Key Decisions and Outcomes from the 50th GST Council Session
The 50th GST Council meeting, held on July 11, 2023, addressed significant GST law changes, including rate adjustments for various goods and services. Key recommendations involved new taxation rules for online gaming, casinos, and horse racing at a uniform 28% rate. The Council also introduced measures to streamline GST compliances, such as mandating e-way bills for precious metals and amending registration rules. Trade facilitation efforts included guidelines for GST Appellate Tribunals and extensions for certain return filings, aiming to enhance compliance and ease business operations.
On July 11, 2023, the 50th Goods and Services Tax (GST) Council convened in New Delhi at Vigyan Bhawan. This milestone meeting, marking fifty sessions since GST's introduction, was chaired by Union Finance Minister Nirmala Sitharaman, with representatives from various states and Union Territories attending. To commemorate the occasion, a brief video titled 'GST Council - 50 Steps Towards a Journey' was unveiled, and a special postal cover and customized stamp were issued by the postal department.
The 50th GST Council meeting addressed three primary areas within GST legislation. These included crucial rate adjustments for both goods and services, along with clarifications and rate regularizations. Discussions also encompassed the recommendations presented by various Groups of Ministers (GoMs). Furthermore, the Council confirmed that compensation cess dues had been settled for states that submitted Accountant General (AG)-certified claims, with remaining states awaiting settlement upon submission of their certificates.
Recommendations with Regard to GST on Goods
The GST Council resolved to decrease the GST rates on several goods, specifically: uncooked/unfried snack pellets (from 18% to 5%), fish soluble paste (from 18% to 5%), imitation zari threads/yarn (from 12% to 5%), and LD slag (reduced from 18% to 5%, aligning it with blast furnace slag and fly ash).
An IGST exemption was granted for Dinutuximab (Quarziba) medicine imported for personal use. This exemption also covers medicines and Food for Special Medical Purposes (FSMP) used in treating rare diseases, as well as FSMP imported by designated Centres of Excellence for Rare Diseases, or by any individual or institution with a recommendation from these centers.
Clarification was provided that the supply of raw cotton, including kala cotton, by agriculturists to cooperatives is subject to taxation under the reverse charge mechanism.
Decisions were made to regularize past period issues 'as is' concerning: raw cotton; trauma, spine, and arthroplasty implants (prior to July 18, 2022); desiccated coconut (July 1, 2017, to July 27, 2017); GST on plates and cups made from areca leaves (prior to October 1, 2019); and GST on biomass briquettes (July 1, 2017, to October 12, 2017).
The Council resolved to amend Entry 52B in the compensation cess notification. This amendment will encompass all utility vehicles, regardless of their nomenclature, provided they satisfy specific criteria: a length greater than 4000 mm, an engine capacity exceeding 1500 cc, and an unladen ground clearance of 170 mm or more.
For products like pan masala and tobacco where retail sale price declaration is not legally mandated, the ad valorem rate effective March 31, 2023, will be notified for compensation cess levy.
RBL Bank and ICBC Bank were added to the list of designated banks eligible for IGST exemption on the import of gold, silver, or platinum.
Recommendations with Regard to GST on Services
A GST exemption was approved for satellite launch services provided by ISRO, Antrix Corporation Limited, and New Space India Limited (NSIL). This exemption may also be extended to similar services offered by private entities.
In a move to facilitate trade, Goods Transport Agencies (GTAs) are no longer obligated to file annual declarations for paying GST under forward charge. Once chosen for a financial year, this option will automatically carry over to subsequent years, unless a declaration is submitted to reverse it. The deadline for selecting this option has been moved to March 31st of the preceding financial year, from the previous March 15th.
It was clarified that services provided by a company director to their company in a personal or private capacity are exempt from taxation under the Reverse Charge Mechanism (RCM).
Clarification stated that food and beverage supplies in cinema halls are taxable as restaurant services when offered independently or as part of a service distinct from cinema exhibition. However, if bundled and meeting the criteria for a composite supply, the entire transaction will be subject to GST at the rate applicable to the primary service, which is cinema exhibition.
Group of Ministers (GoM) Recommendation on Casinos, Race Courses, and Online Gaming
Last year, a Group of Ministers (GoM) was formed to examine GST taxation for casinos, horse racing, and online gaming. In its second report, the GoM advised the GST Council to make a decision, as no consensus was reached on whether these activities should be taxed at 28% on the full-face value of bets or on Gross Gaming Revenue (GGR). During the 50th GST Council meeting, deliberations led to the following recommendations: relevant amendments to the GST law to classify online gaming and horse racing as taxable actionable claims under Schedule III of the CGST Act; a uniform 28% GST rate for casinos, horse racing, and online gaming; and GST application on the face value of chips purchased in casinos, the full value of bets placed with bookmakers/totalizators in horse racing, and the full value of bets placed in online gaming.
Measures for Streamlining GST Compliances
Following a GoM recommendation, the Council suggested introducing Rule 138F into both CGST Rules, 2017, and individual State SGST Rules, 2017. This rule will mandate e-way bill generation for the intra-state movement of gold and precious stones covered under Chapter 71.
Consistent with the GoM's advice on capacity-based taxation and the special composition scheme from the 49th Council meeting, the Council proposed: a Section 148 notification under the CGST Act, 2017, detailing special procedures for registration and return filing by manufacturers of tobacco, pan masala, and similar products; adding Section 122A to the CGST Act, 2017, to impose a special penalty for unregistered machines used by these manufacturers; and notifying Section 123 of the Finance Act, 2021 (amending IGST Act Section 16) from October 1, 2023, along with a Section 16(4) notification to restrict IGST refund routes for exports of tobacco, pan masala, mentha oil, and similar goods.
Amendments were proposed to the CGST Rules, 2017, concerning GST registration. Rule 10A was modified to require bank account details (matching the registered person's name and PAN) within 30 days of registration or before filing GSTR-1/IFF, whichever occurs first. Rule 21A(2A) was amended to allow system-based suspension of GST registration if a valid bank account isn't provided as per Rule 10A. A third proviso in Rule 21A(4) ensures automatic revocation of such suspensions upon Rule 10A compliance. Rule 59(6) was updated to prevent GSTR-1/IFF filing by taxpayers who haven't supplied a valid bank account under Rule 10A. Additionally, Rules 9 and 25 were changed to remove the need for physical verification of business premises in the applicant's presence, while still allowing physical verification in high-risk scenarios even with Aadhaar authentication.
A pilot program for risk-based, biometric Aadhaar authentication of registration applicants is slated for implementation in Puducherry.
Rule 142B and Form GST DRC-01D are to be added to the CGST Rules, 2017. These additions will define the process for recovering tax and interest on amounts communicated under Rule 88C, specifically for instances where the output tax liability in GSTR-1 surpasses the GSTR-3B liability for that month by a predetermined threshold.
Taxpayers will receive system-based intimations for excess Input Tax Credit (ITC) claims in GSTR-3B compared to ITC available in GSTR-2B, exceeding a specified threshold. To facilitate this, Rule 88D and Form DRC-01C will be introduced into the CGST Rules, 2017, alongside an amendment to Rule 59(6).
Form GSTR-3A will be modified to enable the issuance of notices to taxpayers who fail to submit their annual returns (Form GSTR-9/9A) by the prescribed deadline.
Rule 64 of the CGST Rules, 2017, and Form GSTR-5A will be amended to compel OIDAR (Online Information Database Access and Retrieval) service providers to detail supplies made to registered Indian taxpayers in their GSTR-5A return. This aims to improve tracking of reverse charge tax payments by recipients of OIDAR services.
Explanation 3 will be added after Rule 43 of the CGST Rules, 2017, to stipulate that the value of goods supplied from Duty-Free shops at international airport arrival terminals must be included in the value of exempt supplies for input tax credit reversal.
The Council recommended adding Rule 163 to the CGST Rules, 2017, outlining the procedures and conditions for consent-based sharing of taxpayer information from the common GST portal with other systems.
A new sub-rule (3A) is to be inserted into Rule 162 of the CGST Rules, 2017, to specify compounding amounts for various offenses detailed under Section 132 of the CGST Act, 2017.
The Council proposed inserting clause (ca) into sub-section (1) of Section 10 of the IGST Act, 2017. This aims to clarify the place of supply for goods provided to unregistered individuals.
A recommendation was made for establishing state-level coordination committees. These committees, composed of GST officers from both Central and State administrations, would facilitate knowledge sharing on GST topics and coordinate administrative and preventive actions.
The Council also deliberated on the second interim GoM report concerning IT System Reforms, which included various recommendations aimed at preventing GST fraud.
Measures for Facilitation of Trade
The GST Council put forward the rules for appointing and setting conditions for the President and members of the planned GST Appellate Tribunals (GSTATs). These rules are expected to be enacted by the Central government, effective August 1, 2023.
The Council advised extending the relaxations granted for Fiscal Year 2021-22 concerning various tables within Forms GSTR-9 and 9C to Fiscal Year 2022-23.
The exemption from filing GSTR-9/9A remains in effect for small taxpayers with an aggregate annual turnover up to Rs. 2 crore for Fiscal Year 2022-23.
A Circular was recommended by the Council to clarify that the Input Service Distributor (ISD) mechanism is not obligatory for distributing Input Tax Credit (ITC) from common input services acquired from third parties to distinct entities, under current GST law provisions.
A Circular was also recommended to address issues concerning GST liability and ITC reversal for warranty replacements of parts and repair services performed during the warranty period without customer consideration.
A forthcoming Circular will address several refund-related matters: as of January 1, 2022, the refund of accumulated ITC under Section 54(3) of the CGST Act, 2017, for any tax period will be limited to the ITC on inward supplies visible in GSTR-2B for that or preceding tax periods. Furthermore, the value of export goods will be factored into the 'adjusted total turnover' calculation within the Rule 89(4) formula, as per its explanation. Clarification will also be provided on the admissibility of refunds when goods are exported, or payment for exported services is realized, beyond the time limits set by Rule 96A of the CGST Rules, 2017.
A Circular is planned to clarify the Tax Collected at Source (TCS) liability under Section 52 of the CGST Act, 2017, for transactions involving multiple e-commerce operators in the supply of goods, services, or both.
To alleviate taxpayer compliance burdens, clause (f) of Rule 46 of the CGST Rules, 2017, will be amended. This amendment will require only the recipient's state name, rather than their full name and address, on tax invoices for taxable services supplied by/through an e-commerce operator (ECO) or OIDAR provider to an unregistered recipient.
Several circulars are to be issued: one clarifying e-invoice generation under Rule 48(4) of CGST Rules for supplies to government departments; another addressing the calculation of interest under Section 50(3) of the CGST Act, 2017, for wrongly claimed and utilized IGST credit; and a third stating that merely holding subsidiary company securities by a holding company does not constitute a taxable supply of services under GST.
A circular will be issued to establish a verification procedure for Input Tax Credit (ITC) discrepancies. This applies to cases where there's a difference between ITC claimed in GSTR-3B and ITC available in GSTR-2A, specifically for the period from April 1, 2019, to December 31, 2021.
A distinct procedure will be introduced under Section 148 of the CGST Act, 2017, facilitating the manual submission of appeals against orders issued by proper officers regarding taxpayers' TRAN-1/TRAN-2 claims.
Rules 108(1) and 109(1) of the CGST Rules, 2017, will be amended to permit manual appeal filings under specific conditions.
Amnesty schemes for non-filing of GSTR-4, GSTR-9, and GSTR-10, revocation of registration cancellations, and the deemed withdrawal of assessment orders under Section 62 of the CGST Act, 2017, have been extended until August 31, 2023.
Due dates for filing GSTR-1, GSTR-3B, and GSTR-7 for taxpayers in Manipur for April, May, and June 2023, have been extended until August 31, 2023.
Expectations from the 50th GST Council Meeting
A new GST rule is under consideration to address excess Input Tax Credit (ITC) claims. Businesses might be required to explain such claims or deposit the excess amount. Mirroring the DRC-01B mechanism for GSTR-1/IFF and GSTR-3B/3BQ liability mismatches, the Council is exploring a system for GSTR-2B and GSTR-3B discrepancies exceeding a set threshold. Taxpayers with excess ITC claims beyond a specified percentage or amount would receive intimations, necessitating a reason or payment of the excess ITC with interest under Section 50. This provision could be legislated with a threshold difference of 20% and above Rs. 25 lakh to trigger intimations.
The establishment of GST Appellate Tribunals (GSTATs) has been a persistent request from taxpayers. These tribunals are anticipated to alleviate the workload on both taxpayers and courts by streamlining indirect tax disputes. Therefore, this matter was likely addressed at the 50th GST Council meeting. Currently, taxpayers often face lengthy and costly appeals in High Courts or pay GST demands under protest. GSTATs would serve as a second appellate forum and a unified platform for resolving disputes between Central and State authorities. Industrialists have also pressed the central government to implement a temporary provision allowing appeals upon payment of half the disputed amount by the assessee. Furthermore, the Council previously approved a GoM report with amendments, and the final draft GST law amendments are to be circulated for member comments, with the Chairperson authorized to finalize them.
Last year, a GoM was established to discuss the GST implications for online gaming, casinos, and horse racing. Currently, online gaming attracts 18% GST for skill-based games without betting and 28% for games of chance involving betting. Although the GoM determined a 28% GST rate for earnings from all three activities, a consensus on the taxable base value for applying this rate has yet to be reached. This lack of agreement likely led to the discussion being postponed from the February 2023 Council meeting. The upcoming GST Council meeting aimed to resolve this persistent issue.
Recent changes to e-invoicing timelines have created discussions regarding amendments to GST law. A proposed 7-day deadline for reporting e-invoices on the Invoice Registration Portal (IRP) recently surprised businesses, as no such time limit existed since e-invoicing's implementation over two years ago. This led to issues where taxpayers would compile and generate e-invoices for extended periods, occasionally backdating them. The GST portal initially stated that the seven-day limit would only apply to taxpayers with a turnover exceeding Rs. 100 crore. However, a subsequent advisory postponed this limit by three months, with a new implementation date still pending. The Council was expected to discuss this and potentially propose an amendment to the GST law.
Finance Minister Nirmala Sitharaman recently instructed the department to automate GST return scrutiny and devise strategies for expanding the taxpayer base through technology. Following a review with senior officials, the FM directed the CBIC to analyze existing cases and propose tech-driven solutions. Other review topics included grievance redressal, employee welfare, and improving taxpayer services. While the department is expected to act on these fronts, these matters, particularly return scrutiny and revenue enhancement, were anticipated for discussion at the Council meeting. The CBIC's ongoing efforts against fake GST registrations and broader initiatives for revenue growth by expanding the taxpayer base were also on the agenda. The GST Council was expected to mandate physical verification of 'high-risk' GST registration applicants' business premises before granting registration and potentially shorten the deadline for submitting PAN-linked bank account information on the GST system.
Taxpayers transporting gold and precious metals valued at Rs. 2 lakh or more within a state under GST may be required to generate e-way bills. State governments could be granted the authority to establish specific rules and potentially varying threshold limits for this. Such a measure aims to enable states to monitor the movement of these valuable items and mitigate tax evasion.
The rise of transactions involving multiple e-commerce operators, spurred by the government's Open Network for Digital Commerce (ONDC) model, has created ambiguity regarding the taxpayer responsible for Tax Collected at Source (TCS) liability. The GST Council was anticipated to issue a clarification on this matter.
Other anticipated discussions included: a GST fitment panel defining millet products, cancer medicine, and their respective rates, with the panel comprising Central and state authorities classifying critical millet-based products; clarification on the applicability of GST compensation cess to Multi-Utility Vehicles (MUVs) and the GST rate for food and beverage sales in multiplexes; potential discussions on rectifying the inverted tax structure in the textile sector; a proposal for pan masala manufacturers to register their production capacity and machines on the GST portal for output monitoring, potentially requiring QR codes on packages with factory details; and an industry appeal for 100% Central GST and 50% Integrated GST reimbursement for eleven hill states under the 'Scheme for Budgetary Support'.
This meeting aimed to address outstanding issues and propose procedural adjustments to GST. The preceding 49th GST Council meeting, held on February 18, 2023, in New Delhi, had introduced an amnesty scheme for delayed GST return filings and reduced associated late fees.