Recommendations of 55th GST Council Meeting| Measures for Facilitation of Trade and Streamlining GST Compliances

55th GST Council meeting was held on 21st December, 2024 under the chairmanship of Union Minister of Finance and Corporate Affairs. The meeting was also attended by Union minister of different states. The GST Council made recommendations related to following matters:

Changes in GST rates of Goods and Services;
Clarification on GST Rates;
Measures for facilitation of Trade;
Measures for streamlining compliances under GST;
Measures related to Law & Procedures

Detailed discussions of recommendations the recommendations other that ramade in 55th GST Council meeting:

1. Measurement for Facilitation of Trade

1.1 Supply of Goods warehoused in SEZ or FTWZs before clearance shall neither be considered as supply of goods nor supply of services

As per Entry No. 8(a) and 8(b) of Schedule III of CGST Act, the supply of warehoused goods before clearance for home consumption shall neither be considered as supply of goods nor supply of services.
However, ambiguity was around the goods stored in warehouses located in Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) as they are not covered in entry No. 8(a) or 8(b).
To bring uniformity in taxability of goods stored in warehouses located in SEZ and FTWZ with custom bonded warehouses, the GST Council has recommended to insert entry No. (aa) in Para 8 of Schedule III of CGST Act.
As per entry No. 8(aa), supply of goods from warehouses located in SEZ and FTWZ, before clearance of such goods for export or domestic tariff area, shall neither be considered as supply of goods nor supply of services.
Such Entry shall come into effect retrospectively from 1st July, 2017.

1.2 Clarity of taxability of vouchers under GST

Section 12(4) specifies the time of supply for vouchers as supply of goods, Section 13(4) specifies the time of supply for vouchers as supply of services and Rule 32(6) of CGST Rules specifies the valuation for supply of vouchers.
However, ambiguity has always been around whether the supply of vouchers shall be considered as supply of goods or supply of services.
In various judgements, the ruling authority has held that vouchers are merely a payment instrument and not an independent subject matter of supply.
To bring uniformity in provisions, the GST Council has recommended to omit Section 12(4), Section 13(4) of CGST Act and Rule 32(6) of CGST Rules and provide the following clarification on taxability of vouchers:
- No GST on Supply of Vouchers: Transactions in vouchers shall neither be considered as supply of goods nor supply of services;
- Principal to Principal Transaction: Distribution of vouchers on principal to principal basis shall not be subject to GST;
- Principal to Agent Transactions: However, where vouchers are distributed on principal-to-agent basis, the commission/fee or any other amount charged by the agent for such distribution is taxable under GST;
- Ancillary Services: Additional services such as advertisement, co-branding, marketing and promotion, customization and technology support, customer support etc. related to vouchers would be leviable to GST on the amount paid for these services;
- Unredeemed Services: Unredeemed vouchers (breakage) would not be considered as supply under GST and no GST is payable on income booked in the accounts in respect of breakage

1.3 Matter on which necessary clarifications is to be issued to remove ambiguity and legal disputes in certain issues.

a. Reversal of ITC by e-commerce operators with respect to supplies made under section 9(5) of CGST Act, 2017:

The e-commerce operators are receiving notices from the GST authority requiring reversal of ITC with respect to supplies made under u/s 9(5) of CGST Act, i.e, supplies where e-commerce operator is required to deposit GST.
GST Council has recommended that no proportional reversal of ITC is required under section 17 (1) or section 17 (2) of CGST Act, 2017 in respect of supplies for which tax is to paid by e-commerce operator in pursuance of section 9(5) of CGST Act, 2017.

b. Clarification on availability of ITC for goods which have been delivered by the supplier at his (supplier’s) place of business:

In case of ex-works contracts, goods are delivered by the suppliers to the recipient at his own place of business or at the transporter’s place, i.e., responsibility of taking goods from the location of supplier or from the location of transporter is of the recipient.
Ownership in the goods is transferred to the recipient at that point itself.
In such Case, The GST Council has recommended that in such case the goods are considered as “received” by the recipient under section 16(2)(b) of CGST Act, 2017 and the recipient may claim ITC on such goods subject to the conditions outlined in Sections 16 and 17 of the CGST Act, 2017.

c. Clarification regarding applicability of late fee for delay in furnishing of FORM GSTR-9C and providing waiver of late fee on delayed furnishing of FORM GSTR-9C for the period from 2017-18 to 2022-23:

GST Council has recommended that late fee under Section 47(2) of CGST Act shall levy where delay is in filing of complete annual return, i.e., both form GSTR-9 (Annual return) and GSTR-9C (Reconciliation Statement), where applicable.
For the annual returns pertaining to the period 2017-18 to 2022-23, the GST Council also recommended to provide waiver in delayed filing of FORM GSTR-9C, which is in excess of the amount of late fee payable till the date of filing of FORM GSTR-9 of such a financial year. For the purpose of claiming waiver, GSTR-9C is to be filed on or before 31st March 2025.

2. Measures for streamlining Compliances under GST

2.1 New provisions of Track and Trace Mechanism

The GST Council has recommended to empower the government to enforce a track and trace mechanism for specified commodities which are more prone to evasion.
Under this system, a unique Identification Mark (UIM) shall be affixed on goods or the package.
This will provide a legal framework for developing such a system and will help in implementation of mechanisms for tracing specified commodities throughout the supply chain.
This step may help in prevention of Tax evasion practices. Taxpayers may face difficulties in initial implementation.

2.2 Clarification regarding recording of correct details of name of the State of the un-registered recipient as well as correct declaration of place of supply in respect of supply of ‘Online Services’

GST Council has clarified in case of supply of ‘Online Services’ such online money gaming, OIDAR services, etc. to unregistered recipients, the supplier is required to mandatorily record the name of the State of the unregistered recipient on the tax invoice.
Name of State of recipient shall be deemed to be the address on record of the recipient for the purpose of section 12(2)(b) of IGST Act, 2017 read with proviso to rule 46(f) of CGST Rules, 2017.

3. Other Measures pertaining to Law & Procedure

3.1 Align the phrase “Plant or Machinery” in section 17(5)(d) of CGST Act, 2017

Section 17(5)(d) of CGST Act, 2017 specifies that ITC shall be ineligible with respect to goods or services received for construction of an immovable property. However, immovable property shall not include plant or machinery.
Explanation to Section 17 defines the phrase “Plant and Machinery”.
To align the provision and intent, the GST Council has recommended to replace the phrase “Plant or Machinery” in Section 17(5)(d) with “Plant and Machinery”, retrospectively, with effect from 01.07.2017.
Therefore, the said phrase may be interpreted as per the Explanation at the end of section 17 of CGST Act, 2017.

3.2 Reduction in Financial burden by reducing the amount of pre-deposit for filing appeal

GST Council has recommended to amend section 107 and section 112 of CGST Act, 2017 to provide that pre-deposit is required only of 10% for appeals before Appellate Authority and appeal before Appellate Tribunal in cases involving only demand of penalty without involving the demand of tax.

3.3 Temporary Identification Number to persons who is not liable to be registered under GST

As per Rule 87(4), any payment required to be made by a person who is not registered under the Act, shall be made on the basis of a temporary identification number generated through the common portal.
GST Council has recommended to insert a new Rule 16A in CGST Rules, 2017 to provide for a separate provision for generation of temporary identification number for persons who are liable to be registered under GST.
Rule 87(4) of CGST Rules, 2017 shall incorporate a reference to new rule and consequential modification of FORM GST REG-12.

3.4 Amendment in respect of functionality of Invoice Management System (IMS)

Section 38 of CGST Act, 2017 and rule 60 of CGST Rules, 2017 to be amended to provide a legal framework in respect of generation of FORM GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS).
To amend section 34(2) of CGST Act, 2017, to specifically provide for a requirement of reversal of ITC as is attributable to a credit note, by the recipient, to enable the reduction of output tax liability of the supplier.
To insert a new rule 67B in CGST Rules, 2017, to prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by him.
To amend section 39 (1) of CGST Act, 2017 and rule 61 of CGST Rules, 2017 to provide that FORM GSTR-3B of a tax period shall be allowed to be filed only after FORM GSTR-2B of the said tax period is made available on the portal.

4. Other Measures

The GST Council approved the recommendation of the committee of officers suggesting measures for the various issues raised by the States in respect of issues pertaining to IGST settlement and asked the committee to conclude the desired changes by March, 2025.
The GST Council took note of the procedural rules proposed for the internal functioning of the GSTAT, which would be notified after examination by the Law Committee. This would help in operationalization of the GSTAT.
The Council also decided to extend the time frame for the Group of Ministers on the restructuring of the GST Compensation till 30th June, 2025.
On the request of State of Andhra Pradesh the Council recommended that a Group of Ministers be constituted to examine the legal and structural issues, and recommend a uniform policy on imposition of levy in case of a natural disaster/calamity in the State.