Summary of the relevant
updates is provided below for ease of your reference:
A) Proposals relating to GST law, Compliances and Procedures
►
Notify
enabling provisions under GST Acts and consequent amendments in the GST Rules
for providing legal sanctity to Invoice Management System (IMS) functionality:
-
To
recap, IMS facility has been introduced on the GST portal effective 1st
October 2024 onwards, which aims to facilitate taxpayers in matching their
purchase records (invoices, credit / debit notes) with the documents issued by
their suppliers, for the purpose of formulation of GSTR 2B and availment of
Input Tax Credit (ITC).
-
In
this regard, the GST Council has proposed changes for providing legal framework
for generation of FORM GSTR-2B, based on the action taken by the taxpayers on
the IMS functionality [amendment to Section 38 and Rule 60]
-
Additionally,
the following changes have also been recommended:
o
Provision
for specific reversal of ITC by recipient (as covered by the credit note), to
enable/facilitate reduction of output tax liability of the supplier –
amendment to Section 34(2) of the CGST Act
o
Notifying
the manner of adjustment of suppliers’ output tax liability, against the credit
note issued by him – insertion of new Rule 67B in CGST Rules
o
Restrict
filing of GSTR-3B till generation of FORM GSTR-2B of the concerned tax period -
amendment to Section 39(1) and Rule 61 of CGST Act and Rules respectively
► Retrospective amendment of Section 17(5)(d) of CGST
Act for substituting the term “Plant or Machinery” with “Plant and Machinery”:
-
To
recap, the Hon’ble Supreme Court of India in the case of M/s Safari Retreats
Private Ltd. [2024 INSC 756], had observed that clause (d) of Section 17(5)
of CGST Act specifically uses the expression “plant or machinery” and
not “plant and machinery” as defined in explanation to Section 17 of
CGST Act. It was further observed that the term “plant” has not been defined
under the CGST Act or the rules framed thereunder, its ordinary meaning in
commercial terms will have to be attached to it.
-
Therefore,
it was held that to give a plain interpretation to clause (d) of Section 17(5),
the word “plant” will have to be interpreted by taking recourse to the
functionality test – that if a building qualifies to be a plant, ITC can be
availed against the supply of services in the form of renting or leasing the
building or premises.
-
The
council has recommended retrospective amendment in Section 17(5)(d) of the CGST
Act, for replacing the term "plant or machinery" with the term
"plant and machinery" to ensure consistency and uniformity in
its interpretation with the intent as provided in the Explanation to Section 17
of the Act.
►
Inclusion
of Inter-State Reverse Charge Mechanism (‘RCM’) transactions, under Input
Service Distributor (ISD) Mechanism effective from April 2025:
-
To
recap, the 52nd GST Council meeting had recommended amendments to enable ISD
registration to distribute ITC pertaining to services taxed under the reverse
charge mechanism as per Sections 9(3) and 9(4) of the CGST Act i.e. intra-state
RCM transactions
-
It
is now recommended to extend the provisions, to explicitly cover inter-state
RCM transactions for ITC distribution through ISD mechanism
► Notify reduction in payment of pre-deposit for filing
an appeal, concerning an order that solely pertains to a demand of penalty:
-
It
has been recommended that payment of pre-deposit be reduced to 10% (as against
existing 25%) for filing appeal before Appellate Authority and / or Appellate
Tribunal in cases involving only penalty demand i.e., cases without a
demand of tax – amendment of Section 107 and Section 112 of CGST Act
► Introduce clarification regarding documenting
mandatory details on invoices issued for 'Online Services':
-
A
clarification is proposed to be issued, clarifying that a supplier of ‘Online
services’ such as online money gaming, OIDAR services etc. is mandatorily
required to capture the name of state of the unregistered recipients, on the
tax invoice.
B)
Proposals relating to trade facilitation measures:
► Exclusion of supply of goods warehoused in SEZ / FTWZ
before clearance for exports or to DTA from the ambit of ‘supply’:
-
Insertion
of clause 8(aa) in Schedule III of the CGST Act (retrospectively) to exclude
the supply of goods warehoused in SEZ / FTWZ to a ant person before
clearance for exports or to DTA from the ambit of ‘supply’ under GST, at
par with the existing GST provisions for transactions in customs bonded
warehouse.
► Clarification on taxability of vouchers and related
amendments:
-
Omission
of Section 12(4) and Section 13(4) of the CGST Act which provides for the time
of supply of vouchers at the stage of redemption. Omission of Rule 32(6) of the
CGST Rules which prescribes valuation of vouchers to be redeemed against goods
of services.
-
Further,
clarification to be issued on the following:
o
Transactions
in vouchers shall be treated neither as a supply of goods nor as a supply of
services
o
Distribution
of vouchers on:
§
Principal
to Principal basis - not leviable to GST
§
Principal
to agent basis - commission/ fee/ any other amount charged by the agent
o
Additional
services such as advertisement, co-branding, marketing and promotion,
customization and technology support, customer support etc. related to vouchers
leviable to GST
o
Unredeemed
vouchers/ breakage not a supply under GST. Consequently, GST not payable on
breakage income accounted in the books of accounts.
C)
Proposals relating to rate rationalisation for services and goods:
► Changes in GST Rates for services:
-
Sponsorship
Services: Supply of
sponsorship services provided by body corporates is recommended to be now
taxable under forward charge mechanism.
-
Motor
Vehicle Accident Fund: Proposal
to exempt contributions made by general insurance companies (out of third-party
motor vehicle premium collected) to the Motor Vehicle Accident Fund constituted
under section 164B of the Motor Vehicles Act, 1988.
-
Hotel
Accommodation and Restaurant Services to be effective from April 2025:
o
Proposal
include removal of the current definition for the terms 'declared tariff' and
revision of the term 'specified premises'. These changes aim to align the GST
rates for hotel accommodations and restaurant services with the actual value of
the supply provided by the hotel.
o
From
1 April 2025, GST rate applicable to restaurant services within hotels will be
contingent upon the 'value of supply' of accommodation units made by the hotel during
the preceding financial year. Specifically, if the 'value of supply' for any
unit of accommodation exceeded INR 7,500 in the previous year, the applicable
GST rate will be 18% with eligibility for availment of ITC. Conversely, if the
'value of supply' was below this threshold, a GST rate of 5% without ITC shall
apply.
o
Additionally,
hotels to have an option to elect a GST rate of 18% with ITC for restaurant
services by providing declaration before the start of the financial year or
upon obtaining registration.
-
Composition
Levy Scheme: Taxpayers
registered under the composition levy scheme are excluded from applicability of
reverse charge mechanism for renting of commercial/immovable property by
unregistered persons to registered persons i.e., from the entry at Sr. No. 5AB
introduced vide Notification No. 09/2024-CTR dated 08.10.2024.
► Changes in GST Rates for goods:
-
Proposal
to reduce GST rate on Fortified Rice Kernel (FRK) from 18% to 5% and exemption
of GST on gene therapy
-
Benefit
of reduced rate of GST at 0.1% on supplies to merchant exporters extended to
GST Compensation Cess as well.
D)
Other Recommendations-
► Relating to trade facilitation measures:
-
Relaxation
from reversal of proportionate ITC under Section 17(1) or Section 17(2) by an
ECO in respect of supplies for which they are required to pay tax under section
9(5) of the CGST Act.
-
ITC
available at the time of delivery of goods to the transporter / recipient of
goods at the supplier’s place of business (Ex works contract) and considered to
be ‘received’ by the recipient as per Section 16(2)(b), provided, property in
goods are transferred to the recipient at the time of such delivery subject to
the conditions provided in Sections 16 and 17 of the CGST Act.
-
Late
fee under Section 47(2) of the CGST Act to be applicable for delay in filing
complete annual returns i.e., both Form GSTR-9 and GSTR-9C. In other words,
late is applicable in cases of delay in filing Form GSTR-9C, even when Form
GSTR-9 was furnished within the prescribed due dates.
-
Proposal
to waive late fee for delay in filing Form GSTR-9C which is in excess of late
fee payable till the date of filing of FORM GSTR-9, pertaining to the period FY
2017-18 to FY 2022-23. The proposed benefit is available only in cases where
Form GSTR-9C is filed by 31 March 2025.
► Relating to GST Rates :
-
Proposal
to increase GST on sale of old and used vehicles (including EVs) from 12% to
18% except for specific petrol/diesel vehicles and SUVs.
-
RBI-regulated
Payment Aggregators to be exempt from GST as 'acquiring banks' as per Sl. No.34
of Notification 12/2017, but payment gateways and other fintech services not
covered.
-
No
GST to apply on penal charges levied by banks/NBFCs from borrowers for
non-compliance with loan terms.
E)
Other Internal Measures
►
IGST
Settlement: The Council
approved the recommendations from a committee of officers regarding IGST
settlement issues raised by the States. The committee is tasked with finalizing
the necessary changes by March 2025.
►
GSTAT
Procedural Rules: The
procedural rules for the internal functioning of the GST Appellate Tribunal
(GSTAT) were noted by the Council. These rules will be notified after review by
the Law Committee, which will facilitate the operationalization of the GSTAT.
Kindly note that the above recommendations shall be
given effect by way of issuance of relevant notifications, circulars and/or
amendments in the GST law, which will be issued in due course of time.
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