Highlights of the 50th GST Council Meeting

The 50th GST Council meeting, led by Union Finance & Corporate Affairs Minister Nirmala Sitharaman, marked a significant milestone in the history of Goods and Services Tax (GST). The meeting addressed crucial topics such as online gaming taxation, utility vehicle classification, and stricter criteria for registration and claiming Input Tax Credit (ITC). The session commenced in the national capital with the premiere of a short film titled 'GST Council - 50 Steps towards a Journey,' introduced by Finance Minister Nirmala Sitharaman. This article will examine the significant highlights of the 50th GST Council Meeting.

Synopsis of 50th GST Council meeting

The council made several key recommendations, which are as follows:

Casino, Horse Racing, and Online gaming are to be taxed at a uniform rate of 28%.
GST rate reduced to 5% on uncooked/unfried snack pellets.
GST reduction on imitation zari thread or yarn, known by any name in trade parlance, from 12% to 5%.
GST rate reduced on fish soluble paste from 18% to 5%.
Exemption from IGST on import of Dinutuximab (Quarziba) medicine & Food for Special Medical Purposes (FSMP) used to treat rare diseases.
GST exemption on satellite launch services extended to services supplied by organizations in the private sector.
Amendment made in compensation cess notification to include all utility vehicles, regardless of the name, provided they meet specified parameters.
Goods Transport Agencies (GTAs) will not be required to file a declaration for paying GST under forward charge every year.
Provisions of the Finance Act, 2023, about the GST Appellate Tribunal may be notified by the Centre, effective 01.08.2023.

Amnesty schemes for non-filers of FORM GSTR-4, FORM GSTR-9, and FORM GSTR-10 returns, revocation of registration cancellation, and deemed withdrawal of assessment orders issued under Section 62 of CGST Act, 2017, to be extended till 31.08.2023.

50th GST Council Meeting: Recommendations about GST on goods

Reduced GST Rates

Uncooked/unfried snack pellets: The GST rate on uncooked/unfried snack pellets has been reduced from 18% to 5%. This move aims to lower the tax burden on this category of goods.
Fish soluble paste: The GST rate on fish soluble paste has been reduced from 18% to 5%. This reduction will make the product more affordable for consumers.
Imitation zari threads/yarn: The GST rate on imitation zari threads/yarn has been reduced from 12% to 5%. This will help reduce the tax burden on this category of products.
LD slag: LD slag will now be taxed at par with blast furnace slag and fly ash, with a reduced GST rate of 5% instead of 18%. This change aims to promote using LD slag and align it with similar products.

IGST Exemptions

Dinutuximab (Quarziba) medicine: There is an exemption from IGST when importing Dinutuximab (Quarziba) medicine for personal use.
Medicines and Food for Special Medical Purposes (FSMP): IGST exemption is provided for medicines, and FSMP used in the treatment of rare diseases, as well as FSMP imported by Centers for Excellence for Rare Diseases or individuals/institutions recommended by these centers.
Taxability of Raw Cotton: The supply of raw cotton, including kala cotton, by agriculturists to cooperatives is now taxable under the reverse charge mechanism.

Regularization of Past Period Issues

Raw cotton: Issues related to raw cotton will be regularized on an "as is basis" for past periods
Trauma, spine, and arthroplasty implants: Issues related to these implants before 18.07.2022 will be regularized.
Desiccated coconut: Matters related to desiccated coconut for 1.7.2017 to 27.7.2017 will be regularized.
Plates and cups made of areca leaves: GST issues related to plates and cups made of areca leaves before 01.10.2019 will be regularized.
Biomass briquettes: GST issues related to biomass briquettes for 01.7.2017 to 12.10.2017 will be regularized.

50th GST Council Meeting: Amendment to Compensation Cess Notification

Entry 52B in the compensation cess notification will be amended to include all utility vehicles meeting the following parameters:

Length exceeding 4000 mm
Engine capacity exceeding 1500 cc
Ground clearance of 170 mm and above (in an unladen condition)

Levy of Compensation Cess on Pan Masala and Tobacco Products: For the pan masala, tobacco products, etc., where it is not legally required to declare the retail sale price, the ad valorem rate applicable on 31st March 2023 may be notified for the levy of compensation cess. Inclusion of RBL Bank and ICBC Bank: RBL Bank and ICBC Bank have been included in the list of specified banks eligible for IGST exemption on importing gold, silver, or platinum. These recommendations aim to simplify the tax structure, reduce the tax burden on specific goods, and clarify past-period issues.

50th GST Council Meeting: Recommendations regarding GST on services

Based on the information provided, here are the recommendations regarding GST on services:

GST Exemption on Satellite Launch Services

GST exemption will be provided on satellite launch services supplied by ISRO, Antrix Corporation Limited, and New Space India Limited (NSIL). This exemption may also be extended to satellite launch services supplied by other private organizations, promoting the space industry and reducing the tax burden on such services.

Simplified Process for Goods Transport Agencies (GTAs)

GTAs will no longer be required to file a declaration for paying GST under the forward charge every year. Suppose the option has been exercised for a particular financial year. In that case, it will be deemed exercised for the next and future financial years unless a declaration is filed to revert that decision. The deadline to exercise this option has been extended to 31st March of the preceding financial year, providing trade-friendly measures for GTAs.

Taxability of Services Supplied by Directors

It has been clarified that services a company director supplies to the company in their personal or private capacity will not be taxable under Reverse Charge Mechanism (RCM). This clarification helps in determining the tax liability for services provided by directors.

Taxability of Food and Beverages in Cinema Halls

The supply of food and beverages in cinema halls will be taxable as a restaurant service if they are supplied by way of or as part of a service and are supplied independently of the cinema exhibition service. Suppose the supply is considered a composite supply and satisfies the test of being a composite supply with the service of an exhibition of cinema as the principal supply. In that case, the entire supply will attract GST at the rate applicable to the service of an exhibition of cinema. These recommendations aim to clarify the tax treatment of specific services, promote the space industry by granting exemptions, simplify compliance procedures for GTAs, and address the taxability of food and beverages in cinema halls based on their nature and supply arrangement.

28% GST On Online Gaming, horse racing, and casinos

Last year, a GoM was formed to examine the taxation issues related to casinos, horse racing, and online gaming under GST. The GST Council discussed the matter during its 50th meeting and made the following recommendations:

Inclusion of Online Gaming and Horse Racing as Taxable Actionable Claims:

Suitable amendments will be made to the GST law to include online gaming and horse racing in Schedule III of the CGST Act as taxable actionable claims. This means that these activities will be subject to GST.

Uniform Tax Rate:

Casinos, horse racing, and online gaming will be taxed at a uniform rate of 28%. This rate will apply to all three activities.

Tax Calculation:

The GST will be levied on:

The face value of the chips purchased in the case of casinos.
The total value of the bets placed with the bookmaker/totalisator in the case of horse racing.
The total value of the bets placed in the case of online gaming.

These recommendations clarify the taxation of casinos, racecourses, and online gaming under GST.

Recommendations for streamlining GST compliances:

E-way Bill for Intra-state Movement of Gold and Precious Stones

A recommendation has been made to mandate the requirement for e-way bill generation for the intra-state movement of gold and precious stones under Chapter 71.

Particular Procedure for Manufacturers of Tobacco and Pan Masala

The Council recommends issuing a notification under Section 148 of the CGST Act 2017 to prescribe a specific registration and return filing procedure for manufacturers of tobacco, pan masala, and similar items. Additionally, Section 122A may be inserted to provide for a special penalty for non-registration of machines by such manufacturers.

Restriction on IGST Refund Route for Certain Items

The provisions of Section 123 of the Finance Act 2021, amending Section 16 of the IGST Act, will be notified with effect from 1st October 2023. A notification will also be issued under Section 16(4) of the IGST Act 2017 to restrict the IGST refund route for tobacco, pan masala, mentha oil exports, and similar items.

Amendments to GST Registration Rules

Amendments to the CGST Rules, 2017, will be made to streamline GST registration procedures. This includes furnishing bank account details within a specified time frame, system-based suspension of registration for non-compliance, automatic revocation of suspension upon compliance, and disallowance of GSTR-1/IFF filing for non-furnishing of bank account details.

Changes to Physical Verification and Aadhaar Authentication

Amendments will be made to the CGST Rules, 2017, to eliminate the requirement of physical verification of business premises in the applicant's presence, except in high-risk cases. Aadhaar authentication will be used for risk-based biometric authentication of registration applicants in a pilot project conducted in Puducherry.

Manner of Recovery of Tax and Interest

Rule 142B and Form GST DRC-01D will be inserted in the CGST Rules, 2017, to recover tax and interest in cases where the output tax liability in GSTR-1 exceeds the liability reported in GSTR-3B by a specified threshold.

Enhanced Compliance Communication and Notices

Various amendments to GST rules and forms will facilitate improved compliance communication. This includes system-based intimation regarding excess ITC claims, notices for non-furnishing of annual returns, and reporting of OIDAR service details by service providers.

Other Measures

Additional recommendations include the inclusion of duty-free shop supplies in the value of exempt supplies, consent-based sharing of taxpayer information, compounding amounts for offenses, clarification of place of supply for goods to unregistered persons, formation of state-level coordination committees, and measures to curb GST fraud as recommended in the 2nd interim GoM report on IT System Reforms.

Measures for facilitation of trade

Appointment and Conditions of GST Appellate Tribunals (GSTATs): The council recommended rules for the appointment and conditions of the President and members of GSTATs. These rules are expected to be notified by the Centre, ensuring the establishment of GSTATs from 1st August 2023.
Continuation of Relaxations in Form GSTR-9 and 9C: The relaxations provided in the previous fiscal year (2021-22) for various tables of Form GSTR-9 and 9C will be extended to FY 2022-23. This extension aims to simplify compliance requirements for taxpayers.
Exemption from GSTR-9/9A for Small Taxpayers: Small taxpayers with an annual turnover of Rs. 2 crore will be exempt from filing GSTR-9/9A for FY 2022-23. This exemption aims to reduce the compliance burden on small businesses.
Clarification on Input Services Distributor (ISD) Mechanism: A circular will be issued to clarify that the ISD mechanism is not mandatory for distributing input tax credit (ITC) of standard input services procured from third parties to distinct persons, in line with the present provisions of the GST law.
Clarification on Warranty Replacements and Reverse ITC: A circular will be released to address various concerns regarding GST liability and the reversal of ITC in cases involving warranty replacement of parts and repair services during the warranty period without customer consideration. This clarification aims to provide clear tax treatment guidelines for such scenarios.
Refund-Related Issues: A circular will address several refund-related matters, including restrictions on the refund of accumulated ITC based on GSTR-2B, the inclusion of export goods in the adjusted total turnover calculation, and the admissibility of refunds for exports made after the time limit specified under Rule 96A of the CGST Rules, 2017.
TCS Liability in Multi-operator E-commerce Transactions: A circular will provide clarity on the Tax Collected at Source (TCS) liability under Section 52 of the CGST Act, 2017, in cases where multiple e-commerce operators (ECOs) are involved in a single transaction for the supply of goods or services.
Amendments and Clarifications: Amendments and clarifications will be made to GST rules and forms. This includes amending Rule 46 to ease the compliance burden for tax invoices, issuing circulars for e-invoice generation for supplies to government departments, clarifying interest calculation under Section 50(3), determining the taxation of holding company securities, verifying ITC, and enabling manual filing of appeals under specific circumstances.
Extension of Amnesty Schemes and Due Dates: Amnesty schemes related to the non-filing of GSTR-4, GSTR-9, and GSTR-10, revocation of registration cancellation, and deemed withdrawal of assessment orders will be extended until 31st August 2023. Additionally, the due dates for filing GSTR-1, GSTR-3B, and GSTR-7 for April, May, and June 2023 will be extended until 31st August 2023 for taxpayers in Manipur.