Highlights of 53rd GST Council Meeting-Part 2

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”.

Key recommendations of the GST Council:

1. Insertion of Section 128A in CGST Act, to provide for conditional waiver of interest or penalty or both, relating to demands raised under Section 73, for FY 2017-18 to FY 2019-20:

Considering the difficulties faced by the taxpayers, during the initial years of implementation of GST, the GST Council recommended, waiving interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19, and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice upto 31.03.2025. The waiver does not cover the demand for erroneous refunds. To implement this, the GST Council has recommended insertion of Section 128A in the CGST Act, 2017.

2. Reduction of Government Litigation by Fixing monetary limits for filing appeals under GST:

The Council recommended prescribing monetary limits, subject to certain exclusions, for filing of appeals in GST by the department before the GST Appellate Tribunal, High Court, and Supreme Court, to reduce government litigation. The following monetary limits have been recommended by the Council: GSTAT: Rs. 20 lakhs High Court: Rs. 1 crore Supreme Court: Rs. 2 crores

3. Amendment in Section 107 and Section 112 of CGST Act for reducing the amount of pre-deposit required to be paid for filing of appeals under GST:

The GST Council recommended reducing the amount of pre-deposit for filing of appeals under GST to ease cash flow and working capital blockage for the taxpayers. The maximum amount for filing an appeal with the appellate authority has been reduced from Rs. 25 crores CGST and Rs. 25 crores SGST to Rs. 20 crores CGST and Rs. 20 crores SGST. Further, the amount of pre-deposit for filing an appeal with the Appellate Tribunal has been reduced from 20% with a maximum amount of Rs. 50 crores CGST and Rs. 50 crores SGST to 10 % with a maximum of Rs. 20 crores CGST and Rs. 20 crores SGST.

4. Applicability of Goods and Services Tax on Extra Neutral Alcohol (ENA) Taxation of ENA under GST:

The GST Council, in its 52nd meeting, had recommended to amend GST Law to explicitly exclude rectified spirit/Extra Neutral Alcohol (ENA) from the scope of GST when supplied for manufacturing alcoholic liquors for human consumption. The GST Council now recommended amendment in sub-section (1) of Section 9 of the CGST Act, 2017 for not levying GST on Extra Neutral Alcohol used for manufacture of alcoholic liquor for human consumption.

5. Reduction in rate of TCS to be collected by the ECOs for supplies being made through them:

Electronic Commerce Operators (ECOs) are required to collect Tax Collected at Source (TCS) on net taxable supplies under Section 52(1) of the CGST Act. The GST Council has recommended reducing the TCS rate from the present 1% (0.5% CGST + 0.5% SGST / UTGST, or 1% IGST) to 0.5 % (0.25% CGST + 0.25% SGST /UTGST, or 0.5% IGST), to ease the financial burden on the suppliers making supplies through such ECOs.

6. Time for filing appeals in GST Appellate Tribunal:

The GST Council recommended amending Section 112 of the CGST Act, 2017 to allow the three months for filing appeals before the Appellate Tribunal to start from a date to be notified by the Government in respect of appeal/ revision orders passed before the date of said notification. This will give sufficient time for the taxpayers to file appeals before the Appellate Tribunal in the pending cases.

7. Relaxation in condition of section 16(4) of the CGST Act:

a) In respect of the initial years of implementation of GST, i.e., financial years 2017-18, 2018-19, 2019-20, and 2020-21: The GST Council recommended that the time limit to avail input tax credit in respect of any invoice or debit note under Section 16(4) of CGST Act, through any return in FORM GSTR 3B filed up to 30.11.2021 for the financial years 2017-18, 2018-19, 2019-20 and 2020-21, may be deemed to be 30.11.2021. For the same, requisite amendment in section 16(4) of CGST Act, retrospectively, w.e.f. 01.07.2017, has been recommended by the Council.

b) For cases where returns have been filed after revocation: The GST Council recommended retrospective amendment in Section 16(4) of the CGST Act, to be made effective from July 1st, 2017, to conditionally relax the provisions of Section 16(4) of the CGST Act in cases where returns for the period from the date of cancellation of registration/ effective date of cancellation of registration till the date of revocation of cancellation of the registration, are filed by the registered person within thirty days of the order of revocation.

8. Change in due date for filing of return in FORM GSTR-4 for composition taxpayers from 30th April to 30th June:

The GST Council recommended an amendment in clause (ii) of subrule (1) of Rule 62 of CGST Rules, 2017 and FORM GSTR-4 to extend the due date for filing of return in FORM GSTR-4 for composition taxpayers from 30th April to 30th June following the end of the financial year. This will apply for returns for the financial year 2024-25 onwards. The same would give more time to the taxpayers who opt to pay tax under composition levy to furnish the said return.

9. Amendment of Rule 88B of CGST Rules, 2017 in respect of interest under Section 50 of CGST Act on delayed filing of returns, in cases where the credit is available in Electronic Cash Ledger (ECL) on the due date of filing the said return:

The GST Council recommended an amendment in rule 88B of CGST Rules to provide that an amount, that is available in the Electronic Cash Ledger on the due date of filing of return in FORM GSTR-3B, and is debited while filing the said return, shall not be included while calculating interest under section 50 of the CGST Act in respect of delayed filing of the said return.

10. Insertion of Section 11A in CGST Act for granting power not to recover duties not levied or short-levied as a result of general practice under GST Acts:

The GST Council recommended inserting a new Section 11A in the CGST Act to give powers to the Government, on the recommendations of the Council, to allow regularization of non-levy or short levy of GST, where tax was being short paid or not paid due to common trade practices.

11. Refund of additional Integrated Tax (IGST) paid on account of upward revision in price of the goods after export:

The GST Council recommended prescribing a mechanism for claiming a refund of additional IGST paid on account of an upward revision in the price of the goods after their export. This will facilitate a large number of taxpayers, who are required to pay additional IGST on account of upward revision in the price of the goods after export, in claiming a refund of such additional IGST.

12. Clarification regarding the valuation of supply of import of services by a related person where the recipient is eligible to full input tax credit:

The Council recommended clarifying that in cases where the foreign affiliate is providing certain services to the related domestic entity, for which full input tax credit is available to the said related domestic entity, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value in terms of the second proviso to rule 28(1) of CGST Rules. Further, in cases where full input tax credit is available to the recipient if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as Nil, and may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules.

Conclusion

The 53rd GST Council meeting introduced significant changes aimed at easing compliance, reducing litigation, and enhancing clarity in the GST framework. Key measures include waivers of interest and penalties, adjustments in pre-deposit requirements for appeals, and amendments to the CGST Act to address practical issues faced by taxpayers. The Council's recommendations also aim to provide relief to businesses by reducing the TCS rate for ECOs and extending due dates for filing returns.

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