First 18 recommendation of 53rd GST Council Meeting
Introduction of Section 128A in CGST Act, 2017
A new section, Section 128A, has been inserted into the CGST Act, 2017, to provide a conditional waiver of interest or penalty, or both, on the full payment of tax demand before March 31, 2025. This waiver applies to tax demands raised in notices issued under Section 73 for the financial years 2017-18 to 2019-20. However, this waiver does not extend to demands related to erroneous refunds.
Monetary Limits for Filing Appeals under GST by Revenue Department
The GST Council has introduced monetary limits for the Revenue Department to file appeals under GST, as follows:
My Comments:
This move is a welcome step to reduce the mounting litigation, and is in line with the government's policy under the past indirect tax regime. However, it is likely that the amendment will explicitly state that the non-filing of appeals by the Department due to monetary limits will not set a legal precedent.
Additionally, based on past experience, it is possible that the Department may still litigate certain issues, such as valuation, classification, and place of supply, which have wider implications, regardless of the amount involved
Reduction in Pre-Deposit for Filing Appeals under GST
The pre-deposit amounts for filing appeals under GST have been reduced as follows:
My Comments:
This reduction in pre-deposit amounts will provide relief to taxpayers by easing their working capital burden. However, considering the numerous frivolous matters being litigated by the department, it would have been ideal to set even lower limits for the initial 3-4 years of GST implementation.
Exclusion of GST on Supply of Extra Neutral Alcohol for Alcoholic Liquor Manufacturing
An amendment has been proposed to Section 9(1) of the CGST Act, 2017, to exempt the supply of Extra Neutral Alcohol (ENA) from GST when used for the manufacture of alcoholic liquor for human consumption.
My Comments:
This amendment is expected to directly reduce the cost of manufacturing liquor for human consumption. However, it's important to note that ENA used for industrial purposes will continue to be liable to GST. The key aspect to watch out for is whether this amendment will be applied retrospectively or prospectively, as there are several ongoing disputes at various levels.
Reduction of TCS Rate to Ease Financial Burden on Suppliers
The Tax Collected at Source (TCS) rate has been reduced from 1% to 0.5% to alleviate the financial burden on suppliers making supplies through E-commerce Operators (ECOs).
My Comments:
This move is likely to reduce the need for suppliers to claim refunds for unused amounts in their electronic cash ledger, which often resulted from TCS deductions by E-commerce operators.
Amendment to Section 112 of the CGST Act, 2017 for Filing Appeals before Appellate Tribunal
Section 112 of the CGST Act, 2017 is to be amended to allow a three-month period for filing appeals before the Appellate Tribunal, starting from a date to be notified by the Government. This applies to appeal/revision orders passed before the notification date.
My Comments:
The previous three-month timeline for filing appeals before the Tribunal, as per Circular No. 132/2/2020-GST, had raised several interpretation issues. The assumption of office by the Tribunal President had triggered a three-month countdown, but it was practically impossible to file appeals within that timeframe due to the non-constitution of State benches, lack of online or offline filing systems, and absence of rules and procedures. The new amendment will provide a clearer timeline, starting from the government's notification date.
Action Points:
Businesses should prepare their appeals for filing before the Tribunal without waiting for the notification, to avoid last-minute rush and ensure a smooth filing process.
Relaxation in Condition for Availment of ITC under Section 16(4) of the CGST Act, 2017
a) Extension of Time Limit for Availing ITC
The time limit for availing input tax credit in respect of any invoice or debit note under Section 16(4) of the CGST Act, 2017, has been extended. Taxpayers can now claim ITC through any return in FORM GSTR 3B filed up to November 30, 2021, for the financial years 2017-18, 2018-19, 2019-20, and 2020-21. The deadline for availing ITC is deemed to be November 30, 2021.
My Comments:
This is a welcome move, providing relief to taxpayers who were unable to file GSTR-3B within the statutory due date during the initial period of GST implementation. Once the amendment is made, all pending matters can be closed. However, for taxpayers who have already paid or reversed the credit in department proceedings, it is uncertain whether they will be eligible for a refund.
b) Retrospective Amendment to Section 16(4) of the CGST Act
A retrospective amendment will be made to Section 16(4) of the CGST Act, effective from July 1, 2017. This amendment will conditionally relax the applicability of the provision in cases where returns for the period from the date of cancellation of registration to the date of revocation of cancellation of registration are filed by the registered person within thirty days of the order of revocation.
My Comments:
This is a positive move, as businesses should not be penalized for not being able to file returns during the cancellation period. The restriction of Section 16(4) will no longer apply where returns could not be filed due to registration cancellation, providing a welcome relief to taxpayers.
Extension of Due Date for Filing FORM GSTR-4 for Composition Taxpayers
The due date for filing returns in FORM GSTR-4 for composition taxpayers has been extended from April 30 to June 30 following the end of the financial year. This change will apply to returns for the financial year 2024-25 onwards.
My Comments:
This is a beneficial move for small taxpayers, as they will now have more time to file their returns.
Amendment to Rule 88B of CGST Rules for Interest Calculation
Rule 88B of the CGST Rules will be amended to exclude the amount available in the Electronic Cash Ledger on the due date of filing of return in FORM GSTR-3B, which is debited while filing the return, from the interest calculation under Section 50 of the CGST Act for delayed filing of the return.
My Comments:
This is a trade facilitation move by the GST Council, which will prevent unnecessary interest burden on taxpayers who had the balance in their electronic cash ledger but could not file their return on time. This amendment is in line with the ruling of the Madras High Court in the case of Eicher Motors Limited, which held that GST deposited in the E-Cash Ledger would amount to payment to the Government, and interest cannot be levied merely because the GSTR-3B was not filed.
Action Points:
Insertion of New Section 11A in CGST Act, 2017 for Regularization of Non-Levy or Short Levy of GST
A new Section 11A will be inserted in the CGST Act, 2017, empowering 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.
My Comments:
This new provision overcomes a legislative lacuna, validating and empowering the Government to take steps to regularize non-levy or short levy of GST. This is in line with similar provisions under the Central Excise and Customs Act. The section should clearly provide for the grant of refund, subject to unjust enrichment, in cases where taxes have been paid voluntarily or consequent to legal proceedings in the past.
My Comments: There may be upward revision in the export prices wherein original exports were made on payment of taxes. There is no automated system to claim refund of taxes on such upward revision in export price. The Council may provide for manual filing of refund claim by developing new form/utility or claiming the refund under “any other category”. The time limit for such refund should be same as provided under section 54 i.e. within 2 years of relevant date.
Action Points: Evaluate if any past export price escalations have resulted in blockage of taxes due to non-processing of refund thereon. The refund should be
filed for all such past cases and system/process to be developed for claiming such refunds in future through the new route.
My Comments: Result of continuous efforts of Council in plugging the tax leakage through improvised compliance processes. New Form GSTR-1A would permit the taxpayers to make suitable amendments in liabilities declared in GSTR-1 without waiting for next month GSTR-1. This would make sure that liability declared in R-1 and R-1A matches with liability in GSTR-3B.
Action Points: Redefine the business compliance process to integrate the GSTR- 1A in the system to report such transactions. All GSPs-ASPs would need to integrate new features in their system at earliest.
My Comments: In line with earlier years relaxation for small taxpayers.
Mechanism for Claiming Refund of Additional IGST Paid on Account of Upward Revision in Export Price
The GST Council has recommended a mechanism for claiming a refund of additional IGST paid on account of upward revision in the price of goods subsequent to their export.
My Comments:
In cases where export prices are revised upward, and original exports were made on payment of taxes, there is currently no automated system to claim a refund of taxes on such upward revision. The Council may provide for manual filing of refund claims by developing a new form or utility or claiming the refund under the "any other category". The time limit for such refunds should be the same as provided under Section 54, i.e., within 2 years of the relevant date.
Action Points:
Amendment to Section 140(7) of CGST Act for Transitional Credit
Section 140(7) of the CGST Act will be amended retrospectively, effective from July 1, 2017, to provide for transitional credit in respect of invoices pertaining to services provided before the appointed date, and where invoices were received by the Input Service Distributor (ISD) before the appointed date.
Introduction of FORM GSTR-1A for Amending Details in FORM GSTR-1
The Council has recommended providing a new optional facility by way of FORM GSTR-1A to facilitate taxpayers in amending details in FORM GSTR-1 for a tax period and/or declaring additional details, if any, before filing of return in FORM GSTR-3B for the said tax period.
My Comments:
This is a result of the Council's continuous efforts to plug tax leakages through improvised compliance processes. The new Form GSTR-1A will permit taxpayers to make suitable amendments in liabilities declared in GSTR-1 without waiting for the next month's GSTR-1. This will ensure that the liability declared in R-1 and R-1A matches with the liability in GSTR-3B.
Action Points:
Exemption from Filing Annual Return in FORM GSTR-9/9A for FY 2023-24
The Council has recommended exempting taxpayers with an aggregate annual turnover of up to two crore rupees from filing annual returns in FORM GSTR-9/9A for the financial year 2023-24.
My Comments:
This exemption is in line with earlier years' relaxation for small taxpayers.
Amendment to Section 122(1B) of CGST Act for E-commerce Operators
Section 122(1B) of the CGST Act will be amended retrospectively, effective from October 1, 2023, to clarify that the penal provision is applicable only to e-commerce operators who are required to collect tax under Section 52 of the CGST Act, and not to other e-commerce operators.
My Comments:
There is no TCS mandate on e-commerce operators in respect of supplies made by unregistered or composition supplier taxpayers through such e-commerce platforms. Additionally, e-commerce operators who only provide a platform but do not collect consideration on behalf of suppliers are not required to deduct TCS. The amended provision aims to rectify the anomaly in the language to ensure that there are no penal implications on operators who are not required to collect TCS. The retrospective application of this amendment is necessary.
Mechanism for Adjustment of Amount Paid in Respect of Demand through FORM GST DRC-03
The Council has recommended an amendment to Rule 142 of the CGST Rules and the issuance of a circular to prescribe a mechanism for adjusting the amount paid in respect of a demand through FORM GST DRC-03 against the amount to be paid as pre-deposit for filing an appeal.
My Comments:
Currently, there is no system to consider the amount paid through DRC-03 at an earlier or during the appeal filing stage against the pre-deposit required to be made for filing appeals. This creates an extra burden for taxpayers to pay additional pre-deposit. The proposed mechanism aims to link the amount paid through DRC-03 at any stage as a valid payment for making pre-deposit for filing an appeal. There are many other issues with respect to filing DRC-03, and it is expected that clarifications on these issues will also be provided.
Amendments to Sections 73, 74, and Insertion of Section 74A of CGST Act
The Council has recommended amendments to Sections 73 and 74 of the CGST Act, 2017, and the insertion of a new Section 74A to provide for a common time limit for the issuance of demand notices and orders from FY 2024-25, irrespective of whether the case involves fraud, suppression, willful misstatement, etc., or not. Additionally, the time limit for taxpayers to avail 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.
My Comments:
Historically, there have been differences in the treatment of bonafide and willful defaulters under indirect taxation laws. The proposed amendment eliminates the distinction between these two categories of taxpayers, leaving uncertainty open for a longer period for genuine taxpayers. The Council should ensure that differential treatment is given for penalty amounts for bonafide and other categories of taxpayers. The increase in the time limit from 30 days to 60 days is a welcome move, as it will give sufficient time for businesses to evaluate whether to pay the penalty to close the case.
Amendment to Sections 171 and 109 of CGST Act for Anti-Profiteering
The Council has recommended amendments to Sections 171 and 109 of the CGST Act, 2017, to provide a sunset clause for anti-profiteering under GST and to provide for the handling of anti-profiteering cases by the Principal bench of the GST Appellate Tribunal (GSTAT).
My Comments:
Anti-profiteering provisions are no longer relevant after 7 years of GST implementation. The proposal aims to provide for a sunset clause for such anti-profiteering cases. Moreover, the disposal of anti-profiteering matters currently handled by the Competition Commission of India (CCI) are proposed to be transferred to the GSTAT Principal bench.