45th GST Council Meeting Highlights

Union Finance Minister Nirmala Sitharaman chaired the 45th GST Council meeting held on 17th September 2021, in Lucknow, Uttar Pradesh. This was the first meeting offline meeting after the outbreak of the deadly coronavirus pandemic. Prior to this, all the council meetings have been conducted via video-conferencing from March 2020 onwards.

While the 43rd GST Council Meeting introduced the Amnesty scheme and the 44th GST Council Meeting provided many more relaxations to the taxpayers, let us dive into all the changes and announcements made by the finance ministry in the 45th GST Council Meeting here…

Highlights of 45th GST Council Meeting

The concession on specified COVID drugs has been extended till 31st December. These concessions are a part of COVID relief measures. Here are the details:

No GST levied	5% GST levied	Reduced from 12% to 5% GST
Amphotericin	Remdesivir	Itolizumab, Posaconazole, Infliximab
Tocilizumab	Heparin	Bamlanivimab & Etesevimab, Favipiravir
		Casirivimab & Imdevimab, 2-Deoxy-D-Glucose

GST rates have been changed for the following goods:

S. No.	Description	From	To
1	Retro fitment kits for vehicles used by the disabled	Appl. rate	5%
2	Fortified Rice Kernels for schemes like ICDS etc.	18%	5%
3	Medicine Keytruda for treatment of cancer	12%	5%
4	Biodiesel supplied to OMCs for blending with Diesel	12%	5%
5	Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others	5%	18%
6	Specified Renewable Energy Devices and parts	5%	12%
7	Cartons, boxes, bags, packing containers of paper etc.	12%/ 18%	18%
8	Waste and scrap of polyurethanes and other plastics	5%	18%
9	All kinds of pens	12%	18%
10	Railway parts, locomotives & other goods in Chapter 86	12%	18%
11	Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff)	12%	18%
12	IGST on import of medicines for personal use, namely i. Zolgensma for Spinal Muscular Atrophy ii. Viltepso for Duchenne Muscular Dystrophy iii. Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.	12%	Nil
13	IGST exemption on goods supplied at Indo-Bangladesh Border haats	Appl. rate	Nil
14	Unintended waste generated during the production of fish meal except for Fish Oil	Nil (for the period 1.7.2017 to 30.9.2019)

GST rate change for other goods decided in 45th GST Council meeting

A special composition scheme for the brick kiln sector with a threshold limit of Rs. 20 lakhs will be introduced from April 2022 onwards.
Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.
Supply of Mentha oil from an unregistered person is brought under Reverse Charge Mechanism.
Further, Council has also recommended that exports of Mentha oil should be allowed only
against LUT and consequential refund of the input tax credit.

Inverted Duty Structure

Inverted Duty Structure will be implemented for the textile and footwear sector from 1st January 2022. This is to correct the IDS. This was deferred for an appropriate time and now will get implemented for the benefit of small manufacturers.

GST Rate Changes and Scope of Exemption of Services:

No.	Description	From	To
1	Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022.	–	Nil
2	Services by way of grant of National Permit to goods carriages on payment of fee	18%	Nil
3	Skill Training for which Government bears 75% or more of the expenditure [ presently exemption applies only if Govt funds 100%].	18%	Nil
4	Services related to AFC Women’s Asia Cup 2022	18%	Nil
5	Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licencing services]	12%	18%
6	Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media)	12%	18%
7	Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn
8	E Commerce Operators are being made liable to pay tax on following services provided through them (i) transport of passengers, by any type of motor vehicles through it [w.e.f. 1st January, 2022] (ii) restaurant services provided through it with some exceptions [w.e.f. 1st January, 2022]
9	Certain relaxations have been made in conditions relating to IGST exemption relating to import of goods on lease, where GST is paid on the lease amount, so as to allow this exemption even if (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.

Clarification in relation to GST rate on Goods

Pure henna powder and paste, having no additives, attract 5% GST rate under Chapter 14.
Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HS code 2303 attract GST at the rate of 5%.
All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of 12%.
Scented sweet supari and flavored and coated illachi falling under heading 2106 attract GST at the rate of 18%
Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice” attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.
Tamarind seeds fall under heading 1209, and hitherto attracted nil rate irrespective of use. However, henceforth they would attract a 5% GST rate (w.e.f. 1.10.2021) for use other than sowing. Seeds for sowing will continue at the NIL rate.
External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [ 28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18%.
GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from 1.7.2017 to 31.12.2018, in the same manner as has been prescribed for the period on or after 1st January 2019.
Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12% GST in the past has been regularised. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated.
The distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;
It is being clarified that all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%].
Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.

Clarification in relation to GST rate on services

Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST
Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract 5% GST [without ITC].
Ice cream parlour sells already manufactured ice- cream. Such supply of ice cream by parlours would attract GST at the rate of 18%.
Overloading charges at toll plaza are exempt from GST being akin to toll.
The renting of vehicles by State Transport Undertakings and Local Authorities is covered by the expression ‘giving on hire’ for the purposes of GST exemption.
The services by way of grant of mineral exploration and mining rights attracted GST rate of 18% w.e.f. 01.07.2017.
Admission to amusement parks having rides etc. attracts a GST rate of 18%. The GST rate of 28% applies only to admission to such facilities that have casinos etc.
Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.

Trade Facilitation

1. Relaxation in the requirement of filing FORM GST ITC-04:
Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed as under:

- Taxpayers whose annual aggregate turnover in the preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months;
- Taxpayers whose annual aggregate turnover in the preceding financial year is up to Rs. 5 crores shall furnish ITC-04 annually.

2. In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.

3. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having the same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.

4. Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:

- Clarification on the scope of “intermediary services”;
- Clarification relating to the interpretation of the term “merely establishment of distinct person” in condition (v) of Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of section 2 of the IGST Act 2017 for considering a supply of service as export of services;
- Clarification in respect of certain GST related issues:

W.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;

Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availing of refund of accumulated ITC.

5. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGSTAct.

Streamlining compliances in GST

Aadhaar Authentication under GST:

Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.

Late fee for delayed filing:

Taxpayers will be charged a late fee for delayed filing of FORM GSTR-1. It will be auto-populated and collected in next open return in FORM GSTR-3B.

GST Refund:

GST Refund to be disbursed in the bank account, which is linked with the same PAN on which registration has been obtained under GST.

GSTR 1 Blocking

Rule 59(6) of the CGST Rules to be amended with effect from 1st January 2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1 if he has not furnished the return in FORM GSTR-3B for the preceding month.

Restriction to avail ITC

Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availing of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier, in FORM GSTR-1/Invoice Furnishing Facility and are communicated to the registered person in FORM GSTR-2B.

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Expectations from the 45th GST Council Meeting:

1. GST Compensation Cess to the states

The Constitution (101st) Amendment Act 2016 provides for compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for five years. The deadline of June 2022 is approaching and on this note, many state ministers, especially those from the opposition ruled states, are making a demand for an assured compensation mechanism that is to continue for another 5 years. This will be a difficult decision to make, given the unprecedented economic impact of the pandemic and the extensive loss of revenues, both to the Centre and States.

As per the written reply to a Lok Sabha question on July 19, 2021, the MoS Finance had informed that GST compensation due for the period April 2020-March 2021 was 81,179 crore and Rs 55,345 crore, for the period April-May 2021. Compensation is due to all the states except some special category states like Arunachal Pradesh, Manipur, Mizoram, and Nagaland. The amount of compensation towards some major states is quite substantial. Maharashtra is due Rs. 23,133 crores, Tamil Nadu Rs. 9729 crores, Karnataka Rs. 12,702 crores, Uttar Pradesh Rs.11157 crore, for the past 2 years.

The whopping amount of Rs 1.1.lakh crore was borrowed during the Financial Year 2021 and an estimated 1.6 lakh crore is required for compensating the states for the shortfall in the GST revenues.

2. Revision of the Tax rates

The 43rd GST Council Meeting and 44th GST Council Meeting council meetings recommended a reduction in the tax rate on all essential products in light of the ongoing global pandemic and its devastating effects on the economies. Those rates can be withdrawn if the situation has improved and a similar ongoing exercise needs to be done in respect of all previous exemptions if the situation has come to normalcy again.

3. Filling the vacancies in the Tribunal

Tribunals have been created for a purpose, to provide a faster and cheaper process of resolving litigation and relieving the already burdened High Court. The Council can finalize when it would like the National Bench and the Regional Benches of the GST Tribunal to start functioning in this 45th GST council meeting. The statute has created this important institution-but the posts have yet to be filled. This issue of filling the vacancy can also be discussed.

4. Monitoring the GST revenue performance

The council should closely look into the GST revenue performance. Covid had an impact on every system and GST is no different. The gross receipts of GST were Rs 92,849 crores in June 2021 after consecutive collection of Rs 1 lakh crores for the past eight months till May 2021, which was a decent sum considering the mega lockdown that shattered the lives of almost the entire population. The month of July 2021, has seen a downfall in industrial production to 11.5 percent, against 13.6 percent as of May 2021. So, while the August 2021 GST revenue at Rs.1.12 crore was good and the coming festive season should see a revival in demand, especially for consumer goods, there is little room for better results.

5. Addressing the inverted tax structure

Inverted tax structure is the situation when the input tax is greater than the output tax. The GST Council may take a final call on the inverted tax structure for several key sectors like textile, fabrics, and footwear facing this issue. It was brought to the council’s notice that the footwear industry is facing a huge burden due to an inverted tax structure and that’s affecting its profitability. It’s expected that the council will take some steps to correct this.

6. Contemplating over the Sikkim electricity Cess Issue

The GoM is in favors of allowing Sikkim to levy one percent cess on intra-state supply of pharmaceutical items for three years and explore a proposal to levy Rs 0.1/unit of electricity consumption or sale since it is a state subject that is outside the purview of the Goods and Services Tax. The council can contemplate granting this.

You can find the highlights to the past GST council meetings here –
44th GST Council Meeting
43rd GST Council Meeting
42nd GST Council Meeting
41st GST Council Meeting
40th GST Council Meeting