GST

48th GST Council Meeting Updates – Key Highlights

The final resolution and report from the 48th GST Council Meeting have been approved by the Council. Offenses, e-commerce registration, and tribunal establishment have all been discussed during the 48th GST Council meeting. State ministers were invited to the meeting via video conference on December 17, 2022.

Synopsis:

The Council meeting was followed by a press conference highlighting the key decisions taken during the meeting, including the decriminalization of GST offences and measures to simplify GST compliance. Let’s examine them in more detail.

Key Highlights

S.No 48th GST Council Highlights
1 GST Offences are now Punishable by Upto Rs.2 Crores, except in cases of fake invoices.
2 Blended Petrol is subject to 5% GST on Ethanol.
3 The federal government has decriminalised certain offences, such as obstruction of service by officers, failure to provide information, etc.
4 Unregistered Suppliers can Sell goods through e-commerce Portals.
5 Insurance Companies do not charge GST on No Claim Bonuses
6 GST Appellate Tribunal has not yet reached a decision
7 In the next GST Council Meeting, both GoM reports on Pan Masala, Gutka, and GSTAT will be discussed.

 

Overview:

On 17 December, the GST Council held its 48th meeting virtually. The meeting was chaired by Smt. Nirmala Sitharaman (Union Finance Minister), and attended by Shri Pankaj Choudhary, Union Minister of State for Finance, as well as finance ministers of state and union territories. Senior Ministry of Finance officials, as well as state and UT representatives, attended the meeting.

Regarding decriminalising GST-related offences, the Council proposed raising the threshold from ₹1 crore to ₹2 crores for launching a prosecution under GST. It would apply to all cases except invoices issued without the provision of goods or services. Additionally, the Council proposed to reduce the compounding amount from 50% to 150% of the tax amount to 25% to 100%. In addition, certain offences would be decriminalised, including obstruction of an officer in the discharge of their duties, the deliberate falsification of evidence, and failure to provide information, as required.

In addition, the Council proposed to facilitate the use of e-commerce by micro-enterprises. This decision is based on the in-principle approval granted at the previous Council meeting allowing unregistered suppliers and composition taxpayers to make intra-state supplies of goods through an e-commerce operator. As a result of the GST Council’s approval, both the GST Act and the GST Rules have been amended to enable the same. The scheme may be implemented on 1 October 2023.

Input Tax Credit Reversal

According to the second provision of Section 16 of the CGST Act, the GST Council has recommended amending Rule 37(1) of the CGST Rules, 2017 with retrospective effect from 1 October 2022. In this amendment, the input tax credit (ITC) will be reversed proportionately to the amount not paid to the supplier concerning the value of the supply, including the tax due.

Additionally, the Council recommended that Rule 37A be added to the CGST Rules, 2017. This will provide a mechanism for reversing ITC by taxpayers who have yet to pay the tax amount by the specified deadline. It will also provide the mechanism for reclaiming such ITC if the supplier subsequently pays tax. As a result, compliance with Section 16(2)(c) of the CGST Act, 2017 will be made more accessible.

Streamlining GST Compliance Measures

Additionally, the GST Council proposed measures to streamline compliance with the GST law. It was proposed to conduct a pilot program in Gujarat for biometric-based Aadhaar authentication and risk-based physical verification of registration applicants. This move will likely contribute to the reduction of the number of fake or fraudulent registrations.

In combat fraudulent registrations, another step would be to capture the PAN-linked mobile number and email address from the CBDT database and enter them into Form GST REG-01. An OTP-based verification will also be conducted at the time of registration on the mobile number and email address to prevent unscrupulous fraudsters from misusing a person’s PAN.

In addition, the government intends to amend Sections 37, 39, 44 and 52 of the CGST Act, 2017, to restrict the filing of returns or statements to a maximum of three years from the filing deadline. In addition, Form GSTR-1 would be amended to provide for reporting details of supplies made through e-commerce operators covered by section 52 and section 9(5) of the CGST Act, 2017.

There will also be a new Rule 88C and Form GST DRC-01B introduced in the CGST Rules, 2017 to inform taxpayers when the difference between the liabilities reported by the taxpayer in Form GSTR-1 and GSTR-3B for a particular tax period exceeds the specified limits. In this way, taxpayers will be able to either pay the differential liability or explain it.

Under Rule 59(6) of the CGST Rules, 2017, a clause (d) will be added to restrict the filing of Form GSTR-1 for a subsequent tax period if the taxpayer has not deposited the amount specified in the intimation or provided an explanation. Tax officers would not be required to intervene if taxpayers paid or explained the reasons for differences in liabilities reported.

Decisions That Are Taken in Other Key Areas

A number of other decisions were taken by the GST Council, such as clarifying that the ‘No Claim Bonus’ offered by insurance companies will be deductible for the valuation of insurance services. No GST will apply to the same. In the case of a residential dwelling rented to a registered individual, there will be no GST payable if it is rented in their personal capacity and on their own behalf, that is, not for business purposes. Furthermore, incentives paid by the Central Government to banks under the scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions will not be subject to tax.

To reduce tax evasion, the Council also decided to include the supply of mentha arvensis under reverse charge. Additionally, a higher rate of compensation cess of 22% will be applied to SUVs whose engine capacity exceeds 1500cc, ground clearance exceeds 170mm, and whose length exceeds 4000mm.

To eliminate ambiguity and legal disputes on various issues, the following circulars will soon be issued: 

  1. During fiscal years 2017-18 and 2018-19, the following procedure is followed for verifying input tax credits availed in GSTR-3B versus GSTR-2A.
  2. Provide clarification regarding the redetermination of demand under Section 75(2) of the CGST Act, 2017.
  3. Clarification regarding the applicability of e-invoicing for a particular entity.

The GST rate was also reduced, and certain rate clarifications were provided. Despite this, no increases in GST rates were announced at this meeting of the Council. Unregistered persons under GST are also expected to receive new refund rules if their construction contracts or long-term insurance policies are cancelled.

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