Key Decisions and Updates from the 47th GST Council Meeting
The 47th GST Council meeting, held in June 2022, addressed crucial updates and reforms concerning India's Goods and Services Tax. Key outcomes included permitting GSTR-3B amendments and offering compliance relief to e-commerce suppliers, alongside extending deadlines for composition taxpayers. The Council also rationalized GST rates by correcting inverted tax structures, increasing taxes on certain goods and services, and withdrawing several exemptions. Expectations prior to the meeting focused on refining ITC reporting, addressing crypto taxation, and further simplifying compliance for businesses.
The Goods and Services Tax (GST) in India completed five years on July 1, 2022. During the same week, the 47th GST Council meeting convened in Chandigarh on June 28th and 29th, 2022. Chaired by Smt Nirmala Sitharaman, with the Minister of State for Finance, Shri Pankaj Chaudary, and other state ministers present, this important meeting addressed critical issues. Key topics included modifications to Form GSTR-3B, revisions and withdrawals of tax exemptions, corrections to inverted tax structures, and various IT-related initiatives. The Finance Minister also indicated that the 48th GST Council meeting would take place in Madurai, Tamil Nadu, in early August 2022. Its agenda is expected to cover the establishment of GST Appellate Tribunals and determining GST rates for casinos and online gaming, following a Group of Ministers (GoM) report.
Highlights of the 47th GST Council Meeting
The Finance Minister provided a media briefing, acknowledging Chandigarh's smooth hosting of the two-day conference. Discussions primarily revolved around four detailed reports from various Groups of Ministers (GoM), which constituted the main agenda of the 47th GST Council meeting. These reports encompassed:
- Interim report on rate rationalization, exemptions, and rectifying inverted tax structures.
- Taxation of betting, gambling, horse racing, online gaming, and lotteries.
- Information technology-related subjects.
- Procedures for moving precious items like gold.
GSTR-3B Amendments Approved
The GST Council approved amendments to GSTR-3B, the monthly GST return. It also enabled the automatic population of most data in Form GSTR-3B and annual returns (Form GSTR-9) to streamline compliance. The Council decided to discontinue the new GST return system, deeming it obsolete. A proposal for extensive changes to GSTR-3B will be issued for public consultation.
GSTR-9 Continues with Relaxations
Annual returns for the fiscal year 2021-22 are expected to be announced with minimal revisions.
- The annual return system will persist with certain concessions and adjustments.
- GSTR-9 and GSTR-9A remain non-applicable for taxpayers with an annual turnover below Rs.2 crore for FY 2021-22.
- The deadline under Section 73 of the CGST Act for issuing demand orders related to FY 2017-18, previously tied to the annual return due date, has been extended to September 30, 2023.
Relief for E-commerce Suppliers
The GST Council moved to alleviate compliance burdens for e-commerce suppliers.
- E-commerce suppliers engaging in intrastate supplies are now permitted to register under the composition scheme, simplifying their registration process and lowering tax liabilities.
- This new composition scheme for intrastate online sales by e-commerce suppliers is slated for implementation on January 1, 2023, pending IT system readiness.
- Consequently, intrastate e-commerce suppliers whose turnover does not exceed the specified threshold (Rs.40 lakh for goods or Rs.20 lakh for services, or lower limits in certain states/UTs) will not require mandatory GST registration.
- However, interstate suppliers operating on e-commerce platforms must obtain mandatory registration regardless of their turnover.
Deadline Extensions for Composition Taxpayers
- The late fee for GSTR-4 filing for FY 2021-22 has been waived until July 28, 2022, extending the previous deadline of June 30, 2022.
- The deadline for CMP-08 for April-June 2022 (Q1 of FY 2022-23) has been extended from July 18, 2022, to July 30, 2022.
GST Rate and Exemption List Pruning
The GST Council fully endorsed the interim report from the GoM on rate rationalization, alongside the majority of the Fitment Committee's recommendations.
Rectification of Inverted Tax Structure
| Description of Goods or Services | Previous Rate | Revised Rate |
|---|---|---|
| Solar water heaters and systems | 5% | 12% |
| Prepared or finished leather or chamois leather or composition leathers | 5% | 12% |
| Job work for processing of hides, skins, leather, making of leather products including footwear, and clay brick manufacturing | 5% | 12% |
| Earthwork works contracts and sub-contracts to the Central and state governments, Union Territories and local authorities | 5% | 12% |
| Pawan Chakki being air-based atta chakki, wet grinder, cleaning, sorting or grading machines for seeds and grain pulses, and milling machines or cereal making machines, etc; | 5% | 18% |
| Ink for drawing, printing, and writing | 12% | 18% |
| Knives with paper knives, cutting blades, pencil sharpeners and its blades, skimmers, cake-servers, spoons, forks, ladles, etc | 12% | 18% |
| Centrifugal pumps, submersible pumps deep tube-well turbine pumps, bicycle pumps that are power-driven mainly for handling water | 12% | 18% |
| Milking machines and dairy machinery, cleaning, sorting or grading machines and its parts for eggs, fruit or other agri produce | 12% | 18% |
| Lights and fixture, LED lamps, their metal printed circuits board | 12% | 18% |
| Marking out and drawing instruments | 12% | 18% |
| Services by foreman to chit fund | 12% | 18% |
| Works contract for railways, metro, roads, bridges, effluent treatment plant, crematorium, etc. | 12% | 18% |
| Works contract and sub-contract to the Central and state governments, local authorities for canals, dams, pipelines, plants for water supply, historical monuments, educational institutions, hospitals, etc | 12% | 18% |
| Refund of accumulated ITC for edible oils and coal is disallowed. |
*These revised rates become effective from July 18, 2022, contingent on notification by the CBIC.
GST Rate Revisions: Increases and Decreases
| Description of Goods or Services | Previous Rate | Revised Rate |
|---|---|---|
| Items Becoming More Expensive | ||
| Cut and Polished diamonds | 0.25% | 1.50% |
| Tetra Pack (Aseptic Packaging Paper) | 12% | 18% |
| Tar (From coal, or coal gasification plants, or producer gas plants and coke oven plants) | 5%/18% | 18% |
| Items Becoming Less Expensive | ||
| Import of tablets called Diethylcarbamazine (DEC) free of cost for National Filariasis Elimination Programme (IGST) | 5% | Nil |
| Import of particular defence items by private businesses or suppliers for end-consumption of Defence (IGST) | Applicable rates | Nil |
| Ostomy Appliances | 12% | 5% |
| Orthopedic appliances such as intraocular lens, artificial parts of the body, splints and other fracture appliances, other appliances which are worn or carried, or body implants, to compensate for a defect or disability | 12% | 5% |
| Transport of goods and passengers by ropeways (with ITC of services) | 18% | 5% |
| Renting of truck or goods carriage including the fuel cost | 18% | 12% |
*These revised rates become effective from July 18, 2022, contingent on notification by the CBIC.
GST Exemption Withdrawals
| Description of Goods or Services | Previous Rate | Revised Rate |
|---|---|---|
| Previously Fully Exempt, Now Taxable | ||
| Maps and hydrographic or similar charts of all kinds, including atlases, wall maps, topographical plans and globes, printed | Nil | 12% |
| Cheques, lose or in book form | Nil | 18% |
| Parts of goods of heading 8801 | Nil | 18% |
| Air transportation of passengers to and from north-eastern states and Bagdogra now restricted to economy class | Nil | Condition added |
| Transportation by rail or a vessel of railway equipment and material, storage or warehousing of commodities attracting tax such as copra, nuts, spices, jaggery, cotton, etc, fumigation in a warehouse of agri produce, services by RBI, IRDA, SEBI, FSSAI, and GSTN, renting of residential dwelling to GST-registered businesses, and services by the cord blood banks for preserving stem cells | Nil | Applicable rate |
| Room rent (excluding ICU) exceeding Rs.5,000 per patient day taxed without ITC | Nil | 5% |
| Common bio-medical waste treatment facilities for treating or disposing biomedical waste shall be taxed with availability of ITC, like CETPs | Nil | 12% |
| Hotel accommodation priced up to Rs.1,000 per day | Nil | 12% |
| Training or coaching in recreational activities on arts or culture, or sports other than by individuals | Nil | Applicable rate |
| Previously Partially Exempt, Now Taxable | ||
| Petroleum/ Coal bed methane | 5% | 12% |
| e-Waste | 5% | 18% |
| Scientific and technical instruments to public funded research institutes | 5% | Applicable rate |
*These revised rates become effective from July 18, 2022, contingent on notification by the CBIC.
Other Major Decisions
- Further clarification will be provided on using funds from the electronic credit ledger and electronic cash ledger to settle output tax liabilities in returns, explicitly stating that these funds cannot cover penalties, late fees, or interest charges.
- The GST Council will establish a Group of Ministers (GoM) to thoroughly examine the structure required for setting up GST Appellate Tribunals.
- A comprehensive review of the National Anti-profiteering Authority (NAA) is underway.
- The Solicitor General will represent cases before the NAA where its constitutional validity is challenged.
- The government plans to appeal to the Supreme Court in cases where state High Courts have remanded NAA orders.
- The NAA has formed an advocates' panel to ensure consumers receive justice in instances of profiteering.
- The GST Council approved a waiver for filing refund claims by exempting the two-year COVID period (March 1, 2020, to February 28, 2022). Additionally, tax authorities are permitted to file appeals against incorrect refunds without factoring in this two-year period.
- Procedures for refund claims are being simplified for electricity exports and certain concessional goods with inverted tax structures.
- The GST Network intends to implement AI/ML-based systems to verify the background of GST registration applicants and enhance risk-based monitoring of their post-registration conduct. This aims to identify non-compliant taxpayers early and take action to mitigate revenue losses.
- The implementation of the GST margin scheme for tour operators has been postponed to allow for a detailed study.
Pre-Meeting Expectations for the 47th GST Council Meeting
Anticipated GSTR-3B Modifications for Improved ITC Reporting
Changes to Form GSTR-3B and its reporting were anticipated from the GST Council. These modifications aimed to expedite genuine Input Tax Credit (ITC) settlements while preventing fraudulent claims. Reports indicated that the updated GSTR-3B format would enable taxpayers to report gross ITC available for claims, the ITC utilized during the tax period, and the net ITC held in their electronic credit ledger.
Expected Correction of Inverted Tax Structure for Specific Items
The Group of Ministers (GoM) on GST rate rationalization was expected to present an interim report to the GST Council. This report likely suggested measures to rectify the inverted tax structure for items such as inks, LED lights, lamps, and fixtures, potentially increasing their tax rates from 12% to 18%. Additionally, accumulated ITC refunds were not expected for edible oil despite its inverted tax structure.
Predicted Crypto Taxation Under GST
The GST Council intended to provide clear guidelines on taxing cryptocurrencies under GST to monitor digital asset transactions. While a specific GST rate might not have been determined in this meeting, clarity was sought on whether crypto transactions would fall under the 28% tax bracket. The Fitment Committee, however, aimed to conduct further research, consulting with Karnataka and Haryana state governments for a comprehensive paper on GST charges for crypto activities.
Expected GST Rate Adjustments and Exemption List Trimming
The preliminary GoM report, led by Karnataka's chief minister, emphasized that the GST Council's decisions, especially regarding reductions in the GST exemption list, should be made with careful consideration for the public's needs. Previously, the Fitment Committee had declined rate revisions for 113 commodities but approved modifications for 14 goods and 22 services. Complete exemptions were anticipated for items such as bread, kitchenware, tractors, hearing aids, educational institutions, and incense sticks. Conversely, the Council was expected to progressively remove exemptions for products including honey, food grains, flattened rice, parched rice, puffed rice, cereals, jaggery, packaged curd, lassi, buttermilk, paneer, papad, and certain vegetables. Services rendered by IRDA to insurers, FSSAI to food business operators concerning registration, SEBI, and the RBI were expected to lose their GST exemption. The Fitment Committee also proposed exempting certain defense equipment imported by private entities for national defense from basic customs duty and IGST.
Other Anticipated Outcomes
- A clarification regarding Input Tax Credit (ITC) refunds for duty-free stores.
- Exemption from the GST refund application deadlines spanning March 1, 2020, to February 28, 2022.
- An additional extension for the GSTR-4 filing deadline for FY 2021–22, moving it from June 30, 2022, to July 28, 2022.
- Extending the CMP-08 filing deadline from July 18 to July 30, 2022.
- States might request an extension of the GST compensation period by at least two to three years.
- The GST Council was expected to deliver a detailed report on the National Anti-Profiteering Authority (NAA) and its ongoing cases for review.
- Granting authority to both central and state governments to issue show-cause notices, and addressing compliance challenges faced by e-commerce sellers.
- Approval for an extra e-invoice portal or Invoice Registration Portal (IRP).
- A proposal for introducing a new margin scheme tailored for the tour and hospitality sectors.
The GST Council previously met for the 46th GST Council meeting on 31st December 2021.