Introduction
The GST Council is a constitutional body tasked with making recommendations on matters concerning the implementation of the Goods and Services Tax (GST) in India. It held its inaugural meeting on September 22-23, 2016, and continues to convene periodically to discuss and make decisions on various GST-related issues. The GST Council plays a vital role in determining significant aspects of the GST, including tax rates, exemptions, thresholds, and administrative procedures. Decisions within the Council are made through consensus, with a majority vote of at least three-fourths of the weighted votes. The Centre holds one-third of the total votes, while the States hold two-thirds, exemplifying cooperative federalism.[1]
The 50th meeting of the GST Council took place on July 11, 2023, in New Delhi at Vigyan Bhawan under the leadership of Union Finance Minister Nirmala Sitharaman and attended by ministers representing states and Union Territories. This meeting was significant as it marked the completion of 50 Council meetings since the implementation of GST. The postal department also issued a special cover and customised ‘My Stamp’ to honor the occasion. These initiatives aimed to celebrate the progress and achievements of the GST Council over its journey.[2]
The 50th GST Council meeting marked a significant milestone, showcasing the ongoing efforts and collaborative approach of the Council members in shaping the GST framework in India. The meeting resulted in several notable changes, which are as follows-
I. Changes in GST rates of goods
The recommendations for GST rates on services include granting IGST exemption for personal imports of medicine such as Dinutuximab (Quarziba) and rare disease treatments. Additionally, the taxation of raw cotton supplied by agriculturists to cooperatives falls under the reverse charge mechanism. Furthermore, the GST rates for snack pellets, zari thread, LD slag, and fish soluble paste have been reduced to 5% to promote various benefits. Utility vehicles meeting specific parameters are now included in the compensation cess notification, clarifying the term “Ground clearance.” Past issues related to trauma implants, desiccated coconut, areca leaf plates, and biomass briquettes will be resolved and regularized based on existing regulations. An alternative levy of compensation cess without mandatory retail sale price declaration is suggested for pan masala, tobacco products, etc. Moreover, RBL Bank and ICBC Bank are now eligible for IGST exemption on precious metal imports.
II. Recommendations regarding GST rates on Services:
Recommendations for GST rates on services include extending the exemption to private sector organizations for satellite launch services, simplifying GST compliance for Goods Transport Agencies (GTAs) by revising the deadline and process for choosing the forward charge mechanism, clarifying that services rendered by directors in their personal capacity are not subject to reverse charge mechanism (RCM) tax, while services provided in their capacity as directors remain taxable under RCM. Additionally, food and beverages provided separately in cinema halls should be taxed as a restaurant service, while bundled supplies qualify for the cinema exhibition rate.
III. The Group of Ministers (GoM) has released its second report on matters pertaining to casinos, race courses, and online gaming:
The GST Council has proposed amendments to categorize online gaming and horse racing as taxable actionable claims in Schedule III. These activities, along with casinos, will be subjected to a uniform tax rate of 28%. The tax will be applicable to the face value of chips purchased in casinos, the full value of bets placed with bookmakers or totalisators in horse racing, and the full value of bets made in online gaming.
IV. Measures to Facilitate Trade and Streamline Compliances in GST
The measures recommended to facilitate trade include the establishment of the GST Appellate Tribunal and the simplification of annual returns. The clarification on the Input Services Distributor (ISD) mechanism and GST liability for warranty replacements will provide clarity to businesses. Circulars will be issued to address refund-related issues, TCS liability for E-commerce Operators (ECOs), and tax invoice requirements. The issuance of clarifying circulars will help resolve ambiguities on various GST-related issues. Procedures for verifying input tax credit discrepancies will be implemented, and special procedures will be introduced for appeals. The extension of amnesty schemes and due dates for filing returns in Manipur will provide relief to taxpayers. These measures aim to streamline processes and promote ease of doing business in the GST system.
V. Measures for Streamlining Compliances in GST: Enhancing Efficiency and Compliance in the System-
The measures recommended for streamlining compliances in GST focus on various aspects. Firstly, the introduction of rule 138F will mandate the use of e-way bills for the transportation of gold and precious stones within the same state. Additionally, capacity-based taxation and special composition scheme recommendations propose specific procedures, penalties, and restrictions for manufacturers of items like tobacco and pan masala. Amendments in the registration process, including providing bank account details, system-based suspension, and physical verification in high-risk cases, aim to strengthen compliance. A pilot program for biometric-based Aadhaar authentication in Puducherry, with the possibility of expansion to Andhra Pradesh, will further enhance registration processes. Measures for tax and interest recovery, addressing input tax credit differences, improving annual return filing, and clarifying obligations for OIDAR service providers and Duty Free Shops contribute to a more streamlined and transparent system. The prescription of compounding amounts for offenses, provisions for consent-based information sharing, clarification on place of supply for unregistered persons, and recommendations on IT system reforms focus on curbing fraud and promoting compliance. Overall, these measures aim to enhance the efficiency and integrity of the GST system.
Conclusion:
The outcomes of the 50th GST Council meeting and the recommended amendments reflect the ongoing efforts to streamline and improve the GST system in India. The changes in GST rates for various goods, exemptions for specific imports, and clarifications on taxability provide greater clarity and consistency for businesses and taxpayers. The inclusion of Digital games and horse racing are recommended to be considered as taxable actionable claims, implying that they will be subject to taxation, along with the taxation of casinos, aims to bring these activities under the tax ambit and create a level playing field. The recommendations also address past issues and rectify discrepancies to ensure fairness and adherence to regulations. The outcomes of the 50th GST Council meeting and the recommended amendments are generally viewed as positive for the Indian tax and GST system. However, the true effectiveness of these changes will depend on how well they are implemented and the impact they have on the different stakeholders involved. The meeting aimed to bring about positive changes and improvements in the Goods and Services Tax (GST) system, focusing on reducing tax rates and resolving pending issues related to online gaming and cross charges. However, the outcome of these discussions will only be determined once the necessary notifications or circulars are issued
[1] https://gstcouncil.gov.in/gst-council
[2] https://gstcouncil.gov.in/press-release-50th-gst-council-meeting
****
Author’s Note- This article is written by Aakriti Pandey, a final-year law student pursuing the BBALLB program at ICFAI University Dehradun. As an aspiring legal professional, I have a keen interest in exploring the intersection of law and tax.
Author Bio
