Taxing Times Ahead? What's new from the 53rd GST Council

Introduced in 2017, the Goods and Services Tax (GST) streamlined India's indirect tax system. It replaced multiple taxes like VAT with a single levy on most goods and services. GST has various tax rates (5%, 12%, 18%, 28%) and is jointly managed by the central and state governments as:

• Central Goods and Services Tax (CGST) - Collected by the central government for intra-state transactions (within the same state)
• State Goods and Services Tax (SGST) - Collected by the state government for intra-state transactions.

The aim of GST is to eliminate the cascading effect of taxes, where tax is levied on top of previous taxes. It enables manufacturers to receive credit for taxes paid previously, reducing the overall tax burden. Additionally, as a destination-based tax, it is collected in the consuming state, ensuring a more equitable tax revenue distribution among Indian states.

The 53rd GST Council meeting proposed measures to ease tax and legal burdens on Indian taxpayers and facilitate trade. These recommendations will take effect once relevant circulars, notifications, or law amendments are issued. The information and references used are sourced from the Press Information Bureau (PIB).

Key Propositions from the 53rd GST Council Meeting

Adjustments to GST Rates and Trade Facilitation Measures: The 53rd GST Council meeting, chaired by Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman was held on June 22, 2024, in Delhi. The Council proposed several changes to GST rates to align with current economic conditions, including a uniform 5% IGST rate for aircraft parts and tools, a 12% GST rate for milk cans and solar cookers, and a reduced 12% rate for paper cartons and boxes. To simplify GST compliance, especially for small businesses, the Council focused on improving digital filing and refund systems and clarified the GST treatment of various goods (e.g., machinery, sprinklers) and services (e.g., insurance, real estate).

Refund Procedures and Pre-deposit Requirements: The meeting introduced new refund procedures, streamlining the refund process, and modifying pre-deposit requirements for appeals. The pre-deposit amount was lowered from 20% to 10%, with a maximum of INR 2 million (US$239,673) each for CGST and SGST. The maximum sum to file an appeal with the appellate body was also reduced to INR 2 million each for CGST and SGST. Additionally, input tax credit (ITC) claim requirements were relaxed, and interest and penalties for demand notices issued under Section 73 of the CGST Act for fiscal years 2017-18, 2018-19, and 2019-20 were waived, provided the full tax amount is paid by March 31, 2025.

Proposed Changes in GST Rates for Services: Notable changes include exemptions for Indian Railways services, SPV services to Indian Railways, and accommodation services up to INR 20,000/month (US$239.67) per person for stays over 90 days. Insurance services such as co-insurance premiums, reinsurance commission transactions, and retrocession are declared as no supply. Specified insurance schemes' GST liability on reinsurance services is regularized, and incentives under RuPay and BHIM-UPI schemes are declared non-taxable.

Relief for Taxpayers: The meeting implemented relief measures, including waiving interest and penalties for late tax payments for FY 2017-18, 2018-19, and 2019-20. The deadline for availing Input Tax Credit (ITC) was extended for FY 2017-18 to 2020-21. Monetary limits for filing appeals were set at different levels, and pre-deposit requirements for appeals were reduced. Form GSTR 1A adoption allows taxpayers to correct errors in Form GSTR 1 submission. No interest will be charged on delayed returns if the Electronic Cash Ledger balance is nil on the due date.

Anti-profiteering Measures: New applications for anti-profiteering cases will not be accepted after April 1, 2025. Amendments to Section 171 and Section 109 of the CGST Act, 2017, include a sunset clause for anti-profiteering and assign such cases to the Principal Bench of the GST Appellate Tribunal (GSTAT).

Exemptions and Rate Rationalization: The Council introduced several exemptions and rate changes, including compensation cess exemption for SEZ imports from July 1, 2017. Exemptions were provided for certain Indian Railway services and accommodation services. Aadhaar-based biometric authentication for GST registration will be rolled out nationwide in phases.

Conclusion:

The 53rd GST Council meeting centered on a series of promising developments intended to streamline compliance for taxpayers. These encompass changes to tax rates, refund procedures, and appeal pre-deposit requirements. The successful implementation of these proposals, likely through official channels like circulars, notifications, or legislative amendments, could lead to a more efficient GST system in India.

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