45th GST Council Meeting - Analysis of outcomes & recommendations

45th GST Council Meeting was held on September 17th, 2021 at Lucknow. FM Nirmala Sitharaman chaired the meeting. 

Let’s have an understanding of the outcome and recommendations made in meeting. 

A. Recommendations for streamlining Compliance’s under GST

1. Aadhar Authentication of registration has been made mandatory for filing refund application and application for revocation of cancellation of registration. 
2. Late fees on delayed Filing of Form GSTR 1 will be auto populated and collected in next month’s GSTR 3B
3. Refund under GST will be disbursed in the same bank account which is linked with same PAN and on which registration has been obtained under GST. 
4. Section 16(2)(aa) on Input Tax Credit was recently added by Finance Bill. It states that a Registered Person can avail the ITC only when the supplier has uploaded Invoices/ debit notes in FORM GSTR-1/ IFF and is available in FORM GSTR-2B of the recipient. This will empower the already existing Rule 36(4).
5. Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.

B. Recommendations relating to GST Laws and procedures

1. Relaxation has been provided in filing of FORM GST ITC-04 under Rule 45 (3) of the CGST Rules. Taxpayers having annual aggregate turnover  above Rs. 5 crores in preceding financial year shall furnish ITC-04 once in six months while Taxpayers having annual aggregate turnover upto Rs. 5 crores in preceding financial year shall furnish ITC-04 annually.
2. Entities having same PAN and having registration in different states will be allowed to transfer unutilized balance in CGST and IGST cash ledger without going through the refund procedure, subject to certain conditions.
3. Section 50 (3), CGST Act will be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. If ineligible ITC has been availed but not been utilized then No interest will be charged. But if ineligible ITC has been availed and utilized, then Interest in such cases will be charged at 18%.w.e.f. 01.07.2017.
4. The date of issuance of debit note and not the date of underlying invoice shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017 W.e.f. 01.01.2021.
5. There will be no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017.
6. Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.

C. Concession of GST Rates given on Covid 19 life saving drugs namely Amphotericin B, Remdesivir, Tocilizumab and Heparin till September 30th, 2021 has now been extended till December 31st, 2021. Extension is being given only for medicines and not for medical equipment.

D. Council has decided to reduce GST rates to 5 percent till December 31st, 2021 on some other Covid 19 treatment drugs namely Itolizumab, Posaconazole, Infliximab, Favipiravir, Casirivimab, 2-Deoxy-D-Glucose and Bamlanivimab.

E. GST Council has decided to charge GST at the rate of 5 % on food delivery platforms like Swiggy, Zomato, etc on restaurant services supplied through them and the tax will be charged at point of delivery. Earlier, tax collected on bills generated were paid back to the restaurant who in turn deposited the tax to Department. But now aggregators will collect tax from the consumer and pay it directly to the authorities instead of the restaurants.

F. Inverted duty structure anomalies on textiles and footwear sector which was discussed in earlier GST Council meeting will be corrected from January 1, 2022. Necessary GST rate changes will be done. 

G. Changes in GST rates in relation to goods w.e.f 1.10.2021

1. GST rate on Retro fitment kits for vehicles used by Divyang/ Persons with Disabilities reduced to 5%
2. GST rate on Fortified Rice Kernels for schemes like ICDS etc reduced from existing 18% to 5%.
3. GST rate on Medicine Keytruda for treatment of cancer reduced from existing 12% to 5%.
4. GST rate on Biodiesel supplied to OMCs for blending with Diesel reduced from existing 12% to 5%.
5. GST rate on Ores and concentrates of metals such as iron, copper, aluminium, zinc and few others increased from existing 5% to 18%.
6. GST rate on Specified Renewable Energy Devices and parts increased from existing 5% to 12%.
7. GST rate on Cartons, boxes, bags, packing containers of paper etc. increased from existing 12/18% to 18%.
8. GST rate on Waste and scrap of polyurethanes and other plastics increased from existing 5% to 18%.
9. GST rate on certain kinds of pens was 12% and on pen parts was 18%. Council has decided to correct this inversion by making rate on all pens and pen parts to 18% 
10. GST rate on Railway parts, locomotives & other goods in Chapter 86 increased from existing 12% to 18%.
11. GST rate on Life-saving medicines like Zolgngelsma and Viltepso used in treatment of Spinal-Muscular Atrophy and imported for personal use which costs around Rs 16 crores has been exempted from GST. 

H. Changes in GST rates and scope of exemption on Services w.e.f 1.10.2021

1. GST on Services by way of grant of National Permit to goods carriages on payment of fee has been reduced from 18 % to NIL.
2. GST on Skill Training for which Government bears 75% or more of the expenditure [presently exemption applies only if Govt funds 100%] has been reduced from 18 % to NIL.
3. GST on Services related to AFC Women's Asia Cup 2022 has been reduced from 18 % to NIL.
4. GST on Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes in order to bring parity between distribution and licensing services has been increased from existing 12 % to 18%.
5. GST on Printing and reproduction services of recorded media where content is supplied by the publisher in order to bring it on parity with Colour printing of images from film or digital media has been increased from existing 12 % to 18%.
6. Exemption on leasing of rolling stock by IRFC to Indian Railways has been withdrawn.
7. Validity of GST exemption on transport of goods by vessel and air from India to outside India has been extended upto 30.9.2022.

I. Clarification in relation to GST rate on Goods

1. Pure henna powder and paste, having no additives will attract 5% GST rate under Chapter 14.
2. Brewers' Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HSN code 2303 will attract GST at the rate of 5%.
3. All laboratory reagents and other goods falling under heading 3822 will attract GST at the rate of 12%.
4. Scented sweet supari and flavoured and coated illachi falling under heading 2106 will attract GST at the rate of 18%
5. Carbonated Fruit Beverages of Fruit Drink" and "Carbonated Beverages with Fruit Juice" will attract GST rate of 28% and Cess of 12%. This will be being prescribed specifically in the GST rate schedule.
6. Tamarind seeds falling under heading 1209 and hitherto attracted nil rate irrespective of use will henceforth attract 5% GST rate w.e.f. 1.10.2021 for use other than sowing. Seeds for sowing will continue at nil rate.
7. External batteries sold along with UPS Systems/ Inverter will attract GST rate applicable to batteries [ 28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18%.
8. GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from 1.7.2017 to 31.12.2018, in the same manner as has been prescribed for the period on or after 1st January 2019.
9. Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12% GST in the past have been regularized. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated.
10. Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;
11. It is being clarified that all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%].
12. Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.

J. Clarification in relation to GST rate on services

1. Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST
2. Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract 5% GST without claiming ITC.
3. Ice cream parlour selling already manufactured ice- cream would attract GST at the rate of 18%.
4. Overloading charges at toll plaza are exempt from GST being akin to toll.
5. The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption
6. The services by way of grant of mineral exploration and mining rights attracted GST rate of 18% w.e.f. 01.07.2017.
7. Admission to amusement parks having rides etc. attracts GST rate of 18%. The GST rate of 28% applies only to admission to such facilities that have casinos etc.
8. Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.

K. On the issue of compensation scenario, a presentation was made to the Council wherein it was brought out that the revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22. In this context various options, as have been recommended by various committees/ forums were presented. The Council deliberated at length on the issue. The Council decided to set up a GoM to examine the issue of correction of inverted duty structure for major sectors; rationalise the rates and review exemptions from the point of view of revenue augmentation, from GST. It was also decided to set up a GoM to discuss ways and means of using technology to further improve compliance including monitoring through improved e-way bill systems, e-invoices, FASTag data and strengthening the institutional mechanism for sharing of intelligence and coordinated enforcement actions by the Centre and the States.

L. Council has decided to not bring petrol, diesel and other specified petroleum products under the ambit of GST as it was not deemed appropriate to do so at this stage.

M. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.