The 53rd meeting of the GST Council, chaired by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, took place in New Delhi with significant participation from various state and union territory representatives. The council deliberated on several key issues and made noteworthy recommendations aimed at improving GST compliance and easing the burden on taxpayers. Here are the primary outcomes and recommendations from the meeting:
Waiver of Interest and Penalties
The GST Council recommended waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19, and 2019-20. This applies to cases not involving fraud, suppression, or willful misstatement, provided the full tax demanded is paid by March 31, 2025. This measure is designed to offer relief to taxpayers who faced genuine difficulties in the initial years of GST implementation, recognizing the complexities and challenges of transitioning to the new tax regime.
Input Tax Credit Extension
The council extended the time limit for availing input tax credit (ITC) for invoices or debit notes under Section 16(4) of the CGST Act. For the fiscal years 2017-18 to 2020-21, any GSTR 3B return filed by November 30, 2021, will be considered compliant. This extension provides businesses additional time to claim ITC, ensuring they can optimize their tax liabilities and avoid potential financial strain due to missed deadlines.
Conditional Waiver of Interest and Penalties
To further alleviate the compliance burden, the council introduced the concept of a conditional waiver through the introduction of Section 128A in the CGST Act. This provision allows for a conditional waiver of interest or penalty for demands under Section 73 for the fiscal years 2017-18, 2018-19, and 2019-20, subject to the condition that the taxpayer pays the full amount of tax demanded by March 31, 2025. This move acknowledges the teething troubles faced during the initial years of GST and aims to provide a fair chance for taxpayers to rectify their positions without the additional financial burden of penalties and interest, provided they comply with the principal tax obligations within the extended timeline.
Reduction of Litigation
To reduce litigation, the council proposed monetary limits for filing appeals by the department. Appeals to the GST Appellate Tribunal should not exceed Rs. 20 lakh, to the High Court Rs. 1 crore, and to the Supreme Court Rs. 2 crore.
GST Tax Rates Adjustments
Goods
- A uniform rate of 5% IGST on imports of aircraft parts, components, testing equipment, and toolkits.
- A 12% GST rate on all milk cans (irrespective of material).
- Reduction in GST rate on cartons, boxes, and cases of paper or paper-board from 18% to 12%.
- A 12% GST rate on all solar cookers.
- Clarification that all types of sprinklers, including fire water sprinklers, attract 12% GST.
- Extension of IGST exemption on imports for defense forces and specific research equipment.
- Exemption of compensation cess on SEZ imports for authorized operations since July 1, 2017.
Services
- Exemption for services provided by Indian Railways to the public and intra-railway transactions.
- Exemption for accommodation services up to Rs. 20,000 per month for stays of at least 90 days.
- Clarifications on tax treatment for insurance services, reinsurance commissions, and co-insurance agreements.
Trade Facilitation Measures
The council introduced several measures to facilitate trade:
Conditional Waiver
Introduction of Section 128A in the CGST Act to allow conditional waiver of interest or penalty for demands under Section 73 for the initial GST implementation years.
Pre-deposit Reduction
Amendments in Sections 107 and 112 to reduce the amount of pre-deposit required for filing appeals under GST.
ENA Exclusion
Amendment in the GST Law to exclude Extra Neutral Alcohol (ENA) from GST when used for manufacturing alcoholic liquors for human consumption.
TCS Rate Reduction
Reduction of the TCS rate collected by Electronic Commerce Operators (ECOs) from 1% to 0.5% to ease the financial burden on suppliers.
Procedural Amendments
Appeals Timeline
Amendment in Section 112 to allow the three-month period for filing appeals before the Appellate Tribunal to start from a notified date.
Input Tax Credit Relaxation
Retrospective relaxation of Section 16(4) for returns filed after revocation of cancellation.
Composition Taxpayer Returns
Extension of the due date for filing returns in FORM GSTR-4 from April 30 to June 30.
Interest Calculation
Amendment in Rule 88B to exclude amounts available in the Electronic Cash Ledger from interest calculations for delayed return filings.
Clarifications and Miscellaneous Changes
- Supply Valuation: Clarification on valuation rules for services provided between related parties, including corporate guarantees.
- Service Imports: Clarification on the valuation of import services by related entities eligible for full input tax credit.
- ITC on Optical Fiber Cables: Input tax credit availability for ducts and manholes used in optical fiber cable networks.
Bank Services
Clarification on the place of supply for custodial services provided by banks to foreign portfolio investors.
The recommendations of the 53rd GST Council meeting reflect a comprehensive approach to streamline GST compliance, reduce litigation, and ease the operational burden on taxpayers while ensuring clarity in tax regulations and processes.
What are your views on these recommendations of the 53rd GST Council meeting?
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