 of FORM GSTR-1 from Rs 2.5 Lakh to Rs 1 Lakh.

28. Council’s recommendation for monthly filing of FORM GSTR-7 by registered persons under section 51 of CGST Act, irrespective of tax deduction during the month. No late fee proposed for delayed filing of Nil FORM GSTR-7 returns, with invoice-wise details possibly required.

Note: The recommendations of the GST Council have been summarized in this release to inform stakeholders. These decisions will be implemented through relevant circulars, notifications, and legal amendments, which hold the binding force of law.

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

Conclusion: The outcomes of the 53rd GST Council meeting mark a pivotal moment in GST reform, offering businesses crucial waivers on penalties and interest, streamlined appeal processes, and revised GST rates. These measures are set to foster a more conducive business environment, promoting growth and compliance in India’s evolving economic landscape. Stay updated as these recommendations translate into actionable policies shaping the future of GST implementation.