Goods & Services Tax (GST) in IndiaRecommendations of the GST Council in the 48th Council Meeting

INTRODUCTION

The 48^th Goods and Services Tax (GST) Council meeting under the chairmanship of Smt. Nirmala Sitharaman, the Union Minister of Finance and Corporate Affairs along with the State Finance Ministers was virtually held on 17.12.2022 at Delhi.

The GST Council which met after a gap of about 6 months, with 47^th GST Council meeting being held in June 2022, had several items on its agenda for discussion however due to paucity of time as some States’ Finance ministers cited ‘other committed business’; the GST Council could address and decide on merely half its agenda of only 8 out of 15 items scheduled for discussion.

The remaining agenda items including setting up of much awaited GST Appellate Tribunal for adjudication of tax disputes as envisaged under 2017 law, matters related to revenue augmentation and imposition of GST on gutkha and pan masala as well as the determination of tax treatment conundrum regarding online gaming, casinos and horse racing were put on hold as to be decided in the next meeting of the GST Council.

RECOMMENDATIONS

In its 48^th meeting, the GST Council issued several recommendations primarily related to trade facilitation measures, changes in the GST rates and simplified GST compliance procedures.

Key recommendations of the GST Council covered in the press release issued by the Government are as follows:

A. The GST Council recommended that the Central Goods and Services Tax Rules, 2017 (CGST Rules) are to be amended to specify the process for unregistered buyers to follow when a contract or agreement for the supply of services, including the house/flat construction or the purchase of a long-term insurance policy, is cancelled.

B. The GST Council decided to approve the changes that will allow composition taxpayers and unregistered suppliers to use E-Commerce Operators (ECOs) for making intra-state shipments of goods, provided that certain requirements are met. This scheme might be implemented from 01.10.2023, as per the GST Council’s recommendation.

C. The GST Council has further proposed the following:

• Raise the minimum threshold limit required to initiate a GST prosecution from Rs. 1 crore to Rs. 2 crores, excluding the circumstances where false invoicing is involved;
• Lower the contemporary range of the compounding amount, which is between 50 and 150 percent of the tax amount, to a range between 25 and 100 percent;
• Eliminate the criminal punitive consequences for a number of offences, such as hindering or impeding any officer from performing his duties, deliberately tampering with tangible evidence, and failing to provide the requisite information;
• Non-payment of GST on residential dwelling rented to a registered person who is using it for his own residence rather than on behalf of a business entity;
• Discard the 5% tax levy on a component used in cattle feed, namely the husk from pulses;
• Reduce the GST levy of 18% on ethyl alcohol which refineries use to blend with petrol to 5%.

D. The GST Council also recommended setting up a three-year maximum filing window for the filing of particular returns/statements from the due date of filing.

E. The GST Council has proposed to begin a pilot programme in Gujarat for risk-based physical verification of applicants for registration and biometric-based Aadhaar identification; apparently to counteract the issue of sham and fraudulent registrations.

F. The GST Council further emphasized that:

• Rab (rab-salawat) is liable to be taxed at a rate of 18% since it is thought to fall within CTH 1702;
• Fryums manufactured using the extrusion process are specifically covered by CTH 19059030 and are liable to be taxed at a rate of 18%;
• The higher rate of compensating cess i.e., at the rate of 22%, is applied to sport utility vehicles (SUVs) with an engine capacity of more than 1500 cc, a length of more than 4000 mm, and a ground clearance of at least 170 mm;
• The registered person is exempt from paying GST on the rental of the residential dwelling if the residential housing is rented to the registered person in his or her personal capacity for use as his or her own residence and on his or her own account and not on account of his business.

ANALYSIS AND IMPACT OF SUCH RECOMMENDATIONS

• The GST Council’s recommendations inter alia to decriminalize GST offences involving obstruction or impeding any Officers from carrying out their legitimate duties, willful tampering of material evidence and failure to provide the requisite information, while doubling the threshold limits of duty amount for instituting prosecution from ₹1 crore to ₹2 crores for all wrongs other than those involving issuance of fake invoices as well as reducing the compounding amount for certain offences from 50% to 150% of the amount, to 25% to 100% of the amount involved can indubitably be viewed as progressive steps towards the objective of easing up the burden on Courts of Law.
• By bringing the oil refineries under the 5% tax regime on ethyl alcohol that is currently available only to the oil marketing corporations to blend with petrol would certainly further lessen the country’s reliance on imported crude oil and contribute exponentially in saving vital foreign exchange.
• The clarifications provided and parameters laid down by the GST Council pertaining to the uniform definition of a vehicle qualifying as SUVs and keeping the tax rates unchanged would also resolve major conundrums looming around the applicability of higher rate of compensation cess of 22% over and above 28% GST rate in the auto industry.

AMLEGALS Remarks

The GST Council though in its 48^th meeting which would be the last one for this year and very much probably so before the budget 2023 attempted to throw some light on numerous critical issues to settle the disputes once and for all.

As many as three Groups of Ministers (GoM) reports pertaining to crucial agenda matters including taxation mechanism for the businesses engaged in production and sale of tobacco and gutkha, establishment of keenly awaited Appellate Tribunal under GST regime for expeditious adjudication of tax disputes and resolution of the dilemma about tax treatment for online gaming, casinos and horse racing have been put in a cold storage until next council meeting.

There had been certain disagreements among the members of the GST Council regarding the following:

• The proposal of GST levy of 18% instead of existing 12% on pencil sharpeners; and
• Extending the instrumental tax treatment for ethyl alcohol supplied to refineries for blending with petrol.

These disagreements are in light of the concerns primarily regarding the hardship faced by students for the former and diversion of Extra Neutral Alcohol (ENA) to refineries along with tax evasion for the latter.

The GST Council conceded to keep the status quo with regards to clause (d) sub rule (14) of Rule 138 related to e-way bills which was initially proposed to be deleted.

– Team AMLEGALS assisted by Mr. Saurin Thakkar (Intern)

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