Recommendations of 53rd GST Council Meeting
A summary of the 53rd GST Council Meeting
This post will walk you through the Detailed Analysis of the 53rd GST Council Meeting Recommendations:
The GST Council recommends waiving interest and penalties for demand notices issued under Section 73 of the CGST Act (i.e., cases not involving fraud, suppression, or deliberate disinformation, etc.) for fiscal years 2017-18, 2018-19, and 2019-20 if the whole amount required is paid by March 31, 2025.
GST Council advises the time limit to obtain input tax crxfedit with respect to any invoice or debit note under Section 16(4) of the CGST Act, through any GSTR 3B report filed up to 30.11.2021 for FY 2017-18, 2018-19, 2019-20, and 2020-21, may be regarded to be 30.11.2021.
To reduce disputes, the Council suggests a monetary limit of Rs. 20 lakh for the GST Appellate Tribunal, Rs. 1 crore for the High Court, and Rs. 2 crore for the Supreme Court, for filing appeals by the Department.
The GST Council suggests reducing the amount of pre-deposit necessary to be paid for submitting appeals under GST.
GST Council proposes amending sections of the CGST Act to establish that the three-month term for filing appeals in the GST Appellate Tribunal will begin on a date to be published by the government.
To reduce the interest burden of taxpayers, GST Council advises not levying interest u/s 50 of the CGST Act in case of delayed filing of return, on the amount that is accessible in the Electronic Cash Ledger (ECL) on the due date of filing of the said return.
GST Council suggests sunset clause from April 1st, 2025 for receipt of any new application for anti-profiteering.
GST Council recommends exemption from compensation cess leviable on imports in SEZ by SEZ Unit/developer for authorised operations beginning July 1, 2017.
GST Council recommends 12% GST on milk cans (steel, iron, aluminium) regardless of usage; cartons, boxes, and cases of both corrugated and non-corrugated paper or paper-board; solar cookers (single or dual energy source); and sprinklers, including fire water sprinklers.
GST Council recommends exemption of various services supplied by Indian Railways to the ordinary man, as well as intra-railway supplies.
GST Council supports specific exemptions linked to accommodation services, offering relief for students and working professionals.
The GST Council advises a phased implementation of biometric-based Aadhaar authentication for registration applicants across India.
The GST Council issued the following suggestions regarding GST tax rate modifications, trade facilitation initiatives, and GST compliance simplification.
A. Changes in GST Tax Rates:
I. Recommendations relating to GST rates on Goods
A. Changes in GST rates of goods
1. To boost MRO activities, a consistent rate of 5% IGST will be levied on imports of “parts, components, testing equipment, tools, and tool-kits of aircraft,” regardless of their HS classification, subject to certain circumstances.
2. All milk cans (steel, iron, and aluminium) will be subject to a 12% GST, irrespective of their original use.
3. GST rates on ‘carton, boxes, and cases of both corrugated and non-corrugated paper or paper-board’ (HS 4819 10; 4819 20) would be decreased from 18% to 12%.
4. All solar cookers, whether single or dual energy sources, will be charged 12% GST.
5. To amend 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. To clarify that all types of sprinklers, including fire water sprinklers, will be subject to 12% GST, and to standardise previous practice on ‘as is where is’ basis in view of genuine interpretational issues.
7. To extend the IGST exemption on imports of certain commodities for the defence forces for another five years, till June 30, 2029.
8. To extend the IGST exemption on research equipment/buoys imported through the Research Moored Array for African-Asian-Australian Monsoon Analysis and Prediction (RAMA) program, subject to certain restrictions.
9. To exempt Compensation Cess on the imports in SEZ by SEZ Unit/developers for authorised operations w.e.f. 01.07.2017.
Other Miscellaneous Changes
10. To exempt the Compensation Cess from the supply of aerated beverages and energy drinks to permitted clients by Ministry of Defence Unit Run Canteens.
11. To give ad hoc IGST exemption on technical documentation imported for AK-203 rifle kits for the Indian Defence Forces.
II. Recommendations relating to GST rates on services
1. To exempt the services offered by Indian Railways to the general public, notably platform ticket sales, retiring rooms/waiting rooms, cloak room services, and battery-operated car services, as well as intra-railway transactions. The issue for the prior period shall be regularised from October 20, 2023 to the date of the exemption notification in this regard.
2. To deduct GST from services provided by Special Purpose Vehicles (SPV) to Indian Railways by allowing Indian Railway to use infrastructure built and held by SPV throughout the concession period, as well as maintenance services provided by Indian Railways to SPVs. The earlier issue will be regularised on a ‘as is where is’ basis for the period from July 1, 2017 to the date of the exemption notification in this regard.
3. To include a separate entry in notification No. 12/2017- CTR 28.06.2017 under heading 9963 to exempt accommodation services with a value of up to Rs. 20,000/- per month per person, subject to the condition that the accommodation service be provided for a minimum continuous period of 90 days. To provide a similar benefit in earlier situations.
Other changes relating to Services
4. Co-insurance premium distributed by the lead insurer to the co-insurer for the supply of insurance services 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 regularised on a ‘as is where is’ basis.
5. Transactions involving ceding commissions/re-insurance commissions between insurers and reinsurers may be declared as no supply under Schedule III of the CGST Act, 2017, and previous cases may be regularised on a ‘as is where is’ basis.
6. GST liability on reinsurance services of specified insurance schemes covered by Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) dated 28.06.2017 may be regularised on ‘as is where is’ basis for the period from 01.07.2017 to 24.01.2018.
7. GST liability on reinsurance services of insurance schemes for which the government pays the complete premium and are covered under Sr. No. 40 of notification No. 12/2017-CTR dated 28.06.2017 may be regularised on a ‘as is where is’ basis for the period from 01.07.2017 to 26.07.2018.
8. To clarify that retrocession isure-insurance of reinsurance’ and so qualifies for the exemption under Section 36A of the notification No. 12/2017-CTR dated June 28, 2017.
9. To issue clarification that statutory collections made by Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of No.12/2017-CTR dated 28.06.2017.
10. To clarify, further sharing of the incentive by the acquiring bank with other stakeholders is not taxable if it 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 determined by NPCI in consultation with the participating banks.
B. Measures for facilitation of trade:
1. 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 : Given the difficulties faced by taxpayers during the initial years of GST implementation, the GST Council recommended waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for fiscal years 2017-18, 2018-19, and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice by 31.03.2025. The waiver does not cover the demand for incorrect reimbursements. To this aim, the GST Council has suggested that Section 128A be inserted into the CGST Act of 2017.
2. Reduction of Government Litigation by Fixing monetary limits for filing appeals under GST: To reduce government litigation, the Council advocated establishing monetary limits, subject to specified exceptions, for the department to file GST appeals before the GST Appellate Tribunal, High Court, and Supreme Court. The Council suggested the following monetary limits:
GSTAT: Rs. 20 lakhs
High Court: Rs. 1 crore
Supreme Court: Rs. 2 crores
3. Amendment in Section 107 and Section 112 of CGST Act for reducing the amount of pre-deposit required to be paid for filing of appeals under GST: The GST Council recommends reducing the amount of pre-deposit required for submitting GST appeals in order to improve cash flow and working capital for taxpayers. The maximum sum for submitting an appeal with the appellate authority has been reduced from Rs. 25 crores (CGST and SGST) to Rs. 20 crores (CGST and SGST). Also, the pre-deposit for submitting an appeal with the Appellate Tribunal has been reduced from 20% with a maximum 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.
4. Applicability of Goods and Services Tax on Extra Neutral Alcohol (ENA) Taxation of ENA under GST: The GST Council suggested at its 52nd meeting that the GST Law be amended to clearly remove rectified spirit/Extra Neutral Alcohol (ENA) from the scope of GST when supplied for the manufacture of alcoholic liquors for human use. The GST Council has now suggested a change to sub-section (1) of Section 9 of the CGST Act, 2017 to exempt Extra Neutral Alcohol from GST charge when it is used to create alcoholic liquor for human consumption.
5. Reduction in rate of TCS to be collected by the ECOs for supplies being made through them: Electronic Commerce Operators (ECOs) must collect Tax Collected at Source (TCS) on net taxable supplies under Section 52(1) of the CGST Act. The GST Council has suggested that the TCS rate be reduced from the current 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), in order to alleviate the financial burden on suppliers who provide through such ECOs.
6. Time for filing appeals in GST Appellate Tribunal: The GST Council suggested amending Section 112 of the CGST Act, 2017 to allow the three-month time for submitting appeals before the Appellate Tribunal to begin on a date to be notified by the Government in respect of appeal/revision decisions issued prior to the date of notification. This gives taxpayers enough time to file an appeal before the Appellate Tribunal in the current instances.
7. 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 suggested that the time limit for claiming input tax credit under Section 16(4) of the CGST Act through any return in FORM GSTR 3B filed up to 30.11.2021 for the fiscal years 2017-18, 2018-19, 2019-20, and 2020-21 be assumed 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 a retrospective amendment to Section 16(4) of the CGST Act, which will take effect on 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 to the date of revocation of cancellation of the registration are filed by the registered person within thirty days of the order of revocation.
8. Change in due date for filing of return in FORM GSTR-4 for composition taxpayers from 30th April to 30th June: The GST Council suggested a change to clause (ii) of sub-rule (1) of Rule 62 of the CGST Rules, 2017 and FORM GSTR-4 to extend the due date for filing of returns in FORM GSTR-4 for composition taxpayers from April 30th to June 30th following the end of the financial year. This applies to returns beginning with the financial year 2024-25. This would provide taxpayers who choose to pay tax under the composition levy extra time to file the required return.
9. Amendment of Rule 88B of CGST Rules, 2017 in respect of interest under Section 50 of CGST Act on delayed filing of returns, in cases where the credit is available in Electronic Cash Ledger (ECL) on the due date of filing the said return: The GST Council recommended an amendment to rule 88B of the CGST Rules to provide that an amount available in the Electronic Cash Ledger on the due date of filing a return in FORM GSTR-3B and debited while filing the said return shall not be included when calculating interest under section 50 of the CGST Act for late filing of the said return.
10. Insertion of Section 11A in CGST Act for granting power not to recover duties not levied or short-levied as a result of general practice under GST Acts: The GST Council suggested incorporating a new Section 11A into the CGST Act to give the government the authority, based on the Council’s recommendations, to allow regularisation of non-levy or short levy of GST, when tax was being short paid or not paid owing to normal trade practices.
11. Refund of additional Integrated Tax (IGST) paid on account of upward revision in price of the goods subsequent to export: The GST Council suggested establishing a system for requesting a refund of additional IGST paid as a result of an increase in the price of goods after they have been exported. This would make it easier for a significant number of taxpayers who are compelled to pay additional IGST as a result of an increase in the price of products after export to obtain a refund of such additional IGST.
12. Clarification regarding valuation of supply of import of services by a related person where recipient is eligible to full input tax credit: The Council recommended clarifying that in cases where the foreign affiliate provides certain services to the related domestic entity for which the said related domestic entity is entitled to full input tax credit, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed open market value under the second provision of Rule 28(1) of the CGST Rules. Also, in cases where the recipient has the right to full input tax credit, if the related domestic entity does not issue an invoice for any service provided by the foreign affiliate to it, the value of such services may be declared as Nil and may be considered open market value under the second proviso to rule 28(1) of the CGST rules.
13. Clarification regarding availability of Input Tax Credit (ITC) on ducts and manholes used in the network of Optical Fibre Cables (OFCs): The Council proposed that the input tax credit be clarified to include ducts and manholes utilised in an optical fibre cable (OFC) network under clauses (c) and (d) of sub-section (5) of section 17 of the CGST Act.
14. Clarification on the place of supply applicable for custodial services provided by banks: The Council suggested clarifying that the place of supply of custodial services provided by Indian banks to foreign portfolio investors is determinable under Section 13(2) of the IGST Act, 2017.
15. Clarification on valuation of corporate guarantee provided between related persons after insertion of Rule 28(2) of CGST Rules, 2017: The GST Council recommended that rule 28(2) of the CGST Rules be amended retrospectively with effect from October 26, 2023, and that a circular be issued to explain numerous concerns affecting the valuation of services provided by related parties in the form of corporate guarantees. It is clarified, among other things, that valuation under Rule 28(2) of the CGST Rules is not applicable where such services are exported and the recipient is eligible for full input tax credit.
16. Clarification regarding applicability of provisions of Section 16 (4) of CGST Act, 2017, in respect of invoices issued by the recipient under Reverse Charge Mechanism (RCM): The Council recommended clarifying that in cases of supplies received from unregistered suppliers, where tax must be paid by the recipient under the reverse charge mechanism (RCM) and the invoice must be issued only by the recipient, the relevant financial year for calculating the time limit for availing of input tax credit under the provisions of section 16(4) of the CGST Act is the financial year in which the invoice was issued by the recipient.
17. Clarification on following issues to provide clarity to trade and tax officers and to reduce litigation:
i. Clarification on the taxability of a company’s reimbursement of securities/shares as ESOP/ESPP/RSU to its employees
ii. Clarification on the necessity to reverse the input tax credit in respect of the amount of premium in Life Insurance services that is not included in the taxable value under Rule 32(4) of the CGST Rules.
iii. Clarification regarding the taxability of wreck and salvage values in vehicle insurance claims.
iv. Clarification on the Warranty/Extended Warranty supplied by manufacturers to the end customers
v. Clarification on the availability of input tax credit on repair charges made by insurance firms in cases when motor vehicle insurance claims are settled by reimbursement.
vi. Clarification on the taxability of loans issued between related persons or group companies.
vii. Clarification on time of supply on Annuity Payments under HAM Projects.
Viii. Clarification on the time of supply for spectrum allotment to telecom businesses in circumstances where the licence fee and Spectrum usage charges are to be paid in instalments.
ix. Clarification about the place of supply of items delivered to unregistered persons, where the delivery address is different from the billing address.
x. Clarification on the procedure for suppliers to provide evidence of compliance with the provisions of Section 15(3)(b)(ii) of the CGST Act, 2017 in respect of post-sale discounts, indicating that the recipient has reversed the input tax credit on the stated amount.
xi. Clarifications on several topics relating to special procedures for manufacturers of selected goods, such as pan masala and tobacco.
18. The Council recommended that section 140(7) of the CGST Act be amended retrospectively with effect from July 1, 2017, to provide for transitional credit in respect of invoices pertaining to services provided before the appointed date, as well as invoices received by the Input Service Distributor (ISD) before the appointed date.
19. The Council recommended introducing a new optional facility, FORM GSTR-1A, to allow taxpayers to alter the details in FORM GSTR-1 for a tax period and/or declare additional details, if any, before making a return in FORM GSTR-3B for the same tax period. This will allow taxpayers to add any supply details from the current tax period that were not reported in FORM GSTR-1 of the same tax period, as well as 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 the correct liability is auto-populated in FORM GSTR-3B.
20. The Council recommended that taxpayers with an aggregate yearly revenue of up to two crore rupees be exempted from filing an annual return in FORM GSTR-9/9A for the financial year 2023-24.
21. Amendment was recommended to be made in section 122(1B) of 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 CGST Act, and not for other e-commerce operators.
22. The Council recommended modifying Rule 142 of the CGST Rules and issuing a circular to provide a method for adjusting an amount paid in respect of a demand via FORM GST DRC03 against the amount to be paid as a pre-deposit for filing an appeal.
Other measures pertaining to Law and Procedures
23. Rolling out of biometric based Aadhaar authentication on All-India basis: The GST Council recommended that biometric-based Aadhaar authentication for registration applicants be phased in across India. This would tighten the GST registration process and aid in combating fraudulent input tax credit (ITC) claims generated through fake invoices.
24. Amendments in Section 73 and Section 74 of CGST Act, 2017 and insertion of a new Section 74A in CGST Act, to provide for common time limit for issuance of demand notices and orders irrespective of whether case involves fraud, suppression, willful misstatement etc., or not: There is currently a varied time limit for issuing demand notifications and demand orders, depending on whether or not charges of fraud, suppression, willful falsehood, and so on are involved. To make the implementation of those provisions easier, the GST Council proposed establishing a common time limit for the issuance of demand notices and orders for demands beginning in FY 2024-25, in cases involving charges of fraud or willful misstatement and those that do not, among other things. Also, the time restriction for taxpayers to benefit from a reduced penalty by paying the tax demanded plus interest has been recommended to be extended from 30 to 60 days.
25. The Council recommended amending sections 171 and 109 of the CGST Act, 2017 to include a sunset clause for anti-profiteering under GST and to direct the handling of anti-profiteering cases to the Principal Bench of the GST Appellate Tribunal (GSTAT). Council has also suggested that any new anti-profiteering applications be received by April 1, 2025.
26. Amendment in Section 16 of IGST Act and section 54 of CGST Act to curtail refund of IGST in cases where export duty is payable: The Council proposed amendments to Section 16 of the IGST Act and Section 54 of the CGST Act to limit refunds for goods subjected to export duty, regardless of whether the goods are exported without or with taxes paid, and such restrictions should also apply if the goods are supplied to a SEZ developer or a SEZ unit for authorised operations.
27. The threshold for reporting B2C inter-State supplies invoice-by-invoice in Table 5 of FORM GSTR-1 was recommended to be decreased from Rs 2.5 lakh to Rs one lakh.
28. The Council recommended registered persons who are required to deduct tax at source under section 51 of the CGST Act file a return in FORM GSTR-7 every month, regardless of whether or not tax was deducted during that month. It has also been suggested that no late fee be charged for late filing of the Nil FORM GSTR-7 returns. Also, it has been suggested that invoice-specific details be provided in the FORM GSTR-7 return.
Note: The GST Council’s recommendations are offered in this release, which includes significant decision items in simple language for stakeholder information. The same would be implemented through the necessary circulars/notifications/law amendments, which would have the force of law.
