Finance Minister Nirmala Sitharaman announced several significant measures during the 53rd GST Council meeting held on Saturday, June 22, 2024. The session, chaired by Sitharaman and attended by state finance ministers, focused on tax amendments, Aadhaar biometric integration, and exemptions in railway services. Here are the key takeaways:
Insertion of Section 128A for Waiving Interest and Penalties on Tax Demands for FY 2017-18 to FY 2019-20:
The Council has recommended the insertion of Section 128A in CGST Act, to provide for conditional waiver of interest or penalty or both, relating to demands raised under Section 73, for FY 2017-18 to FY 2019-20: Considering the difficulties faced by the taxpayers, during the initial years of implementation of GST, the GST Council recommended, waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19 and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice upto March 31, 2025. The waiver does not cover demand of erroneous refunds. To implement this, the GST Council has recommended insertion of Section 128A in CGST Act, 2017.
Monetary Limits for GST Appeal Filing by GST Department:
The GST Council has recommended the implementation of prescribed monetary limits for filing appeals by the department in GST cases before various judicial bodies. This measure aims to reduce government litigation and streamline the legal process. The proposed monetary limits, subject to certain exclusions, are as follows:
- GST Appellate Tribunal (GSTAT): ₹20 lakhs
- High Court: ₹1 crore
- Supreme Court: ₹2 crores
By setting these monetary thresholds, the Council seeks to minimize unnecessary appeals and focus on significant cases, thereby enhancing the efficiency of the legal system and reducing the burden on courts and taxpayers alike.
Amendment in Section 16 of the IGST Act and Section 54 of the CGST Act to Curtail Refund of IGST on Export Duty Payable Goods:
The Council has recommended amendments in Section 16 of the IGST Act, 2017 i.e. Eligibility and conditions for taking input tax credit, and Section 54 of the CGST Act, 2017 i.e. Refund of tax that the refund in respect of goods, that are subjected to Export Duty, is restricted, irrespective of whether the said goods are exported without payment of taxes or with payment of taxes, and such restrictions should also be applicable if such goods are supplied to an SEZ developer or an SEZ unit for authorized operations.
Recommends Reporting of B2C inter-State supplies to be reduced from Rs 2.5 Lakh to Rs 1 Lakh:
The threshold for reporting of B2C inter-state supplies invoice-wise in Table 5 of FORM GSTR-1 is recommended to be reduced from Rs 2.5 Lakh to Rs 1 Lakh.
Recommended that FORM GSTR-7 be filed every month irrespective of whether TDS is deducted or not:
FORM GSTR-7, to be filed by the registered persons mentioned below who are required to deduct tax at source under Section 51 of CGST Act, 2017, is to be filed every month irrespective of whether any tax has been deducted during the said month or not. FORM GSTR-7 to be filled by the following persons:
(a) A Department or establishment of the Central Government or State Government; or
(b) Local authority; or
(c) Governmental agencies; or
(d) Such persons or category of persons as may be notified by the Government on the recommendations of the Council.
Further Note that: -
• No late fee may be payable for delayed filing of Nil FORM GSTR-7 return.
• Invoice-wise details may be required to be furnished in the said FORM GSTR-7 return.
Recommended to file complaints of Anti-Profiteering cases only up to April 1, 2025 in GSTAT:
The Council recommended amendments in Section 171 and Section 109 of the CGST Act, 2017 to provide a sunset clause for anti-profiteering under GST and to provide for the handling of anti-profiteering cases by the Principal bench of GST Appellate Tribunal (GSTAT). The council has also recommended the sun-set date of 01.04.2025 for receipt of any new application regarding anti-profiteering.
Recommended Reduction in Pre-Deposit Amounts for Filing Appeals to Ease Taxpayer Cash Flow:
The GST Council recommended reducing the amount of pre-deposit for filing of appeals under GST to ease cash flow and working capital blockage for the taxpayers. The maximum amount for filing an appeal with the appellate authority has been reduced from Rs. 25 crores CGST and Rs. 25 crores SGST to Rs. 20 crores CGST and Rs. 20 crores SGST. Further, the amount of pre-deposit for filing an appeal with the Appellate Tribunal has been reduced from 20% with a maximum amount of Rs. 50 crores CGST and Rs. 50 crores SGST to 10 % with a maximum of Rs. 20 crores CGST and Rs. 20 crores SGST.
Amendment to Exclude Extra Neutral (ENA) Alcohol from GST for Liquor Manufacturing:
The GST Council, in its 52nd meeting, had recommended amending the 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. However, the GST Council now recommended an amendment in sub-section (1) of Section 9 of the CGST Act, 2017, for not levying GST on Extra Neutral Alcohol used for the manufacture of alcoholic liquor for human consumption.
Comprehensive Clarifications to Address Trade and Compliance Issues in GST:
• Clarification regarding the valuation of the supply of import of services by a related person where the recipient is eligible for full input tax credit:
The Council recommended clarifying 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 the 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.
• Clarification regarding the availability of Input Tax Credit on ducts and manholes used in the network of Optical Fiber Cables (OFCs):
The Council recommended clarifying that input tax credit is not restricted in respect of ducts and manholes used in the network of OFCs, under clause (c) or under clause (d) of sub-section (5) of section 17 of the CGST Act.
• Clarification on the place of supply applicable for custodial services provided by banks
The GST Council recommended clarifying that the 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.
• Clarification on the valuation of corporate guarantee provided between related persons after insertion of Rule 28(2) of CGST Rules, 2017
Amendment of Rule 28(2) of CGST Rules, 2017, retrospectively with effect from October 26, 2023, and issuance of a circular to clarify various issues regarding the 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, 2017 would not be applicable in case of export of such services and also where the recipient is eligible for full input tax credit.
• Clarification regarding the applicability of provisions of Section 16 (4) of CGST Act, 2017, in respect of invoices issued by the recipient under the Reverse Charge Mechanism (RCM):
The Council recommended clarifying that in cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under 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, 2017 is the financial year in which the invoice has been issued by the recipient.
• Clarification on the following issues to provide clarity to trade and tax officers and to reduce litigation:
1.Clarification on the taxability of reimbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees
2.Clarification on the requirement of reversal of input tax credit in respect of the amount of premium in Life Insurance services, which is not included in the taxable value as per Rule 32(4) of CGST Rules.
3.Clarification on the taxability of wreck and salvage values in motor insurance claims.
4.Clarification in respect of Warranty/ Extended Warranty provided by Manufacturers to the end customers
5.Clarification regarding the 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.
6.Clarification on taxability of loans granted between related person or between group companies.
7.Clarification on time of supply on Annuity Payments under HAM Projects. Clarification 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.
8.Clarification relating to place of supply of goods supplied to unregistered persons, where delivery address is different from the billing address
9.Clarification 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.
10.Clarifications on various issues pertaining to special procedure for the manufacturers of the specified commodities, like pan masala, tobacco etc.
Reduction in TCS Rate for Electronic Commerce Operators to Ease Financial Burden on Suppliers:
The GST Council recommended that 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 reducing the TCS rate from the 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.
Extension of Appeal Filing Period under Section 112 of CGST Act:
The GST Council recommended amending Section 112 of the CGST Act, 2017, to allow the three-month period for filing appeals before the Appellate Tribunal to start from a date to be notified by the Government in respect of appeal/ revision orders passed before the date of said notification. This will give sufficient time for the taxpayers to file appeals before the Appellate Tribunal in the pending cases.
Amendments Recommended for Relaxation in Section 16(4) of CGST Act
Relaxation in condition of section 16(4) of the CGST Act:
a. In respect of initial years of implementation of GST, i.e., financial years 2017-18, 2018-19, 2019-20 and 2020-21:
The GST Council recommended that the time limit to avail input tax credit in respect of any invoice or debit note under Section 16(4) of CGST Act through any return in FORM GSTR 3B filed upto 30.11.2021 for the financial years 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.
b. With respect to cases where returns have been filed after revocation:
The GST Council recommended retrospective amendment in Section 16(4) of the CGST Act, to be made effective from July 1st, 2017, to conditionally relax the provisions of Section 16(4) of the 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.
Extension of Due Date for Filing FORM GSTR-4 for Composition Taxpayers:
The GST Council recommended 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. The same would give more time to the taxpayers who opt to pay tax under composition levy to furnish the said return.
Amendment in Rule 88B of CGST Rules for Exclusion of Electronic Cash Ledger Amount from Interest Calculation:
The GST Council recommended an 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.
Proposal for New Section 11A in CGST Act to Regularize Non-Levy or Short Levy of GST:
The GST Council recommended inserting a new Section 11A in the 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.
Retrospective Amendment in Section 140(7) of CGST Act for Transitional Credit on Pre-GST Services:
The Council recommended amendment in section 140(7) of CGST Act retrospectively w.e.f. 01.07.2017 to provide for transitional credit in respect of invoices pertaining to services provided before the appointed date and where invoices were received by Input Service Distributor (ISD) before the appointed date.
Introduction of Optional Facility in FORM GSTR-1A for Taxpayers to Amend or Add Details Before Filing FORM GSTR-3B:
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.
Exemption from Filing FORM GSTR-9/9A for FY 2023-24 for Taxpayers with Turnover up to Two Crore Rupees:
The Council recommended that filing of annual returns in FORM GSTR-9/9A for the FY 2023-24 may be exempted for taxpayers having aggregate annual turnover upto two crore rupees.
Recommended Amendments to Sections 73 and 74 and Insertion of Section 74A in CGST Act
Presently, there is a different time limit for issuing demand notices and demand orders in cases where charges of fraud, suppression, willful 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 willful misstatement and not involving the charges of fraud or willful 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.
Amendment to Section 122(1B) of CGST Act for E-commerce Operators retrospectively w.e.f. October 01, 2023:
The 53rd GST Council recommended amendment in Section 122(1B) of the CGST Act 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 the CGST Act and not for other e-commerce operators.
Recommended to Adjust demand amount paid through DRC-03 against Pre-Deposit:
The Council recommended amendment in Rule 142 of CGST Rules, 2017 and issuance of a circular to prescribe a mechanism for adjustment of an amount paid in respect of demand through FORM GST DRC-03 (voluntary tax payment Form for taxpayers) against the amount to be paid as pre-deposit for filing the Appeal.
Recommended Rolling out of bio-metric based Aadhaar authentication on All-India basis:
The Council recommended roll-out the biometric-based Aadhaar authentication of registration applicants on the PAN India basis in a phased manner. This will strengthen the registration process in GST and will help in combating fraudulent input tax credit (ITC) claims made through fake invoices.
Recommendations to clarify the GST rates on Goods:
1. The Council has recommended that the uniform rate of 5% IGST would apply to import of Parts, components, testing equipment, tools and tool-kits of aircrafts, irrespective of the HS classification to provide a fillip to MRO activities subject to specified conditions.
2. The Council has recommended that All milk cans (of steel, iron and aluminium) irrespective of their use would attract 12% GST
3. The Council has recommended that GST rate on ‘carton, boxes and cases of both corrugated and non-corrugated paper or paper-board’ (HS 4819 10; 4819 20) would be reduced from 18% to 12%
4. The Council has recommended that All solar cookers whether single or dual energy source, would attract 12% GST.
5. The Council has recommended amending 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
6. The Council has recommended clarifying that all types of sprinklers including fire water sprinklers will attract 12% GST and to regularise the past practice on ‘as is where is’ basis in view of genuine interpretational issues
7. The Council has recommended extending IGST exemption on imports of specified items for defence forces for a further period of five years till 30th June, 2029.
8. The Council has recommended extending 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
9. The Council has recommended exempting Compensation Cess on the imports in SEZ by SEZ Unit/developers for authorised operations w.e.f. 01.07.2017
Recommendations to clarify the GST rates on Services:
1. To exempt the services provided by Indian Railways to the general public, namely, the 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 October 20, 2023, to the date of issue of exemption notification in this regard. Aiming to ease the financial burden on passengers. This decision is part of broader efforts to make railway services more affordable.
2. To exempt GST on the services provided by Special Purpose Vehicles (SPV) 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 July 01, 2017, till the date of issue of exemption notification in this regard.
3. To create a separate entry in notification No. 12/2017- CTR dated June 28, 2017, under heading 9963 to exempt accommodation services(Hostel Accommodation outside educational institutions) having the 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. To extend similar benefits for past cases.
Other changes relating to Services-
1. Co-insurance premium apportioned by the lead insurer to the co-insurer for the supply of insurance service by the 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.
2. 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.
3. GST liability on reinsurance services of specified insurance schemes covered by Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) dated June 28, 2017, may be regularized on ‘as is where is’ basis for the period from July 01, 2017, to January 24, 2018.
4. 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- dated June 28, 2017, may be regularized on ‘as is where is’ basis for the period from July 01, 2017, to July 26, 2018.
5. To issue a 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 June 28, 2017.
6. To issue a clarification that statutory collections made by the Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of No.12/2017-CTR dated June 28, 2017.
7. To issue a clarification that further sharing of the incentive by acquiring bank with other stakeholders, where the sharing of such incentive is clearly defined under the 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.
Other Key Takeaway Point:
Petrol and diesel under GST:
The central government reiterated its intent to bring petrol and diesel under the GST regime, pending consensus among states on the applicable tax rate. This move is seen as a step towards uniform taxation of fuel across the country.
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