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Context

• Union Finance Minister Nirmala Sitharaman chaired the 53rd GST Council meeting in New Delhi.
• The GST Council made the following recommendations relating to changes in GST tax rates, measures for facilitation of trade and measures for streamlining compliances in GST.

Changes in GST Tax Rates:

• Recommendations relating to GST rates on Goods
• Changes in GST Rates of Goods

1. Uniform Rate on Aircraft Parts and Tools
• Rate: 5% IGST
• Applicability: Imports of parts, components, testing equipment, tools, and tool-kits of aircrafts, irrespective of HS classification
• Purpose: To boost MRO (Maintenance, Repair, and Overhaul) activities
• Conditions: Subject to specified conditions
2. GST on Milk Cans
• Rate: 12%
• Applicability: All milk cans made of steel, iron, and aluminum
3. Reduction in GST on Paper Products
• Rate: Reduced from 18% to 12%
• Products: Cartons, boxes, and cases of both corrugated and non-corrugated paper or paper-board (HS 4819 10; 4819 20)
4. GST on Solar Cookers
• Rate: 12%
• Applicability: All solar cookers, whether single or dual energy source
5. Incorporation of Poultry Keeping Machinery Parts
• Rate: 12%
• Amendment: Existing entry for poultry keeping machinery to specifically include “parts of poultry keeping machinery”
• Purpose: To address genuine interpretational issues and regularize past practices
6. Clarification on Sprinklers
• Rate: 12%
• Applicability: All types of sprinklers, including fire water sprinklers
• Purpose: To address genuine interpretational issues and regularize past practices
7. IGST Exemption for Defence Imports
• Duration: Extended for five years, until 30th June 2029
• Applicability: Specified items for defence forces
8. IGST Exemption for Research Equipment Imports
• Programme: Research Moored Array for African-Asian-Australian Monsoon Analysis and Prediction (RAMA)
• Conditions: Subject to specified conditions
9. Compensation Cess Exemption for SEZ Imports
• Applicability: Imports in SEZ by SEZ Unit/developers for authorized operations
• Effective Date: From 01.07.2017

Other Miscellaneous Changes

1. To exempt Compensation cess on supply of aerated beverages and energy drinks to authorised customers by Unit Run Canteens under Ministry of Defence.
2. To provide Adhoc IGST exemption on imports of technical documentation for AK-203 rifle kits imported  for  Indian Defence forces.

Recommendations relating to GST rates on services

Recommendations Relating to GST Rates on Services

Exemptions in GST Rates on Services

1. Exemption for Indian Railways Services to the General Public
• Services Covered: Sale of platform tickets, facility of retiring rooms/waiting rooms, cloakroom services, and battery-operated car services.
• Additional Exemption: Intra-Railway transactions.
• Past Period Regularization: From 20.10.2023 to the date of issue of the exemption notification.
2. Exemption for Services Provided by Special Purpose Vehicles (SPV) to Indian Railways
• Services Covered: Use of infrastructure built & owned by SPV during the concession period and maintenance services supplied by Indian Railways to SPV.
• Past Period Regularization: From 01.07.2017 till the date of issue of the exemption notification.
3. Exemption for Accommodation Services
• Separate Entry Creation: Under heading 9963.
• Value of Supply: Accommodation up to Rs. 20,000/- per month per person.
• Condition: The accommodation service must be supplied for a minimum continuous period of 90 days.
• Past Period Benefit: Similar benefits to be extended for past cases.

These exemptions and amendments in GST rates aim to streamline processes, reduce tax burdens in specific areas, and address past interpretational issues to provide clarity and relief to taxpayers and service providers.

Other changes relating to Services

Recommendations Relating to GST Rates on Services (Continued)

1. Co-Insurance Premium Apportionment
• Proposal: Co-insurance premium apportioned by the lead insurer to the co-insurer for the supply of insurance service in co-insurance agreements may be declared as no supply under Schedule III of the CGST Act, 2017.
• Past Cases: Regularization on an 'as is where is' basis.
2. Ceding Commission/Re-Insurance Commission Transactions
• Proposal: Transactions of ceding commission/re-insurance commission between insurer and re-insurer may be declared as no supply under Schedule III of the CGST Act, 2017.
• Past Cases: Regularization on an 'as is where is' basis.
3. GST Liability on Reinsurance Services for Specified Insurance Schemes
• Schemes Covered: Insurance schemes covered by Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) dated 28.06.2017.
• Past Period Regularization: From 01.07.2017 to 24.01.2018.
4. GST Liability on Reinsurance Services for Government-Paid Insurance Schemes
• Schemes Covered: Insurance schemes for which the total premium is paid by the Government, covered under Sr. No. 40 of notification No. 12/2017-CTR dated 28.06.2017.
• Past Period Regularization: From 01.07.2017 to 26.07.2018.
5. Clarification on Retrocession
• Proposal: Clarify that retrocession, defined as 're-insurance of re-insurance', is eligible for the exemption under Sl. No. 36A of notification No. 12/2017-CTR dated 28.06.2017.
6. Exemption for Statutory Collections by RERA
• Clarification: Statutory collections made by the Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of notification No. 12/2017-CTR dated 28.06.2017.
7. Incentive Sharing for RuPay Debit Cards and BHIM-UPI Transactions
• Clarification: Further sharing of incentives by the acquiring bank with other stakeholders, where the sharing is defined under the incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions and decided by NPCI in consultation with participating banks, is not taxable.

These recommendations aim to streamline the GST structure, provide clarity on taxation issues, and regularize past practices to ensure compliance and ease of doing business.

Measures for facilitation of trade:

Additional GST Recommendations

1. Conditional Waiver of Interest or Penalty
• Section 128A Insertion: To provide conditional waivers of interest or penalties for demands raised under Section 73 for FY 2017-18 to FY 2019-20.
• Conditions: Taxpayers must pay the full amount of tax demanded by 31.03.2025.
• Exclusions: The waiver does not cover demands for erroneous refunds.
2. Reduction of Government Litigation
   • GST Appellate Tribunal (GSTAT): Rs. 20 lakhs
   • High Court: Rs. 1 crore
   • Supreme Court: Rs. 2 crores
• Monetary Limits for Appeals: Prescribed limits for filing appeals in GST by the department to reduce litigation.
3. Reduction of Pre-Deposit Amounts for Appeals
   • Appeals with Appellate Authority: Reduced from Rs. 25 crores CGST and Rs. 25 crores SGST to Rs. 20 crores CGST and Rs. 20 crores SGST.
   • Appeals with Appellate Tribunal: 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.
• Amendment to Sections 107 and 112: To reduce the amount of pre-deposit required for filing GST appeals.
• New Limits:
4. GST on Extra Neutral Alcohol (ENA)
• Taxation Clarification: Amend GST law to explicitly exclude rectified spirit/ENA from GST when used for manufacturing alcoholic liquors for human consumption.
• Amendment: To sub-section (1) of Section 9 of the CGST Act, 2017, ensuring GST is not levied on ENA used for producing alcoholic liquor for human consumption.

These recommendations aim to streamline tax compliance, reduce litigation, ease financial burdens on taxpayers, and clarify the taxability of specific goods.

Further Recommendations on GST

1. Reduction in TCS Rate for Electronic Commerce Operators (ECOs)
• Current Rate: ECOs collect Tax Collected at Source (TCS) at 1% (0.5% CGST + 0.5% SGST/ UTGST or 1% IGST) on net taxable supplies under Section 52(1) of the CGST Act.
• Proposed Reduction: Recommended reduction of TCS rate to 0.5% (0.25% CGST + 0.25% SGST/ UTGST or 0.5% IGST) to alleviate the financial burden on suppliers making supplies through ECOs.
2. Extension of Time for Filing Appeals in GST Appellate Tribunal
• Amendment to Section 112: Proposed amendment to allow a three-month period for filing appeals before the Appellate Tribunal to begin from a date notified by the Government, concerning appeal/revision orders passed before the notification date. This provides taxpayers with ample time to file appeals in pending cases.
3. Relaxation in Condition of Section 16(4) of CGST Act
   • Time Limit for Availing Input Tax Credit: The time limit to avail input tax credit for any invoice or debit note under Section 16(4) of the CGST Act is extended through any return in FORM GSTR 3B filed up to 30.11.2021 for the financial years 2017-18 to 2020-21.
   • Retrospective Amendment: Recommended retrospective amendment in Section 16(4) of CGST Act from 01.07.2017 to facilitate this extension.
   • Retrospective Amendment: Proposed retrospective amendment in Section 16(4) of CGST Act, effective from July 1st, 2017.
   • Conditional Relaxation: To conditionally relax the provisions of section 16(4) of CGST Act for cases where returns are filed within thirty days of the revocation of registration cancellation.
• For Initial Years of GST Implementation (2017-18 to 2020-21):
• In Cases of Return Revocation:

1. Change in Due Date for Filing of Return in FORM GSTR-4 for Composition Taxpayers
• Amendment in Rule 62 of CGST Rules, 2017: Recommended extension of the due date for filing of return in FORM GSTR-4 for composition taxpayers from 30th April to 30th June following the end of the financial year, starting from the financial year 2024-25 onwards.
• Purpose: Provides more time to taxpayers opting to pay tax under composition levy to furnish the said return.
2. Amendment of Rule 88B of CGST Rules, 2017
• Interest Calculation: Proposed amendment in rule 88B of CGST Rules to exclude the amount available in the Electronic Cash Ledger on the due date of filing of return in FORM GSTR-3B, which is debited while filing the said return, from the calculation of interest under section 50 of the CGST Act for delayed filing of the said return.
3. Insertion of Section 11A in CGST Act
• Granting Power not to Recover Duties: Recommended insertion of a new Section 11A in CGST Act to empower the Government, on the recommendations of the Council, to allow regularization of non-levy or short levy of GST resulting from common trade practices.
4. Refund of Additional Integrated Tax (IGST) on Upward Revision in Export Goods' Price
• Mechanism for Claiming Refund: Proposed prescription of a mechanism for claiming refund of additional IGST paid due to upward revision in price of exported goods. This facilitates taxpayers required to pay additional IGST on revised export goods' prices in claiming refund of such additional IGST.

1. Clarification on Valuation of Import of Services by Related Persons
• Deemed Open Market Value: Proposed clarification that in cases where a foreign affiliate provides services to a related domestic entity, eligible for full input tax credit, the value declared in the invoice by the domestic entity may be deemed as the open market value.
• Nil Value: If the invoice is not issued by the related domestic entity for services provided by the foreign affiliate, and full input tax credit is available to the recipient, the value of such services may be deemed as nil, following the second proviso to rule 28(1) of CGST Rules.
2. Clarification on Input Tax Credit (ITC) for Ducts and Manholes in Optical Fiber Cable (OFC) Networks
• No Restriction: Recommended clarification that input tax credit is not restricted for ducts and manholes used in the network of optical fiber cables (OFCs) under section 17 of CGST Act.
3. Clarification on Place of Supply for Custodial Services by Banks
• Determinable Place: Recommended clarification that the place of supply for custodial services provided by Indian Banks to Foreign Portfolio Investors should be determined as per Section 13(2) of the IGST Act, 2017.
4. Clarification on Valuation of Corporate Guarantees between Related Parties
• Retrospective Amendment: Recommended retrospective amendment of rule 28(2) of CGST Rules from 26.10.2023 and issuance of a circular to clarify issues regarding valuation of services providing corporate guarantees between related parties.
• Export Exemption: Clarification that valuation under rule 28(2) would not apply in cases of exporting such services and where the recipient is eligible for full input tax credit.
5. Clarification on Applicability of Section 16(4) of CGST Act in Reverse Charge Mechanism (RCM)
• Calculation of Time Limit: Recommended clarification that for supplies received from unregistered suppliers where tax is paid by the recipient under RCM and invoice issued by the recipient, the relevant financial year for the time limit for input tax credit under section 16(4) of CGST Act is the financial year of invoice issuance.

17. Clarifications to Reduce Litigation
18. Clarification on taxability of reimbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees. ii. Clarification on reversal of input tax credit for premium in Life Insurance services. iii. Clarification on taxability of wreck and salvage values in motor insurance claims. iv. Clarification on Warranty/Extended Warranty provided by Manufacturers to end customers. v. Clarification on input tax credit availability on repair expenses in motor vehicle insurance claims. vi. Clarification on taxability of loans granted between related persons or group companies. vii. Clarification on time of supply on Annuity Payments under HAM Projects. viii. Clarification on time of supply for allotment of Spectrum to Telecom companies with payment in instalments. ix. Clarification on place of supply of goods to unregistered persons with different delivery and billing addresses. x. Mechanism clarification for suppliers to provide evidence of compliance with Section 15(3)(b)(ii) regarding post-sale discounts. xi. Clarifications on special procedure for manufacturers of specified commodities like pan masala, tobacco, etc.
19. Transitional Credit Amendment

• Recommended amendment in section 140(7) of CGST Act retrospectively w.e.f. 01.07.2017 to allow transitional credit for services provided before the appointed date and invoices received by Input Service Distributor (ISD) before the appointed date.

19. New Optional Facility for Amendment in GSTR-1

• Proposed a new optional facility through FORM GSTR-1A to enable taxpayers to amend or declare additional details before filing of return in FORM GSTR-3B for a tax period, ensuring correct liability auto-populated in FORM GSTR-3B.

20. Exemption from Annual Return Filing

• Recommended exemption from filing annual return in FORM GSTR-9/9A for FY 2023-24 for taxpayers with aggregate annual turnover up to two crore rupees.

21. Amendment in Penal Provision

• Recommended amendment in section 122(1B) of CGST Act retrospectively w.e.f. 01.10.2023 to clarify that the penal provision applies only to e-commerce operators required to collect tax under section 52 of CGST Act.

22. Mechanism for Adjustment of Demand Payment

• Recommended amendment in rule 142 of CGST Rules and issuance of a circular to prescribe a mechanism for adjusting the amount paid in respect of a demand through FORM GST DRC-03 against the pre-deposit for filing appeal.

Other Measures Pertaining to Law and Procedures

1. Rolling Out Biometric-Based Aadhaar Authentication
• Recommended the pan-India phased rollout of biometric-based Aadhaar authentication for registration applicants to strengthen the GST registration process and combat fraudulent ITC claims through fake invoices.
2. Amendments in Sections 73, 74, and Introduction of Section 74A
• Proposed amendments in Section 73 and Section 74 of CGST Act, 2017, and introduction of a new Section 74A to establish a common time limit for issuing demand notices and orders, regardless of whether fraud, suppression, or willful misstatement charges are involved. Additionally, recommended extending the time limit for taxpayers to avail reduced penalty from 30 to 60 days.
3. Sunset Clause for Anti-profiteering and Handling by GST Appellate Tribunal
• Recommended amendments in Section 171 and Section 109 of CGST Act, 2017, to introduce a sunset clause for anti-profiteering under GST and designate the Principal bench of GST Appellate Tribunal (GSTAT) for handling anti-profiteering cases. Proposed a sunset date of 01.04.2025 for new anti-profiteering applications.
4. Amendments to Curtail Refund of IGST
• Proposed amendments in Section 16 of IGST Act and Section 54 of CGST Act to restrict the refund of IGST on goods subject to export duty, regardless of whether taxes were paid or not, and applicable even if goods are supplied to SEZ developer or unit for authorized operations.
5. Threshold Reduction for Reporting of B2C Inter-State Supplies
• Recommended reducing the threshold for reporting B2C inter-State supplies invoice-wise in Table 5 of FORM GSTR-1 from Rs 2.5 Lakh to Rs 1 Lakh.
6. Monthly Filing of FORM GSTR-7 and Invoice-wise Details
• Recommended that registered persons required to deduct tax at source under Section 51 of CGST Act file FORM GSTR-7 monthly, regardless of whether any tax was deducted. Also proposed no late fee for delayed filing of Nil FORM GSTR-7 return and the requirement to furnish invoice-wise details in the return.

PRACTICE QUESTION Q. What are the recommended monetary limits, as suggested by the GST Council, for filing appeals by the department in GST cases before the GST Appellate Tribunal, High Court, and Supreme Court respectively, with the aim of reducing government litigation? a) GSTAT: Rs. 10 lakhs, High Court: Rs. 50 lakhs, Supreme Court: Rs. 1 crore b) GSTAT: Rs. 20 lakhs, High Court: Rs. 1 crore, Supreme Court: Rs. 2 crores c) GSTAT: Rs. 50 lakhs, High Court: Rs. 2 crores, Supreme Court: Rs. 5 crores d) GSTAT: Rs. 5 lakhs, High Court: Rs. 25 lakhs, Supreme Court: Rs. 50 lakhs Answer b)

SOURCE: PIB