DA Newsflash (GST): Key Observations from the 53rd GST Council Meeting

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A) Input Tax Credit (ITC) Related Recommendations:

1) ITC Time Limit Relaxation for Initial GST Years:

• Years Covered: FY 2017-18, 2018-19, 2019-20, and 2020-21.
• New Time Limit: Invoices or debit notes can be claimed up to 30.11.2021 for returns filed by this date.
• Retrospective Amendment: Effective from 01.07.2017.

2) ITC on Returns Filed Post-Revocation:

• Condition: Applies to returns filed within 30 days post-revocation of registration.
• Retrospective Amendment: Effective from 01.07.2017.

3) ITC on Ducts and Manholes for Optical Fiber Cables:

• Clarification: ITC is not restricted under section 17(5) clauses (c) or (d) of the CGST Act.

4) Valuation of Import of Services from Related Persons:

• Clarification: The invoice value by the domestic entity is considered the open market value when full ITC is available.
• No Invoice Issued: Value deemed Nil for services provided by a foreign affiliate if no invoice is issued.

5) Custodial Services by Banks:

• Clarification: Place of supply for custodial services to Foreign Portfolio Investors is under Section 13(2) of the IGST Act.

6) Corporate Guarantees Between Related Persons:

• Clarification: Valuation rules for providing corporate guarantees, especially regarding ITC eligibility and export services.

7) RCM Invoices Issued by Recipients:

• Time Limit Clarification: Relevant financial year for availing ITC is when the invoice is issued by the recipient.

B) Measures for Facilitation of Trade:

Waivers and Reductions:

1) Interest and Penalty Waivers: Conditional waivers for FY 2017-18 to 2019-20 for Section 73 notices if paid by 31.03.2025.

2) Litigation Reduction: Monetary limits for departmental appeals:

• GST Appellate Tribunal: Rs. 20 lakh
• High Court: Rs. 1 crore
• Supreme Court: Rs. 2 crore

3) Pre-deposit Reductions: Reduction in pre-deposit amounts for appeals.

4) ENA Exclusion: GST exclusion for ENA used in manufacturing alcoholic beverages.

5) TCS Rate Reduction: Reduction from 1% to 0.5%.

C) Procedural Amendments:

1. GST Appellate Tribunal Appeals: Start of appeal period from a government-notified date.
2. Return Filing Due Date: Extension from 30 April to 30 June for composition taxpayers.
3. Interest Calculation: Amendments in rule 88B regarding Electronic Cash Ledger balances.
4. Non-Recovery Powers: New Section 11A for non-recovery due to general practice.
5. Refund Mechanisms: For additional IGST paid on revised export prices.
6. Service Valuation: Clarifications on valuation and ITC availability.

D) Changes in GST Tax Rates

Goods:

1. Imports of Aircraft Parts: Uniform rate of 5% IGST.
2. Milk Cans: 12% GST on all milk cans (steel, iron, aluminum).
3. Paper and Cardboard Boxes: GST reduced from 18% to 12%.
4. Solar Cookers: 12% GST.
5. Poultry Machinery Parts: 12% GST.
6. Sprinklers: 12% GST.
7. Defence Items: IGST exemption extended for 5 years.
8. Research Equipment: IGST exemption for specific imports.
9. SEZ Imports: Compensation Cess exemption from 1 July 2017.
10. Defence Canteen Supplies: Exemption on aerated beverages and energy drinks.
11. AK-203 Rifle Kits: Adhoc IGST exemption.

Services:

1. Indian Railways: Exemption on certain services.
2. SPVs for Railways: Exemption on infrastructure use and maintenance services.
3. Accommodation Services: Exemption for services valued up to Rs. 20,000 per month for continuous periods of 90 days.
4. Insurance Services: No supply status for co-insurance and re-insurance commissions.
5. Government-paid Insurance Schemes: Regularization of GST liability for specific periods.
6. Re-insurance Clarifications: Clarification on retrocession eligibility for exemptions.
7. RERA Statutory Collections: Exempt from GST.
8. Bank Incentive Sharing: Exemption under specific schemes.

E) Clarifications:

1. ESOP/ESPP/RSU Reimbursements: Clarifications on taxability.
2. Life Insurance Premium: Clarifications on ITC reversals.
3. Wreck and Salvage Values: Clarifications on motor insurance claims.
4. Warranty Services: Clarifications on manufacturer warranties.
5. Motor Vehicle Insurance: ITC availability on repair expenses.
6. Loans Between Related Persons: Clarifications on taxability.
7. Annuity Payments: Time of supply clarifications.
8. Spectrum Allocation: Time of supply clarifications.
9. Goods Supply: Place of supply clarifications for unregistered persons.
10. Post-Sale Discounts: Mechanism for compliance evidence.
11. Special Procedures: Clarifications for pan masala, tobacco manufacturers.
12. Transitional Credits: Amendments for pre-GST services.
13. GSTR-1 Amendments: Introduction of FORM GSTR-1A for corrections.
14. Annual Return Exemption: For taxpayers with turnover up to Rs. 2 crore.
15. E-commerce Operators: Clarifications on penal provisions applicability.
16. Demand Adjustments: Mechanism for FORM GST DRC-03 adjustments.
17. Biometric Authentication: Nationwide rollout for registration applicants.
18. Common Time Limit: Unified time limit for demand notices.
19. Anti-profiteering Provisions: Sunset clause from April 1, 2025.
20. Export Duty Refunds: Restrictions on IGST refunds for export-duty liable goods.
21. B2C Invoice Reporting: Threshold reduced from Rs. 2.5 lakh to Rs. 1 lakh.
22. FORM GSTR-7 Filing: Monthly filing regardless of tax deduction.

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