Alerts & Updates 24th Jun 2024

Key Proposals by the 53rd GST Council

Authors

Rohit Jain Deputy Managing Partner | Mumbai
Vivek Baj Partner | Pune
Sai Dash Senior Associate | Pune
Atharva Javalekar Senior Associate | Pune

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  • The much anticipated 53rd Goods and Service Tax Council meeting was held on June 22, 2024. The Council addressed some of the most pertinent issues under GST and has recommended various proposals with an intention to reduce tax compliance and litigation. The Council has also made recommendations for rationalising GST rates on certain specific goods and services. Summarised below are such key recommendations made:

  • On Input Tax Credit (“ITC”)
    • The time limit to avail ITC in respect of any invoice or debit note for the period FY 2017-18, 2018-19, 2019-20 and 2020-21 is proposed to be extended to November 30, 2021, by retrospectively amending Section 16(4) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) w.e.f. July 1, 2017.
    • Retrospective amendment is proposed to be made in Section 16(4) of the CGST Act allowing registered person to claim ITC for the duration when registration was cancelled, provided the returns starting from the period from the date of cancellation till the date of revocation of such cancellation is filed within 30 days of Order of revocation.
    • Council has proposed to clarify that ITC on ducts and manholes used in the network of Optical Fiber Cables (“OFCs”) would be available and Section 17(5)(c) or (d) qua restriction of ITC on such activities will not be applicable.
    • It is clarified that with respect to supplies received from unregistered supplier, where tax is to be paid by the recipient under RCM, the Financial Year in which such self-invoice is issued by the recipient will be considered as the relevant Financial Year for calculation of time limit for availment of ITC under Section 16(4) of CGST Act.
    • Section 140(7) of CGST Act which pertains to distribution of ITC of services received prior to the appointed day by an Input Service Distributor (“ISD”) whose invoices have been received on or after the appointed date is proposed to be amended retrospectively w.e.f. July 1, 2017 proving that availment/distribution of such credits where invoices were received before the appointed date will also be now permitted.
    ELP Comment
    Relaxations of the timeline for availment of ITC under Section 16(4) of CGST Act will provide an impetus to the trade and industry. Further, clarification on availability of ITC should indeed curb the long pending disputes and litigations.
  • On Valuation
    • It is clarified that value of services declared on invoice may be treated as the Open Market Value (“OMV”) under Rule 28(1) of CGST Rules where full ITC is available for services imported from foreign Group Company by related domestic entity. Further, in cases where full ITC is available and invoice is not issued by the related domestic entity, the value of such services may be deemed to be declared as ‘Nil’ and may be deemed as OMV in terms of second proviso to rule 28(1) of CGST Rules.
    • It is clarified that deemed valuation of 1% of the amount of Corporate Guarantee or actual consideration, whichever is higher, will not be applicable in cases of export of such services and where the recipient is eligible for full ITC.
    ELP Comment
    The above recommendations provides much-needed clarifications. Further, the dispute over valuation of services by way of providing corporate guarantee as per Rule 28(1) or Rule 28(2) of CGST Rules has now been put to rest.
  • On Interest and penalty
    • Section 128A in CGST Act is proposed to be inserted in order to provide waiver of interest or penalty or both against demands raised for the period FY 2017-18 to FY 2019-20 under Section 73 of CGST Act, subject to the condition that such Tax demanded is paid by March 31, 2025.
    • Rule 88B of CGST Rules is proposed to be amended to provide that the amount available in the Electronic Cash Ledger (“ECL”) on the due date of filing of Form GSTR-3B, and is debited while filing the said return, shall not be included while calculating interest under section 50 of the CGST Act in respect of delayed filing of return.
  • On provision relating to demands and recovery
    • Section 74A is proposed to be inserted in CGST Act, for providing a common time limit qua issuance of notices and orders from the period FY 2024-25. The common time limit will be applicable in all cases irrespective of whether demand is raised on account of fraud, wilful misstatement or not.
    • Recommendation has also been made to increase the time limit for availing the benefit of reduced penalty from 30 days to 60 days.
  • On Appeal
    • The monetary limit for filing appeal by Department is proposed to be as follows:
      • GST Appellate Tribunal – INR 20 Lakhs
      • High Court – INR 1 Crore
      • Supreme Court – INR 2 Crores
    • The maximum amount for filing appeal with the appellate authority is proposed to be reduced from to INR 40 crores (CGST & SGST) which was earlier INR 50 Crores. Further, the amount of pre-deposit for filing appeal with the GST Appellate Tribunal is proposed to be reduced to 10% with a maximum of INR 40 Crores (CGST and SGST) which was 20% with a maximum of INR 50 Crores.
    • Section 112 of the CGST Act is proposed to be amended to prescribe the time limit for filing appeal before the GST Appellate Tribunal to be 3 months starting from the date to be notified by the Government in respect of appeal/ revision orders passed before the date of said notification.
    ELP Comment
    The dichotomy amongst the taxpayers with regard to timeline for filing an appeal upon appointment of the President of GST Tribunal seems to have been resolved.
  • On Compliances
    • Due date for filing of return by Composition taxpayers is proposed to be postponed to 30th June following the end of the Financial Year (earlier it was 30th April).
    • Form GSTR-1A is proposed to be introduced for undertaking amendments in Form GSTR 1. However, such amendments can only be undertaken before filing of Form GSTR-3B for the current period.
    • For F.Y. 2023-24, taxpayers having aggregate annual turnover of upto INR 2 Crores will not be required to file GSTR – 9/9A.
    • Recommendation has been made to reduce the threshold limit for reporting of B2C inter-state supplies in form GSTR 1, from INR 2.5 lakhs to INR 1 lakh.
  • On Anti-profiteering
    • April 1, 2025, has been recommended as the sunset date with regard to receipt of any new application regarding anti-profiteering. It is further recommended that Principal bench of GST Appellate Tribunal will decide the anti-profiteering cases.
  • On restriction of claiming refund on export of goods
    • Section 16 of the IGST Act and Section 54 of the CGST Act are purposed to be amended in order to restrict refund in respect of goods which are subjected to export duty, irrespective of whether such goods are exported without payment of taxes or with payment of taxes. The said restrictions will also be applicable, in case of supply of goods to SEZ developer or SEZ unit for authorised operations.
  • On other important changes
    • Section 9(1) of the CGST Act is proposed to be amended in order to exempt levy of GST on Extra Neutral Alcohol used for manufacture of alcoholic liquor for human consumption.
    • It is clarified that the Place of Supply for custodial services supplied by Indian banks to foreign portfolio investors will be determinable as per Section 13(2) of the IGST Act i.e. recipient based.
    • Mechanism for refund of additional Integrated Tax (IGST) paid on account of upward revision in price of the goods subsequent to export is proposed to be prescribed by CBIC.
    • Section 11A is proposed to be inserted in CGST Act granting power to the Government in order to allow regularization of non-levy or short levy of GST where Tax was being short paid or not paid due to common trade practice under GST Acts.
    • Section 122(1B) is proposed to be amended retrospectively w.e.f. October 1, 2023, to provide that these penalties will be applicable only to those e-commerce operators (“ECOs”) who are required to collect tax (“TCS”) under Section 52 of CGST Act and not for other e-commerce operators. The TCS deducted by ECOs on net taxable supplies is proposed to be reduced to 0.5% from 1%.
    • Amendment to Rule 142 of CGST Rules is proposed to be made to this effect under and issuance of a circular to prescribe the mechanism of adjustment of tax paid in respect of demand through Form GST DRC-03 against amount to be paid as pre-deposit for filing appeal.
    • Council has recommended to roll-out the biometric-based Aadhaar authentication of registration applicants on pan-India basis in a phased manner.
    • Clarifications on various matters are expected to be issued to provide clarity on taxability of re-imbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees, reversal of input tax credit in respect of amount of premium in Life Insurance services,  warranty/ extended warranty provided by Manufacturers to the end customers, time of supply in respect of allotment of Spectrum to Telecom companies in cases where payment of licence fee and Spectrum usage charges is to be made in instalments, place of supply of goods supplied to unregistered persons, where delivery address is different from the billing address,  mechanism for providing evidence by the suppliers for compliance of the conditions of Section 15(3)(b)(ii) of CGST Act, 2017 in respect of post-sale discounts, to the effect that input tax credit has been reversed by the recipient on the said amount.
    • Rate of GST on certain goods and services proposed to be changed. Further, exemption from GST is proposed on certain services provided by Indian Railways as well as exemption on defence imports proposed to be extended from 2024 till 2029.

    Note: It is pertinent to note that to effectuate the said recommendations, Circulars/ Notifications will be issued by Central Board of Indirect Taxes & Customs (“CBIC”). The aforesaid recommendations will be implemented vide suitable Notifications/ Circulars to be issued by CBIC in the due course.

    ELP Comment
    The recommendations made by the Council seems beneficial and will definitely help reduce tax disputes and demands. Especially, waiver of interest and penalty and clarification issued qua timeline for availment of ITC will bring much awaited relief to tax payers.

    We hope you have found this information useful. For any queries/clarifications please write to us at insights@elp-in.com or write to our authors:

    Rohit Jain, Partner – Email – rohitjain@elp-in.com;
    Vivek Baj, Partner – Email – vivekbaj@elp-in.com;
    Sai Dash, Senior Associate – Emailsaidash@elp-in.com;
    Atharva Javalekar, Senior Associate – Emailatharvajavalekar@elp-in.com

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion or advice. This document is not intended to address the circumstances of any individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.