Recommendations of 50th GST Council Meeting: Highlights

The 50th meeting of the Goods and Services Tax (GST) Council took place on July 11, 2023 at New Delhi, chaired by the Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman, bringing forth several important recommendations. In this article, we will discuss the key recommendations made by the Council during this 50th milestone meeting and their implications. From taxation changes to measures for facilitating trade and streamlining compliances, let’s explore the highlights of the 50th GST Council meeting.

A. Recommendations on Changes in GST Rates 

The GST Council has brought forth several recommendations regarding changes in GST tax rates on goods and services. These recommendations aim to streamline the taxation system, provide exemptions where necessary and encourage certain industries.

Recommendations of 50th GST Council Meeting: Highlights

1. Changes in GST Rates of Goods

i) Reduced Rates for Snack Pellets and Imitation Zari Thread: The Council has decided to reduce the GST rate on uncooked/unfried snack pellets to 5%. Additionally, the payment of GST on uncooked/unfried snack pellets for the past period will be regularized. Similarly, the GST rate on imitation zari thread or yarn, known by any name in trade parlance, has been lowered from 12% to 5%. The GST payments related to this matter during the past period will also be regularized.

GST Rate Reduced to 5% (Snack Pellets, Fish Paste, LD Slag and Zari Thread): CBIC Notifications

ii) Exemptions for Medicines and Food for Special Medical Purposes: To support the treatment of rare diseases enlisted under the National Policy for Rare Diseases, 2021, the Council has exempted IGST on medicines and Food for Special Medical Purposes (FSMP) when imported for personal use. This exemption extends to FSMP imported by Centres of Excellence for Rare Diseases or any person or institution recommended by these centers. Furthermore, IGST exemption is also granted for Dinutuximab (Quarziba) medicine when imported for personal use.

iii) Promoting Environmental Protection and Utilization: In a bid to encourage better utilization of LD slag, the GST rate on LD slag has been reduced from 18% to 5%. This move aims to protect the environment while promoting the use of this product. Additionally, to support the protection of the environment, the Council has decided to reduce the GST rate on fish soluble paste from 18% to 5%. Both the LD slag and fish soluble paste will have their past GST payments regularized.

GST Rate Reduced to 5% (Snack Pellets, Fish Paste, LD Slag and Zari Thread): CBIC Notifications

iv) Regularizing Taxation Issues and Clarifications: The GST Council has taken steps to regularize various taxation issues and provide clarifications in specific areas. Supply of raw cotton, including kala cotton, by agriculturists to cooperatives will now be taxable under reverse charge mechanism and past issues related to this matter will be regularized. Similarly, the Council will regularize the matters relating to trauma, spine and arthroplasty implants for the period prior to 18/07/2022, considering genuine interpretational issues. Furthermore, the issues relating to GST on plates and cups made of areca leaves and biomass briquettes for specific periods will also be regularized.

CBIC Clarifications on GST Rates and Classification of Certain Goods: Circular 200/12/2023

2. Changes in GST Rates on Services

i) Expanding Exemptions and Simplifying Processes: The Council recommends extending the GST exemption on satellite launch services supplied by ISRO, Antrix Corporation Limited and New Space India Limited (NSIL) to similar services supplied by organizations in the private sector. This step aims to encourage start-ups and boost the space industry. Additionally, to simplify processes for Goods Transport Agencies (GTAs), it has been decided that they will not be required to file a declaration for paying GST under forward charge every year. Instead, if they have exercised this option for a specific financial year, it will be deemed as exercised for the next and future financial years unless they choose to revert to reverse charge mechanism (RCM). The last date for exercising this option will be 31st March of the preceding financial year, and the option can be exercised starting from 1st January of the preceding financial year.

Choosing FCM or RCM Options Simplified for GTAs: CBIC Notifications

ii) Clarity on Taxability of Director’s Services and Cinema Hall Supplies: The Council has provided clarifications regarding the taxability of certain services. Services supplied by a director of a company to the company in their private or personal capacity, such as renting of immovable property, will not be taxable under RCM. Only services supplied by a director as or in the capacity of a director of the company will be taxable under RCM in the hands of the company or body corporate. Additionally, the supply of food and beverages in cinema halls will be taxable as a restaurant service if supplied independently of the cinema exhibition service. However, if the sale of cinema tickets and supply of food and beverages are bundled together as a composite supply, the entire supply will attract GST at the rate applicable to the exhibition of cinema, which is considered the principal supply.

CBIC Clarifications on GST Applicability for Certain Services: Circular 201/13/2023

3. Recommendations from GoM on Casinos, Race Courses and Online Gaming

The GST Council considered the second report submitted by the Group of Ministers (GoM) on the taxation of casinos, horse racing and online gaming. The GoM recommended including online gaming and horse racing as taxable actionable claims in the GST law. It was further recommended that all three (casinos, horse racing and online gaming) be taxed at a uniform rate of 28%. For casinos, the tax will be applicable on the face value of chips purchased, while for horse racing, it will be on the full value of bets placed with bookmakers/totalisator. Similarly, for online gaming, the tax will be on the full value of the bets placed.

B. Recommendations on Measures for Facilitation of Trade

The GST Council has made several important recommendations to facilitate trade and streamline GST processes. Let’s take a closer look at the key highlights from the meeting.

1. Establishment of GST Appellate Tribunal

To ensure the smooth functioning of the proposed GST Appellate Tribunal, the Council recommended the rules governing the appointment and conditions of the President and Members of the Tribunal. It was also suggested that the provisions of the Finance Act, 2023 related to the Tribunal should be notified by the Centre from 1st August 2023. Additionally, the Chief Secretary of Maharashtra was nominated as a member of the Search and selection committee for the Tribunal. The State Benches of the Tribunal will be established in a phased manner.

2. Simplification of Annual Returns & Exemption from Filing

The Council recommended continuing the relaxations provided in the previous fiscal year (FY 2021-22) for various tables of FORM GSTR-9 and FORM GSTR-9C in the upcoming fiscal year (FY 2022-23). This move aims to ease the compliance burden for taxpayers. Furthermore, small taxpayers with an aggregate annual turnover of up to two crore rupees will be exempt from filing the annual return (FORM GSTR-9/9A) for FY 2022-23 as well.

Annual GST Return Exemption FY 2022-23 (GSTR-9): CBIC Notification

3. Input Services Distributor (ISD) Mechanism

The Council recommended clarifying certain aspects of the ISD mechanism. It was suggested that the distribution of input tax credit of common input services procured from third parties to distinct persons should not be mandatory, as per the present provisions of the GST law. However, an amendment may be made in the GST law to make the ISD mechanism mandatory prospectively for such common input services.

CBIC Clarification on Taxability of Inter-office Supply of Services in Different States

4. Clarifications on Various GST Issues

a) Warranty Replacement and Repair Services: To provide clarity on GST liability in cases involving warranty replacement of parts and repair services during the warranty period without any consideration from customers, a circular will be issued. The circular will state that manufacturers are not required to charge GST on such replacement of parts and/or repair services. Additionally, manufacturers are not obligated to reverse input tax credit in such cases.

ITC Availability for Warranty Period Replacement/ Repair Services: CBIC Clarification

b) Refund-related Issues: The Council recommended the issuance of a circular to clarify various refund-related issues. The circular will specify that the refund of accumulated input tax credit (ITC) under Section 54(3) of the CGST Act, 2017 for a specific tax period will be restricted to the ITC on inward supplies reflected in FORM GSTR-2B of the said tax period or any previous tax period. The circular will also address the inclusion of the value of export goods while calculating the “adjusted total turnover” in the formula under rule 89(4) of CGST Rules. Additionally, it will provide clarification on the admissibility of refunds in cases where the export of goods or the realization of payment for export of services occurs after the time limit provided under rule 96A of CGST Rules, 2017.

CBIC’s Clarification on GST Refunds Related 4 Issues: GST Circular 197/09/2023

c) TCS Liability in E-commerce: A circular will be issued to clarify the Tax Collection at Source (TCS) liability under Section 52 of the CGST Act, 2017 in cases where multiple E-commerce Operators (ECOs) are involved in a single transaction of supplying goods or services.

GST TCS Liability in Case of Multiple ECOs in One Transaction (ONDC): CBIC Clarification

5. Simplification of Compliance Requirements

a) Simplified Tax Invoice Requirements: To ease the compliance burden on taxpayers, the Council recommended amending clause (f) of rule 46 of CGST Rules, 2017. The amendment will require only the name of the State of the recipient, rather than the full address, to be mentioned on the tax invoice in cases of the supply of taxable services by or through an ECO or by a supplier of OIDAR services to an unregistered recipient.

b) Issuance of Clarification Circulars: To address ambiguity and legal disputes on various issues and benefit taxpayers, the Council recommended the issuance of several clarification circulars. These circulars will cover the following topics:

i) The requirement for registered persons with turnover exceeding the prescribed threshold to issue e-invoices for supplies made to government departments, establishments, agencies, local authorities and public sector undertakings registered solely for the purpose of Tax Deducted at Source (TDS).

CBIC Clarifies E-Invoice Rules for Supplies to Government Entities

ii) The calculation of interest liability under section 50(3) of the CGST Act, 2017 for wrongly availed and utilized Integrated Goods and Services Tax (IGST) credit.

Interest on Wrong Availment of IGST Credit: CBIC Clarification

iii) The clarification that holding securities of a subsidiary company by a holding company does not constitute a supply of services and is not subject to GST.

No GST on Shares Held in a Subsidiary Company: CBIC Clarification

c) Verification of Input Tax Credit: To provide further relief to taxpayers, the Council recommended issuing a circular to provide a procedure for verifying input tax credit in cases where there are differences between FORM GSTR-3B and FORM GSTR-2A. This verification will cover the period from 01/04/2019 to 31/12/2021.

Handling ITC Differences in GSTR-3B & 2A: CBIC Clarification

6. Other Recommendations

i) Special procedures will be provided under section 148 of the CGST Act, 2017 to enable manual filing of appeals against orders passed by proper officers concerning TRAN-1/TRAN-2 claims of registered persons, as directed by the Hon’ble Supreme Court in the case of Union of India v/s Filco Trade Centre Pvt. Ltd.

ii) Rule 108(1) and rule 109(1) of CGST Rules, 2017 will be amended to allow for manual filing of appeals under certain specified circumstances.

iii) The amnesty schemes notified through notifications dated 31.03.2023 will be extended until 31/08/2023. These schemes pertain to non-filers of FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 returns, revocation of registration cancellations and deemed withdrawal of assessment orders issued under Section 62 of CGST Act, 2017.

Extension of Deadlines for GST Amnesty Schemes till 31st August 2023

iv) Due dates for filing FORM GSTR-1, FORM GSTR-3B and FORM GSTR-7 for the months of April, May and June 2023 will be extended until 31/07/2023 for registered persons in the state of Manipur, considering the prevailing law and order situation.

Extension of GST Returns Due Dates for Manipur Taxpayers: CBIC Notifications

C. Recommendations on Streamlining Compliance & Simplifying GST Processes

The 50th GST Council Meeting focused on recommendations to streamline compliances in GST, aiming to improve efficiency and curb frauds in the system. Here are the key highlights from the meeting:

1. E-way Bill Requirement for Gold and Precious Stones

To ensure better tracking and transparency, the Council recommended the insertion of rule 138F in the CGST and SGST Rules. This rule allows states to mandate the generation of e-way bills for intra-state movement of gold and precious stones under Chapter 71. This step will help monitor and regulate the movement of these valuable commodities.

Rule 138F of CGST Rules 2017: Intra-State movement of Gold, Precious Stones, etc.

2. Capacity-based Taxation and Special Composition Scheme

In line with the recommendations of the Group of Ministers (GoM), the Council proposed measures to address capacity-based taxation and enhance the Special Composition Scheme. These measures include:

i) Issuance of a notification under section 148 of the CGST Act, prescribing a special procedure for manufacturers of tobacco, pan masala and similar items. This procedure includes registration of machines and the filing of special monthly returns.

ii) Introduction of section 122A in the CGST Act, providing for a special penalty for non-registration of machines by such manufacturers.

iii) Notification of section 123 of the Finance Act, 2021, which amends section 16 of the IGST Act. This notification aims to restrict the IGST refund route for exports of tobacco, pan masala, similar items and mentha oil.

These measures will streamline taxation for these specific industries and ensure compliance with GST regulations.

3. Strengthening Registration Process

To tackle the issue of fake and fraudulent registrations, the Council recommended amendments to the CGST Rules, 2017. These amendments aim to strengthen the registration process and combat such malpractices. The proposed amendments include:

i) Amendment in rule 10A: Registered persons will be required to furnish details of their bank account, in the name and PAN of the registered person, within 30 days of grant of registration or before filing the statement of outward supply (FORM GSTR-1/IFF), whichever is earlier.

ii) Amendment in rule 21A(2A): Registered persons failing to furnish valid bank account details under rule 10A will face system-based suspension of their registration.

iii) Insertion of 3rd proviso in rule 21A(4): Automatic revocation of system-based suspension upon compliance with the provisions of rule 10A.

iv) Amendment in rule 59(6): Registered persons who have not furnished details of a valid bank account under rule 10A may not be allowed to furnish details of outward supplies in FORM GSTR-1 or using IFF.

v) Amendments in rules 9 and 25: Elimination of the requirement for physical verification of business premises in the presence of the applicant. Additionally, provision for physical verification in high-risk cases even if Aadhaar authentication has been completed.

These amendments will enhance the registration process, mitigate the risks of fraudulent registrations and promote a more reliable compliance framework.

4. Risk-based Biometric-based Aadhaar Authentication

To strengthen the authentication process for registration applicants, the Council proposed a pilot project in the Union Territory of Puducherry. The project will test a risk-based biometric-based Aadhaar authentication system. After successful testing in Gujarat and Puducherry, the State of Andhra Pradesh also expressed its intent to join the pilot. This initiative aims to ensure the authenticity of registration applicants and reduce the occurrence of identity-related frauds.

Aadhaar Authentication Based GST Registrations in Gujarat & Puducherry

5. Recovery of Tax and Interest

In order to recover tax and interest, the Council recommended the insertion of Rule 142B in the CGST Rules, 2017, along with the introduction of FORM GST DRC-01D. This provision outlines the procedure for recovering unpaid tax and interest when the output tax liability exceeds the liability disclosed in the return by a specified threshold. These measures will enable the efficient recovery of outstanding dues and discourage tax evasion.

Rule 142B of CGST Rules 2017: Intimation of Amounts Recoverable u/s 79 (DRC-01D)

6. Mechanism to Address ITC Differences

To reduce discrepancies in Input Tax Credit (ITC) claims, the Council proposed a system-based mechanism. This mechanism will notify taxpayers when their ITC claimed in FORM GSTR-3B exceeds the ITC available in FORM GSTR-2B by a certain threshold. Taxpayers will be required to provide explanations for the differences or take remedial action. These measures will help prevent the misuse of ITC and ensure accurate reporting.

Rule 88D of CGST Rules 2017: Manner of Dealing with ITC Differences of GSTR-2B & 3B

7. Discipline in Annual Return Filing

To improve compliance with annual return filing, the Council recommended amending FORM GSTR-3A. This amendment will enable the issuance of notices to registered taxpayers who fail to furnish their Annual Return in FORM GSTR-9 or FORM GSTR-9A by the due date. This step will promote timely filing and enhance transparency in annual reporting.

8. Amendments for OIDAR Service Providers

To ensure proper tax payment on reverse charge basis, the Council proposed amendments to Rule 64 and FORM GSTR-5A of the CGST Rules, 2017. These amendments will require OIDAR service providers to provide details of supplies made to registered persons in India in their return (FORM GSTR-5A). This will facilitate the tracking and verification of tax payments by registered recipients of OIDAR services.

9. Duty-Free Shops and Exempt Supplies

The Council recommended the insertion of Explanation 3 after rule 43 of the CGST Rules, 2017. This explanation will clarify that the value of supply of goods from Duty-Free Shops at arrival terminals in international airports should be included in the value of exempt supplies for the purpose of input tax credit reversal. This measure will ensure consistent treatment of such supplies under the GST framework.

10. Compounding Amount and Information Sharing

To address various offenses under section 132 of the CGST Act, the Council proposed the insertion of sub-rule (3A) in rule 162 of the CGST Rules, 2017. This sub-rule will prescribe the compounding amount for these offenses. Additionally, the Council recommended the insertion of rule 163 to facilitate the consent-based sharing of information of registered persons available on the common portal with other systems. Account Aggregators will be notified as the systems for sharing information, further strengthening compliance and data sharing.

Rule 163 of CGST Rules 2017: Consent-based Sharing of Taxpayer’s Information

11. Clarification on Place of Supply for Goods to Unregistered Persons

To provide clarity regarding the place of supply for goods supplied to unregistered persons, the Council recommended the insertion of a clause (ca) in sub-section (1) of section 10 of the IGST Act, 2017. This clarification will help in determining the correct place of supply and ensure compliance with applicable tax regulations.

12. State Level Coordination Committee

To enhance knowledge sharing and promote coordinated efforts, the Council proposed the formation of a State level coordination committee. This committee will include GST officers from both State and Central GST administrations. The committee will focus on sharing knowledge on GST matters and working together to implement administrative and preventive measures effectively.

13. IT System Reforms

The Council also discussed the 2nd interim report of the Group of Ministers (GoM) on IT System Reforms. The GoM recommended several measures to curb frauds in GST through system-based reforms. These include strengthening the registration process, leveraging third-party data for risk management, and implementing controls to prevent the misuse of Input Tax Credit along the supply chain. These IT system reforms aim to enhance the efficiency, transparency, and integrity of the GST system.

D. Conclusion

The 50th meeting of the GST Council brought forth significant recommendations to improve the GST system in India. These recommendations include uniform taxation for casino, horse racing and online gaming, the establishment of the GST Appellate Tribunal, exemptions for critical medical items, rate reductions on specific goods and measures for streamlining compliance processes. These decisions aim to establish consistency, simplify processes and promote economic growth while ensuring the welfare of taxpayers and the protection of the environment.

MoF Press Release dated 11/07/2023: Highlights of Recommendations of 50th GST Council Meeting

CA Abhinav Aggarwal @ CA Club CA Abhinav Aggarwal is a qualified Chartered Accountant and ICAI member since 2010. He holds vast experience in Audit, Income Tax & GST and is a passionate writer on the CA profession and related topics.

Disclaimer: While reasonable efforts have been made to ensure the accuracy and reliability of the information presented in this article, it should not be considered as professional tax advice or guidance. For compliance, the readers are advised to directly refer to the relevant laws, regulations and notifications issued by the appropriate authorities.

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