The 53rd GST Council meeting was held on 22nd June 2024 in New Delhi under the Chairmanship of the Honourable Union Finance Minister, Smt. Nirmala Sitaraman. This was the first meeting after the installation of the new Government at the centre and also assumes significance as it precedes the all-important full-fledged Union Budget 2024 which is likely to be presented in July 2024. The meeting was also attended by Union Minister of State for Finance Shri Pankaj Chaudhary, Chief Ministers of Goa and Meghalaya; Deputy Chief Ministers of Bihar, Haryana, Madhya Pradesh, and Odisha, besides Finance Ministers of States & UTs (with legislature) and senior officers who matter. There were a lot of important recommendations that were made which can be categorised mainly into 4 silos. The first one which deals with legislative changes, the second deals with change in the rate of taxes, the third one deals with certain clarifications and the fourth one deals with Business process changes as way forward for ease of doing business. Let us analyse them one by one.
In order to prioritise litigation free tax administration, the council had made a lot of recommendations:
1. Let us begin with the Notices issued for past period. There were lot of Show Cause Notices that were issued by the department especially in the initial years of roll out of GST law in this country. Most of them may be on account of ignorance or inadvertence but not intentional. In order to give relief for the litigations triggered on account of above reasons, the GST Council had recommended waiving interest and penalties for demand notices issued under Section 73 of the CGST Act 2017. The provisions of Section 73 deals with the cases not involving fraud, suppression or wilful mis-statement, etc.. This relief is for the fiscal years 2017-18, 2018-19 and 2019-20. It comes with a caveat that these relaxations are applicable only if the full tax demanded in such notices is paid before 31st March 2025. This recommendation will be enabled by insertion of Section 128A in CGST Act,2017. This comes as an amnesty so to say, where the litigations will conclude once for all. There were so many such schemes that were announced earlier also but this is unique as here even the civil liability of interest is also waived. This shows the benign intent of the Government and its aim to move forward progressively.
2. The next very important move is with respect of the relief granted on availment of Input tax credit. Again, during the initial periods of roll out there were lot of difficulties in availment and utilisation of Input Tax credit, be it because of wrong understanding of law, mischievous interpretation of law, technical glitches by the electronic eco system, and so on. In order to provide relaxation from these difficulties, the last date for availment of ITC in respect of the missed credits pertaining to previous financial year, the ITC can be availed before filing the return (GSTR-3B of course) for the month of September in the next financial year. This created a lot of procedural infirmities. Hence the facility of availing the credit was delinked from the filing of return and the last day was fixed as 30 November of the next financial year. As the amended law stands now, Time limit to claim ITC on invoices or debit notes of a financial year is revised to earlier of two dates ie., 30th November of the following year or, the date of filing annual returns. This was proposed in the Budget 2022 and came into effect for the financial years 2023-24 onwards. Now in this meeting, GST Council had recommended the time limit to avail input tax credit w.r.t. any invoice or debit note under Section 16(4) of CGST Act, through any GSTR 3B return filed up to 30.11.2021 for FY 2017-18, 2018-19, 2019-20 and 2020-21, may be 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. While with respect to cases where returns have been filed after revocation, the 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. This will also lay down all the litigations triggered on this subject in one stroke. After all procedural infirmities cannot be a reason for genuine benefits extended by legislation especially when the incidence of the tax has been borne by them.
3. Recently, the honourable Kerala High Court observed that the requirement of pre-deposit for appeal is a statutory obligation and there is no necessity on the Central Excise & Customs Department (Tax Department) to issue a defect notice to an assessee even though it was a usual practice to point out the same in the interest of fairness. Be it as it may, the right to appeal is a statutory entitlement which operates within the limitations placed on it by the law. One such limitation flows from the principle that an appellant must first deposit the adjudged dues before his further appeal can be heard. However, often an appellant may succeed in his appeal, and hence it would, in retrospect, be unfair to saddle him with this financial burden. So, to balance these factors, tax laws mandate some “pre-deposit” so as to discourage frivolous appeals and also safeguard the bona fide interests of both the taxpayers and the revenue. But it undoubtedly creates a financial stress on the litigant. Therefore, taking this point into consideration, Council has recommended certain reduction in the pre-deposits to be made at the time of filing appeal. We need to wait for the Notification to see exactly what is in store. In case of Departmental Appeal there is no Pre-Deposit. However, on the department’s side to avoid frivolous litigations, an enhanced monetary limit of Rs. 20 lakh for GST Appellate Tribunal, Rs. 1 crore for High Court and Rs. 2 crore for Supreme Court, has been fixed. Surely these measures are expected to weigh down the stress on the dispute resolution mechanism.
4. One may be aware that any order passed by the Appellate Authority is appealable before the Goods and Services Tax Tribunal (GSTAT) as per Section 112 of CGST Act, 2017. As per Section 112 of the CGST Act, any person aggrieved by the order passed by the Appellate Authority or Revisional Authority shall file an appeal before the Appellate Tribunal within 3 months from the date of communication of the order and in case of appeals by the department, the time limit is six months from the date of communication of the order. It was subsequently clarified that this time limit of three months will commence from the date of on which the president of GSTAT assumes office. Now, that the honourable president of GSTAT assumed office on 04th May 2024, technically the three month period for filing the appeal by the Taxpayer should have ended on 03th August 2024. This may cause difficulty to all those who want the file appeal in GSTAT but the regional benches are yet to be operational. Therefore, as further relaxation the Council has suggested an extended time limit to file appeals at GSTAT and to provide a three-month period for filing appeals in GST Appellate Tribunal which will start from a date to be notified by the Government later. This will give sufficient time to the taxpayers to file appeal before the GSTAT, in pending cases thereby not depriving any taxpayer their right to be part of grievance redressal mechanism.
5. Just like the levy of interest on ineligible ITC only to the extent of unavailable balance in the electronic Credit ledger, to ease the interest burden of the taxpayers, GST Council recommended not to levy interest under Section 50 of CGST Act 2017, in case of delayed filing of return, on the amount which is available in Electronic Cash Ledger (ECL) on the due date of filing of the said return, as it is construed to be with the Government though not exactly. This will be effectuated by an amendment of Rule 88B of CGST Rules 2017. The GST Council recommended amendment in rule 88B of CGST Rules to provide that an amount, which is available in the Electronic Cash Ledger on the due date of filing of return in FORM GSTR-3B, and is debited while filing the said return, shall not be included while calculating interest under section 50 of the CGST Act in respect of delayed filing of the said return.
6. The Competition Commission of India (CCI) with whom this subject of Anti-Profiteering was entrusted from 01st December 2022, had recently expressed its inability to handle such matters contending that it was not their core function. They wanted to keep themselves off from this litigation resolution process. It could be seen that, CCI has disposed of just 27 cases since December 1, 2022, while about 140 cases are pending for adjudication. Besides, 184 disputes are pending in various high courts where the order of previous authority were challenged. Therefore, GST Council now recommends sunset clause from April 1st, 2025 for receipt of any new application for Anti-profiteering. Probably the GSTAT may be given the mandate for Antiprofiteering resolutions if a need for such authority is felt to be continued.
7. The Honourable Andhra Pradesh High Court in a very important decision has held that no exemption from payment of compensation cess under the Goods and Services Tax (GST) is available on import of goods by units in Special Economic Zones (SEZs). The judgement was delivered in the case of M/s.Maithan Alloys which was engaged in the business of manufacturing ferro alloys and was established as an SEZ unit. The high court in the above case observed that Sections 7, 26 and 50 of the SEZ Act, 2005, are the three main provisions which allow the SEZ units to claim the exemptions of duties, tax, cess and certain drawbacks and concessions. The key requirement for Section 7 to apply is that the law which imposes the tax, duty, or cess must be referenced in the First Schedule of SEZ Act 2005. Goods and Services Tax (Compensation to States) Act, 2017 is not mentioned in the First Schedule and therefore it cannot be construed to be exempted automatically. Now, GST Council recommends exemption from Compensation Cess leviable on the imports in SEZ-by-SEZ Unit/developer for authorised operations from 1st July, 2017, retrospectively through a notification amending the law.
8. There were a lot of representations for reduction of Tax on packing materials used in relation to agricultural sector from the Association of packing materials especially from the orchids of Jammu & Kashmir and milk producers of Gujarat, it appears. Acceding to their request, GST Council has recommended 12% GST on milk cans (steel, iron, aluminium) irrespective of use; Carton, Boxes And Cases of both corrugated and non-corrugated paper or paper-board; Solar cookers whether single or dual energy source; and sprinklers including fire water sprinklers. The reduction is from 18% to 12% in these cases without any condition.
9. Talking of the interest of common man, GST Council has recommended exemption of certain services provided by Indian Railways to common man and also intra railway supplies. The recommendation is to exempt the services provided by Indian Railways to general public, namely, sale of platform tickets, facility of retiring rooms/waiting rooms, cloak room services and battery-operated car services and to also exempt the Intra-Railway transactions. The issue for the past period will be regularized from 20.10.2023 to the date of issue of exemption notification in this regard. Alog with that the recommendation will also include to exempt GST on the services provided by Special Purpose Vehicles (SPV) like Rail Vikas Nigam Limited (RVNL) etc., to Indian Railway by way of allowing Indian Railway to use infrastructure built & owned by SPV during the concession period and maintenance services supplied by Indian Railways to SPV. The issue for the past will be regularized on ‘as is where is’ basis for the period from 01.07.2017 till the date of issue of exemption notification in this regard.
10. The Council also has recommended to create a separate entry in exemption notification No. 12/2017- CTR 28.06.2017 under heading 9963 to exempt accommodation services having value of supply of accommodation up to Rs. 20,000/- per month per person subject to the condition that the accommodation service is supplied for a minimum continuous period of 90 days and to extend similar benefit for past cases too.
11. In order to plug the menace of fake registrations leading to fake invoice menace, GST Council recommends to roll-out the biometric-based Aadhaar authentication of registration applicants on pan-India basis in a phased manner. This will sure to benefit better tax management and focussed attention on fraudsters for surgical strikes.
12. The Council recommended providing a new optional facility by way of FORM GSTR-1A to facilitate the taxpayers to amend the details in FORM GSTR-1 for a tax period and/ or to declare additional details, if any, before filing of return in FORM GSTR-3B for the said tax period. This will facilitate taxpayer to add any particulars of supply of the current tax period missed out in reporting in FORM GSTR-1 of the said tax period or to amend any particulars already declared in FORM GSTR-1 of the current tax period (including those declared in IFF, for the first and second months of a quarter, if any, for quarterly taxpayers), to ensure that correct liability is auto-populated in FORM GSTR-3B.
13. An Amendment is to be made in section 122(1B) of CGST Act 2017 retrospectively w.e.f. 01.10.2023, so as to clarify that the said penal provision is applicable only for those e-commerce operators, who are required to collect tax under section 52 of CGST Act, and not for other e-commerce operators.
14. In another very important change in Demand and recovery process, amendments has been proposed in Section 73 and Section 74 of CGST Act, 2017 and insertion of a new Section 74A in CGST Act, to provide for common time limit for issuance of demand notices and orders irrespective of whether case involves fraud, suppression, wilful misstatement etc., or not. Actually, now, there is a different time limit for issuing demand notices and demand orders, in cases where charges of fraud, suppression, wilful misstatement etc., are not involved, and in cases where those charges are involved. In order to simplify the implementation of those provisions, the GST Council recommended to provide for a common time limit for issuance of demand notices and orders in respect of demands for FY 2024-25 onwards, in cases involving charges of fraud or wilful misstatement and not involving the charges of fraud or wilful misstatement etc. Also, the time limit for the taxpayers to avail the benefit of reduced penalty, by paying the tax demanded along with interest, has been recommended to be increased from 30 days to 60 days. This will definitely encourage voluntary compliance of Tax payments.
15. Further, Amendment in section 16 of IGST Act and section 54 of CGST Act have been recommended to provide that the refund in respect of goods, which are subjected to export duty, is restricted, irrespective of whether the said goods are exported without payment of taxes or with payment of taxes. Such restrictions should also be applicable, if such goods are supplied to a SEZ developer or a SEZ unit for authorized operations.
16. The Government recipient of Supply of Goods or Service exceeding certain threshold are mandated to Deduct Tax at Source under Section 51 are oblidged to file a return in Form GSTR -7. Return in FORM GSTR-7, from now on, is to be filed every month irrespective of whether any tax has been deducted during the said month or not. It has also been recommended that no late fee may be payable for delayed filing of Nil FORM GSTR-7 return. Further, it has been recommended that invoice-wise details may be required to be furnished in the said FORM GSTR-7 return.
The GST Council had inter alia made the following recommendations relating to changes in GST tax rates, on Goods & Services which are listed below:-
1. A uniform rate of 5% IGST will apply to imports of ‘Parts, components, testing equipment, tools and tool-kits of aircrafts, irrespective of their HS classification to provide a fillip to MRO activities subject to specified conditions.
2. To amend existing entry covering Poultry keeping Machinery attracting 12% GST to specifically incorporate “parts of Poultry keeping Machinery” and to regularise past practice on ‘as is where is’ basis in view of genuine interpretational issues.
3. To extend IGST exemption on imports of specified items for defence forces for a further period of five years till 30th June, 2029.
4. To 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.
5. To exempt Compensation cess on supply of aerated beverages and energy drinks to authorised customers by Unit Run Canteens under Ministry of Defence.
6. To provide Adhoc IGST exemption on imports of technical documentation for AK-203 rifle kits imported for Indian Defence forces.
7. Co-insurance premium apportioned by lead insurer to the co-insurer for the supply of insurance service by lead and co-insurer to the insured in coinsurance agreements, may be declared as no supply under Schedule III of the CGST Act, 2017 and past cases may be regularized on ‘as is where is’ basis.
8. Transaction of ceding commission/re-insurance commission between insurer and re-insurer may be declared as no supply under Schedule III of CGST Act, 2017 and past cases may be regularized on ‘as is where is’ basis.
9. GST liability on reinsurance services of specified insurance schemes covered by Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) dated 28.06.2017 may be regularized on ‘as is where is’ basis for the period from 01.07.2017 to 24.01.2018.
10. GST liability on reinsurance services of the insurance schemes for which total premium is paid by the Government that are covered under Sr. No. 40 of notification No. 12/2017-CTR dated 28.06.2017 may be regularized on ‘as is where is’ basis for the period from 01.07.2017 to 26.07.2018.
11. To issue clarification that retrocession is ‘re-insurance of re-insurance’ and therefore, eligible for the exemption under Sl. No. 36A of the notification No. 12/2017-CTR dated 28.06.2017.
12. To issue clarification that statutory collections made by Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of No.12/2017-CTR dated 28.06.2017.
13. To issue clarification that further sharing of the incentive by acquiring bank with other stakeholders, where the sharing of such incentive is clearly defined under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions and is decided in the proportion and manner by NPCI in consultation with the participating banks is not taxable.
14. In addition to changes in the rate of Tax, the GST Council has recommended the following Trade Facilitation measures as well.
15. Looking back if one could recollect, the GST Council, in its 52nd meeting, had recommended to amend GST Law to explicitly exclude rectified spirit/Extra Neutral Alcohol (ENA) from the scope of GST when supplied for manufacturing alcoholic liquors for human consumption. The GST Council now recommended amendment in sub-section (1) of Section 9 of the CGST Act, 2017 for not levying GST on Extra Neutral Alcohol used for manufacture of alcoholic liquor for human consumption.
16. Electronic Commerce Operators (ECOs) are required to collect Tax Collected at Source (TCS) on net taxable supplies under Section 52(1) of the CGST Act. The GST Council has recommended to reduce the TCS rate from present 1% (0.5% CGST + 0.5% SGST/ UTGST, or 1% IGST) to 0.5 % (0.25% CGST + 0.25% SGST/UTGST, or 0.5% IGST), to ease the financial burden on the suppliers making supplies through such ECOs.
17. An amendment in clause (ii) of sub-rule (1) of Rule 62 of CGST Rules, 2017 and FORM GSTR-4 to extend the due date for filing of return in FORM GSTR-4 for composition taxpayers from 30th April to 30th June following the end of the financial year. This will apply for returns for the financial year 2024-25 onwards. This amendment would give more time to the taxpayers who opt to pay tax under composition levy to furnish the said return.
18. Inserting a new Section 11A in CGST Act to give powers to the Government, on the recommendations of the Council, to allow regularization of non-levy or short levy of GST, where tax was being short paid or not paid due to common trade practices.
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- to prescribe a mechanism for claiming refund of additional IGST paid on account of upward revision in price of the goods subsequent to their export. This will facilitate a large number of taxpayers, who are required to pay additional IGST on account of upward revision in price of the goods subsequent to export, in claiming refund of such additional IGST.
19. The GST Council has also mandated to issue clarification in respect of the following as well, that, in cases where the foreign affiliate is providing certain services to the related domestic entity, for which full input tax credit is available to the said related domestic entity, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules. Further, in cases where full input tax credit is available to the recipient, if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as Nil, and may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules.
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- to clarify that input tax credit is not restricted in respect of ducts and manhole used in network of optical fiber cables (OFCs), under clause (c) or under clause (d) of sub-section (5) of section 17 of CGST Act.
- place of supply of Custodial services supplied by Indian Banks to Foreign Portfolio Investors is determinable as per Section 13(2) of the IGST Act, 2017.
- amendment of rule 28(2) of CGST Rules retrospectively with effect from 26.10.2023 and issuance of a circular to clarify various issues regarding valuation of services of providing corporate guarantees between related parties. It is inter alia being clarified that valuation under rule 28(2) of CGST Rules would not be applicable in case of export of such services and also where the recipient is eligible for full input tax credit.
- in cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM) and invoice is to be issued by the recipient only, the relevant financial year for calculation of time limit for availment of input tax credit under the provisions of section 16(4) of CGST Act is the financial year in which the invoice has been issued by the recipient.
- on taxability of re-imbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees Clarification on requirement of reversal of input tax credit in respect of amount of premium in Life Insurance services, which is not included in the taxable value as per Rule 32(4) of CGST Rules.
- in respect of Warranty/ Extended Warranty provided by Manufacturers to the end customers.
- regarding availability of input tax credit on repair expenses incurred by the insurance companies in case of reimbursement mode of settlement of motor vehicle insurance claims.
- on taxability of loans granted between related person or between group companies.
- on time of supply on Annuity Payments under HAM Projects. (Hybrid Annuity Model)
- regarding time of supply in respect of allotment of Spectrum to Telecom companies in cases where payment of licence fee and Spectrum usage charges is to be made in instalments.
- relating to place of supply of goods supplied to unregistered persons, where delivery address is different from the billing address to be fixed clearly.
- on mechanism for providing evidence by the suppliers for compliance of the conditions of Section 15(3)(b)(ii) of CGST Act, 2017 in respect of post-sale discounts, to the effect that input tax credit has been reversed by the recipient on the said amount.
- on various issues pertaining to special procedure for the manufacturers of the specified commodities, like pan masala, tobacco etc.
Before bidding adieu………….
20. Though the 53rd GST Council met for a short duration (effectively half a day), a lot of path breaking changes have been recommended keeping in mind the trade facilitation, reduction of litigation and important rate changes that require urgent attention. However, there were a lot of unaddressed agenda as well. There was significant expectation of online gaming taxation, which the honourable Finance Minister clarified that it was not on the agenda, resulting in no major decisions being made, now. However, it was assured that when the next meet will happen, where the agenda which they couldn’t complete in this GSTC or it wasn’t tabled also, will be carried forward to the 54th GST Council meeting. Hopefully it will be conducted as early as possible after the Budget and in the middle or end of the August 2024.
Jai Hind !!!!
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