GST Council Updates: 49th Meeting Recommendations

In its 49th meeting, the GST Council made recommendations on GST compensation, the GST Appellate Tribunal, the approval of the GoM Report on Capacity Based Taxation and Special Composition Scheme for certain commodities (such as pan masala, gutkha, chewing tobacco), GST rates, and other trade facilitation measures.

The 49th meeting of the GST Council was held on February 18, 2023, in New Delhi, under the chairmanship of Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. Union Minister of State for Finance Shri Pankaj Chaudhary also attended the meeting, as did Finance Ministers of States and UTs (with legislatures) and senior officers from the Ministry of Finance and States/ UTs.

The following are highlights of the GST Council’s 49th meeting recommendations:

Central Govt. to clear the balance dues of GST Compensation Cess to States

The Government of India has decided to clear the entire Rs. 16,982 crore pending GST compensation balance for the month of June 2022. Because the GST compensation fund is depleted, the Center has decided to release funds from its own reserves, which will be repaid or recovered through future compensation cess collection. As a result, as specified in the GST (Compensation to States) Act 2017, the Center would settle the entire provisionally admissible compensation cess due for five years. Furthermore, the Centre would pay the admissible final GST compensation cess due to the states that have provided their revenue figures as certified by the respective states’ Accountant General, totaling Rs. 16,524 crore.

GoM Report on Constitution of GST Appellate Tribunal

The report that was compiled by the Group of Ministers (GoM) on the GST Appellate Tribunal was approved by the GST Council with some amendments. The members will be asked for their feedback on the final draft of the amendments to the GST laws. The authority to put an end to the discussion has been delegated to the Chairperson.

GoM Report on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST

The recommendations made by the GoM were approved by the Council in order to improve revenue collection from products like pan masala, gutkha, and chewing tobacco. These recommendations included, among other things, that the capacity-based levy not be prescribed; compliance and tracking measures to be implemented in order to plug leakages/evasion; exports of such commodities to be permitted only against LUT, with a subsequent refund of accumulated ITC; and compensation cess levied on such commodities. The Council also approved the recommendations on cess levy to be changed from ad valorem to specific tax based levy to boost the first stage collection of the revenue.

GST Rates: Changes/ Clarifications

i) The Goods and Services Tax (GST) rate on “rab” will be lowered from 18% to “NIL.” However, the rate of GST will be reduced to 5% in cases where “rab” is sold in prepackaged and labelled forms. In addition, the payment of the GST on rab during the previous period is to be regularised on an “as is” basis due to genuine doubts regarding the classification of rab and the applicable GST rate; [Refer Notification 3/2023 and 4/2023]

ii) The rate of GST that is applied to “pencil sharpeners” will go down from 18% to 12%; [Refer Notification 3/2023]

iii) To suitably amend Customs Notification 104/94 dated 16/03/1994 so that if a device such as a tag-tracking device or data logger is already affixed on a container, no separate IGST shall be levied on such affixed device and the ‘nil’ IGST treatment available for the containers under the said notification shall also be available to the such affixed device subject to the existing conditions;

iv) To amend the entry located at Sl. No. 41A of the GST Compensation Cess Rate Notification 1/2017 so that the exemption benefit covers both coal rejects supplied to and by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit therefor has been availed by any person; [Refer Notification 1/2023]

v) To extend the dispensation that is currently available to the Central Government, State Governments, Parliament, and State Legislatures with regard to the payment of GST under the reverse charge mechanism (RCM) to the Courts and Tribunals also in respect of taxable services supplied by them, such as the renting of premises to telecommunication companies for the installation of towers, the renting of chambers to lawyers, etc. [Refer Notification 2/2023]

vi) to extend the exemption available to educational institutions as well as Central and State educational boards for the conduct of entrance examinations to any authority, board, or body established by the Central Government or a State Government, including the National Testing Agency, for the purpose of conducting entrance examinations for admission to educational institutions. [Refer Notification 1/2023]

Other Recommendations on Trade Facilitation Measures

i) Timeline Extension for Revocation Application for Cancellation of Registration and one time Amnesty Scheme for past cases:

The GST Council has recommended that section 30 of the CGST Act, 2017 and rule 23 of the CGST Rules, 2017 be amended to increase the time limit for filing an application for revocation or cancellation of registration from 30 to 90 days. Furthermore, if the registered person fails to apply for such revocation within 90 days, the Commissioner or an officer authorised by him in this regard may extend the time period for a further period not exceeding 180 days.

The Council has also recommended that in the past, where registration was cancelled due to non-filing of returns, but an application for revocation of cancellation of registration could not be filed within the time specified in section 30 of the CGST Act, an amnesty scheme be provided by allowing such persons to file such application for revocation by a specified date, subject to certain conditions.

ii) Timeline extension u/s 62(2) of the CGST Act, 2017 and one time Amnesty Scheme for past cases:

According to Section 62(2) of the CGST Act, 2017, the “best judgment” assessment order issued under Section 62(1) is deemed withdrawn if the relevant return is filed within 30 days of the said assessment order’s service. The Council proposed amending Section 62 to increase the time period for filing a return to enable deemed withdrawal of such a best judgement assessment order from 30 days to 60 days, extendable by another 60 days if certain conditions are met.

The Council has also recommended providing an amnesty scheme for conditional deemed withdrawal of assessment orders in past cases where the concerned return could not be filed within 30 days of the assessment order but was filed along with due interest and late fees up to a specified date, regardless of whether an appeal against the assessment order was filed or not or whether the said appeal was decided or not.

iii) Rationalisation of Late fee for Annual Return:

In the case of late filing of an annual return in Form GSTR-9, a late fee of Rs 200 per day (Rs 100 CGST + Rs 100 SGST), subject to a maximum of 0.5% of the turnover in the state or UT (0.25% CGST + 0.25% SGST), is currently payable. The Council proposed to rationalise the late fee for late filing of annual returns in FORM GSTR-9 for registered persons with aggregate turnover of up to Rs 20 crore in a fiscal year, as follows:

a) Registered persons with a total turnover of up to Rs. 5 crores in the fiscal year:

Rs 50 per day (Rs 25 CGST + Rs 25 SGST), subject to a maximum of 0.04 percent of his turnover in the state or union territory (0.02% CGST + 0.02% SGST).

b) Registered persons with a total turnover of more than Rs. 5 crore and up to Rs. 20 crore in the fiscal year:

Rs 100 per day (Rs 50 CGST + Rs 50 SGST), subject to a maximum of 0.04 percent of his turnover in the state or union territory (0.02% CGST + 0.02% SGST).

iv) Amnesty in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10:

The Council recommended amnesty schemes in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 by way of conditional waiver/reduction of late fee in order to provide relief to a large number of taxpayers.

v) Rationalization of provision of place of supply of services of transportation of goods:

The Council recommended that section 13(9) of the IGST Act, 2017 be deleted to provide that the place of supply of services of transportation of goods, in cases where the location of the supplier of services or the location of the recipient of services is outside India, shall be the location of the recipient of services.

Please note that the above recommendations of the 49th GST Council meeting would be given effect through the relevant circulars, notifications, and law amendments, which are the only documents that shall have the force of law.

GoI Press Release dt. 18/02/2023: GST Council 49th Meeting Recommendations