September 21, 2021

Briefing on 45th GST Council Meeting| GST Update

The GST Council met for the 45th Time on 17th September 2021 under chairmanship of the Hon’ble Finance Minister. In the 45th GST Council meeting, Major decisions were taken around the revision of GST rates on various goods such as COVID-related medicines, Paper Products, Waste of plastic, etc., and various other services also. Recommendations are also made around streamlining compliance under GST.

Gist of major changes recommended in the 45th GST Council meeting is as follows:

1. Recommendations for Streamlining of GST Compliance and Trade Facilitations

1.1 Relaxation in Filing of GST ITC-04

GST ITC-04 is a form filed to provide information about Inputs/Capital goods sent for job work and Goods received back after such job work.
At present GST ITC-04 is required to be filed by every supplier, who is sending goods to job workers, on quarterly basis.
However, to reduce compliance burden, GST Council has recommended following relaxation with respect to frequency of filing of GST ITC-04:

Category of Taxpayer	Frequency of Filing of GST ITC-04
Taxpayer with annual aggregate turnover of exceeding INR 5 Crores during preceding year	Half Yearly
Taxpayer with annual aggregate turnover of upto INR 5 Crores during preceding year	Annually

1.2 Inter-Branch transfer of CGST & IGST Balance in Cash Ledger

In many cases, the balance in the cash ledger is lying under one GSTIN and liability is paid in cash under another GSTIN of the same person.
To avoid unnecessary funds blockage, GST Council has recommended that unutilised balance in CGST & IGST ledger of one GSTIN can be transferred between distinct persons (i.e., entities having the same PAN but registered in different states).
Taxpayers will not be required to apply for refund of balance lying in cash ledger.

1.3 Clarification on various issues under GST

There are various issues under GST around which a lot of ambiguity and legal disputes are going on. Therefore, with an objective to provide more clarity and reduce legal disputes, GST Council has recommended to provide more clarity around following issues:
- Scope of “Intermediary Service”.

Clarification with respect to interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services.

Time Limit of claiming ITC with respect to Debit Note
- Earlier, as per Section 16(4) of CGST Act, time limit to avail ITC with respect to Debit Notes was computed from the date of original invoice.
- GST Council has clarified that, with effect from 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall be considered for computing time limit u/s 16(4) of CGST Act, 2017.

Where invoice reference number has been generated with respect to an invoice then physical copy of such tax invoice is not required to be carried.

As per Section 54(3) of CGST Act, no refund of unutilised ITC is allowed with respect to goods exported out of India which are subject to export duty. GST Council has clarified that this condition shall apply only with respect to such goods which are actually subject to export duty, i.e., on which some export duty has to be paid at the time of export.

Clarification on procedure of claiming refund of GST paid on wrongly classified transaction:
- As per Section 77(1) of CGST Act, if a taxpayer pays GST on a transaction considering it as intra-state supply and subsequently such transaction is held as inter-state supply then the taxpayer is entitled to claim refund of CGST & SGST paid.
- Similar provisions are also given under IGST Act also.
- The GST Council has recommended that the procedure and time limit of claiming such refund must be clarified.

1.4 Measures for streamlining compliance under GST

Aadhar Authentication is a prerequisite for claiming refund under GST and for filing application for revocation of cancellation of GST registration.

Till now, late fee for filing of GSTR-1 is applicable. However, unlike GSTR-3B, the same is not collected automatically while filing GSTR-1. GST Council has recommended that now late fee for GSTR-1 filing shall be auto-populated and collected in next open GSTR-3B.

GST refund shall be provided in a bank account which is linked with the same PAN on which GST registration is obtained.

With effect from 01.01.2021, Rule 59(6) to CGST Rules, 2017 was inserted to provide that filing of GSTR-1 shall not be allowed if GSTR-3B has not been furnished for preceding 2 months/tax periods. However, such provision has not been implemented so far. GST Council has recommended that such provision shall come into effect from 01.01.2022.

A new Clause (aa) is proposed to be inserted in Section 16(2) of CGST Act, 2017 by Finance Bill, 2021 that ITC shall be available with respect to such invoices details of which are uploaded by supplier in his GSTR-1/IFF and same is appearing in GSTR-2B of recipient. GST Council has recommended that upon notification of such a clause, necessary changes will be made in Rule 36(4).

2. Recommendation of Changes in GST rates of Goods and Services

2.1 Changes and clarification in GST rates of Goods

Concessional rate and reduced rate of GST on COVID-19 treatment drugs, such as Amphotericin B, Remdesivir etc, has been extended till 31st December, 2021.

GST Council has recommended GST Rate Change for various goods with effect from 01.10.2021. Some illustrative list of products:

Goods	Existing GST Rate	Proposed GST Rate
Ores and concentrates of metals such as iron, copper, aluminum, zinc, and few others	5%	18%
Cartons, boxes, bags, packing containers of paper, etc.	12%/18%	18%
Waste and scrap of polyurethanes and other plastics	5%	18%
All kinds of pens	12%/18%	18%
Miscellaneous goods of paper like cards, catalog, printed material (Chapter 49 of tariff	12%	18%
IGST exemption on goods supplied at Indo- Bangladesh Border haats	Applicable Rate	NIL

A complete list of Goods can be checked in the press release.

In order to correct inverted duty structure, GST rate change in footwear and textiles sector will be implemented with effect from 01.01.2022.

Council has decided it is not an appropriate stage to cover specified petroleum products under GST.

Clarification has also been provided with respect to classification of various goods. Illustrative clarifications are:
- all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%],
- 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;
- All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of 12%.

A complete list of Goods can be checked in the press release.

2.2 Changes and clarification on GST rates on Services

GST Council has recommended GST Rate Change for various services with effect from 01.10.2021. Some illustrative list of services:

Goods	Existing GST Rate	Proposed GST Rate
Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022.	–	NIL
Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licencing services]	12%	18%
Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media)	12%	18%

E Commerce Operators are made liable to pay GST on following services provided through them with effect from 1st January, 2022:
- transport of passengers, by any type of motor vehicles through it.
- Restaurant services provided through it with some exceptions

Till now, restaurants and all cloud kitchens are liable to collect GST @ 5% from customers and deposit the same to the account of the government. E-commerce platforms such as Swiggy and Zomatos were collecting TCS on such transactions. However, the GST Council has shifted the liability of GST payment from restaurants to e-commerce operators with effect from 01.01.2022.

Clarification has also been provided with respect to GST rates on various services. Following are the illustrative clarifications:

Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract 5% GST [ without ITC].

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.

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.

3. Other Issues

GST Council has decided to set up a Group of Ministers (“GoM”) to discuss the ways to use technology to improve compliance and monitoring through various systems such as 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.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Detailed analysis of 52nd GST Council Meeting

GST Council met for 52nd time on 7th October, 2023 under the chairmanship of Hon’ble Finance and Corporate affair minister. GST Council discussed various aspects such as Amnesty Scheme for filing of GST Appeal, Clarification on applicability of GST on Guarantee services provided by director and company, changes in GST rates etc.

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