Mazars Tax Update | Edition 01.22

Key takeaways from the 47^th GST Council meeting by Mazars Advisory LLP

The two-day council meet concluded on 29^th June 2022 has made the following recommendations with respect to changes in GST rates on goods and services, changes related to GST law and procedures, measures for trade facilitation and ease in compliances. The major takeaways of GST the council meet are as follows:

A. Increase in GST rates on the supply of several goods and services has been recommended to remove inverted duty structure.

B. Changes in GST rates on the supply of several goods and services have been recommended. Major changes in tax rates are as follows:

C.  The benefit of exemption from tax to be withdrawn on supply of various services. Some of the important exemptions recommended to be struck off are as follows:

1. Transportation by rail or a vessel of railway equipment and material.
2. Storage or warehousing of commodities which attract tax (nuts, spices, copra, jaggery, cotton etc.)
3. Fumigation in a warehouse of agricultural produce.
4. Services by RBI, IRDA, SEBI, FSSAI & GSTN.
5. Renting of a residential dwelling to business entities (registered persons).
6. Services provided by the cord blood banks by way of preservation of stem cells
7. Like CETPs, common bio-medical waste treatment facilities for treatment or disposal of biomedical waste shall be taxed at 12% to allow them ITC
8. Hotel accommodation priced up to Rs. 1000/day shall be taxed at 12%
9. Room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital shall be taxed to the extent of the amount charged for the room at 5% without ITC.

D. Clarification on GST rate applicability on various goods and services has been discussed:

Goods:

1. Electric vehicles whether or not fitted with a battery pack, are eligible for the concessional GST rate of 5%
2. All fly ash bricks attract the same concessional rate irrespective of fly ash content
3. Stones covered in S. No.123 of Schedule-I (such as Napa stones), even if they are ready to use and polished in minor ways [not mirror polished], attract a concessional GST rate of 5%
4. GST rate on all forms of mango under CTH 0804, including mango pulp (other than mangoes sliced and dried) attract GST at 12%. Entry is also being amended to make this amply clear. Raw or fresh mangoes continue to be exempt.
5. Sewage-treated water is exempted from GST and is not the same as purified water provided in S. No. 99 of notification 2/2017-CT(Rate). The word 'purified' is being omitted to make this amply clear.
6. Nicotine Polarilex Gum attracts a GST rate of 18%.

Services:

1. Due to ambiguity in GST rates on the supply of ice cream by ice cream parlours, GST charged @5% without ITC on the same during the period 1.07.2017 to 5.10.2021 shall be regularized to avoid unnecessary litigation.
2. Application fee charged for entrance or issuance of eligibility certificate for admission or issuance of migration certificate by universities is exempt from GST.
3. Ginned or baled fibre is covered in entry 24B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 in the category of raw vegetable fibres. The exemption under this entry is being rationalized.
4. Services associated with transit cargo both to and from Nepal and Bhutan are covered by the exemption under entry 9B of notification No. 12/2017-CT(R) dated 28.06.2017.
5. The activity of selling space for advertisement in souvenirs published in the form of books is eligible for concessional GST at 5%.
6. Renting a vehicle with an operator for transportation of goods on a time basis is classifiable under Heading 9966 (rental services of transport vehicles with operators) and attracts GST at 18%.GST on such renting where the cost of fuel is included in the consideration charged is being prescribed at 12%.
7. Allowing the choice of location of a plot is part of the supply of long-term lease of a plot of land. Therefore, location charges or preferential location charges (PLC) are part of consideration charged for a long-term lease of land and shall get the same treatment under GST.
8. Services provided by the guest anchors to TV channels in lieu of honorarium attract GST.
9. An additional fee collected in the form of higher toll charges from vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and shall be given the same tax treatment as given to toll charges.
10. Services in form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF) are covered under the definition of health care services for exemption under GST.
11. The sale of land after levelling, laying down of drainage lines etc. is a sale of land and does not attract GST.
12. Renting motor vehicles for the transport of passengers to a body corporate for a period (time) is taxable in the hands of body corporate under RCM.
13. The expression ‘public transport’ used in the exemption entry at SI No. 17(d) of notification No. 12/2017-CT(R), which exempts transport of passengers by public transport other than predominantly for tourism purposes, in a vessel between places located in India, means that such transport should be open to the public for point-to-point transport [e.g., such transport in Andaman and Nicobar Islands].

E. Measures taken for trade felicitation

1. Waiver of requirement of mandatory registration under section 24(ix) of CGST Act for person supplying goods through ECOs, subject to certain conditions.
2. Composition taxpayers would be allowed to make intra-State supply through e-commerce operators subject to certain conditions.
3. Change in formula for calculation of refund under inverted duty structure to factor utilization of ITC on account of inputs and input services for payment of output tax in the same ratio in which ITC has been availed on inputs and input services during the said tax period. This would help those taxpayers who are availing ITC on input services also.
4. Amendment in CGST Rules for handling of pending IGST refund claims to be made in cases where the exporter is identified as risky exporter or where there is a violation of provisions of Customs Act, the refund claims in respect of export of goods are to be suspended/withheld. Amendment in rule 96 of the CGST Rules has been recommended in this regard.
5. Re-credit of amount in electronic credit ledger to be provided in those cases where, erroneous refund amount sanctioned to a taxpayer in contravention of rule 96(10) of the CGST Rules, is deposited by him along with interest and penalty, wherever applicable. A new FORM GST PMT-03A is introduced for the same.
6. Retrospective amendment to provide that interest will be payable on the wrongly availed ITC only when the same is utilized as suggested in Finance act, 2022 to be notified soon.
7. Amendment to provide for transfer of balance in electronic cash ledger of a registered person to electronic cash ledger of CGST and IGST of a distinct person to be implemented on portal soon.
8. Waiver of late fee for delay in filing FORM GSTR-4 for FY 2021-22 till 28^th July 2022 and extension of due date for filing FORM GST CMP-08 for Q1 of FY 2022-23 till 31^st July 2022.
9. Present exemption of IGST on import of goods under AA/EPCG/EOU scheme to be continued.
10. Exemption from filing annual return in FORM GSTR-9/9A for FY 2021-22 to be provided to taxpayers having AATO upto Rs. 2 crores.
11. CGST Rules to be amended to provide that there is no requirement of reversal of input tax credit for exempted supply of Duty Credit Scrips by the exporters.
12. UPI & IMPS to be provided as an additional mode for payment of Goods and Services Tax.
13. Amendment in CGST Rules to provide for refund of unutilized Input Tax Credit on account of Export of Electricity.
14. Supplies from Duty Free Shops (DFS) at international terminal to outgoing international passengers to be treated as exports by DFS and consequential refund benefit to be available to them on such supplies. Rule 95A of the CGST Rules, Circular No. 106/25/2019-GST dated 29.06.2019 and related notifications to be rescinded accordingly.

F. Measures taken for streamlining the compliances:

1. Provision has been introduced for automatic revocation of suspension of registration in cases, where suspension of registration was done by the system upon non-compliance in terms of continuous non-filing of specified number of returns and once all the pending returns are filed on the portal by the taxpayer.
2. A proposal has been made for comprehensive changes in FO
3. RM GSTR-3B to be placed in public domain for seeking inputs/suggestions of the stakeholders.
4. Time period from 01.03.2020 to 28.02.2022 to be excluded from calculation of the limitation period for filing refund claim by an applicant under section 54 and 55 of CGST Act, as well as for issuance of demand/ order (by proper officer) in respect of erroneous refunds under section 73 of CGST Act. Further, limitation under section 73 for FY 2017-18 for issuance of order in respect of other demands linked with due date of annual return, to be extended till 30 September 2023.
5. The Council has decided to constitute a Group of Ministers to address various concerns raised by the States in relation to constitution of GST Appellate Tribunal and make recommendations for appropriate amendments in CGST Act.