48th GST Council Meeting Expectations

The Union Finance & Corporate Affairs Minister, Smt. Nirmala Sitharaman presided over the 48th meeting of the GST Council, which was held via video conference on December 17, 2022.

No tax hike on any item was announced in the meeting and the council decided to decriminalise certain offences under GST. Several other significant decisions were taken in the meeting. Let us read the highlights in detail here!

48th GST Council Meeting Highlights

A) Measures for facilitation of trade:

1. Decriminalization under GST: The Council has recommended to:

Raise the minimum threshold of tax amount for launching prosecution under GST
from Rs. One Crore to Rs. Two Crores, except for the offence of issuance of
invoices without supply of goods or services or both;
Reduce the compounding amount from the present range of 50% to 150% of tax
amount to the range of 25% to 100%;
Decriminalize certain offences specified under clause (g), (j) and (k) of sub-section
(1) of section 132 of CGST Act, 2017, viz.-
- obstruction or preventing any officer in discharge of his duties;
- deliberate tempering of material evidence
- failure to supply the information.

2. Refund to unregistered persons:

There is no procedure for claim of refund of tax borne by the unregistered buyers in cases where the contract/ agreement for supply of services, like construction of flat/house and long-term insurance policy, is cancelled and the time period of issuance of credit note by the concerned supplier is over. The 48th GST Council recommended an amendment in CGST Rules, 2017, along with the issuance of a circular, to prescribe the procedure for filing an application of refund by unregistered buyers in such cases.

3. Facilitate e-commerce for micro-enterprises:

GST Council in its 47th GST Council meeting had granted in-principle approval for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs),
subject to certain conditions. The Council approved the amendments in the GST Act and GST Rules, along with issuance of relevant notifications, to enable the same. Further, considering the time required for the development of the requisite functionality on the portal as well as for providing sufficient time for preparedness by the ECOs, Council has recommended that the scheme may be implemented w.e.f. 01.10.2023.

4. Rule Amendments:

Paras 7, 8(a) and 8(b) were inserted in Schedule III of CGST Act, 2017 with effect from 01.02.2019 to keep certain transactions/ activities, such as supplies of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales and supply of warehoused goods before their home clearance, outside the purview of GST. In order to remove the doubts and ambiguities regarding taxability of such transactions/ activities during the period 01.07.2017 to 31.01.2019, the Council has recommended to make the said paras effective from 01.07.2017. However, no refund of tax paid shall be available in cases where any tax has already been paid in respect of such transactions/ activities during the period 01.07.2017 to 31.01.2019.

The Council has recommended to amend sub-rule (1) of rule 37 of CGST Rules, 2017 retrospectively with effect from 01.10.2022 to provide for reversal of input tax credit, in terms of second proviso to section 16 of CGST Act, only proportionate to the amount not paid to the supplier vis a vis the value of the supply, including tax payable.

The Council recommended inserting Rule 37A in CGST Rules, 2017 to prescribe the mechanism for reversal of input tax credit by a registered person in the event of nonpayment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently. This would ease the process for complying with the condition for availment of input tax credit under section 16(2)(c) of CGST
Act, 2017.

Sub-rule (3) of rule 108 and rule 109 of the CGST Rules, 2017 to be amended to provide clarity on the requirement of submission of the certified copy of the order appealed against and the issuance of final acknowledgement by the appellate authority. This would facilitate the timely processing of appeals and ease the compliance burden for the appellants.

Rule 109C and FORM GST APL-01/03 W to be inserted in the CGST Rules, 2017 to provide the facility for withdrawal of an application of appeal up to certain specified stage. This would help in reducing litigations at the level of appellate authorities.

Sub-rule (3) of rule 12 of CGST Rules, 2017 to be amended to provide for facility to the registered persons, who are required to collect tax at source under section 52 or deduct tax at source under section 51 of CGST Act, 2017, for cancellation of their registration on their request.

5. Circulars:

Circular to be issued to clarify that No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for valuation of insurance services.

Circular to be issued for clarifying the issue of treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under the Insolvency and Bankruptcy Code, 2016. Rule 161 of CGST Rules, 2017 and FORM GST DRC-25 are also to be amended for facilitating the same.

Circular to be issued for clarifying the issues pertaining to the place of supply of services of transportation of goods in terms of the proviso to sub-section (8) of section 12 of the IGST Act, 2017 and availability of input tax credit to the recipient of such supply. It has also been recommended that proviso to sub-section (8) of section 12 of the IGST Act, 2017 may be omitted.

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

Procedure for verification of input tax credit in cases involving difference in input tax credit availed in FORM GSTR-3B vis a vis that available as per FORM GSTR-2A during FY 2017-18 and 2018-19.
Clarifying the manner of re-determination of demand in terms of sub-section (2) of section 75 of CGST Act, 2017.
Clarification in respect of applicability of e-invoicing with respect to an entity.

B) Measures for streamlining compliances in GST

1. Proposal to conduct a pilot in State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants. Amendment in rule 8 and rule 9 of CGST Rules, 2017 to be made to facilitate the same. This will help in tackling the menace of fake and fraudulent registrations.

2.PAN-linked mobile number and e-mail address (fetched from CBDT database) to be captured and recorded in FORM GST REG-01 and OTP-based verification to be conducted at the time of registration on such PAN-linked mobile number and email address to restrict misuse of PAN of a person by unscrupulous elements without knowledge of the said PAN-holder.

3. Section 37, 39, 44 and 52 of CGST Act, 2017 to be amended to restrict filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return / statement.

4. FORM GSTR-1 to be amended to provide for reporting of details of supplies made through ECOs, covered under section 52 and section 9(5) of CGST Act, 2017, by the supplier and reporting by the ECO in respect of supplies made under section 9(5) of CGST Act, 2017.

5. Rule 88C and FORM GST DRC-01B to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liability reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period, where such difference exceeds a specified amount and/ or percentage, for enabling the taxpayer to either pay the differential liability or explain the difference. Further, clause (d) to be inserted in sub-rule (6) of rule 59 of CGST Rules, 2017 to restrict furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid. This would facilitate taxpayers to pay/ explain the reason for the difference in such liabilities reported by them, without the intervention of the tax officers.

6. Amendment in definition of “non-taxable online recipient” under section 2(16) of IGST Act, 2017 and definition of “Online Information and Database Access or Retrieval Services (OIDAR)” under section 2(17) of IGST Act, 2017 so as to reduce interpretation issues and litigation on taxation of OIDAR Services.

C) Tax Rate Changes

No GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

D) Reverse Charge Mechanism

In the 48th GST Council Meeting, it was also decided to include supply of Mentha arvensis under reverse charge mechanism as has been done for Mentha Oil.
Rab (rab-salawat) is classifiable under CTH 1702 which attracts GST at the rate of 18%.
Fryums manufactured using the process of extrusion is specifically covered under CTH 19059030 and attract GST at the rate of 18%.
The higher rate of compensation cess of 22% is applicable to motor vehicle fulfilling all four conditions, namely, it is popularly known as SUV, has engine capacity exceeding 1500 cc, length exceeding 4000 mm and a ground clearance of 170 mm or above
Goods falling in lower rate category of 5% under schedule I of notification No. 1/2017-CTR imported for petroleum operations will attract lower rate of 5% and the rate of 12% shall be applicable only if the general rate is more than 12%

E) Relief Measure

As a relief measure, the Council decided to regularise the intervening period starting from the date of issuance of Circular (3.08.2022) in respect of GST on ‘husk of pulses including chilka and concentrates including chuni/churi, khanda’ on “ as is basis” on account of genuine doubts.

F) RuPay Debit Cards

Incentives paid to banks by the Central Government under the scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.

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48th GST Council Meeting Expectations

The 48th GST Council Meeting is said to be scheduled in the next week i.e. on December 17, 2022. It is a crucial one as it might be the last GST council meeting of this year and a final gathering before the Union Budget 2023. Experts are presuming that in addition to discussing tax rate modifications on various commodities, the Council is anticipated to debate reports about a GST fee on online gambling and the creation of an Appellate Tribunal.

The 47th GST Council Meeting witnessed a bunch of major decisions taken related to rates, withdrawal of exemptions GST Appellate Tribunals among other significant changes. Let us understand the expectations from the upcoming 48th GST Council Meeting:

Goods and Services Tax Appellate Tribunals (GSTAT)

According to sources, the GST Council-nominated Group of Ministers (GoM), which is led by Deputy Chief Minister of Haryana Dushyant Chautala, has delivered the final report on the establishment of the Goods and Services Tax Appellate Tribunals, which has been a long-standing demand of the industry (GSTAT).

GST Rate Changes

GST on Health and Life Insurance

The insurance sector has been demanding to remove or reduce the GST rate on health/medical insurance and life insurance. This has been a major issue especially during and after the pandemic. Currently, the GST rate is 18% which is being considered as a hindrance for people to buy insurance. Most Indians choose not to purchase insurance and instead pay out of cash for medical care.

An umbrella organization for non-life insurance agents, the Confederation of General Insurance Agents’ Associations of India, pushed the government last year to at least distinguish between policies on commercial lines (used by business and industry) and policies on personal lines, used by individuals. The input tax credit can be availed w.r.t. the premium paid for insurance policies serving business and industry.

However, for people who use health, personal accident, and home security (fire, theft, etc.) policies, the premium payment and high GST rate of 18% are costs that deplete their meagre income.

2. GST on Pan Masala and Gutka

GoM has made suggestions for taxing pan masala and gutka based on production capacity. Additionally, the GoM has expressed its opinions regarding the inclusion of mentha oil, one of the main components of pan masala, under the reverse charge mechanism.

According to sources, the GST Council is set to discuss a report from a group of ministers (GoM) that suggests stringent steps to track down and stop tax evasion by pan masala and gutkha businesses at its upcoming 48th GST Council Meeting.

3. GST on Online Gaming

Additionally, it is vital to resolve the classification and valuation problems that online game participants encounter.

Conrad Sangma, the chief minister of Meghalaya, chairs the Group of Ministers (GoM) on Internet Gaming, which just conducted its final meeting on the subject and is reported to have advocated a GST rate of 28% on all online gaming, regardless of whether it is a game of skill or chance.

Apart from this, on February 1, 2023, the Union Budget 2023–24 is expected to be introduced in Parliament.

4. GST on SUV

The GST rate panel may provide another tax-related clarification. Vehicles in the SUV category that have 1,500 cc engines and that have a length of more than 4,000 mm may be subject to a 22% cess.

You can find the highlights of the past GST council meetings here –

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