Harshita Agrawal
INTRODUCTION
The author of this article has thoroughly covered the industry modifications that the GST Council suggested at its 48th Council Meeting on December 17, 2022. The Central Board of Indirect Taxes and Customs (CBIC) has taken the suggestions into consideration for implementing in the Indian Economy as accorded under Article 279A of the Constitution. The CBIC published Notification Nos. 26 and 27 on December 26, Notification Nos. 12 to 15 on December 30, and Circular Nos. 183/2022-GST, 184/2022-GST, 185/2022-GST, 186/2022-GST, 187/2022-GST, and 188/2022-GST on December 27, respectively.
Recommendation for GST amendments in insurance industry
Circular to be issued to clarify that No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for valuation of insurance services.
GST is levied only on the actual insurance premium amount, after deducting the no-claim bonus, that policyholders pay to the insurer in exchange for insurance services.
A No Claim Bonus, also known as an NCB, is a reward given by an insurance company to an insured for not filing any claims during the policy year. The NCB is a discount that ranges from 20% to 50% and is given to the insured when they renew their policy. During renewal, the NCB discount is applied to the premium amount. This discount is transferable and can be used if the policyholder purchases a new vehicle.
Recommendation for GST amendments for micro enterprises
Facilitate e-commerce for micro enterprises: GST Council in its 47th meeting had granted in-principal approval for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs), subject to certain conditions. The Council approved the amendments in the GST Act and GST Rules, along with issuance of relevant notifications, to enable the same. Further, considering the time required for development of the requisite functionality on the portal as well as for providing sufficient time for preparedness by the ECOs, Council has recommended that the scheme may be implemented w.e.f. 01.10.2023.
GST Recommendation for amendments in respect of ITC availability
The Council has recommended to amend sub-rule (1) of rule 37 of CGST Rules, 2017 retrospectively with effect from 01.10.2022 to provide for reversal of input tax credit, in terms of second proviso to section 16 of CGST Act, only proportionate to the amount not paid to the supplier vis a vis the value of the supply, including tax payable.
The Council recommended 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 non-payment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently. This would ease the process for complying with the condition for availment of input tax credit under section 16(2)(c) of CGST Act, 2017.
On the basis of above recommendations, CBIC has issued following Circulars, Circular Nos. 183/2022-GST, 184/2022-GST, 185/2022-GST
Recommendations for GST on Real Estate Industry
No GST shall be payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.
CBIC on the basis of 48th GST Council Meeting vide Notification No. 15/2022- Central tax (rate) dated 30.12.2022 has amended Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 w.e.f 01.01.2023:-
Exemption of renting of residential unit- The Board has accorded exemption to registered person availing residential unit under Entry No. 12 to services by way of renting, subject to the following conditions-
- The registered person is the proprietor of a proprietorship concern and rents the residential dwelling in his personal capacity for use as his own residence; and
- Such renting is on his own account and not that of the proprietorship concern.
Recommendation pertaining to IBC
Circular to be issued for clarifying the issue of treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under Insolvency and Bankruptcy Code, 2016. Rule 161 of CGST Rules, 2017 and FORM GST DRC-25 also to be amended for facilitating the same. On the basis of above recommendation of GST Council, the CBIC released Circular No. 187/19/2022-GST dated 27 Dec, 2022 to clarify the treatment of statutory dues under GST in respect of the taxpayer against whom the proceedings have been finalized under Insolvency and Bankruptcy Code, 2016.
The reference for such an amendment has been placed to the Circular No.134/04/2020-GST dated 23rd March, 2020, wherein it was clarified that no coercive action can be taken against the corporate debtor with respect to the dues of the period prior to the commencement of Corporate Insolvency Resolution Process (CIRP).
According to Section 84 of the CGST Act, the Commissioner must notify the person and the appropriate authority where the recovery proceedings are ongoing if the government dues against any person under the CGST Act are reduced as a result of any appeal, revision, or other proceedings in respect of such government dues. Additionally, recovery actions in regard to the lower amount of government fees may still be pursued.
The word ‘other proceedings’ has not been defined in CGST Act. It should be noted that the IBC’s adjudicating and appellate authorities are quasi-judicial bodies set up to handle civil disputes involving insolvency and bankruptcy. For instance, the NCLT acts as an adjudicating authority under the IBC for insolvency proceedings that are commenced upon a request from any stakeholder of the entity, such as the company, creditors, debtors, workers, etc., and it issues an order approving the resolution plan. As the IBC proceedings also resolve any outstanding government debts against the corporate debtor under the CGST Act or other applicable legislation, they appear to fall under the definition of “other proceedings” in Section 84 of the CGST Act.
Rule 161 of CGST Rules, 2017 prescribes FORM GST DRC-25 for issuing intimation for such reduction of demand specified under section 84 of CGST Act. As a result, the jurisdictional Commissioner must issue an intimation in Form GST DRC-25 in cases where a confirmed demand for recovery has been issued by the tax authorities and a summary has been issued in FORM GST DRC-07/DRC 07A against the corporate debtor and the proceedings have been concluded against the corporate debtor under IBC, reducing the amount of statutory dues payable by the corporate debtor to the government under the CGST Act or under existing laws.
Recommendation in relation to Transport Industry
Circular to be issued for clarifying the issues pertaining to the place of supply of services of transportation of goods in terms of the proviso to sub-section (8) of section 12 of the IGST Act, 2017 and availability of input tax credit to the recipient of such supply. It has also been recommended that proviso to sub-section (8) of section 12 of the IGST Act, 2017 may be omitted.
Refund to unregistered persons:
In instances where the contract or agreement for the supply of services, such as the construction of a flat or house and long-term insurance policy, is cancelled and the time period for the issuance of a credit note by the concerned supplier has passed, there has not been a procedure for claiming a refund of the tax paid by the unregistered buyers.
The Council recommended amendment in CGST Rules, 2017, along with issuance of a circular, to prescribe the procedure for filing application of refund by the unregistered buyers in such cases. On the basis of above recommendation, Circular No. 188/20/2022-GST dated 27/12/2022 prescribes manner of filing an application for refund by unregistered person.
It would be worth noting that Section 54, subsection (1) of the CGST Act, already allows anyone to request a refund of any tax they have paid as well as any interest they may have paid on that tax or any other amount they have paid by filing a request within two years of the relevant date in the form and manner that may be prescribed. Additionally, in accordance with clause (e) of sub-section (8) of section 54 of the CGST Act, the said refund shall be paid to him rather than being credited to the Consumer Welfare Fund in cases where the unregistered person has borne the incidence of tax and not passed the same on to any other person (CWF).
In order to enable such unregistered person to file application for refund under subsection (1) of section 54, in cases where the contract/agreement for supply of services of construction of flat/ building has been cancelled or where long-term insurance policy has been terminated, a new functionality has been made available on the common portal which allows unregistered persons to take a temporary registration and apply for refund under the category ‘Refund for Unregistered person’. Further, sub-rule (2) of rule 89 of CGST Rules, 2017 has been amended and statement 8 has been inserted in FORM GST RFD-01 vide Notification No. 26/2022-Central Tax dated 26.12.2022 to provide for the documents required to be furnished along with the application of refund by the unregistered persons and the statement to be uploaded along with the said refund application.
Recommendations for GST on Banking Industry
In order to promote digitalization, the Cabinet has approved an incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) vide press release dated 15 Dec 2021. The GST Council on 48th Council Meeting has further extended the benefit to acquiring banks by making incentives paid to banks by CG under scheme of promotion of RuPay Debit Cards and low value BHIM-UPI as non-taxable. Since they are in the nature of subsidies, there is no GST on incentives that the Central Government pays to banks in order to promote RuPay Debit Cards and the low-value BHIM-UPI transaction scheme.
Recommendation for POS in case of Transportation of Goods
CBIC vide Circular No. 184/16/2022-GST dated 27 Dec 2022 clarified pertaining to the entitlement of ITC, where the place of supply is determined in terms of the proviso to sub-section (8) of Section 12 of IGST.
In case of supply of services by way of transportation of goods, including by mail or courier, where the transportation of goods is to a place outside India, and where the supplier and recipient of the said supply of services are located in India, the place of supply is the concerned foreign destination where the goods are being transported, in accordance with the proviso to the sub-section (8) of section 12 of IGST Act, which was inserted vide the Integrated Goods and Service Tax (Amendment) Act, 2018 w.e.f. 01.02.2019.
The above circular clarified that the eligibility requirements and circumstances for claiming input tax credits are outlined in Section 16 of the CGST Act. Whereas, under the conditions outlined in section 17 of the CGST Act, credit and blocked credits may be allocated. The aforementioned legal provisions do not prevent the beneficiary who is based in India from claiming an input tax credit even though the place of supply for the aforementioned input service is outside of India. Thus, long as other requirements outlined in Sections 16 and 17 of the CGST Act are satisfied, the recipient of the service of transportation of goods shall be eligible to claim input tax credit in relation to the IGST so charged by the supplier.
Recommendation for Energy Sector
For petroleum activities, 5% GST is charged on imported products and equipment that fall under the concessional 5% GST rate category, and 12% GST is charged if the general GST rate is higher than 12%.
GST Council has amended the rate of tax applicable for Ethyl alcohol sold to refineries to blend it with the motor spirit or petrol from 18% to 5%. In order to give effect, the recommendations of the GST Council, CBIC has changed the rate of Entry No. 102A of Schedule -1, which deals with Ethyl alcohol supplied to Oil Marketing Companies or Petroleum refineries for blending with motor spirit (petrol) vide vide Notification No. 12/2022- Central Tax (Rate) dated 30.12.2022 to 2.5%.
As per the above Notification, 9% rate will be applicable on Entry No. 25 of Schedule-III, which deals with ‘Ethyl alcohol and other spirits, denatured, of any strength (other than ethyl alcohol supplied to Oil Marketing Companies or Petroleum refineries for blending with motor spirit (petrol)’.
Recommendation for Automobile Industry
The GST Council recommended that a cess of 22% shall be applicable on Sport utility vehicles (SUV) if 4 (four) conditions are met: –
- Popularly referred to as an SUV;
- these vehicles have an engine with a displacement of at least 1500 cc;
- a length of at least 4000 mm; and
- a ground clearance of at least 170 mm.
Recommendations for facilitation of Trade
For the purpose of facilitation of trade in the digital space, the GST Council has recommended to provide a big relief for unregistered dealers and composition taxpayers, who wants to sell their goods through E-Commerce operators (ECOs). The council, has permitted unregistered dealers and compositions taxpayers to make intra-state supply of goods through ECOs, subject to fulfilment 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.
CONCLUSION
As a corollary, the GST Council has taken the necessary actions to lessen tax litigation relevant to the aforementioned areas and provide some tax payer relief by giving unregistered tax payers the chance to apply for a refund. Unregistered individuals and MSMEs have received lasting benefits as a result of this GST Council Session. Oil marketing businesses eventually also benefited from this robust tax regime. The upcoming GST Council Meeting will be keenly anticipated by taxpayers and experts who want to see more significant problems pertinent to the expansion of the economy addressed.
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