50th GST Council Meeting: Changes in Tax Rates -

50th GST Council Meeting: Changes in Tax Rates

Saloni

July 14, 2023

GST

The GST Council held its 50th meeting on July 11, 2023, in New Delhi. Finance ministers of all states and union territories attended the meeting, which was presided over by the minister of finance for the federal government, Nirmala Sitharaman. The GST Council Chairperson released a short video film titled ‘GST Council- 50 steps towards a journey’ to mark the milestone of 50th meeting.

The Council examined different GST-related concerns and offered several suggestions to reduce the difficulty of compliance, rationalise the tax rates, and increase revenue collection. These suggestions seek to streamline procedures, improve compliance, and guarantee the GST framework’s efficient operation. Reams of changes have been recommended for the existing tax structure and we’ll list some of the notable changes among them.

Changes in GST Rates

The GST Council made several key recommendations regarding the tax rates on goods. Prominent changes include:

Reduction in GST rates on uncooked/unfried snack pellets: The rate on uncooked/unfried snack pellets was lowered to 5%. Additionally, past payments of GST on uncooked/unfried snack pellets will be regularised on an “as-is basis.”

Exemption of IGST on medicines for rare diseases: Import of medicines and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases enlisted under the National Policy for Rare Diseases, 2021, will be exempted from IGST when imported for personal use.

Clarification on the taxable supply of raw cotton to cooperatives: The supply of raw cotton, including kala cotton, by agriculturists to cooperatives will be taxable under the reverse charge mechanism (RCM). Past issues related to this matter will be regularised on an “as-is basis.”

Reduction in GST rate on imitation Zari thread or yarn: The GST rate on imitation Zari thread or yarn will be reduced from 12% to 5%. Past GST payments related to this matter will be regularised.

Inclusion of utility vehicles in compensation cess notification: Amendments will be made to include utility vehicles meeting specific parameters such as length, engine capacity, and ground clearance in the compensation cess notification. It’s clarified that ‘ground clearance’ refers to measurements in the unladen condition, reducing ambiguity.

Reduction in GST rate on LD slag: The GST rate on LD slag will be reduced from 18% to 5%, encouraging better utilisation of this product and promoting environmental protection.

Exemption on Satellite Launch Services: GST exemption will be extended to satellite launch services beyond government organisations such as ISRO, Antrix Corporation Limited, and New Space India Limited (NSIL) to private sector organisations as well.

Measures for Facilitation of Trade

The GST Council proposed measures to facilitate trade and improve the ease of doing business. These include:

GST Appellate Tribunal: The Council recommended the enactment of rules governing the appointment and conditions of the President and Members of the proposed GST Appellate Tribunal. This will ensure the smooth constitution and functioning of the Tribunal.

Annual Returns for FY 2022-23: Relaxations provided in the previous financial year will be continued for various tables of FORM GSTR-9 and FORM GSTR-9C. Additionally, smaller taxpayers with an aggregate annual turnover up to two crore rupees will be exempted from filing annual returns (FORM GSTR-9/9A) for FY 2022-23.

Clarity on Input Services Distributor (ISD) mechanism: A circular will be issued clarifying that the ISD mechanism is not mandatory for the distribution of input tax credit (ITC) of common input services procured from third parties to distinct persons. The distribution of such common input services will be made mandatory prospectively.

Circulars for clarity: Several circulars will be issued to address issues related to warranty replacement, refund procedures, TCS (Tax Collected at Source) liability for E-commerce Operators (ECOs), and tax invoices in specific cases. These circulars will provide much-needed clarity to taxpayers.

Second Report of GoM on Casinos, Racecourses, and Online Gaming:

The GoM (Group of Ministers) constituted to investigate the issues related to taxation on casinos, horse racing and online gaming presented its second report in this Council meeting.

The GST Council recommended a uniform tax rate of 28% for these activities.
Taxation will be based on the face value of chips purchased in casinos, the full value of bets placed in horse racing, and the full value of bets placed in online gaming.

Streamlining Compliance in GST

To ensure a robust GST system, the Council proposed measures to streamline compliances. Following are the highlights:

E-way bill requirement for movement of gold and precious stones: States will have the option to mandate the generation of e-way bills for intra-state movement of gold and precious stones under Chapter 71.

Capacity-based taxation and special composition scheme: A special procedure will be introduced for manufacturers of tobacco, pan masala, and similar items. This includes registration of machines, filing of special monthly returns, and a special penalty for non-registration of machines.
Mechanism to address differences in ITC: The GST Council recommended a mechanism to address differences in ITC (Input Tax Credit) between FORM GSTR-2B and FORM GSTR-3B. Taxpayers will receive system-based intimation regarding excess availment of ITC in GSTR-3B compared to GSTR-2B, and they will be required to explain the reasons or take remedial action.
Recovery of tax and interest: A new rule and form will be introduced to provide a mechanism for the recovery of tax and interest in cases where the output tax liability in GSTR-1 exceeds that disclosed in GSTR-3B. The taxpayer will be required to pay the outstanding amount or provide a satisfactory explanation.
Strengthening compliance of annual returns: Notice will be issued to registered taxpayers who fail to file their annual return (FORM GSTR-9 or FORM GSTR-9A) by the due date.
Amendments and clarifications through circulars: Various circulars will be issued to address issues related to calculation of interest on wrongly availed IGST credit, refund related issues, TCS liability, and more.

The 50th GST Council Meeting witnessed crucial decisions pertaining to changes in tax rates, facilitation of trade, and streamlining of compliances. These recommendations aim to simplify processes, promote trade, and ensure the effective implementation of GST. With these changes, the GST system is expected to become more robust, transparent, and conducive to economic growth.