Highlights of 53rd GST Council Meeting-Part 3

On June 22, 2024, the 53rd GST Council meeting was held in Delhi, with Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, presiding. The council proposed various adjustments to GST rates, introduced trade facilitation measures, and sought to streamline GST compliance.

You can read about changes in GST rates recommended in this meeting in our blog “Highlights of 53rd GST Council Meeting- Part I”.

There are some other key recommendations of the GST Council which are covered by our blog “Highlights of 53rd GST Council Meeting- Part II”.

In this part, we will understand the remaining recommendations of the Council.

1. Clarification regarding the availability of Input Tax Credit (ITC) on ducts and manholes used in the network of Optical Fiber Cables (OFCs):

The Council recommended clarifying that input tax credit is not restricted in respect of ducts and manholes used in the network of optical fiber cables (OFCs), under clause (c) or under clause (d) of sub-section (5) of section 17 of CGST Act.

2. Clarification on the place of supply applicable for custodial services provided by banks:

The Council recommended clarifying that the place of supply of Custodial services supplied by Indian Banks to Foreign Portfolio Investors is determinable as per Section 13(2) of the IGST Act, 2017.‍

3. Clarification on the valuation of corporate guarantee provided between related persons after insertion of Rule 28(2) of CGST Rules, 2017:

1. GST Council recommended amendment of rule 28(2) of CGST Rules retrospectively with effect from 26.10.2023 and issuance of a circular to clarify various issues regarding the valuation of services of providing corporate guarantees between related parties. It is inter alia being clarified that valuation under rule 28(2) of CGST Rules would not be applicable in case of export of such services and also where the recipient is eligible for full input tax credit.‍

4. Clarification regarding the applicability of provisions of Section 16 (4) of CGST Act, 2017, in respect of invoices issued by the recipient under the Reverse Charge Mechanism (RCM):‍

The Council recommended clarifying that in cases of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism (RCM) and invoice is to be issued by the recipient only, the relevant financial year for calculation of time limit for availing of input tax credit under the provisions of section 16(4) of CGST Act is the financial year in which the invoice has been issued by the recipient.‍

5. Clarification on the following issues to provide clarity to trade and tax officers and to reduce litigation:

• Clarification on the taxability of reimbursement of securities/shares as ESOP/ESPP/RSU provided by a company to its employees
• Clarification on the requirement of reversal of input tax credit in respect of the amount of premium in Life Insurance services, which is not included in the taxable value as per Rule 32(4) of CGST Rules.
• Clarification on the taxability of wreck and salvage values in motor insurance claims
• Clarification in respect of Warranty/ Extended Warranty provided by Manufacturers to the end customers
• Clarification regarding the availability of input tax credit on repair expenses incurred by the insurance companies in case of reimbursement mode of settlement of motor vehicle insurance claims.
• Clarification on the taxability of loans granted between related persons or between group companies.
• Clarification on time of supply on Annuity Payments under HAM Projects.
• Clarification regarding the time of supply in respect of allotment of Spectrum to Telecom companies in cases where payment of license fee and Spectrum usage charges is to be made in instalments.
• Clarification relating to the place of supply of goods supplied to unregistered persons, where the delivery address is different from the billing address
• Clarification on the mechanism for providing evidence by the suppliers for compliance of the conditions of Section 15(3)(b)(ii) of CGST Act, 2017 in respect of post-sale discounts, to the effect that input tax credit has been reversed by the recipient on the said amount.
• Clarifications on various issues pertaining to special procedures for the manufacturers of the specified commodities, like pan masala, tobacco, etc.

6. The Council recommended amendment in section 140(7) of CGST Act retrospectively w.e.f. 01.07.2017 to provide for transitional credit in respect of invoices pertaining to services provided before the appointed date, and where invoices were received by Input Service Distributor (ISD) before the appointed date.

7. The Council recommended providing a new optional facility by way of FORM GSTR-1A to facilitate the taxpayers to amend the details in FORM GSTR-1 for a tax period and/ or to declare additional details, if any, before filing of return in FORM GSTR-3B for the said tax period. This will facilitate the taxpayer to add any particulars of supply of the current tax period missed out in reporting in FORM GSTR-1 of the said tax period or to amend any particulars already declared in FORM GSTR-1 of the current tax period (including those declared in IFF, for the first and second months of a quarter, if any, for quarterly taxpayers), to ensure that correct liability is auto-populated in FORM GSTR-3B.

8. The Council recommended that filing of annual returns in FORM GSTR-9/9A for the FY 2023-24 may be exempted for taxpayers having aggregate annual turnover upto two crore rupees.

9. An amendment was recommended to be made in section 122(1B) of CGST Act retrospectively w.e.f. 01.10.2023, so as to clarify that the said penal provision is applicable only for those e-commerce operators, who are required to collect tax under section 52 of the CGST Act, and not for other e-commerce operators.

10. The Council recommended amendment in rule 142 of CGST Rules and issuance of a circular to prescribe a mechanism for adjustment of an amount paid in respect of demand through FORM GST DRC-03 against the amount to be paid as pre-deposit for filing an appeal.‍

11. Rolling out of bio-metric-based Aadhaar authentication on an All-India basis:‍

The GST Council recommended to roll-out the biometric-based Aadhaar authentication of registration applicants on a pan-India basis in a phased manner. This will strengthen the registration process in GST and will help in combating fraudulent input tax credit (ITC) claims made through fake invoices.

12. Amendments in Section 73 and Section 74 of CGST Act, 2017 and insertion of a new Section 74A in CGST Act, to provide for the common time limit for the issuance of demand notices and orders irrespective of whether the case involves fraud, suppression, wilful misstatement, etc., or not:‍

Presently, there is a different time limit for issuing demand notices and demand orders, in cases where charges of fraud, suppression, wilful misstatement, etc., are not involved, and in cases where those charges are involved. In order to simplify the implementation of those provisions, the GST Council recommended providing for a common time limit for issuance of demand notices and orders in respect of demands for FY 2024-25 onwards, in cases involving charges of fraud or wilful misstatement and not involving the charges of fraud or wilful misstatement, etc. Also, the time limit for the taxpayers to avail of the benefit of reduced penalty, by paying the tax demanded along with interest, has been recommended to be increased from 30 days to 60 days.

13. The Council recommended amendments in section 171 and section 109 of the CGST Act, 2017 to provide a sunset clause for anti-profiteering under GST and to provide for the handling of antiprofiteering cases by the Principal bench of GST Appellate Tribunal (GSTAT). Council has also recommended the sun set date of 01.04.2025 for receipt of any new application regarding antiprofiteering.‍

14. Amendment in Section 16 of the IGST Act and Section 54 of CGST Act to curtail refund of IGST in cases where export duty is payable:

The Council recommended amendments in section 16 of the IGST Act and section 54 of the CGST Act to provide that the refund in respect of goods, that are subjected to export duty, is restricted, irrespective of whether the said goods are exported without payment of taxes or with payment of taxes, and such restrictions should also be applicable if such goods are supplied to a SEZ developer or a SEZ unit for authorized operations.

15. The threshold for reporting of B2C inter-state supplies invoice-wise in Table 5 of FORM GSTR-1 was recommended to be reduced from Rs 2.5 Lakh to Rs 1 Lakh.

16. The Council recommended that the return in FORM GSTR-7, to be filed by the registered persons who are required to deduct tax at source under section 51 of CGST Act, is to be filed every month irrespective of whether any tax has been deducted during the said month or not. It has also been recommended that no late fee may be payable for delayed filing of the Nil FORM GSTR-7 return. Further, it has been recommended that invoice-wise details may be required to be furnished in the said FORM GSTR-7 return.

Conclusion

The 53rd GST Council Meeting brought forth several important clarifications and amendments aimed at improving GST compliance and reducing litigation. From clarifications on Input Tax Credit for ducts and manholes in OFC networks to the introduction of biometric-based Aadhaar authentication, the Council's recommendations highlight their commitment to making GST more efficient and transparent. By addressing various issues related to taxability, valuation, and compliance, these changes are poised to streamline GST processes for businesses and taxpayers alike.

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