Outcomes and Key Discussions from the 49th GST Council Meeting

The 49th Goods and Services Tax (GST) Council convened in New Delhi on Saturday, February 18, 2023. Chaired by Union Finance Minister Nirmala Sitharaman, this significant gathering occurred just two months after the 48th meeting on December 17, 2022. Notably, it marked the third instance where a GST Council meeting was held in the same month as the Union Budget presentation, following similar patterns observed in 2017 and 2019 when key policy decisions were made.

Outcomes from the 49th GST Council Meeting

Union Finance Minister Nirmala Sitharaman addressed the media on February 18, 2023, at 5 p.m., detailing the meeting's resolutions: - Two Group of Ministers (GoM) reports were approved, one with minor adjustments.- All outstanding GST compensation dues since June 2022 are to be settled, funded by the government's own resources and future revenues.- The GST rate on 'Rab' (liquid jaggery) was lowered to nil (if loose) or 5% (if labelled/packaged), reduced from 18%.- The GST on pencil sharpeners decreased from 18% to 12%.- GST on tracking devices installed in durable containers is now nil, subject to specific conditions.- Services provided by courts and tribunals will be subject to tax under the Reverse Charge Mechanism (RCM). Specifically, renting out premises by court/tribunal registries for commercial use to local bodies will attract RCM.- Educational institutions and central/state education boards received an exemption for conducting entrance examinations for admission to educational institutions, applicable to any authority, board, or body established by the Central or State Government, including the National Testing Agency (NTA).- Late fees for delayed filing of annual GST returns for FY 2022-23 onwards were rationalized:- For registered persons with an Annual Aggregate Turnover (AATO) up to Rs.5 crore, the fee is Rs. 25 per day, capped at 0.02% of turnover.- For registered persons with an AATO between Rs.5 crore and Rs.20 crore, the fee is Rs. 50 per day, capped at 0.02% of turnover.- A GST amnesty scheme was declared for GSTR-4, GSTR-9, and GSTR-10, reducing late fees.- A special composition scheme was introduced for specific sectors, including pan masala and Gutkha.- The GoM report concerning the appellate tribunal was discussed and will be redrafted with modifications for circulation and approval by GST Council members.- Classification of Multi-Utility Vehicles (MUVs) and GST on cement were not addressed due to time constraints; GST on millet-based health products requires further discussion.- The GoM recommended a single bench for the GST appellate tribunal, with a primary bench in Delhi and state-level benches. Each appellate tribunal bench would comprise two technical and two judicial members. A few GST Council members voiced concerns about the selection process for judicial panel members, advocating for more state representation. It was suggested that technical members should have equal representation (50% each) from the central and state governments.- The GoM report on pan masala, proposing a special composition scheme and capacity-based taxation, was accepted.- The GoM report on online gaming was not taken up, as the Finance Minister leading the committee was absent.- The Council proposed amending Section 62 (Best Judgment Assessment) to extend the time limit for filing a return to allow for deemed withdrawal of such an assessment order. The period would increase from the current 30 days to 60 days, with a possible extension of another 60 days under certain conditions.- Additionally, the FM announced a conditional deemed withdrawal of past assessment orders where the relevant return was not filed within 30 days but was subsequently filed with applicable interest and late fees by a specified date. This applies regardless of whether an appeal was filed or decided against the assessment order.

49th GST Council Meeting Press Release

For the official press release from the Ministry of Finance, please refer to the following link: 49th GST council meeting press release.

Live Updates from the 49th GST Council Meeting

• 3:15 p.m.: Reports indicated that discussions on establishing the GST Appellate Tribunal were deferred to a subsequent Council meeting. This delay allows for further refinement of the GoM's recommendations based on suggestions from various states.
• 2:37 p.m.: The GST Council reconvened after a lunch break to continue deliberations on the GoM's report regarding the GST appellate tribunal.
• 2:30 p.m.: The GoM report on the formation of an appellate tribunal was taken up for discussion. Sources suggested that 14-15 states voted against the GoM's recommendations concerning the structure of GST appellate tribunals.
• 2:15 p.m.: The Union FM was scheduled to brief the media on the meeting's outcomes at 4:15 p.m. on February 18, 2022 (this year might be a typo in the original text, should be 2023).
• 11:15 a.m.: The 49th GST Council meeting commenced with the arrival of Union FM Smt. Nirmala Sitharaman at Vigyan Bhavan, New Delhi. She was joined by Union Minister of State for Finance Shri M. P. Chaudhary, state and UT Finance Ministers, and senior government officials.

Anticipations for the 49th GST Council Meeting

The 49th GST Council meeting, held on February 18, 2023, in New Delhi, had several key expectations.

GoM Report on GST for Pan Masala

The Group of Ministers (GoMs) was expected to present its report on taxing 'Gutkha/chewing tobacco' and 'Pan Masala' businesses. Although the report on GST on Pan Masala was on the agenda for the 48th GST Council meeting, it was not addressed then.

The GoM on Pan Masala was established to evaluate the necessity and benefits of implementing a capacity-based valuation system for levying GST on pan masala and similar products. Furthermore, the Council was expected to approve the refund of accumulated Input Tax Credit (ITC) for exports of these products against a letter of undertaking.

Measures under consideration by the GST Council included mandatory machine registration, specific monthly GST returns detailing machines, clearances, inputs, and special compliance rules such as compulsory e-invoicing, e-way bills, GPS installation or FASTags, unique identification marking, CCTV camera installation, and substantial penalties for non-compliance.

GoM Report on GST Appellate Tribunal Potentially Off Agenda

Initial media reports suggested that the decision to establish Goods and Services Tax Appellate Tribunals (GSTAT), based on the GoM report, might not be on the agenda.

Taxpayers have long demanded a fully operational GST Appellate Tribunal. The report by the Head of the GoM, Haryana Deputy CM Dushyant Chautala, was submitted in late 2022 and was initially expected at the 48th GST Council meeting. However, it was postponed to future meetings due to the need for extensive discussion.

GoM Report on Online Gaming and Similar Activities Unlikely to Be Discussed

The GST Council was anticipated to deliberate on the Goods and Services Tax implications for online gaming, horse racing, and casinos. However, recent media reports indicated this topic might not be covered.

The GoM, led by Meghalaya Chief Minister Conrad Sangma, was slated to present its final report on GST on online gaming at this meeting.

Differences among GoM members regarding the base value for tax applicability have been a persistent issue. The latest report, issued in late 2022, was largely similar to the initial report from earlier that year, with the exception of these divergent opinions.

The committee's first report recommended a uniform 28% GST rate on horse racing, casinos, and online gaming, also outlining the base value for taxation. Currently, online gaming is subject to two different GST rates: 18% for skilled games without betting and 28% for games of chance involving betting and gambling. Nevertheless, consensus on the base value for GST calculation remained elusive within the committee, and the GST Council might not make a decision on this matter at the upcoming meeting.

GST Rate Rationalization and Revenue Enhancement

Both central and state governments aim to expand the taxpayer base at every stage of GST taxation, seeking to increase tax collections. Currently, monthly GST collections average around Rs.1.4 lakh crore, with 1.40 crore registered GST taxpayers.

The Council was expected to balance the expectations of states/UTs and taxpayers during the 49th GST Council Meeting.

Potential Amendment to the IGST Act for Place of Supply for Goods Transportation

Media reports suggested the GST Council might discuss creating parity in the taxation of Indian and foreign shipping lines for Indian exporters. This could involve revising the Integrated Goods and Services Tax (IGST) Act to amend the place of supply provision for goods transportation, shifting it to the 'location of the recipient' instead of the current 'destination of goods'.

Currently, Indian exporters pay GST on freight charges from Indian shipping lines for exporting goods, but not on charges from foreign shipping lines. The proposed amendment aims to ensure consistent taxability for both foreign and Indian shipping lines, either by exempting or taxing IGST on the transportation of goods by shipping vessels entering or leaving India.

Expected GST Rate Adjustments for Electric Vehicles, Millet-Based Health Products, and More

Prior to the Budget 2023, various industrial associations urged the Finance Minister to reduce tax rates on several items. A prominent request was for a rate reduction on inputs for Electric Vehicles (EVs), specifically lithium-ion battery cells and packs, from the current 18% to 5%. This move would encourage domestic EV manufacturing and boost consumption in India.

While a GST rate cut on cement, as demanded by the industry, might not be decided upon, the fitment committee was expected to present the matter to the GST Council.

Rate reductions on millet-based health products containing over 70% millet content were also on the agenda. The fitment committee suggested a nil rate for loose millet-based health products and 5% for those supplied in pre-packaged and labelled forms.

The GST rate on pencil sharpeners, previously increased to address an inverted tax structure, might be reconsidered at this Council meeting, potentially reverting to 12% from 18%, given their common use by schoolchildren.

The textile industry continues to face an inconsistent inverted tax structure, negatively impacting businesses. Fabric attracts 5% GST, while yarn is taxed at 12% and polyester chips at 18%. Experts advocate for a uniform tax rate across the entire textile product range.

Another widely sought change was a reduction in GST on health insurance and certain life insurance products from 18%. Insurers argued that this would lower premium costs, making health insurance more accessible and affordable for policyholders.

The hospitality industry, in its Budget 2023 demands, sought a uniform 12% GST rate for all hotel rooms. Currently, a 12% GST applies to hotel rooms with tariffs up to Rs.7,500, while those above Rs.7,500 are taxed at 18%. Furthermore, the industry requested full input tax credit claims, aligning with global standards. Presently, ITC can only be claimed if the hotel booking is in the same state as the business's GST registration.

The 48th GST Council meeting took place on December 17, 2022. Stay informed for future updates on GST Council meetings, including live news, outcomes, and press releases.