Takeaways from 48th GST Council Meetings

Gst council meets on regular intervals to consider the issues informed by the industry and take suitable action as per industry suggestions and changing market scenarios. So far, 47 GST Council meetings have been held where major changes were suggested in GST Law. Now, GST Council met for the 48th time on 17th December 2022 in New Delhi through video conferencing under the chairmanship of the Hon’ble Finance Minister.

In the 48th GST Council meeting, the GST council suggested changes in GST rates of certain products, clarified GST rates applicable, decriminalization of certain offenses under GST, rationalization of GST provisions, etc.

Changes suggested in the 48th GST Council meeting is as follows:

1. Decriminalization under GST

1.1 Increase in threshold limit of initiating prosecution

1. As per Section 132(1)(iii) of the GST Act, if any person commits any of the offenses specified u/s 132(1) and the amount of tax evaded or ITC wrongly availed or utilized or the amount of refund wrongly taken exceeds INR 1 crores but does not exceeds INR 2 Crores, then such person shall be punishable with imprisonment which may extend upto 1 year and fine.
2. GST Council has recommended increasing such minimum threshold limit from 1 Crore to INR 2 Crores.
3. However, such increase shall not apply for the offense of issuance of an invoice without a supply of goods or services.

1.2 Reduction in Compounding amount

1. As per Section 138(2) of the CGST Act, the amount for compounding of the offense shall be:
   • The minimum amount shall not be less than INR 10,000 or 50% of the tax amount involved;
   • The maximum amount shall not be less than INR 30,000 or 150% of the tax amount involved.
2. GST Council has recommended to reduce the present range of 50% to 150% to 25%-100%.

1.3 Decriminalisation of other offenses

1. GST council has suggested decriminalizing certain offenses specified u/s 132 viz:
   • obstruction or preventing any officer in the discharge of his duties; (Section 132(g)).
   • deliberate tempering of material evidence (Section 132(j)).
   • failure to supply the information (Section 132(k)).

 2. Refund to unregistered person

• In a certain contract of supply of service to an unregistered person, such as the Construction of flat, issuance of insurance policy, etc., GST is charged to an unregistered person at the time of raising the invoice.
• However, what happens when such service stands canceled and a credit note is issued by the supplier after the expiry of the time of issuance of a credit note.
• In that case, the supplier is not allowed to reverse the GST charged at the time of supply of service.
• Therefore, till date, in such cases, the burden of GST is borne by the unregistered person.
• Now, the GST council has recommended that in such cases, CBIC shall specify the procedure of claiming a refund of a GST Component by an unregistered person. 

3. Extension of date of implementation of sale by the unregistered dealer and composition suppliers on the e-commerce platform

• As per Section 22(ix) of the CGST Act, every person making a supply through e-commerce platforms is required to obtain GST registration.
• In the 47th GST Council meeting, GST Council recommended that unregistered dealers and composition suppliers can make intra-state supply through an e-commerce platform subject to certain conditions.
• The Council approved the amendments in the GST Act and GST Rules, along with the issuance of relevant notifications, to enable the same. 
• However, since e-commerce companies need time for the development of the requisite functionality on the portal and need sufficient time for preparedness, the GST council has recommended that the scheme may be implemented w.e.f. 01.10.2023.

4. Earlier effective of Entry No. 7, 8(a) and 8(b) of Schedule III

• As per Entry No. 7 of Schedule III, the Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India shall neither be treated as a supply of goods nor a supply of services.
• Similarly, as per entries 8(a) and 8(b), the Supply of warehoused goods before clearance for home consumption and high seas sales are also covered under Section III.
• These entries were inserted by CGST Amendment Act, 2018, and brough into effect from 01.02.2019.
• However, doubts and ambiguity was around the taxability of such transactions from 01.07.2017 to 31.01.2019.
• To end this controversy, GST Council has recommended that such entries shall effective from 01.07.2017.
• However,  no refund shall be granted in cases where any tax has already been paid in respect of such transactions/ activities during the period 01.07.2017 to 31.01.2019.

5. ITC-related amendments

5.1 Reversal of input tax credits shall only be proportionate to the amount not paid

1. As per Rule 37(1), in the case where the recipient fails to pay to supplier the value of the supply within 180 days, the recipient is required to reverse ITC proportionate to the payment not made.
2. However, provisions of Rule 37(1) got amended vide Notification no. 19/2022 CT dated 28.09.2022, with effect from 01.10.2022 wherein such proportionate word was not provided. Therefore, the interpretation was drawn that complete ITC is required to be reversed where even partial payment is not made.
3. However, GST Council has recommended that Rule 37(1) shall be suitably amended with effect from 01.10.22 to provide that the reversal of input tax credits shall only be proportionate to the amount not paid to the supplier.

5.2 ITC reversal rules in case supplier does not pay tax GST on time

1. As per the newly inserted condition in Section 16(2)(c) of the GST Act, ITC shall be available subject to the condition that the tax charged in respect of such supply has been actually paid to the Government, either in cash or through the utilization of ITC.
2. GST Council has recommended insertion of new Rule 37A to provide a detailed mechanism of reversal of ITC in case a supplier does not pay GST.

6. Facility to withdraw appeal before finalization

1. As on date, there is no option available to withdraw the appeal application once filed.
2. Therefore, GST Council has recommended to insert Rule 109C and FORM GST APL-01/03 W in the CGST Rules, 2017 to provide the facility for withdrawal of an application of appeal up to a certain specified stage. 
3. This would help in reducing litigations at the level of appellate authorities.

7. Other Recommendations

1. Rule 108(3) and Rule 109 of CGST Rules, 2017 to be amended to provide clarity on the requirement of submission of a certified copy of the order appealed against and the issuance of final acknowledgment by the appellate authority.  This would facilitate the timely processing of appeals and ease the compliance burden for the appellants. 
2. A Circular is to be issued to clarify that the No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for the valuation of insurance services. 
3. Circular is to be issued for clarifying the manner of treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalized under the Insolvency and Bankruptcy Code, 2016. Rule 161 of CGST Rules, 2017 and FORM GST DRC-25 also to be amended for facilitating the same. 
4. Necessary amendments to be made in Rule 12(3) of CGST Rules to provide for cancellation of GST registration of persons who are required to collect TCS and TCS at their request.
5. Section 12(8) of the IGST Act provides for the place of supply of service in case of transaction of goods. GST council has recommended that a circular to be issued for clarifying the issues pertaining to the place of supply of services of transportation of goods and availability of ITC to the recipient of such supply. It has also been recommended that the proviso to sub-section (8) of section 12 of the IGST Act, 2017 may be omitted.
6. GST Council has recommended to issue circulars on the following issues to remove ambiguity and legal disputes, thus benefiting taxpayers at large:
   • Procedure for verification of ITC in cases involving differences in ITC availed in FORM GSTR-3B vis a vis ITC available as per FORM GSTR-2A during FY 2017-18 and 2018-19. 
   • Clarifying the manner of re-determination of demand in terms of sub-section (2) of section 75 of CGST Act, 2017. 
   • Clarification on the applicability of e-invoicing with respect to an entity.

8. Measures for streamlining compliances in GST

8.1 Biometric-based Aadhaar authentication and risk-based physical verification of GST Registrations

1. GST Council has proposed to conduct a pilot in the State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants.
2. Necessary amendments are required to be made in rule 8 and rule 9 of CGST Rules, 2017 to facilitate the same. 
3. This will help in tackling the menace of fake and fraudulent registrations. 

8.2 Mobile Number and email id to be taken from PAN Database

1. Now for GST registration, the applicant is required to enter mobile number and email if on his own and then same are validated through OTPs.
2. However, GST Council has recommended that PAN-linked mobile numbers and e-mail addresses (fetched from the CBDT database) to be captured and recorded in FORM GST REG-01 and OTP-based verification to be conducted at the time of registration on such PAN-linked mobile numbers and email addresses.
3. This step will restrict the misuse of the PAN of a person by unscrupulous elements without the knowledge of the said PAN holder.

8.3 Restrict filing of return till 3 years from the due date of filing of return

1. As per the existing system, there is no time limit given under the statute beyond which the window to file a GST return will close. Therefore, applicants file GST returns after many years with applicable interest and penalty.
2. GST Council has proposed to restrict the filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return/statement.

8.4 Treatment of the difference in liability reported in GSTR-1 and GSTR-3B

1. Rule 88C and FORM GST DRC-01B are to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liability reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period, where such difference exceeds a specified amount and/ or percentage.
2. In that case, the taxpayer is either required to pay the differential liability or explain the reason for the difference. 
3. Further, clause (d) is to be inserted in rule 59(6) of CGST Rules, 2017 to restrict the furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid. 
4. This would facilitate taxpayers to pay/ explain the reason for the difference in such liabilities reported by them, without the intervention of the tax officers.

8.5 Other Amendments

1. FORM GSTR-1 is to be amended to provide for reporting of details of supplies made through ECOs, covered under section 52 and section 9(5) of CGST Act, 2017, by the supplier and reporting by the ECO in respect of supplies made under section 9(5) of CGST Act, 2017. 
2. Amendment in the definition of “non-taxable online recipient” under section 2(16) of IGST Act, 2017 and definition of “Online Information and Database Access or Retrieval Services (OIDAR)” under section 2(17) of IGST Act, 2017 so as to reduce interpretation issues and litigation on taxation of OIDAR Services. 

9. Tax rates under GST

9.1 Change in GST Rates

GST Council has proposed to change GST Rates in the following cases:

Further, the supply of Mentha arvensis is proposed to be covered under RCM as has been done for Mentha Oil.

9.2 Clarity on GST Rates applicable

1. Rab (Rab-Salawat) is classifiable under CTH 1702 and attracts GST @ 18%.
2. fryums manufactured using the process of extrusion is specifically covered under CTH 19059030 and attract GST @18%.
3. A higher rate of compensation cess of 22% is applicable to a motor vehicle fulfilling all four conditions, namely, it is popularly known as SUV, has an engine capacity exceeding 1500 cc, length exceeding 4000 mm, and a ground clearance of 170 mm or above.
4. goods falling in the lower rate category of 5% under schedule I of notification No. 1/2017-CTR imported for petroleum operations will attract a lower rate of 5% and the rate of 12% shall be applicable only if the general rate is more than 12%.

9.3 other

1. No GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.
2. Incentives paid to banks by the Central Government under the scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.