53rd GST Council Meeting: Key Framework Adjustments

The 53rd GST Council Meeting, chaired by Union Finance Minister Nirmala Sitharaman, took place on June 22, 2024, in New Delhi. The council discussed several important changes to the Goods and Services Tax (GST) regime, focusing on refining tax rates and service exemptions. This comprehensive guide covers all the key decisions and implications from the meeting.

Introduction of GST Council Meeting

The 53rd GST Council Meeting aimed to address and streamline the GST regime’s applicability across various goods and services. By refining tax rates and offering specific exemptions, the council intends to make the GST framework more efficient and aligned with current economic demands. The meeting’s outcomes have significant implications for businesses and consumers alike, impacting various sectors from defense imports to solar energy.

GST Council Meeting: Changes in GST Rates of Goods

Aircraft Parts and Tools

The council decided to impose a 5% Integrated GST (IGST) on the import of aircraft parts, components, testing equipment, tools, and tool-kits. This change aims to support the aviation sector by standardizing the tax rate on essential aircraft maintenance and manufacturing components.

Milk Cans

A uniform GST rate of 12% has been imposed on milk cans made from steel, iron, and aluminum. This decision simplifies the tax structure for dairy equipment, potentially impacting the pricing and supply chain of milk distribution.

Carton Boxes

The GST rate on cartons, boxes, and cases of paper has been reduced from 18% to 12%. This reduction is likely to benefit packaging industries and reduce costs for businesses relying on paper-based packaging solutions.

Solar Cookers

All solar cookers, whether they operate on a single or dual energy source, are now subject to a 12% GST. This move promotes renewable energy solutions and makes solar cooking technology more accessible.

Poultry Machinery Parts

Parts of poultry keeping machinery will now attract a 12% GST. This change is designed to support the poultry industry by ensuring a consistent tax rate on essential equipment.

Sprinklers

A 12% GST is now applicable on all types of sprinklers, including fire water sprinklers. This decision aims to support agricultural practices and enhance fire safety measures.

GST Council Meeting: Exemptions

Defence Imports

The exemption from IGST on specified defense items has been extended until June 30, 2029. This exemption helps reduce the cost burden on the defense sector and supports national security initiatives.

RAMA Programme Imports

Research equipment and buoys imported under the RAMA programme will continue to enjoy IGST exemptions. This supports scientific research and marine monitoring efforts.

SEZ Imports

The Compensation Cess exemption on imports by Special Economic Zones (SEZ) units and developers has been in effect since July 1, 2017. This exemption encourages investment and development within SEZs.

Aerated Beverages and Energy Drinks

Aerated beverage and energy drink supplies to canteens managed by units under the Ministry of Defense are excluded.

GST Council Meeting: Service Exemptions

Indian Railways Services

Certain services provided by Indian Railways, such as platform tickets, retiring rooms, cloakrooms, battery-operated car services, and intra-railway transactions, have been exempted from GST. This measure aims to reduce the cost burden on travelers and improve the efficiency of railway operations.

Accommodation Services

Accommodation services provided for relief to students and working professionals have been exempted from GST for stays up to Rs 20,000 per month per person for stays of 90+ days. This exemption makes long-term accommodation more affordable for individuals.

SPV Services

Special Purpose Vehicle (SPV) services to Indian Railways and maintenance services provided by Indian Railways to SPVs have been exempted from GST. This encourages investment in railway infrastructure and enhances operational efficiency.

GST Council Meeting: Other Recommendations

GST Council Meeting: Interest and Penalties

The council has waived interest and penalties for Section 73 demand notices for the fiscal years 2017-18, 2018-19, and 2019-20, provided the full tax is paid by March 31, 2025. This provides relief to taxpayers facing historical tax demands.

GST Council Meeting: Input Tax Credit (ITC)

The time limit for claiming Input Tax Credit (ITC) on invoices and debit notes under Section 16(4) for the fiscal years 2017-18 to 2020-21 is deemed as November 30, 2021, for returns filed by this date. This extension helps businesses manage their tax credits more effectively.

Monetary Limits for GST Appeals

The council has set new monetary limits for departmental appeals: Rs 20 lakh for the GST Appellate Tribunal, Rs 1 crore for High Court, and Rs 2 crore for the Supreme Court. These limits aim to streamline the appeals process and reduce litigation.

GST Council Meeting: Aadhaar Authentication

Nationwide implementation of biometric-based Aadhaar authentication for GST registration applicants will be rolled out in phases. This initiative aims to enhance registration integrity and curb fraudulent input tax credit claims via fake invoices.

Reduction in Pre-deposit Amount for GST Appeals

To ease cash flow, the pre-deposit amount required for filing appeals under the GST Act has been reduced, with a maximum cap of Rs 20 crores for CGST and SGST combined. This change makes it easier for businesses to contest tax demands.

Appeal Filing Period

The CGST Act will be amended to start the three-month period for GST Appellate Tribunal appeals from a notified date. This provides clarity on the appeal process timeline.

Interest Burden

No interest will be charged on delayed return filing if the amount is available in the Electronic Cash Ledger on the due date. This change reduces the financial burden on taxpayers.

Anti-Profiteering

A sunset clause from April 1, 2025, for new Anti-profiteering applications has been introduced. This change aims to streamline the anti-profiteering framework.

GST Council Meeting: Reduction in TCS Rate by Electronic Commerce Operators (ECOs)

The TCS rate for Electronic Commerce Operators (ECOs) has been reduced from 1% to 0.5%. This reduction eases the financial burden on suppliers using e-commerce platforms.

GST Council Meeting: Exemption of GST on Extra Neutral Alcohol

An amendment has been recommended to exclude Extra Neutral Alcohol from GST when used for manufacturing alcoholic liquor. This exemption supports the beverage industry.

GST Council Meeting: Amendment in IGST Act and CGST Act for Export Duty Cases

Amendments have been recommended to restrict IGST refunds in cases where export duty is payable. This change aims to prevent revenue leakage.

GST Council Meeting: Reduction in Threshold for B2C Inter-State Supplies

The threshold for reporting B2C inter-State supplies invoice-wise in FORM GSTR-1 has been reduced from Rs 2.5 lakh to Rs 1 lakh. This change improves tax compliance and transparency.

GST Council Meeting: Monthly Filing of GSTR-7

GSTR-7, which is filed by TDS deductors, will now be required monthly without a late fee for delayed filing of Nil returns. This change simplifies compliance for businesses.

Common Time Limits for Demand Notices in CGST Act Amendments

Common Deadlines for Demand Letters under the CGST Act Amendments
Regardless of the existence of fraud, concealment, or deliberate misrepresentation, the GST Council suggested amending the CGST Act, 2017 to create a consistent deadline for the issuance of demand notifications and orders. For FY 2024–2025 and beyond, taxpayers now have an additional 60 days to take advantage of the lower penalties by paying the tax due plus interest, instead of the previous 30 days.

GST Council Meeting: Other Changes Related to Services

Co-insurance Premium

Co-insurance premiums have been declared as “no supply” under Schedule III, with regularization of past cases. This clarification simplifies the tax treatment of co-insurance arrangements.

Re-insurance Commission

Re-insurance commissions are also declared as “no supply” under Schedule III, with regularization of past cases. This decision helps streamline the taxation of re-insurance transactions.

GST on Reinsurance Services

GST on reinsurance services will be regularized on an ‘as is where is’ basis for specified insurance schemes. This change provides clarity and consistency in the tax treatment of reinsurance.

Retrocession Clarification

Retrocession, defined as the re-insurance of re-insurance, is now eligible for exemption. This clarification supports the insurance industry’s risk management practices.

RERA Collections

The Real Estate Regulatory Authority’s (RERA) collections are defined as GST-exempt per Notification No. 12/2017-CTR entry 4. The real estate regulatory system is supported by this exception.

RuPay Debit Cards

Incentives shared by National Payments Corporation of India (NPCI) with banks for transactions using RuPay debit cards are not taxable when defined by NPCI in consultation with banks. This exemption promotes digital payments and financial inclusion.

Conclusion

The 53rd GST Council Meeting brought significant changes to the GST framework, aiming to streamline tax rates, enhance compliance, and provide targeted exemptions. These changes reflect the council’s commitment to adapting the GST regime to current economic conditions and supporting various sectors. Businesses and consumers should stay informed about these updates to optimize their tax strategies and compliance efforts.

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