Alerts & Updates 20th Feb 2023

Key recommendations by the 49th GST Council

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The 49th meeting of the GST Council was held on February 18th, 2023. Summarised below are the key recommendations made:

  • On GST Compensation Cess:
    • Entire outstanding GST Compensation Cess of Rs. 16,982 crores due to the States for June 2022 is to be cleared from the Central Government’s own resources and recouped from future Compensation Cess collection. This would clear the provisionally admissible compensation for the past five years.
    • An additional final compensation cess of Rs. 16,524 crores would be cleared to those States who have provided the revenue figures as certified by the Accountant General of the States.
  • On formation of GST Appellate Tribunals:
    • The Council adopted the report of the Group of Ministers (“GoM”) with certain modifications and the final draft amendments to the GST Laws is to be circulated to its members for comments.
    • The GoM has suggested, inter alia that the tribunals should consist of two judicial members, one technical member each from the Centre and States, and a retired Supreme Court judge as president.
  • On Capacity Based Taxation and Special Composition Scheme:
    • Recommendations of the GoM on the following have been accepted with a view to plug tax leakage and improve revenue collection for certain products like chewing tobacco, gutkha, pan masala, etc., namely:

    – Capacity based levy not to be prescribed

    – Compliance and tracking measures to be taken to plug leakages/evasions

    – Exports to be allowed only against LUT with consequential refund of accumulated ITC

    – Compensation Cess levied to be changed from ad valorem to specific tax based levy to boost first stage revenue collection.

  • On GST Rates and related issues:
    • GST rates have been proposed to be reduced in two cases, namely:
    Sl. No. Goods Old Rate New Rate
    1 ‘Rab’ 18% 5% – if sold prepackaged and labelled

    Nil – if sold otherwise

    2 Pencil Sharpener 18% 12%
    • The payment of GST on ‘Rab’ during the past period has been proposed to be regularized on an “as is basis” in order to avoid doubts over its classification and applicable GST Rate.
    • No separate IGST to be levied on tag-tracking or data logger devices where such devices are already affixed on the container.
    • Exemption benefit under Sl. No. 41A of Notification No. 1/2017-Compensation Cess (Rate) is to be amended to extend to coal rejects supplied to and by a coal washeries, arising out of coal on which Compensation Cess has been paid and no ITC thereof has been availed by any person.
    • GST exemption will be extended to any authority, board or body set up by the Central or State Government including the National Testing Agency for conduct of entrance examination for admission to educational institutions.
    • Dispensation on payment of GST under reverse charge to be extended to courts and tribunals in respect of taxable services supplied by them such as renting of premises to telecommunication companies for installation of towers, renting of chambers to lawyers etc.
  • On Facilitation of Trade:
    • Section 30 of the CGST Act, 2017 and Rule 23 of the CGST Rules, 2017 are to be amended to increase the time limit for making an application for revocation of cancellation of registration from 30 days to 90 days, extendable by another 180 days thereof. Further, a one-time amnesty may be provided for past cases, where registration has been cancelled on account of non-filing of the returns, but application for revocation of cancellation could not be filed within the specified time limit.
    • Section 62 of the CGST Act, 2017 is to be amended to increase the time period for filing returns for deemed withdrawal of best judgment assessment orders from 30 to 60 days, extendable by another 60 days thereof and a one-time amnesty would be available for past cases where returns could not be filed within 30 days of the assessment order.
    • In case of delayed filing of return in Form GSTR-9, late fee is to be rationalized to Rs. 50/- per day for registered persons having aggregate turnover up to Rs. 5 crores in the said financial year and to Rs. 100/- per day for registered persons having aggregate turnover of more than Rs. 5 crores and up to Rs. 20 crores in the said financial year.
    • Amnesty Schemes have been recommended in respect of pending returns in FORM GSTR-4 (GST Return of Composition scheme), FORM GSTR-9 (GST Annual Return) and FORM GSTR-10 (Final Return filed by GST Taxpayers after cancellation of GST Registration) in order to provide relief to large number of taxpayers.
    • Section 13(9) of the IGST Act, 2017 is proposed to be deleted to provide that the place of supply of services of transportation of goods, in cases where the location of the supplier or the recipient is outside India, shall be the location of the recipient of such services.
  • ELP comments
    Most recommendations made during the 49th meeting of the GST Council have been towards facilitating ease of business and tax compliance for assessees. Various amnesty initiatives have been proposed to ease taxpayers into compliance.

    The proposed amendment towards introducing the GST Appellate Tribunal is a welcome, albeit belated move. The delay in setting up the Tribunal has led to blockage of genuine refunds, accumulation of interest burden and uncertainty on legal positions.

    The earlier skewed ratio of Judicial and Technical members on the Benches and appointment of member of Indian Legal Services as a Judicial Member was declared as ultra vires the Constitution by the Hon’ble Madras High Court in Revenue Bar Association vs. Union of India [(2019) 30 GSTL 584]. While the matter is sub judice before the Supreme Court, the GST Council has sought to rationalize the composition of Benches to make it legally sustainable.

    We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:

    Darshan Bora, Partner – DarshanBora@elp-in.com
    Sweta Rajan, Partner – SwetaRajan@elp-in.com
    Samyuktha Srinivasan, Senior Associate – SamyukthaSrinivasan@elp-in.com
    Suraj Subramanian, Advocate – surajsubramanian@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