Yet another milestone has been achieved in the GST era, when the GST Council held its 50th meeting in New Delhi under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman last week (11 July 2023).
The GST Council has inter-alia made recommendation relating
to GST Compensation, GST Appellate
Tribunal, approval of the Report
of Group of Ministers (‘GoM’)
on Capacity Based Taxation and Composition Scheme in certain
Sectors on GST, recommendations relating to GST rates on Goods & Services, other measures for facilitating trade and for streamlining compliances.
Some of the relevant recommendations, where Circulars/
Notifications are yet to be issued, have been summarized below, for your ready reference:
Recommendations relating
to GST rates on Goods
🢖 Reducing the GST rate to 5% on uncooked/ unfried snack pellets
🢖 Reducing the GST rate from 12% to 5% on imitation zari thread or yarn (known by any name in the trade parlance)
🢖 Supply
of raw cotton (including kala cotton) by agriculturist to
cooperatives is liable to GST
under reverse charge mechanism
🢖 Reducing the GST rate from 18% to 5% on fish soluble paste
🢖 To encourage better utilisation and
protection of the Environment, reducing the GST rate from 18% to
5% on LD slag
🢖 IGST exempted
on import of Dinutuximab (Quarziba) medicine for personal
use
🢖 IGST
exempted on Medicines
and Food for Special Medical Purposes (‘FSMP’) [used in the treatment of Rare Diseases enlisted under the National Policy
for Rare Diseases, 2021] when imported for
personal use subject
to existing conditions
🢖 IGST exempted on FSMP when imported by Centres of Excellence for Rare Diseases
or any person/ institution on recommendation of any of the listed Centres of Excellence
🢖 Expanding the scope of Entry 52B from ‘Sport
Utility Vehicles’ to All Utility Vehicles (by whatever name called) provided the following parameters are met:
∞ Length
exceeding 4000 mm
∞ Engine
capacity exceeding 1500 cc
∞ Ground Clearance
(in un-laden condition) of 170 mm & above
🢖 In order to levy Compensation Cess
on pan masala, tobacco products etc, (where it is not legally required to declare the retail sale
price), the earlier Ad Valorem Rate as was applicable on 31 March 2023
would be considered
🢖 IGST exemption on imports of gold,
silver or platinum available to specified banks to now also include
RBL Bank and ICBC Bank
Recommendations relating
to GST rates on Services
🢖 GST
Exempted on Satellite Launch Services supplied by Private Sector Organizations (to encourage start-ups),
in addition to when such services supplied by ISRO, Antrix Corporation Limited
and New Space India Limited
🢖 As a trade friendly measure, GTA
would no longer be required to file declaration every Financial Year [whether
to discharge GST by itself (i.e. under forward charge) or to not by itself
(i.e. where recipient to pay at 5%
under reverse charge)]. Once
the option is selected (say, GTA selects to discharge GST under forward charge),
the same option would continue for next and future Financial Years, unless GTA intends to change to another option (i.e. to discharge GST under reverse
charge). Further, the last
date of exercising such option shall now be the 31st March of the preceding
Financial Year (instead of 15th March)
🢖 Services
supplied by the Director in his/ her private capacity (such as supplying services by way
of renting of immovable property) would
not be subjected to GST under reverse charge
mechanism (i.e. only those services supplied
by the Director as or in the capacity of Director would be subjected to reverse charge mechanism)
🢖 Supply of food
and beverages in cinema halls is taxable as restaurant services and
liable to GST at 5% [provided these are supplied as part of service and independent
from the cinema exhibition services]. In case such supply of food and beverages are clubbed together with sale of cinema
ticket, then entire supply will attract
GST at the composite rate applicable to service of exhibition of cinema
(being the principal
supply)
🢖 Casino,
Horse Racing and Online Gaming to be subjected to GST at 28% at the full value (i.e.
on the face value of the chips purchased in the case of casinos; on the full
value of the bets placed
with bookmaker/ totalisator in the case of Horse Racing; and on the full
value of the bets placed in case of the Online Gaming)
Measures for trade facilitation
🢖 The Council
has recommended the Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2023 governing
appointment and conditions of
President and Members of the proposed GST Appellate Tribunal for enabling smooth constitution and functioning of GST
Appellate Tribunal. Further, the
relevant provisions of Finance Act,
2023 may be notified by the Centre with effect from 1 August 2023,
so that the same can be brought
into operation at the earliest
🢖 Relaxations provided in Annual Return
(in Form GSTR-9)
and Reconciliation Statement
(in Form GSTR-9C) for the
period FY 2021-22 to be continued for FY 2022-23 also. Further, small taxpayers having Aggregate Annual
Turnover upto INR 2 crores
are exempted from filing Annual
Return for FY 2022-23
🢖 In
case of supply of taxable services by or through an ECO or by a supplier of
Online Information and Database
Access or Retrieval (‘OIDAR’) Services to an unregistered person, then only name of the State of the Recipient (instead of Name
and Full Address of the Recipient) must be mentioned on the Tax Invoice,
to ease compliance burden
🢖 In
pursuance of the directions of Hon’ble Supreme Court in case of the Union of
India v/s Filco Trade Centre Pvt.
Ltd., the Council has recommended a special procedure under Section 148 of the CGST Act, to enable manual filing of appeal against the
orders passed by Proper Officers in respect of Form GST TRAN-1/ Form GST TRAN-2
In light of this, Rule 108(1)
and Rule 109(1) of the CGST Rules to be amended to provide for manual filing of appeal under certain
specified circumstances
Measures for streamlining compliances
🢖 New
Rule 138F under the CGST Rules is recommended to be inserted to mandate the requirement of generation of E-way Bills
for movement of gold and precious stones under Chapter 71. Further, similar rule would be inserted in SGST Rules of the
States who want to mandate such provisions for intra-State movement
🢖 In lines with the recommendations
of the 49th GST Council Meeting with respect to Capacity Based Taxation and Special Composition Scheme for certain
commodities (such as pan masala,
gutkha, chewing tobacco,
etc.), the Council
in this meeting has made following further
recommendations:
∞ Issuance of a notification prescribing a special procedure
to the manufacturers of such commodities for registration of machines and for filing of special monthly
returns
∞ Insertion of new Section
122A under the CGST Act, to provide a special penalty for non- registration of machines by such manufacturers
∞ Issuance of a notification restricting IGST refund route in
respect of exports of such commodities as well
as mentha oil
🢖 Provisions of Section 123 of Finance
Act, 2021 amending
the provisions of Section 16(3)
of the IGST Act to be notified with effect from 1 October 2023 [i.e. all the registered persons
undertaking zero-rated supply to now have only one option to undertake
such supplies under a cover of LUT
(without payment of IGST), instead of earlier alternate option to undertake
such supplies (on payment of IGST)]
🢖 To strengthen the registration
process and to effectively deal with the menace of fake/ fraudulent registrations in GST, the Council has
recommended the following amendments in CGST Rules 2017:
∞ Details
of Bank Account (in name and PAN of the registered person) to be furnished earlier of (a) within 30 days of grant of
registration or (b) before filing statement of outward supplies in Form GSTR-1/ IFF
∞ System-based
auto-suspension of the registration in case details
of Bank Account are not furnished in such prescribed
timelines
∞ Automatic
revocation of such suspension of the registration on furnishing such details of Bank Account
∞ In case the details
of Bank Account
are not furnished
in such prescribed timelines, the said
registered person may not be
allowed to furnish details of outward supplies in Form GSTR-1/
IFF
🢖 In order to streamline the process
of obtaining registration, the Council has recommended to do away with the requirement of the presence
of the applicant during physical verification of business premises (except
in case of high-risk cases, physical verification required despite Aadhaar has been authenticated)
🢖 In
light of the recommendations of the 48th GST Council Meeting, where biometric-based Aadhaar authentication and risk-based
physical verification of Applicants was proposed to be conducted on pilot basis in the State of Gujarat to tackle the menace of
fraudulent registrations. Union Territory of Puducherry and State of Andhra Pradesh have also expressed its intent to join such pilot
initiative after the system’s readiness is tested in the State of
Gujarat
🢖 New
Rule 142B in CGST Rules has been recommended to be inserted to
provide for manner of recovery (in Form GST DRC-01D)
of the tax liability difference between the amount reported
in Form GSTR-1 and Form GSTR-3B along with interest, which
has not been paid and for which no satisfactory explanation has been furnished
🢖 New Rule 88D in
CGST Rules has been recommended to be inserted to provide a mechanism for system-based intimation (in Form GST
DRC-01C) to the registered person in respect of the excess availment
of ITC in Form GSTR-3B
vis-Ã -vis that made available in Form GSTR-
2B above a certain threshold and for such person to explain
the reasons of such difference or take remedial
action. This will help in reducing ITC mismatches and misuse of ITC facility
in GST
🢖 To improve
discipline in filing of Annual Returns (in
Form GSTR-9/ Form GSTR-9A), Form GSTR-3A (i.e. Notice to return defaulter
u/s 46 for not filing return) to be amended to provide for issuance of notice to the registered taxpayers for their failure
to furnish Annual
Returns by the respective due dates
🢖 To amend Rule 64 in CGST Rules, to require OIDAR service
providers to provide
the details of supplies made to registered persons in
India in their return (in Form GSTR-5A), in
order to track due payment of GST on reverse charge basis by such registered persons
🢖 New
Explanation 3 to be inserted after Rule 42 of CGST Rules, to
prescribe that the value of supply of goods from Duty Free Shops at arrival terminal in
international airports to the incoming
passengers to be included in the value of exempt supplies
for the purpose of reversal of ITC
🢖 The Council has recommended insertion of Rule 163 in CGST Rules, 2017 to provide for manner and
conditions of consent-based sharing of information of registered
persons available on the common portal amongst different departments of Government
Please note that notifications giving effect to such recommendations and
circulars for providing these clarifications are awaited
Certain Circulars/ Notifications have been issued on 17 July 2023, where some of the recommendations have been clarified or made effective, which are summarised
as under:
🢖 Currently, Input
Service Distributor (‘ISD’) mechanism is not mandatory for
distribution of Input Tax Credit
(‘ITC’) of common input services procured from third parties to the distinct persons.
However, the Council
has recommended to make ISD mechanism mandatory
prospectively
In light of such recommendation, the Government of India has issued Circular No
199/11/2023- GST dated 17
July 2023 which clarified the following:
∞ In case where the Head Office
(‘HO’) distributes or wishes to distribute ITC to Branch
Offices (‘BOs’) in respect
of such common input services through the ISD mechanism, HO
is required to get itself
registered mandatorily as an ISD in accordance with Section 24(viii)
of the CGST Act
∞ Distribution
of the ITC in respect a common input services procured from a third
party can be made by the HO to a BO through ISD mechanism only
∞ Value of supply
of services made by a Registered Person to a Distinct Person needs to be determined as per Rule 28 of CGST Rules,
read with Section 15(4) of CGST Act (i.e. Open Market Value)
∞ In case where
full ITC is eligible to the recipient, then the value
declared in the Tax Invoice
would be deemed to be the Open Market Value irrespective of the fact whether cost of any particular component
of such services (like employee cost etc.),
has been included
or not in the value
∞ In case where full ITC is not eligible to the recipient, then the cost of salary of employees of the HO, involved in
providing the said services to the BOs, is not
mandatorily required to be included while computing the value
of such services
🢖 Circular to be issued to
provide clarity on various issues pertaining to the GST liability as well as the liability to reverse ITC in cases involving warranty replacement of parts and repair services during warranty period without
any consideration from the customers (clarifying inter alia that no GST is chargeable by the
manufacturer on such replacement of parts and/ or repair service and also, no reversal
of ITC is required to be
made by the manufacturer)
In light of such recommendation, the Government
of India has issued Circular No 195/07/2023- GST dated 17 July 2023 which clarified the following:
∞ Where the manufacturer/
distributor provides replacement of parts and/ or repair services to the customer during the warranty period,
without separately charging any consideration at the time of such
replacement/ repair services, no
further GST is chargeable on such
replacement of parts and/ or repair service
during warranty period
∞ Where any
additional consideration is charged by the manufacturer/ distributor
from the customer, either
for replacement of any part or for any service,
then GST will be payable
on such supply
with respect to such additional consideration
∞ Since the value
of original supply includes the likely cost of replacement of parts and/ or repair services to be
incurred during the warranty period, such supplies cannot
be construed as ‘exempt supply’ and
also, not required to reverse ITC in
respect of such replacement/ repair
∞ In case cases where the distributor replaces the part(s)
to the customer under warranty
either by using his stock or
by purchasing from a third party and charges the consideration for the part(s) so replaced from the manufacturer,
by issuance of a tax invoice, for the said supply made by him to the manufacturer. In such a case, GST would be payable
by the distributor on
the said supply by him to the manufacturer and the manufacturer
would be entitled to avail the ITC of the same, subject
to other conditions of CGST Act. In such case, no reversal
of ITC by the distributor is required
in respect of the same
∞ In case where the distributor
raises a requisition to the manufacturer for the part(s) to be replaced by him under warranty and the
manufacturer then provides the said part(s) to the distributor for the purpose of such replacement to the customer
as part of warranty. In such a case, where the manufacturer is providing such part(s) to the distributor for replacement
to the customer during the warranty period, without
separately charging any consideration
at the time of such replacement, no
GST is payable on such replacement of
parts by the manufacturer. Further, no reversal of ITC is required to be made by
the manufacturer in respect of the parts so replaced
by the distributor under
warranty
∞ There may be cases where the distributor replaces
the part(s) to the customer
under warranty out of the supply already received by
him from the manufacturer and the manufacturer issues a credit note in respect of the
parts so replaced. Accordingly,
the tax liability
may be adjusted by the manufacturer, provided the distributor has reversed the ITC availed
in respect of the parts so replaced
∞ Where the distributor provides
repair services to the customer,
in addition to the replacement of parts without charging the customer, but charges the
manufacturer, then GST
would be payable by the distributor on the said supply by him to the manufacturer and the manufacturer
would be entitled to avail the ITC of the same, subject to other
conditions of CGST Act
∞ Where a customer enters into an
agreement of Extended Warranty with the manufacturer at the time of original supply,
then the consideration for such Extended
Warranty becomes part of the value of the composite supply
(where the principal supply being the supply
of goods and GST would be payable
accordingly). However, in case where a consumer enters into an agreement of Extended Warranty
at any time after the original supply,
then the same is
a separate contract and GST would be payable by the service provider (whether manufacturer or the distributor or any third party), depending on the nature
of the contract (i.e. whether the extended warranty is only
for goods or for services or for composite supply involving goods and services)
🢖 The Government of India has issued Circular No 197/09/2023-GST dated 17 July 2023 which clarified
the following:
∞ For the purpose of computing
accumulated ITC admissible for the refund period from 1 January 2022 onwards,
Form GSTR-2B should be considered instead of Form GSTR-2A (i.e. due to the amendment in Rule 36(4)
restricting availment of ITC if such Tax Invoice is not appearing in Form GSTR-2B)
∞ Appropriate modifications to the Undertaking [which is to be electronically filed
along with the refund
claim (in Form GST RFD-01)] to accommodate various amendments in
relation to Form GSTR-2
and Form GSTR-3
∞ The value of goods exported out
of India to be included while calculating “Adjusted Total Turnover” will be same as being determined
as per the Explanation (i.e.
lower of the FOB value declared
in Shipping Bill/ Bill of Export or value declared in Tax Invoice)
∞ Admissibility of refund in cases where export of goods or realisation of payment for export of services is made after the time limit provided
under Rule 96A of the CGST Rules,
stating that the substantive
benefits of zero-rating may not be denied
∞ The registered person to file
two refund claims – (1) of unutilised ITC, on actual export of goods or services; and (2) of IGST paid on
account of goods not being exported or the payment
not being realized for export of services, within
the prescribed time frame. However,
no refund of interest paid would be available
🢖 Circular to be issued to provide clarity on discharging TCS liability
under Section 52 of the CGST Act, where multiple E-Commerce Operators (‘ECOs’) are involved in a single
transaction of supply
of goods and/ or services
In light of such recommendation, the Government of India has issued Circular No
194/06/2023- GST dated 17
July 2023 which clarified the following:
∞ In case where there
are ECO on either side of the Supplier and Buyer, then the compliances under Section 52 of CGST Act, including collection of TCS, is to be done by the Supplier-side ECO who finally releases the payment to
the Supplier for a particular supply made by the said supplier through him
∞ In case where the Supplier-side
ECO is the supplier himself, then the compliances under Section 52 of CGST Act, including collection of TCS, is to be
done by the Buyer-side ECO who
finally releases the payment to the Supplier-side ECO for a particular supply
made by the said supplier through
him
🢖 The registered person, whose turnover
exceeds the prescribed threshold for generation of e- invoicing1, is required to issue e-invoices for the supplies made to
∞ Government
Departments or Establishments
∞ Government Agencies
∞ Local Authorities
∞ PSUs, etc.
Who have obtained registration solely to comply with TDS provisions under GST
[vide Circular No 198/10/2023-GST dated
17 July 2023]
🢖 In respect
of wrongly availed and utilised IGST credit,
the balance of ITC in electronic credit ledger under all the heads (i.e. IGST, CGST and SGST) together, should be considered while computing interest liability
 |
1 The threshold limits
for generation of e-invoicing
are as under:
∞ INR 5 Crores
with effect from 1
August 2023;
∞ INR 10
Crores with effect from 1 October
2022;
∞ INR 20
Crores with effect from 1
April 2022;
∞ INR 50
Crores with effect from 1
April 2021;
∞ INR 100 Crores
with effect from 1 January 2021
Further, the balance available
under Compensation Cess cannot be utilised for payment of any GST under the heads (i.e. IGST, CGST
and SGST)
To illustrate, say, IGST amounting
to INR 10,000/- was wrongly
availed and utilised, and the balance
available in electronic credit ledger are
as under:
|
IGST |
CGST |
SGST |
Compensation Cess |
|
2,000 |
3,000 |
3,000 |
500 |
In light of such clarification, IGST wrongly availed and utilised
would be INR 2,000/- [10,000 – (2,000
+ 3,000 + 3,000)] and thus, interest would be computed at 18% on INR
2,000/-.
[vide Circular No 192/04/2023-GST dated
17 July 2023]
🢖 Merely holding of securities (which
is neither goods nor services, as per the provisions under GST) of a subsidiary company by
a holding company cannot be treated as a supply of services and thus,
cannot be taxed under GST
[vide Circular No 196/08/2023-GST dated
17 July 2023]
🢖 It was recommended by the Council
to extend the benefits of Circular No 183/15/2022-GST dated 27 December
2022 available for FY 2017-18
and FY 2018-19 for additional period 1 April 2019
to 31 December 2021
As per such Circular
No 183/15/2022-GST, the registered person
is required to furnish the following documents, and claim the excess ITC not
appearing in Form GSTR-2A:
|
Excess ITC claimed in Form GSTR-3B over that
available in Form
GSTR-2A |
Certificate issued
from the |
|
Up to INR 5,00,000/- |
Concerned Supplier |
|
More than INR
5,00,000/- |
Chartered Accountant or Cost Accountant |
In light of the above recommendation, the Government of India issued Circular No 193/05/2023- GST dated
17 July 2023 which clarified the following:
∞ For
the period from 1 April 2019 to 8 October 2019, the guidelines
provided by Circular No.
183/15/2022-GST shall be applicable, in toto, since Rule 36(4) came into effect
from 9 October 2019 only [i.e. the registered person can submit the
relevant certificate and avail ITC]
∞ For
the period 9 October 2019 to 31 December 2021, the guidelines
provided by Circular No.
183/15/2022-GST shall be applicable, subject to not exceeding the ceiling limit
of the eligible ITC available in
respect of invoices or debit notes the details of which have been furnished
by the Suppliers, as under:
|
Period |
Ceiling Limit |
|
9 October 2019 to 31 December 2019 |
20% |
|
1 January 2020 to 31 December 2020 |
10% |
|
1 January 2021 to 31 December 2021 |
5% |
∞ For
the period 1 January 2022 onwards, no ITC shall be allowed in
respect of a supply unless the same is reported by the Supplier
in the Form GSTR-1/ using IFF and is communicated to the said registered person in Form
GSTR-2B
🢖 One-Time Amnesty has been extended by another 2 months (i.e.
from 30 June 2023 to 31 August 2023) for the following:
∞ In case of filing of
application for revocation for cancellation of registration of the past cases, by allowing such persons to file an application
within a specified time period and subject to
fulfilment of certain prescribed conditions
∞ In case of deemed withdrawal of
the best-judgement order under Section 62 of the CGST Act, if the relevant return is filed within a specified time
period and subject to fulfilment of certain prescribed conditions
∞ In respect of pending Form GSTR-4, Form GSTR-9 and Form GSTR-10
by way of conditional waiver/
reduction in late fees
[vide Notification Nos 22-26/2023-Central Tax dated 17 July 2023, which have been
retrospectively made effective from 30
June 2023]
🢖 In view of the prevailing unrest
situation in the State of Manipur, the Council recommended to extend the due dates for filing of
Form GSTR-1 (i.e. Details of outward supplies
of goods or services), Form GSTR-3B (i.e. Details of Outward Supplies
and inward supplies
liable to reverse
charge) and Form GSTR-7 (i.e. Return for Tax Deducted at Source) for the months of April 2023,
May 2023 and June 2023 for the all registered persons in the State of Manipur
till 31 July 2023
In light of this recommendation, the Government of India issued Notification
Nos 18-21/2023- Central Tax dated 17
July 2023, which have been retrospectively made effective from 30 June 2023 to extend the due
dates for such compliances till
31 July 2023.
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