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.
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Changes in GST Tax Rates:
GST rates on Goods:
Category | Details | GST/IGST Rate |
Aircraft Parts | Imports of parts, components, testing equipment, tools, and tool-kits for aircrafts, irrespective of HS classification | 5% IGST |
Milk Cans | All milk cans (steel, iron, aluminium) | 12% GST |
Cartons and Boxes | Carton, boxes, and cases of both corrugated and non-corrugated paper or paper-board (HS 4819 10; 4819 20) | Reduced from 18% to 12% GST |
Solar Cookers | All solar cookers (single or dual energy source) | 12% GST |
Poultry Keeping Machinery | Including parts of Poultry keeping Machinery | 12% GST |
Sprinklers | All types of sprinklers including fire water sprinklers | 12% GST |
Defence Forces Imports | Specified items for defence forces | IGST exemption extended till 30th June, 2029 |
Research Equipment Imports | Research equipment/buoys under RAMA programme | IGST exemption, subject to conditions |
SEZ Imports | Imports in SEZ by SEZ Unit/developers for authorised operations | Compensation Cess exemption w.e.f. 01.07.2017 |
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:
Category | Topic | Description |
Insurance | Co-insurance Premiums | Declare co-insurance premiums shared between lead and co-insurers as ‘no supply’ under Schedule III of the CGST Act, 2017, and regularize past cases on an ‘as is where is’ basis. |
Insurance | Ceding/Re-insurance Commissions | Declare ceding/re-insurance commissions between insurers and re-insurers as ‘no supply’ under Schedule III of the CGST Act, 2017, and regularize past cases on an ‘as is where is’ basis. |
Insurance | Reinsurance Services (Specified Schemes) | Regularize GST liability on reinsurance services for specified insurance schemes under Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) from 01.07.2017 to 24.01.2018 on an ‘as is where is’ basis. |
Insurance | Reinsurance Services (Government-Paid Schemes) | Regularize GST liability on reinsurance services for government-paid insurance schemes under Sr. No. 40 of notification No. 12/2017-CTR from 01.07.2017 to 26.07.2018 on an ‘as is where is’ basis. |
Insurance | Retrocession Clarification | Clarify that retrocession, or ‘re-insurance of re-insurance,’ is eligible for exemption under Sl. No. 36A of notification No. 12/2017-CTR. |
Real Estate | RERA Statutory Collections | Clarify that statutory collections by the Real Estate Regulatory Authority (RERA) are exempt from GST under entry 4 of notification No. 12/2017-CTR. |
Banking | Incentive Sharing Clarification | Clarify that incentives shared by acquiring banks with other stakeholders under the RuPay Debit Cards and BHIM-UPI promotion scheme, as defined by NPCI, are not taxable. |
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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.
Sr No | Measure | Description |
1 | Conditional Waiver of Interest/Penalty | Waiver of interest and penalties on demands under Section 73 of CGST Act for FY 2017-18 to 2019-20 if tax is paid by 31.03.2025, excluding demands for erroneous refunds. Insertion of Section 128A in CGST Act recommended. |
2 | Monetary Limits for Appeals | Prescribing monetary limits for filing appeals: GSTAT (Rs. 20 lakhs), High Court (Rs. 1 crore), Supreme Court (Rs. 2 crores) to reduce government litigation. |
3 | Reduction in Pre-deposit Amount | Reduction in pre-deposit for appeals under GST |
4 | Exclusion of Extra Neutral Alcohol (ENA) from GST | Amendment recommended in Section 9(1) of CGST Act to exclude ENA used for manufacturing alcoholic liquor for human consumption from GST scope, . |
5 | Reduction in TCS Rates for ECOs | Reduction of TCS rates by ECOs from 1% (0.5% CGST + 0.5% SGST/UTGST or 1% IGST) to 0.5% (0.25% CGST + 0.25% SGST/UTGST or 0.5% IGST) to ease supplier financial burden. |
6 | Time Extension for Filing Appeals | Amendment in Section 112 of CGST Act to extend appeal filing period before Appellate Tribunal, with a notified start date for pending cases. |
7 | Relaxation in Input Tax Credit (ITC) Time Limit | Deemed extension of ITC time limit under Section 16(4) for FY 2017-18 to 2020-21 until 30.11.2021 for returns filed via FORM GSTR 3B. Retrospective amendment from 01.07.2017 for post-cancellation returns filed within 30 days. |
8 | Change in GSTR-4 Return Due Date | Extension of due date for composition taxpayers to file FORM GSTR-4 from 30th April to 30th June following FY end (from FY 2024-25). |
9 | Interest on Delayed GST Returns | Amendment in Rule 88B of CGST Rules to exclude ECL debits on due date from interest calculation under Section 50 for delayed GSTR-3B filing. |
10 | Power to Regularize Non-levy of GST | Insertion of Section 11A in CGST Act to allow regularization of non-levy or short-levy of GST due to common trade practices, on Council recommendations. |
11 | Refund Mechanism for Additional IGST | Mechanism for claiming refund of additional IGST paid due to price revision post-export recommended. |
12 | Valuation Clarifications | Valuation of import of services by related persons clarified under rule 28(1) of CGST Rules.Clarity on ITC availability for ducts and manholes used in OFC networks under Section 17. |
13 | ITC on Optical Fibre Cables | Ensure that input tax credit (ITC) is not restricted to ducts and manholes used in the network of optical fibre cables (OFCs) |
14 | Place of Supply Clarifications | Determination of place of supply for custodial services by Indian Banks to Foreign Portfolio Investors under Section 13(2) of IGST Act recommended. |
15 | Corporate Guarantee Valuation | Retrospective amendment of rule 28(2) of CGST Rules from 26.10.2023 for clarity on corporate guarantee service valuation, exempting export scenarios and total ITC eligibility cases. |
16 | Section 16(4) Application in RCM | Clarification on ITC availment under Section 16(4) for supplies from unregistered suppliers, tying time limit to recipient’s invoice issuance financial year. |
17 | Various Trade and Tax Issues Clarifications | Several issues clarified to reduce litigation: – ESOP/ESPP/RSU reimbursement taxability – Input tax credit reversal for life insurance premium – Tax treatment of wreck and salvage values in motor insurance claims – Warranty treatment by manufacturers – ITC on motor vehicle repair expenses – Taxability of loans between related persons – Time of supply for annuity payments under HAM projects – Spectrum allotment time of supply – Place of supply for goods delivered to unregistered persons – Mechanism for post-sale discount evidence by suppliers – Special procedure clarifications for specified commodities (e.g., pan masala, tobacco). |
18 | Transitional Credit Amendment | Amendment in Section 140(7) of CGST Act retrospectively from 01.07.2017 for ISD transitional credit on services pre-GST. |
19 | Facilitation with FORM GSTR-1A | Introduction of FORM GSTR-1A to amend/declare additional details in GSTR-1 before filing GSTR-3B, facilitating correct liability auto-population. |
20 | Exemption from Annual Return for Small Taxpayers | Exemption from filing FORM GSTR-9/9A for FY 2023-24 for taxpayers with turnover up to Rs. 2 crores recommended. |
21 | Penalty Clause Clarification for ECOs | Retrospective amendment in section 122(1B) of CGST Act to limit penalty applicability to ECOs collecting tax under section 52. |
22 | Adjustment Mechanism for Demand Payments | Amendment in rule 142 of CGST Rules and circular issuance for adjustment of demand payments via FORM GST DRC-03 against appeal pre-deposit amount. |
23 | Biometric Aadhaar Authentication | Phased rollout recommended for biometric Aadhaar authentication for GST registration to curb fraudulent ITC claims. |
24 | Uniform Time Limit for Demand Notices | Common time limit recommended for issuing demand notices/orders regardless of fraud involvement for FY 2024-25 onwards. Extension of reduced penalty payment window to 60 days. |
25 | Sunset Clause for Anti-profiteering | Amendment in section 171 and section 109 of CGST Act to introduce a sunset clause for anti-profiteering cases under GST until 01.04.2025. |
26 | Restriction on IGST Refund for Export Duty Goods | Amendments in section 16 of IGST Act and section 54 of CGST Act to restrict IGST refund on goods subject to export duty, applicable also for SEZ supplies. |
27 | Threshold Reduction for B2C Inter-State Supplies Reporting | Reduction of invoice-wise reporting threshold in FORM GSTR-1 Table 5 for B2C inter-state supplies from Rs. 2.5 lakh to Rs. 1 lakh. |
28 | Monthly Filing Requirement for TDS | Mandatory monthly filing of FORM GSTR-7 by TDS deductors under section 51, with nil return late fee exemption and invoice-wise details requirement. |
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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.
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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.
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- 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.
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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.
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- 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.
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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.
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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).
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- Significance: This reduction aims to alleviate the financial burden on suppliers making supplies through ECOs, thereby supporting e-commerce transactions and encouraging compliance.
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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.
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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.
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- 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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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).
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- Significance: These clarifications aim to reduce litigation, provide guidance on specific transaction types, and ensure uniform tax treatment across industries, enhancing compliance and clarity.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.