GST Council's 53rd Meeting: Comprehensive Reforms and Relief Measures

The 53rd GST Council meeting held on June 22, 2024, chaired by Finance Minister Nirmala Sitharaman, has introduced significant reforms aimed at simplifying the Goods and Services Tax (GST) framework. The Council's recommendations span across GST tax rates on goods and services, compliance enhancements, and measures to facilitate trade. These changes reflect the Council's commitment to streamlining GST and reducing the compliance burden on taxpayers.

Measures for Trade Facilitation

1. Interest and Penalty Waivers

Section 128A Insertion: A new Section 128A will be inserted in the CGST Act to provide conditional waivers of interest or penalties for demands raised under Section 73 for FY 2017-18 to FY 2019-20, provided the taxpayer pays the full tax demanded by March 31, 2025.

2. Reducing Government Litigation

Monetary Limits for Appeals: To reduce government litigation, the Council has prescribed monetary limits for filing appeals:

• GSTAT: ₹20 lakhs

• High Court: ₹1 crore

• Supreme Court: ₹2 crores

3. Pre-Deposit for Appeals

Amendments in Sections 107 and 112: The amount of pre-deposit for filing appeals will be reduced to ease cash flow and working capital. The maximum for appellate authority appeals is reduced to ₹20 crores CGST and SGST each, and for the Appellate Tribunal to 10% with a maximum of ₹20 crores CGST and SGST each.

4. ENA Exemption

Taxation of Extra Neutral Alcohol (ENA): The GST law will be amended to exclude ENA from GST when used for manufacturing alcoholic liquors for human consumption.

5. Reduced TCS Rate

TCS Rate for ECOs: The Tax Collected at Source (TCS) rate for Electronic Commerce Operators (ECOs) is reduced from 1% to 0.5%, easing the financial burden on suppliers.

6. Appeal Filing Time Extension

Section 112 Amendment: The three-month period for filing appeals before the Appellate Tribunal will start from a date notified by the Government, allowing sufficient time for pending cases.

7. Relaxation of ITC Conditions

Section 16(4) Amendments: The time limit for availing Input Tax Credit (ITC) for the initial GST years (2017-21) will be deemed as November 30, 2021. For returns filed post-cancellation revocation, ITC claims are relaxed conditionally.

8. Extended Filing Deadlines

GSTR-4 Due Date Change: Composition taxpayers will now file their annual return in FORM GSTR-4 by June 30 instead of April 30, starting from the financial year 2024-25.

9. Interest Calculation Adjustment

Rule 88B Amendment: Interest under Section 50 will not be calculated on amounts available in the Electronic Cash Ledger on the return's due date if debited while filing the return.

10. New Powers to Avoid Tax Recovery

Section 11A Insertion: A new Section 11A will empower the Government to regularize non-levy or short levy of GST resulting from common trade practices.

11. Refund Mechanism for Export Revisions

Refund of Additional IGST: A mechanism will be introduced for claiming refunds on additional IGST paid due to upward price revisions of exported goods.

12. Valuation of Import Services

Rule 28 Clarification: For related domestic entities, the value declared in invoices for services from foreign affiliates will be deemed as the open market value if full ITC is available.

13. ITC on OFC Networks

Clarification on ITC: ITC is not restricted for ducts and manholes used in Optical Fiber Cable (OFC) networks.

14. Custodial Services for Foreign Portfolio Investors

Place of Supply Clarification: Custodial services provided by Indian banks to Foreign Portfolio Investors will follow Section 13(2) of the IGST Act for place of supply.

15. Corporate Guarantee Valuation

Rule 28 Amendment: Valuation rules for corporate guarantees between related parties will be clarified, with retrospective amendments from October 26, 2023.

16. RCM Invoices

Section 16(4) Clarification: For RCM supplies from unregistered suppliers, the relevant financial year for ITC is the year in which the invoice was issued by the recipient.

17. Clarifications to Reduce Litigation

• Taxability of ESOP/ESPP/RSU reimbursements

• ITC reversal requirements for life insurance premium

• Wreck and salvage value taxability in motor insurance claims

• Warranty provisions for manufacturers

• ITC on repair expenses for motor insurance claims

• Taxability of loans between related persons

• Annuity Payments under HAM Projects

• Time of supply for spectrum allotments

• Place of supply for goods to unregistered persons with different delivery addresses

• Compliance for post-sale discount ITC reversals

• Special procedures for specific commodity manufacturers

18. Transitional Credit for Services

Section 140(7) Amendment: Transitional credit for pre-GST invoices will be provided retrospectively from July 1, 2017.

19. Optional GSTR-1A Filing

New GSTR-1A Facility: Taxpayers will have an option to file revised details of outward supplies in FORM GSTR-1A for any month or quarter until September 30 of the following financial year.

Changes in GST Tax Rates

I. Recommendations on GST Rates for Goods

1. Aircraft Parts and Tools: A uniform IGST rate of 5% will be levied on imports of parts, components, testing equipment, tools, and toolkits for aircraft, regardless of HS classification, subject to specific conditions. This measure aims to boost Maintenance, Repair, and Overhaul (MRO) activities.

2. Milk Cans: All milk cans made of steel, iron, or aluminum will now attract a 12% GST, standardizing the tax rate across different materials.

3. Carton and Paper Products: The GST rate on cartons, boxes, and cases of both corrugated and non-corrugated paper or paperboard has been reduced from 18% to 12%.

4. Solar Cookers: All types of solar cookers, including those with single or dual energy sources, will be taxed at 12%.

5. Poultry Keeping Machinery: The existing 12% GST rate on poultry keeping machinery will be expanded to explicitly include parts of such machinery, regularizing past practices.

6. Sprinklers: All types of sprinklers, including fire water sprinklers, will attract 12% GST, with past practices regularized.

7. Defence Imports: The IGST exemption on imports of specified items for defense forces has been extended for five more years, until June 30, 2029.

8. Research Equipment: Imports of research equipment and buoys under the RAMA program will continue to enjoy IGST exemption under specified conditions.

9. SEZ Imports: Compensation Cess will be exempted on imports by SEZ units or developers for authorized operations, retroactively effective from July 1, 2017.

10. Beverages in Defense Canteens: Aerated beverages and energy drinks supplied to authorized customers by Unit Run Canteens under the Ministry of Defence will be exempt from Compensation Cess.

11. AK-203 Rifle Kits: An ad hoc IGST exemption is provided for imports of technical documentation for AK-203 rifle kits for Indian Defense forces.

II. Recommendations on GST Rates for Services

A. Exemptions and Clarifications

1. Indian Railways Services: Services provided by Indian Railways to the general public, including the sale of platform tickets, use of retiring rooms, cloak room services, and battery-operated car services, will be exempt from GST. Intra-railway transactions will also be exempted, and past issues will be regularized from October 20, 2023.

2. SPV Services to Indian Railways: Services provided by Special Purpose Vehicles (SPV) to Indian Railways, including the use of infrastructure during the concession period, will be exempt from GST. Past issues will be regularized from July 1, 2017.

3. Accommodation Services: A new exemption under heading 9963 will cover accommodation services with a value of up to ₹20,000 per month per person, provided for a minimum continuous period of 90 days. Similar benefits will apply retrospectively.

B. Other Service-Related Changes

1. Co-Insurance and Re-Insurance: Co-insurance premium apportioned by the lead insurer and re-insurance commission between insurers will be declared as no supply under Schedule III of the CGST Act, with past cases regularized.

2. Reinsurance Services: GST liability on reinsurance services for specified insurance schemes will be regularized for periods ranging from July 1, 2017, to July 26, 2018.

3. Retrocession: Clarification will be issued that retrocession (re-insurance of re-insurance) is eligible for exemption under Sl. No. 36A of the notification No. 12/2017-CTR.

4. RERA Collections: Statutory collections by Real Estate Regulatory Authorities (RERA) are exempt from GST.

5. Incentive Sharing: Incentive sharing under the promotion scheme for RuPay Debit Cards and BHIM-UPI transactions will be clarified as non-taxable.

   
   

Conclusion

The 53rd GST Council meeting has introduced a comprehensive set of reforms aimed at rationalizing tax rates, simplifying compliance, and enhancing trade facilitation. These measures are expected to provide relief to taxpayers, stimulate economic activities, and reduce the overall complexity of the GST regime. The decisions reflect the Council's responsiveness to industry needs and its commitment to creating a more efficient and taxpayer-friendly GST framework.

For further details, refer to the official press release.

(https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2027982)