The GST Council met after a gap of almost eight months, this being the first one after the new government came into power. Several significant changes and clarifications have been recommended, aiming to strengthen the GST systems and processes, reduce litigation, and provide relief to taxpayers on multiple issues. The recommendations of the GST Council shall be given effect through Notifications and/or Circulars or by way of an amendment to the GST law. The key decisions taken by the GST Council in the said meeting are as follows:
Changes relating to GST rate on goods and services
- To boost Maintenance Repairs Operations (MRO) activities, a uniform rate of 5% IGST shall be applicable on imports of parts, components, testing equipment, tools and tool kist of aircraft, subject to conditions.
- All milk cans, whether of steel/iron/aluminium will attract 12% GST.
- Cartons, boxes and cases (of corrugated or non-corrugated paper or paper board) of solar cookers (single or dual energy source) will attract 12% GST.
- Parts of poultry-keeping machinery and sprinklers (including fire water sprinklers) will attract 12% GST. Past period liabilities are to be regularized on 'as is where is' basis on account of genuine interpretational issues.
- IGST exemption on imports of specified items for defense forces is to be extended for another five years, i.e., 30 June 2029.
- Compensation cess on the imports in SEZ by SEZ units/developers for authorized operations has been exempted retrospectively from 1 July 2017.
- Compensation cess has been exempted on the supply of aerated beverages and energy drinks at Unit Run Canteens under the Ministry of Defence.
- Adhoc IGST exemption has been provided on imports of technical documentation for AK203 rifle kits imported for Indian Defence forces.
- Service provided by Indian Railways to the general public by way of sale of platform tickets, facility of retiring/waiting rooms, cloakroom services and battery-operated car services and intra-railway transactions has been exempted. Liability in respect of transactions between 20 October 2023 till the date of issuance of exemption Notification will be regularized.
- Accommodation services where the value of monthly accommodation is less than INR 20,000 per person and continuing for a minimum period of 90 days to be exempted; exemption to apply retrospectively.
- Apportionment of premium made by lead insurers to co-insurers under coinsurance agreements and transactions of ceding/reinsurance commission between insurer and re-insurer to be declared as 'no supply' under Schedule III of the CGST Act, 2017. Past period transactions are to be regularized on 'as is where is' basis.
- GST liability on re-insurance services of specified insurance schemes (as covered under Sr. no. 35 and 36 of exemption Notification no. 12/2017) and on insurance services for schemes where the government pays the total premium may be regularized on 'as is where is' basis for the period 1 July 2017 to 24 January 2018 and 1 July 2017 to 26 July 2018, respectively.
- It has been recommended to clarify that:
- Exemption as provided under Sr. no. 36A of exemption Notification no. 12/2017 is also applicable on retrocession, i.e., 're-insurance of re-insurance.'
- Statutory collections made by the Real Estate Regulatory
Authority (RERA) are exempt from GST by covering such services
under exemptions provided to the "Governmental Authority"
for any activity in relation to any function entrusted to a
municipality under Article 243 W of the Constitution.
Our Comments
It would be interesting to see how "RERA" can be treated as a "Governmental Authority" to cover within the scope of exemption entry. - Sharing of incentives by acquiring banks to other stakeholders as defined under the scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions is not taxable.
Measures for facilitation of trade
- Waiver of interest or penalty or both for demand notices issued
under Section 73 of the CGST Act, 2017 for the FY 2017-18 to FY
2019-20, in cases where the full amount of tax demanded has been
paid upto 31 March 2025. It is important to note that refund cases
are kept outside the said amnesty scheme.
Our Comments
The above amnesty scheme will significantly cut down on legal disputes at the adjudication stage for FY 2019-20, whereas for FY 2017-18 and FY 2018-19, the scheme will involve the dismissals of appeals before the first appellate authority. It will be interesting to see if pre-deposits made at the appeal level will be allowed to be adjusted to discharge the tax liabilities for the given period. Additional clarification is needed on whether the advantage of waiving interest and penalties applies to each issue individually in a given Show Cause Notice (SCN) or to the entire SCN as a whole. - Aim to reduce litigation by fixing monetary limits for filing
of appeals by the GST Department:
Forum Monetary Limit (INR) GSTAT 2 million High Court 10 million Supreme Court 20 million - Reduction in pre-deposit amount for filing of appeals by
taxpayers:
Level of Appeal Existing pre-deposit Proposed First Appeal Maximum amount – INR 500 million (250 million CGST and SGST each) Maximum amount – INR 400 million (200 million CGST and SGST each) Second Appeal 20% of the disputed amount with an upper cap of INR 1 billion (500 million CGST and SGST each) 10% with an upper cap of INR 400 million (200 million CGST and SGST each)
Our Comments
The revision of pre-deposit amounts from an additional 20% to 10% at the Tribunal level will certainly encourage more taxpayers to file appeals and will be considered a welcoming move for the industry at large. This, however, can add to the list of matters that will pile up in the initial years with the Tribunal.
Also, apart from that, for the initial years, few of the taxpayers have received demand orders confirming unjustifiable demands, specifically in cases where GSTR-2A vs. GSTR-3B related Input Tax Credit (ITC) values or e-way bill vs. GSTR-1 related transactions are compared. It would have been additionally helpful if the Council could have come up with a lower rate of pre-deposit for filing first-level appeals in these specific cases. - The period of three months for filing an appeal before the
Appellate Tribunal to start from a date to be notified by the
government in respect of appeal/revision orders passed before the
date of said Notification.
Our Comments
Clarification issued vide Circular No. 132/2/2020-GST specified that the timelines for filing Tribunal Appeals would begin from the date of assumption of office by the President of the GST Appellate Tribunal (GSTAT) or the State Bench President of the Appellate Tribunal. In May 2024, Justice (Retd.) Sanjaya Kumar Mishra took an oath as the President of the GSTAT. With this, there was panic among taxpayers that the appeal filing clock had already started unwinding despite no functional Tribunal benches or mechanism on the GSTN portal for filing the appeals. This amendment will give sufficient time for the taxpayers to prepare and file the appeals before the Appellate Tribunal in the pending cases. - The Council has recommended amending GST Rules and also issuing
suitable clarification for prescribing a mechanism to adjust the
amount paid through Form GST DRC-03 against the amount to be paid
as pre-deposit for filing appeals.
Our Comments
The taxpayers largely welcome this recommendation. It would help many genuine taxpayers where appeals were rejected by appellate authorities solely on the basis of this procedural lapse of paying pre-deposit through Form GST DRC-03 instead of Form GST APL-01 and consequently, writs had to be filed by such taxpayers to seek relief as the GSTAT is yet to be functional. Andhra Pradesh High Court also adopted a similar view in case of writ petition filed by M/s. Ravi Traders, where the matter was remanded back to the lower authorities, who had rejected the appeal solely on this ground. - Suitable amendment to be carried out in the CGST Act for keeping Extra Neutral Alcohol (ENA) outside the purview of GST when used for the manufacture of alcoholic liquor for human consumption.
- Reduced Tax Collected at Source (TCS) rates for e-commerce operators from the present 1% to 0.5% of the net value of taxable supplies made through it.
To view the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.