The GST Council announced a plethora of measures pursuant to its 45th meeting at Lucknow, Uttar Pradesh. The Council seems to have heard and addressed the longstanding demands of the taxpayers while also taking steps to plug revenue leakages. Some of the key takeaways from the Council meeting are captured below for your easy reference.

1. Recommendations relating to GST law and procedure

Trade Facilitation Measures:

  • Relaxation in requirement of filing Form GST ITC-04 (job-work details) from quarterly to six monthly (for taxpayers having turnover above INR 50 million) and annual (for taxpayers having turnover below INR 50 million).
  • Retrospective amendment w.e.f. 1 July 2017 in Section 50(3) of CGST Act to levy interest only in case of 'availment and utilization' of ineligible ITC, at the rate of 18% per annum. as opposed to 24%.
  • Ability to transfer unutilized balance in IGST and CGST cash ledger between distinct persons (entities having the same PAN but registered in different States) without going through the refund procedure.
  • Circulars would be issued in order to remove ambiguity and legal disputes on the following issues viz. -
    • Scope of "intermediary services."
    • Interpretation of the term "merely establishment of distinct person" in condition (v) of Section 2 (6) of the IGST Act 2017 for export of services.
    • W.e.f. 1 January 2021, ITC can be claimed basis the date of issuance of a debit note, and not the date of the underlying invoice.
    • The need to carry physical copies of tax invoices where IRN has been generated, therefore (e-invoice) has been dispensed with.
    • Only those items on which some export duty is required to be paid at the time of export will be covered under the restriction imposed under Section 54(3) of the CGST Act from availment of refund of accumulated ITC.
  • A specific rule to address the procedural and time limit issues arising in case of a refund of wrongly paid taxes would be incorporated in CGST Rules.

Measures for Streamlining Compliances:

  • Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
  • Refund to be disbursed in the bank account, which is linked with the same PAN on which GST registration has been obtained.
  • Late fee for delayed filing of Form GSTR-1 to be auto-populated and collected in next open return in Form GSTR-3B.
  • Restriction would be imposed w.e.f. 1 January 2022 on furnishing of Form GSTR-1 if the taxpayer has not furnished Form GSTR-3B for the preceding month.
  • Rule 36(4) of CGST Rules to be amended once the proposed clause (aa) to Section 16(2) to restrict availment of ITC in respect of invoices/debit notes to the extent the details thereof are furnished by the supplier in Form GSTR-1/IFF and communicated to the recipient in Form GSTR-2B, is notified.
  • Furthermore, the GST Council has decided to set up a GoM to discuss ways and means of using technology to further improve compliance, including monitoring through improved 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.

2. Recommendations relating to GST rates - Clarifications, Corrections and Changes

GST Rates Changes:

Sr. No Description From To
Goods [w.e.f. 1 October 2021]
1 Retro fitment kits for vehicles used by the disabled Appl. rate 5%
2 Medicine Keytruda for treatment of cancer 12% 5%
3 Biodiesel supplied to OMCs for blending with Diesel 12% 5%
4 Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others 5% 18%
5 Specified Renewable Energy Devices and parts 5% 12%
6 6 Cartons, boxes, bags, packing containers of paper etc. 12%/18% 18%
7 Waste and scrap of polyurethanes and other plastics 5% 18%
8 All kinds of pens 12%/18% 18%
9 Railway parts, locomotives & other goods in Chapter 86 12% 18%
10 Miscellaneous goods of paper like cards, catalog, printed material (Chapter 49 of tariff) 12% 18%
11 IGST exemption on import of medicines for personal use
  1. Zolgensma for Spinal Muscular Atrophy
  2. Viltepso for Duchenne Muscular Dystrophy
  3. Other medicines used in the treatment of muscular atrophy recommended by the Ministry of Health and Family Welfare and Dept. of Pharmaceuticals
12% Nil
12 IGST exemption on goods supplied at Indo-Bangladesh Border haats Appl. rate Nil
Services [w.e.f 1 October 2021]
1 Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended up to 30 September 2022 - Nil - Nil
2 Services by way of grant of National Permit to goods carriages on payment of fee 18% Nil
3 Licensing services/the right to broadcast and show original films, sound recordings, Radio and Television programs [to bring parity between licensing and distribution] 12% 18%
4 Printing and reproduction services of recorded media where content is supplied by the publisher [to bring it on parity with Color printing of images from film or digital media] 12% 18%

Other noteworthy changes:

  • W.e.f 1 January 2022, e-commerce operators shall be made liable to pay tax on the following services provided through them -
    • Transport of passengers, by any type of motor vehicles through it
    • Restaurant services provided through it with some exceptions
  • IGST exemption relating to the import of goods on lease, where GST is paid on the lease amount, to be allowed even if -
    • Such goods are transferred to a new lessee in India upon expiry or termination of the lease, and
    • The lessor located in SEZ pays GST under a forward charge
  • Supply of mentha oil from an unregistered person has been brought under the reverse charge mechanism. Furthermore, exports of mentha oil shall be allowed only against LUT and consequential refund of ITC.
  • W.e.f 1 April 2022, a special composition scheme shall be extended to Brick Kilns, with a threshold limit of INR 2 million. Bricks would attract GST at 6% without ITC under the scheme. Otherwise, they would be exigible to 12% GST with ITC.
  • Concessional GST rates applicable to COVID-19 treatment drugs like Remdesivir, Amphotericin B and Infliximab up to 31 December 2021.
  • The GST Council has also decided to set up a Group of Ministers (GoM) to rationalize the rates and review exemptions from the point of view of revenue augmentation.

GST Rates Correction:

  • GST rate changes, in order to correct the duty inverted structure in Footwear and Textiles sectors, to be implemented w.e.f. 1 January 2022.
  • The GST Council has also decided to set up GoM to examine the issue of correction of inverted duty structure for major sectors.

GST Rates Clarification:

For Goods:

  • 'Carbonated Fruit Beverages of Fruit Drink' and 'Carbonated Beverages with Fruit Juice' attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.
  • External batteries sold along with UPS Systems/Inverter attract GST rate applicable to batteries [28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18%.
  • GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from 1 July 2017 to 31 December 2018, in the same manner as has been prescribed for the period on or after 1 January 2019.
  • Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of 'Nil' and 5%/12%, respectively.
  • It is being clarified that all pharmaceutical goods falling under heading 3006 attract a12% GST rate[not 18%].
  • All laboratory reagents and other goods falling under heading 3822 attract a GST rate of 12%.

For Services:

  • Services by cloud kitchens/central kitchens are covered under 'restaurant service' and attract 5% GST [without ITC].
  • Supply of ice cream by parlors would attract GST at 18% [this clarification appears to negate Telangana AAR's ruling that such supply would qualify as 'restaurant services' exigible to 5% GST under Notification No. 11/2017-CT (Rate)]
  • The services by way of grant of mineral exploration and mining rights attract GST at 18% w.e.f. 1 July 2017.
  • Admission to amusement parks having rides, etc., attracts a GST rate of 18%. The GST rate of 28% is applicable 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."

Our Comments

Looking at the overall recommendations, one can clearly observe that the GST Council has been listening to the taxpayers' concerns and has also acted on them. The GST Council has sought to appease and buttress the sentiments of various stakeholders. We can now only look forward to the plethora of Notifications and Circulars that should be released in due course to give effect to these announcements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.