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Context

• The 48th GST Council meeting was held on December 17.

Summary of Key Highlights of the 48th GST Council meeting are as follows

• Decriminalisation of three kinds of offences under GST: Obstruction of duties of an officer, the threshold amount of tax for launching criminal offence under GST increased from the current limit of Rs.1 crore to 2 crores, except where fake invoices are involved and to reduce the workload of courts decriminalised the compounding of offence up to a limit;
• A few GST rate rationalisation matters were taken up – GST on pulse husks for cattle feed (including chilka and concentrates) was reduced to nil from 5%. Further, the concessional 5% GST on ethyl alcohol was extended to refineries for blending with petrol, which was earlier charged at 18%.
• Clarifications were given on a few taxation matters, such as the GST on equipment used by petroleum companies for exploration and how to deal with mismatches of invoices in GSTR-1 vs GSTR-3B in the early years.
• e-Commerce operators can allow the suppliers to be registered under the composition scheme and unregistered vendors, facilitating e-commerce for all the micro-enterprises.
• The second report on casinos and online gaming was not circulated and hence not part of the 48th meeting agenda.
• No decision has been taken on any GST rate hike.
• Cess on SUV at 22% clarified- Applicable if meets 4 criteria-
  • Popularly known as SUV, 
  • The engine capacity of more than 1500 cc,
  • Length more than 4000 mm and
  • Ground clearance equal to or more than 170 mm
• Further, Council clarified that no GST on insurance is levied on the No-claim bonus offered by insurance companies, so it is deductible from the premium without a GST charge.

Tax Rates Reduced and clarified

The GST rates on the following items were slashed-

Item description	Before	After
Husk of pulses, along with chilka and concentrates, chuni or churi, and khanda used as cattle feed*	5%	Nil
Ethyl alcohol that is sold to refineries to blend it with the motor spirit or petrol	18%	5%
Sale of Mentha arvensis, similar to Mentha oil	No RCM	Under RCM

*Intervening period from 3rd August 2022, as per the Circular clarifying levy, is regularised.

Clarifications on tax rates for supply of goods and services are as follows-

• Rab, also called rab-salawat is categorised under HSN code 1702, and GST rate of 18% gets charged.
• GST at 18% is charged on drums made using extrusion, particularly covered under HSN code 19059030.
• Cess on SUV at 22% clarified- Applicable if meets 4 criteria-
• Popularly known as SUV, 
• The engine capacity of more than 1500 cc,
• Length more than 4000 mm and
• Ground clearance equal to or more than 170 mm
• 5% GST is charged on imported equipment or goods classified in the concessional 5% GST rate category for petroleum operations and 12% GST applies if the general rate is higher than 12%.
• No GST is chargeable if the residential dwelling is rented to a GST-registered person in their personal capacity for their own use/account as a residence and not for business.
• No GST on incentives paid to banks by the Central Government as a subsidy under the promotion of RuPay Debit Cards and low-value BHIM-UPI transaction schemes

GST amendments for ease of Trade and Business

(1) Decriminalisation under GST:

The Council has decided to decriminalise the following three offences under the GST law –

• The tax threshold for launching prosecution under GST or taking criminal action is increased from Rs.1 crore to Rs.2 crore, except for fake invoices. In other words, offences pertaining to the issuance of invoices without the sale of goods or services or both or dealing with fake invoices continue to be prosecuted if the tax amount is more than Rs.1 crore.
• Reduction in the compounding amount from the current tax range of 50%-150% to the range of 25%-100%
• Certain offences under Section 132(1) clauses (g), (j) and (k) of the CGST Act, such as obstruction or restricting any officer from discharging their duties, intentional tempering of material evidence and failure to provide the information.

(2) Unregistered persons to get new refund rules:

Earlier, there was no defined process for refund claims for the buyers not registered under GST upon cancellation of the contract/ agreement for the sale of services such as flat/house construction and long-term insurance policy and upon the expiry of the time limit to issue credit note by the supplier.

The GST Council decided to amend the CGST Rules and directed CBIC to issue a Circular for the procedure to file a refund application by such unregistered buyers.

(3) Facilitate e-commerce for micro-enterprises from 1st Oct 2023:

From 1st October 2023, GST-unregistered suppliers, dealers and composition taxable persons can sell goods through e-commerce operators within the state, subject to some conditions.

CBIC and GSTN will make the necessary amendments to the Rules via notifications, an amendment to the Act and get the GST portal ready for the new functionality within the defined timeline.

(4) Clarifying the date of applicability for new entries in Schedule III under GST:

New entries were added in Schedule III (Items not covered under GST) from 1st February 2019, such as para 7 (sale from one non-taxable territory to another, such as high sea sales), para 8(a) (sale of warehoused goods before clearance for home consumption) and para 8(b) (Sale of goods by the consignee to any other person where goods are dispatched from the foreign port but before clearance for home consumption).

Confusion arose about their taxability from 1st July 2017 up to 31st January 2019, so the GST Council recommended giving effect to these additions from the inception of GST. However, no refund of tax already paid shall be granted.

(5) Reversal of Input Tax Credit (ITC) for non-payment of invoice within 180 days:

CGST Rule 37(1) will be amended retrospectively from 1st October 2022 for ITC reversal to provide for reversal of input tax credit as per the second proviso to Section 16 of CGST Act, only to the extent of the invoice amount unpaid to the supplier versus the value of the supply, along with tax payable.

(6) New CGST Rule 37A for ITC reversal where the supplier fails to deposit tax:

The GST Council decided to insert Rule 37A in CGST Rules that will define steps to reverse ITC claimed on taxes undeposited by the supplier within a specified date. Further, the process of re-availing such ITC where the supplier pays it subsequently will be provided.

It allows easy compliance with the condition for claiming an input tax credit as per Section 16(2)(c) of the CGST Act.

(7) Amendments for timely and easier GST appeal processing:

Changes in CGST Rules 108(3) and 109: More clarity for submission of a certified copy of the order against which the appeal is filed and the final acknowledgement issued by the appellate authority.

Change in CGST Rule 109C and insertion of new form GST APL-01/03 W: Gives facility for withdrawing an appeal application up to a certain defined stage, avoiding litigations at the level of appellate authorities.

(8) Insurance – No Claim Bonus (NCB) offered by insurance companies, especially in motor vehicle insurance, is allowed as a deduction from the taxable premium amount for valuation purposes.

(9) Fresh GST Circulars will be issued on the following issues:

• Treatment of pending GST dues from bankrupt businesses where proceedings are filed under the Insolvency and Bankruptcy Code, 2016. Rule 161 of CGST Rules and form DRC-25 will be amended accordingly.
• Place of supply of mail/courier services for transportation of goods to places outside India under the proviso to Section 12(8) of the IGST Act and ITC availability to the recipient. The removal of that proviso from the law is further recommended by the Council.
• Procedure for verification of ITC differences between GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19.
• Manner of demand re-determination as per Section 75(2) of the CGST Act.
• Applicability of e-invoicing for a business entity.

(10) Grant of GST registration to TDS deductor and TCS collectors:

CGST Rule 12(3) will be amended to introduce a facility to the GST-registered TDS deductor and TCS collectors for applying for the cancellation of GST registration.

Streamlining GST Compliance

1. Biometric-based Aadhaar authentication, as well as risk-based physical verification of GST registration applicants, is proposed in Gujarat on a pilot basis with amendments in CGST Rules 8 and rule 9 for curbing fake and fraudulent registrations.
2. Form REG-01 will capture PAN-linked mobile numbers and e-mail IDs (from the CBDT database) with OTP verification to restrict misuse of PAN of a person.
3. Amendment that restricts filing of all GST returns and statements can be filed after a maximum of three years from the due date.
4. Amendment to GSTR-1 for allowing e-commerce operators and sellers to report sales through e-commerce operators, covered under Sections 52 and 9(5) of the CGST Act.
5. Insertion of CGST Rule 88C and form DRC-01B for intimation to the taxpayer, by the GST portal, for any tax liability differences between GSTR-1 and GSTR-3B for a tax period over a defined amount and/ or percentage, to either pay or explain the difference.
6. Further, a new clause (d) will be inserted in CGST Rule 59(6) to restrict the filing of GSTR-1 for future tax periods if the taxpayer has not deposited the tax laid down in the intimation. Further, that restriction may apply if he has also not replied to such intimation giving reasons for the pending unpaid tax without the intervention of the tax officers.
7. Amendment in the definition of “non-taxable online recipient” under section 2(16) of IGST Act, 2017 and definition of “Online Information and Database Access or Retrieval Services (OIDAR)” under section 2(17) of IGST Act, 2017 to reduce issues in interpretation and litigation on taxation of OIDAR Services.

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