The 52nd GST Council meeting chaired by Finance Minister Nirmala Sitharaman on October 07, 2023 resulted in several key recommendations, which are summarized in the following sections.
A. RECOMMENDATIONS WITH REGARD TO GST ON GOODS:
1. GST rates on ‘Food preparation of millet flour in powder form, containing at least 70% millets by weight’ falling under HSN code 1901 is recommended to be reduced from 18% to prescribed as:
GST rate on molasses is recommended to be reduced from 28% to 5%.
2. GST rate on molasses is recommended to be reduced from 28% to 5%.
3. Imitation zari thread or yarn made of metallised polyester film/plastic film will attract 5% GST, however, no refund will be allowed on account of inversion.
4. Foreign-going vessels converting to coastal run will be liable to pay 5% IGST, with conditional IGST exemption if they reconvert to foreign-going vessels within six months.
5. Extra Neutral Alcohol used for the manufacture of alcoholic liquor for human consumption will be excluded from GST.
6. A separate tariff HS code will be created for rectified spirit for industrial use, attracting an 18% GST rate.
B. RECOMMENDATIONS WITH REGARD TO GST ON SERVICES:
1. Exemption in respect of pure and composite services provided to Central/State/UT governments and local authorities in relation to any functions entrusted to Panchayat/Municipality under the Constitution of India will be retained.
2. Services of water supply, public health, sanitation conservancy, solid waste management, and slum improvement supplied to Governmental Authorities will be exempted.
3. Job work services for processing barley into malt will attract a 5% GST rate instead of 18% and would be covered under ‘job-work in relation to food and food products’.
4. Bus operator companies selling through e-commerce are excluded from the purview of section 9(5) of the CGST Act enabling them to pay GST on their supplies using their ITC.
5. Supply of all goods and services by Indian Railways will be taxed under Forward Charge Mechanism.
C. OTHER RECOMMENDATIONS:
1. Amnesty scheme for filing of appeals: The eligibility criteria for taxpayers who can avail the benefits under this amnesty scheme are inter alia:
Taxpayers must make a pre-deposit of 12.5% of the disputed tax amount, with at least 20% (i.e., 2.5% of the disputed tax) to be debited from the Electronic Cash Ledger.
2. Levy of GST on personal guarantees (by directors)/corporate guarantees provided by holding company to its subsidiary company:
A circular will be issued to provide further clarification that after the insertion of the said sub-rule, the value of 'corporate guarantees' supplied between related parties will be governed by this rule, regardless of whether full ITC is available to the recipient of services or not.
3. Provision for automatic restoration of provisionally attached property: Amendment recommended to Rule 159(2) of the CGST Rules and Form GST DRC-22 to provide that the order for the provisional attachment of property will automatically become invalid after one year from the date of the provisional attachment order, without need for separate specific written order from the Commissioner.
4. Clarification on various issues related to Place of Supply: A Circular to be issued to provide clarification on several issues related to the place of supply including transportation of goods, advertising services and of co-location services.
5. Clarification relating to export of services: A Circular would be issued clarifying the admissibility of export remittances received in Special INR Vostro Account, as permitted by RBI, for the purpose of consideration of supply of services to qualify as ‘export of services’ as per Section 2(6)(iv) of the IGST Act.
6. Supplies to SEZ units/developers for authorized operations: Amendments recommended to Notification No. 1/2023-Integrated Tax, effective from October 1, 2023 enabling suppliers to SEZ developers or units engaged in authorized operations to provide goods or services (excluding specific commodities) to SEZ developers or units for authorized operations. Consequently, such supplies can be made by paying the IGST, which can later be claimed as a refund.
7. Composition of GSTAT Members: Amendments recommended to Section 110 of the CGST Act to align the appointment provisions for the President and Members of the GSTAT with the Tribunal Reforms Act, 2021.
8. Amendment with respect to ISD: Amendments recommended in sections 2(61) and 20 of the CGST Act, along Rule 39 of the CGST Rules, to make ISD procedure mandatory for distributing ITC in specific cases involving Head Offices and Branch Offices.
GLS Comments:
These recommendations from the 52nd GST Council has initiated a series of substantial changes that carry wide-ranging implications for taxpayers and the overall GST framework. These decisions are driven by the goals of simplifying processes, reducing legal disputes, and providing greater clarity. From the introduction of an amnesty scheme for appeal filing to the insertion of new rule for corporate guarantees are positive moves as these changes reflect a commitment to making the GST system more efficient and taxpayer-friendly.
However, certain critical questions arise from these recommendations. While the introduction of the amnesty scheme, is beneficial for those who, due to various reasons, were unable to file appeals within the prescribed timelines. It comes as a relief to taxpayers who may have faced challenges like the pandemic or other unforeseen circumstances hindering their ability to file timely appeals. However, it remains unclear how this scheme will address cases that were previously disposed of due to being time-barred, with recoveries already made by GST authorities. Will these taxpayers be allowed to file appeals and challenge the recoveries already executed?
The amendment concerning the ISD registration, adds a layer of complexity to compliance. Even companies with only two GST registrations, procuring common third-party services, will now be obligated to obtain additional GST registrations. This change could potentially result in heightened compliance burdens, especially for MSMEs.
On the topic of corporate guarantees, the recommended changes aim to provide much-needed clarity to a current landscape of numerous notices and litigations surround this issue. The recommended changes, which specify the valuation and taxability of corporate guarantees provided between related parties, aim to streamline this process and reduce ambiguities.
While these changes are undoubtedly progressive, they also pose certain challenges. It is essential for taxpayers to stay vigilant and adapt swiftly to ensure compliance and optimize their tax strategies. The industry eagerly awaits the fine print of the specific amendments to assess if any further open issues or complexities require attention.
Disclaimer:
The information provided in this update is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein. This update is not intended to address the circumstances of any particular individual or corporate body. There can be no assurance that the judicial/ quasi judicial authorities may not take a position contrary to the views mentioned hereinrra quis.
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