Key Highlights of the 53rd GST Council Meeting

The latest GST Council meeting has ushered in a series of pivotal changes to enhance the efficiency and clarity of the Goods and Services Tax (GST) framework. This document encapsulates the key adjustments in GST rates on goods and services, crucial exemptions, and procedural reforms designed to streamline compliance and foster economic growth. From revised GST rates on essential goods to significant exemptions in services and innovative measures to facilitate trade, this overview captures the essence of the Council’s efforts to adapt and refine the GST regime, ensuring it remains responsive to the needs of businesses and taxpayers alike.

1. Changes in GST Tax Rates:

GST rates on Goods:

Other Miscellaneous Changes

 Exemption of Compensation Cess: The supply of aerated beverages and energy drinks to authorised customers by Unit Run Canteens under the Ministry of Defence will be exempt from compensation cess.

 Ad hoc IGST Exemption: Imports of technical documentation for AK-203 rifle kits intended for the Indian Defence forces will receive an ad hoc exemption from IGST.

GST rates on Services:

The following recommendations were made relating to GST rates on services.

 Exempt services Indian Railways provides to the public include platform tickets, retiring/waiting rooms, cloakroom services, and battery-operated car services, including intra-railway transactions. This exemption will be retroactive from 20.10.2023 to the issuance date of the notification.

 Exempt GST on services provided by Special Purpose Vehicles (SPVs) to Indian Railways for infrastructure use and maintenance during the concession period. This exemption will be retroactive from 01.07.2017 to the notification’s issuance date.

 Add a new entry under notification No. 12/2017-CTR to exempt accommodation services up to Rs. 20,000 per month per person, provided the service is for a minimum of 90 continuous days. Extend this benefit retroactively for past cases.

Further, below is a table with the other changes relating to services:

1. The GST Council Meeting further recommended the following measures for the facilitation of trade:

The description below gives a detailed insight into the mentioned pointers.

1. Conditional Waiver of Interest/Penalty

   • Description: The GST Council recommended waiving interest and penalties related to demands under Section 73 of the CGST Act for FY 2017-18 to 2019-20. This waiver applies if the taxpayer pays the entire tax demanded in the notice by 31.03.2025. It excludes demands related to erroneous refunds. To implement this, Section 128A is proposed to be inserted in the CGST Act, 2017.
   • Impact: This measure aims to alleviate financial burdens on taxpayers who faced challenges during the initial implementation years of GST, encouraging compliance by providing relief on interest and penalties.

2. Monetary Limits for Appeals

   • Description: The GST Council proposed monetary limits for filing appeals at various levels:

• GSTAT (Goods and Services Tax Appellate Tribunal): Up to Rs. 20 lakhs.
• High Court: Up to Rs. 1 crore.
• Supreme Court: Up to Rs. 2 crores.

1. • Impact: This measure seeks to streamline and reduce litigation by setting clear financial thresholds for appeals. This ensures that smaller disputes are resolved at lower levels, thereby saving time and resources.

1. Reduction in Pre-deposit Amount for Appeals

   • Description: The amount of pre-deposit required for filing appeals under GST has been reduced:

• Appellate Authority: Maximum pre-deposit reduced from Rs. 25 crores CGST and Rs. 25 crores and SGST to Rs. 20 crores CGST and Rs. 20 crores SGST.
• Appellate Tribunal: Pre-deposit reduced from 20% to 10% of the disputed tax amount, with a maximum cap of Rs. 20 crores CGST and Rs. 20 crores and SGST.

1. • Impact: This reduction aims to ease cash flow and working capital blockage for taxpayers involved in appeal proceedings, making the process more accessible and less financially burdensome.

2. Exclusion of Extra Neutral Alcohol (ENA) from GST

   • Description: Amendment proposed in Section 9(1) of the CGST Act to explicitly exclude Extra Neutral Alcohol (ENA) used for manufacturing alcoholic liquor for human consumption from the scope of GST.
   • Significance: This amendment clarifies the non-applicability of GST on ENA when explicitly used for producing alcoholic beverages, aligning with industry norms and practices.

3. Reduction in Tax Collected at Source (TCS) Rates for ECOs

   • Description: The GST Council recommended reducing the TCS rates levied by Electronic Commerce Operators (ECOs) from:

• Current rates: 1% (0.5% CGST + 0.5% SGST/UTGST or 1% IGST).
• Revised rates: 0.5% (0.25% CGST + 0.25% SGST/UTGST or 0.5% IGST).

1. • Significance: This reduction aims to alleviate the financial burden on suppliers making supplies through ECOs, thereby supporting e-commerce transactions and encouraging compliance.

2. Extension of Time for Filing Appeals

   • Description: Amendment proposed in Section 112 of the CGST Act to extend the three months for filing appeals before the Appellate Tribunal. The start date for this extended period will be notified by the Government for pending cases.
   • Impact: This extension provides taxpayers with sufficient time to prepare and file appeals, ensuring fair representation and legal recourse in GST-related disputes.

3. Relaxation in Input Tax Credit (ITC) Time Limit

   • Description: The GST Council recommended retrospective amendments in Section 16(4) of the CGST Act:

• For FY 2017-18 to 2020-21: Deemed extension of the time limit to avail ITC through any return in FORM GSTR 3B filed by 30.11.2021.
• Post-cancellation revocation: This amendment aims to conditionally relax the provisions of Section 16(4) in cases where a registered person files returns within thirty days from the date of the order of revocation of registration. Specifically, it applies to the period from the date of cancellation of registration until the date of revocation of registration.

1. • Impact: These amendments aim to mitigate compliance challenges faced by taxpayers, especially in retrospective scenarios and during registration revocations, enhancing clarity and reducing potential disputes.

2. Change in GSTR-4 Return Due Date

   • Description: Amendment proposed in Rule 62 of the CGST Rules and FORM GSTR-4 to extend the due date for filing returns by composition taxpayers from 30th April to 30th June following the financial year.
   • Impact: This extension provides composition taxpayers with additional time to file their returns, easing administrative burdens and promoting compliance.

3. Interest on Delayed GST Returns

   • Description: Amendment in Rule 88B of the CGST Rules to exclude amounts available in the Electronic Cash Ledger (ECL) on the due date of filing FORM GSTR-3B from interest calculations under Section 50 for delayed returns.
   • Significance: This amendment prevents double financial burdens on taxpayers by ensuring that amounts already available in the ECL are not subjected to interest calculations for delayed filings.

4. Power to Regularize Non-levy of GST

   • Description: Insertion of Section 11A in the CGST Act to authorize the government, based on GST Council recommendations, to regularize instances of non-levy or short-levy of GST due to common trade practices.
   • Significance: This provision aims to provide a legal framework for rectifying inadvertent GST non-compliance arising from industry practices, ensuring fairness and uniformity in tax administration.

5. Refund Mechanism for Additional IGST

   • Description: Mechanism recommended for claiming refund of additional IGST paid due to upward price revisions post-export of goods.
   • Objective: This measure facilitates exporters by enabling them to claim refunds on IGST paid for price adjustments made after goods have been exported, enhancing export competitiveness and compliance.

6. Clarification regarding Valuation of Supply of Import of Services by a Related Person

• Description: If the related domestic entity declares the value of these imported services on their invoice, it may be considered as the open market value as per the second proviso to rule 28(1) of CGST Rules. In cases where the related domestic entity issues no invoice for services provided by the foreign affiliate, the value of such services may be deemed as Nil, aligning with the open market value concept under the same rule.
• Impact: These clarifications streamline the valuation process for imported services, ensuring compliance with CGST Rules while facilitating smoother transactions between related entities.

1. Clarification regarding Availability of Input Tax Credit (ITC) on Ducts and Manholes used in the Network of Optical Fiber Cables (OFCs)

• Description: It was recommended that businesses involved in telecommunications infrastructure development can claim input tax credit without restrictions on ducts and manholes used in the OFC network. This ensures clarity and compliance under the CGST Act, facilitating seamless operations and cost-efficiency in infrastructure projects.
• Significance: By allowing unrestricted ITC, the measure supports the growth of telecommunications infrastructure, enhances investment confidence, and promotes broader economic development through improved digital connectivity.

1. Place of Supply Clarifications

   • Description: Clarity provided on determining the place of supply for custodial services provided by Indian banks to Foreign Portfolio Investors, aligning with Section 13(2) of the IGST Act.
   • Purpose: This clarification ensures consistency in tax treatment for cross-border financial services, supporting regulatory compliance and reducing interpretative challenges.

2. Corporate Guarantee Valuation

   • Description: Retrospective amendment in Rule 28(2) of the CGST Rules from 26.10.2023 to clarify the valuation of corporate guarantee services between related parties.
   • Objective: This amendment aims to streamline valuation practices, particularly in export scenarios, and ensure that full input tax credit eligibility criteria are met, reducing disputes and compliance costs.

3. Section 16(4) Application in RCM

   • Description: Clarification issued on the application of Section 16(4) for ITC availing concerning supplies received from unregistered suppliers under the reverse charge mechanism (RCM).
   • Intent: This clarification aligns the time limit for ITC availment with the recipient’s financial year, ensuring compliance with GST provisions and reducing potential disputes.

4. Various Trade and Tax Issues Clarifications

   • Description: Multiple clarifications issued to address specific trade and tax issues, including:

• Taxability of ESOP/ESPP/RSU reimbursements.
• Input tax credit treatment for life insurance premium portions excluded from taxable value.
• Tax treatment of wreck and salvage values in motor insurance claims.
• Warranty services by manufacturers and input tax credit eligibility on related expenses.
• Taxability of loans between related parties or group companies.
• Time of supply determinations for annuity payments and spectrum allotment.
• Place of supply for goods delivered to unregistered persons with differing billing and delivery addresses.
• The mechanism for suppliers to evidence compliance with post-sale discount input tax credit reversals.
• Special procedure clarifications for specified product manufacturers (e.g., pan masala, tobacco).

1. • Significance: These clarifications aim to reduce litigation, provide guidance on specific transaction types, and ensure uniform tax treatment across industries, enhancing compliance and clarity.

2. Transitional Credit Amendment

   • Description: Amendment proposed in Section 140(7) of the CGST Act retrospectively from 01.07.2017 to allow transitional credit claims for invoices received by Input Service Distributors (ISDs) before appointed date.
   • Purpose: This amendment seeks to resolve transitional credit issues for pre-GST service invoices processed by ISDs, ensuring compliance with transitional provisions and reducing administrative burdens.

3. Facilitation with FORM GSTR-1A

   • Description: Introduction of FORM GSTR-1A to facilitate amendments and declarations of additional details in FORM GSTR-1 before filing FORM GSTR-3B for the same tax period.
   • Objective: This form enables taxpayers to promptly rectify reporting omissions or inaccuracies in their GSTR-1 filings, ensuring accurate tax liabilities in subsequent GSTR-3B filings and enhancing compliance.

4. Exemption from Annual Return for Small Taxpayers

   • Description: Exemption recommended from filing FORM GSTR-9/9A for FY 2023-24 for taxpayers with an annual turnover up to Rs. 2 crores.
   • Intent: This exemption aims to reduce compliance burdens for smaller taxpayers, focusing regulatory efforts on larger taxpayers while ensuring accurate tax reporting through alternative compliance measures.

5. Penalty Clause Clarification for ECOs

   • Description: Amendment in Section 122(1B) of the CGST Act retrospectively w.e.f. 01.10.2023 to restrict penalty applicability specifically to ECOs collecting taxes under Section 52.
   • Significance: This clarification limits penalty imposition to ECOs involved in tax collection at source activities, ensuring fairness and consistency in penalty enforcement under GST provisions.

6. Adjustment Mechanism for Demand Payments

   • Description: Amendment proposed in Rule 142 of the CGST Rules and issuance of circulars to facilitate the adjustment of demand payments made through FORM GST DRC-03 against pre-deposit amounts required for appeals.
   • Objective: This mechanism streamlines payment adjustments between demand liabilities and pre-deposits for pending appeal cases, enhancing administrative efficiency and taxpayer compliance.

7. Biometric Aadhaar Authentication

   • Description: A phased rollout is recommended for biometric Aadhaar authentication for GST registration to prevent fraudulent input tax credit (ITC) claims.
   • Purpose: This initiative aims to strengthen GST registration processes by linking biometric identification to taxpayer credentials, reducing the risk of identity fraud and enhancing compliance.

8. Uniform Time Limit for Demand Notices

   • Description: Recommendation for a uniform time limit for issuing demand notices or orders regardless of fraud involvement, effective from FY 2024-25 onwards. Also, the time limit for the taxpayers to avail the benefit of reduced penalty, by paying the tax demanded along with interest has been recommended to be increased from 30 days to 60 days.
   • Significance: This measure standardizes the issuance timelines for demand notices, promoting consistency in tax administration while allowing taxpayers adequate time to respond or appeal.

9. Sunset Clause for Anti-profiteering

   • Description: Amendment proposed in Section 171 and Section 109 of the CGST Act to introduce a sunset clause for anti-profiteering provisions, effective until 01.04.2025.
   • Significance: This clause establishes a time-bound framework for anti-profiteering measures under GST, ensuring transparency and accountability in price adjustments post-GST implementation.

10. Restriction on IGST Refund for Export Duty Goods

    • Description: Amendments in Section 16 of the IGST Act and Section 54 of the CGST Act to restrict IGST refunds on goods subject to export duty, applicable also for Special Economic Zone (SEZ) supplies.
    • Objective: This restriction aims to align GST refund policies with export duty provisions, preventing potential revenue leakage and ensuring consistency in export incentives under GST.

11. Threshold Reduction for B2C Inter-State Supplies Reporting

    • Description: Reduction of the invoice-wise reporting threshold in FORM GSTR-1 Table 5 for business-to-consumer (B2C) inter-state supplies from Rs. 2.5 lakh to Rs. 1 lakh.
    • Purpose: This reduction simplifies reporting requirements for B2C transactions across state borders, enhancing compliance and administrative efficiency for taxpayers and GST authorities.

12. Monthly Filing Requirement for TDS

    • Description: Mandatory monthly filing of FORM GSTR-7 by Tax Deductors at Source (TDS) under Section 51 of the CGST Act, irrespective of whether any tax has been deducted during the said month or not.  It is also recommended that invoice-wise details should be furnished in the said return.
    • Rationale: This requirement ensures timely and accurate reporting of TDS deductions under GST, promoting transparency and compliance with tax deduction obligations.

In conclusion, the 53rd GST Council Meeting introduced a series of impactful measures to simplify compliance, reduce litigation, and enhance trade facilitation under the GST regime. These reforms signify a concerted effort to foster a more robust and taxpayer-friendly GST framework while ensuring fair and efficient tax administration across India.