India: Update On GST Council Meeting Held On July 11, 2023

1. INTRODUCTION

The 50th Goods and Services Tax ("GST") council meeting was held in New Delhi, on July 11, 2023, under the chairpersonship of the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman. Marking the milestone of the 50th meeting of the GST council, the chairperson released a short video titled 'GST Council-50 steps towards a journey' depicting the journey of the GST Council. In addition, to mark this occasion, the first set of special cover and customized 'My stamp' was also presented by the Chief Postmaster General, Delhi.

The GST council has made several recommendations including; changes in GST rates for some products, measures for facilitation of trade and streamlining compliances in GST. We have provided a summary of the key recommendations along with our comments below:

2. KEY RECOMMENDATIONS RELATING TO RATE CHANGES

3. KEY RECOMMENDATIONS RELATING TO CERTAIN EXEMPTIONS, CLARIFICATIONS AND OTHER CHANGES

• Exemption of Integrated Goods and Services Tax ("IGST") on Dinutuximab (Quarziba) medicine when imported for personal use.

• Exemption of IGST on medicines and Food for Special Medical Purposes ("FSMP") (used in the treatment of rare diseases enlisted under the National Policy for Rare Diseases, 2021), when imported for personal use subject to existing The IGST exemption is also being extended to FSMP when imported by Centres of Excellence for Rare Diseases or any person or institution on recommendation of any of the listed Centres of Excellence.

• To clarify, that supply of raw cotton, including 'kala cotton', by agriculturists to cooperatives is taxable under reverse charge mechanism.

• To regularize the matters relating to trauma, spine, and arthroplasty implants for the period prior to July 18, 2022, on "as is basis" in view of genuine interpretational issues.

• To regularize the matters relating to desiccated coconut for the period July 01, 2017, to July 27, 2017, on an "as is basis" in view of genuine interpretational issues.

• It has been decided that GST exemption on satellite launch services supplied by Indian Space Research Organization, Antrix Corporation Limited and New Space India Limited ("NSIL") may be extended to such services supplied by organizations in private sector to encourage startups.

• The 'Goods Transport Agency' ¹will not be required to file a declaration every year for paying GST under forward charge basis. Once filed, it will be applicable for subsequent years unless they file a declaration that they want to revert to reverse charge mechanism.

• Services supplied by a director of a company to the company in his/her personal capacity (such as renting immovable property to the company or body corporate) is not taxable under reverse charge mechanism.

• Amendment to entry 52B of GST Compensation cess notification² to cover 'all utility vehicles by whatever name called', instead of only referring to vehicles popularly known as SUVs, provided they meet the other parameters i.e, length exceeding 4,000 mm, engine capacity exceeding 1,500 cc and ground clearance of 170 mm and above. It is also clarified that the term 'ground clearance' would mean ground clearance in unladen conditions.

• It has been decided to clarify that the supply of food and beverages in cinema halls is taxable as 'restaurant services' as long as (a) they are supplied by way of or as part of a service and (b) supplied independently of the cinema exhibition service. Where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to sale of cinema ticket, the principal supply.

4. RECOMMENDATIONS PERTAINING TO ONLINE GAMING

Amendments to be incorporated in schedule III of the Central Goods and Services Tax Act, 2017, ("CGST Act") to consider casinos, race courses and online gaming as taxable actionable claim. A uniform rate of 28% (twenty eight per cent) is recommended to be levied on these activities. It was further recommended to levy 28% (twenty eight per cent) GST on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing and on full value of the bets placed in the case of online gaming.

5. KEY MEASURES FOR TRADE FACILITATION

• Rules governing appointment of president and members of the proposed GST Appellate Tribunal ("GSTAT") for establishing smooth constitution and functioning of the GSTAT is recommended vide this council meeting. Additionally, provisions of Finance Act, 2023, pertaining to GSTAT is also proposed to be notified by the Central Government with effect from August 01,2023.

• For easing compliance burden on small taxpayers, it is recommended to provide exemption from filing of annual return for taxpayers having aggregate annual turnover upto INR 2,00,00,000 (Indian Rupees Two Crores). Additionally, the relaxations provided in respect of filling up various tables of Form GSTR-9 and Form GSTR-9C to be continued for financial year ("FY") 2022-23.

• It is recommended to release circulars clarifying that Input Services Distributor ("ISD") mechanism is not mandatory for distribution of input tax credit of common input services procured from third parties to the distinct persons as per the present provisions of the GST It is further recommended to make ISD mechanism mandatory prospectively for distribution of input tax credit of such common input services procured from third parties. The council has also recommended clarifying issues pertaining to taxability of internally generated services provided by one distinct person to another distinct person.

• No GST is chargeable by manufacturers on replacements of parts and/or repair services (during warranty period) and no reversal of input tax credit is required to be made thereafter. Circulars to this effect also on various refund related issues is recommended to be released.

• Circular to be issued to provide clarification regarding Tax Collected at Source ("TCS") liability under Section 52 of the CGST Act, in cases where multiple E-commerce operators ("ECOs") are involved in a single transaction of supply of goods or services or both.

• To ease compliance burden on ECO and suppliers of online information database access and retrieval services ("OIDAR"), the following is recommended.
  • relevant amendments to be made to the invoice rules, wherein requirement of only name of the state of the recipient and not name and full address of recipient to be provided.

• Various other circulars are recommended to be issued to remove ambiguity and legal disputes on several issues some of which are as follows- taxpayers to generate e-invoice for supplies made to Government departments, mere holding of securities of a subsidiary company by a holding company cannot be treated as a supply of services etc.

• Certain amnesty schemes were notified dated March 31, 2023, aiding default filers of Form GSTR -4, Form GSTR-9 and Form GSTR-10 which now stands extended till August 31, 2023. Additionally, in view of the prevailing law and order situation in the state of Manipur, the council has recommended to extend the due dates for filing of FORM GSTR-1, FORM GSTR-3B and FORM GSTR-7 for the months of April, May, and June 2023 till July 31, 2023.

6. KEY MEASURES FOR STREAMLINING COMPLIANCES IN GST

• To keep a check on the menace of fake registrations, GST council recommended strengthening the process of registrations under the GST Act by amending certain provisions wherever Some of the proposed amendments include the following:
  • Mandatory physical verification of the business premises in respect of high-risk cases even where
  • 'Adhaar' has been authenticated.
  • Doing away with the requirement of undertaking physical verification in the presence of the applicant.
  • To provide for system-based suspension of the registration in respect of such registered persons who do not furnish the details of valid bank account within the time prescribed under the relevant rules.

• Pilot testing to be conducted in the Union Territory of Puducherry for risk based biometric based Aadhaar authentication of registration applicants

• The Council has recommended a mechanism for system-based intimation to the taxpayers in respect of the excess availment of input tax credit in FORM GSTR-3B vis a vis that made available in FORM GSTR-2B above a certain threshold, along with the procedure of auto-compliance on the part of the taxpayers which requires them to explain the reasons for the said difference or take remedial action in respect of such This will help in reducing input tax credit mismatches and misuse of input tax credit facility in GST.

• Amendments to be made in Form GSTR-5A and the relevant rules, to require OIDAR service providers to provide the details of supplies made to registered persons in India. This will help in tracking due payment of tax on reverse charge basis by such registered persons in India in respect of supplies received from OIDAR service providers.

• Relevant amendments are to be made to provide issuance of notices to registered taxpayers for their failure to furnish annual return in Form GSTR-9 or Form GSTR-9A by the due date.

• It is recommended to make relevant changes in the rules to prescribe that value of supply of goods from duty free shops at arrival terminal in international airports to the incoming passengers to be included in the value of exempt supplies for the purposes of reversal of input tax credit.

• Council has also recommended insertion of rules to provide manner and conditions of consent based sharing of information of registered persons available on the common portal with other The Council has also recommended issuance of a notification under relevant provisions for notifying 'Account Aggregators' as the systems with which information is to be shared by the common portal.

7. QUICK VIEW

While most of the changes recommended are either clarificatory in nature or introduced with a view to streamline GST compliances and/or facilitate trade to augment the objective of 'ease of doing business', the recommendations in respect to online gaming took the industry by storm. Levy of 28% (twenty-eight per cent) GST on the face value of bets is detrimental and will sure have far-reaching consequences with respect to the growth and stability of this industry. The gaming industry anxiously waits to see the actual amendments that comes in force and hopes to gain more clarity on the proposed recommendations.

The recommendation to set up the GSTAT, with the objective of operationalizing it at the earliest, is a much- awaited decision and a welcome move. This should help in clearing the backlog of cases before the tax authorities.

Footnotes

1. Goods transport agency" means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called;

2. GST Compensation cess notification no. 1/2017 -Compensation Cess (Rate) dated June 28, 2017

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