Indirect Tax Alert - Recommendations made by the GST Council in its 49th meeting held on 18 February 2023

Acceptance of reports of the Group of Ministers (GoM)

• GoM on setting up the Appellate Tribunal

  • The GST Council has adopted the report of the GoM in respect of the GST Appellate Tribunal with certain modifications. Final draft amendments would be circulated to the members for their comments.

• GoM on Capacity Based Taxation and Special Composition Scheme in certain Sectors in GST:

  • To plug leakages and improve revenue collection from commodities like pan masala, gutkha and chewing tobacco, the GST Council approved the following recommendations of the GoM:

    • The capacity-based levy would not be prescribed

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

    • Export of such commodities to be allowed only under the Letter of Undertaking with a consequential refund of accumulated input tax credit

    • Imposition of Compensation Cess to be modified from ad valorem to specific tax-based levy to boost the first stage collection of the revenue.

Trade facilitation measures:

• Extension of time limit to apply for revocation of cancellation of registration:

  • Amendments to section 30 of the Central Goods and Services Tax Act, 2017 (CGST Act) and rule 23 of the Central Goods and Services Tax Rules, 2017 (CGST Rules) are recommended to:

    • Increase the time limit to apply for revocation of cancellation of registration from 30 days to 90 days; and

    • Empowering the Commissioner (or an officer authorised by him) to extend the aforesaid time limit for a further period not exceeding 180 days.

• Extension of time limit for filing returns pursuant to assessment order (best Judgement assessment):

  • Amendment to section 62 of the CGST Act is recommended to increase the time limit for filing the GST returns for enabling deemed withdrawal of Best Judgement assessment order (passed due to non-filing of returns) from the existing 30 days to 60 days, and subject to certain conditions, extendable further by another 60 days.

• Rationalising late fee for Annual returns:

  • Late fee for delayed filing of annual returns for FY 2022-23 onwards, for registered persons having aggregate turnover of upto INR 200mn in a financial year, is proposed to be rationalised as follows:

    • For persons having aggregate turnover upto INR 50mn: INR 50 per day (INR 25 CGST + INR 25 SGST), subject to a maximum of an amount calculated at 0.04% of turnover in the State or Union territory (0.02% CGST + 0.02% SGST)

    • For persons having aggregate turnover exceeding INR 50mn and upto INR 200mn: INR 100 per day (INR 50 CGST + INR 50 SGST), subject to a maximum of an amount calculated at 0.04% of his turnover in the State or Union territory (0.02% CGST + 0.02% SGST).

• Amnesty Schemes:

  • Following amnesty schemes have been recommended by the GST Council:

    • For the past cases of cancellation of GST registration due to non-filing of GST returns, where the application for revocation of cancellation could not be filed within a prescribed period, it is recommended to allow such persons to file an application for revocation of cancellation by a specified date, subject to certain conditions.

    • For the past cases where the best judgment assessment orders were passed due to non-filing of returns and were not withdrawn as the taxpayer could not file the returns within 30 days of the assessment order, a conditional deemed withdrawal of such assessment order is recommended where the relevant return is filed with due interest and late fees up to a specified date, irrespective of whether the assessment order is appealed or not and whether the appeal is decided or not.

    • The GST Council has also recommended an amnesty scheme by way of conditional waiver/reduction of late fees in respect of pending returns in Form GSTR-4, GSTR-9 and GSTR-10.

• Recommendations in respect of the place of supply for the transportation of goods:

GST Council has recommended to rationalise the provision of determination of place of supply of services of transportation of goods, where the location of either supplier or recipient of services is outside India, by deletion of section 13(9) of the Integrated Goods and Services Tax Act, 2017 (IGST Act). Consequently, the place of supply of services of transportation of goods, where the location of either the supplier or recipient of services is outside India, would be the location of the recipient of services.

GST Rate changes

• GST rate on ‘Rab’ is proposed to be reduced from 18% to 5% (if pre-packaged and labelled) and Nil (in other cases). The payment of GST on ‘Rab’ during the past period has been decided to regularise on an ‘as-is basis’ due to genuine doubts concerning its classification and applicable rate

• GST rate on ‘Pencil Sharpener’ is proposed to be reduced from 18% to 12%

• Exemption available to educational institutions and Central and State educational boards for the conduct of entrance examination is proposed to be extended to any authority, board or body set up by the Central Government or State Government including the National Testing Agency for the conduct of entrance examination for admission to educational institutions

• The dispensation available to Central and State Governments, Parliament and State Legislatures from payment of GST under the reverse charge mechanism is proposed to be extended to the 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 the chamber to lawyers, etc.

• Compensation Cess exemption to be available to both, ‘coal rejects supplied to and by a coal washery’ arising out of coal on which compensation cess has been paid and no input tax credit has been availed

• Exemption notification no:104/94-Cus. dated 16 March 1994 to be amended to provide that if a device like a tag-tracking device or data logger is already affixed on a container, no separate IGST shall be levied on such affixed device and it would get ‘nil’ IGST treatment as available to the containers, subject to existing conditions.

[Source of information in the alert: Press Release dated 18 February 2023. The exact language and effective date of the proposed amendments would be as per the amendment act/rule/notification/clarification, as and when issued and made effective.]

BDO Comments

The approval of the GoM report on setting up the Appellate Tribunal would pave a way for the setting up of the Tribunals, remedying the present situation of the taxpayers having to approach the High Courts, for filing appeals and reducing the burden on the High Courts.

The trade facilitation measures, such as amnesty schemes, rationalising late fees and enhancing the time limit for application for revocation of cancellation of registration and filing of returns pursuant to assessment order are a welcome move and the taxpayers would await the exact coverage of such measures and the conditions attached. The online gaming industry would await the next council meeting where the report of the GoM on online gaming is likely to be taken up for discussion and finalisation.

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