The Goods and Services Tax (GST) is an important aspect of India's taxation system which impacts businesses and consumers. Recently, the GST Council made several recommendations in there 52nd council meetings held on 07.10.2023 and changes aimed at simplifying the tax structure by reducing rates, and providing relief to various sectors. Let's delve into some of the key takeaways from these recommendations proposed by the council:
Changes in GST Rates for Goods
- Millets Flour: One of the notable changes is the revised GST rates for millets flour falling under HSN 1901, with effect from date of notification. Products containing at least 70% millets by weight will now be taxed at 0% if sold in non-pre-packaged and non-labelled form, and at 5% if sold in pre-packaged and labelled form. This change aims to promote healthier dietary choices by making millet-based products more accessible and affordable
- Imitation Zari Thread or Yarn: For the textile and fashion industries, the GST Council clarified the taxation of imitation zari thread or yarn made from metallised polyester film/plastic film falling under HSN 5605. It is now categorized under the entry for imitation zari thread or yarn, attracting a 5% GST rate. Importantly, there will be no refund for polyester film (metallised)/plastic film due to inversion, providing clarity to businesses in this sector.
- Foreign-Going Vessels: Foreign-going vessels are now liable to pay 5% Integrated GST (IGST) on the value of the vessel if it converts to coastal run. However, there's a conditional IGST exemption for foreign-flag foreign-going vessels, provided they reconvert to foreign-going vessels within six months. This aims to boost coastal shipping and maritime trade.
- Extra Neutral Alcohol (ENA): ENA used for the manufacture of alcoholic liquor for human consumption will be kept outside the ambit of GST. This change simplifies the tax treatment for ENA, which is a key ingredient in the alcoholic beverage industry.
- Molasses: The GST rate on molasses has been significantly reduced from 28% to 5%. This move aims to increase liquidity for sugar mills and enable faster clearance of cane dues to sugarcane farmers. It also reduces the cost of manufacturing cattle feed, as molasses is a key ingredient.
- ENA for Industrial Use: A separate tariff HS code has been created for ENA for industrial use, with an 18% GST rate. This helps classify and tax industrial use separately from other applications.
Changes in GST Rates for Services
- Governmental Authority Services: Pure and composite services provided to Central/State/UT governments and local authorities in relation to functions entrusted to Panchayat/Municipality remain exempt from GST. Additionally, services related to water supply, public health, sanitation conservancy, solid waste management, and slum improvement and upgradation supplied to Governmental Authorities are now also exempt from GST.
- Job Work Services: Job work services for processing barley into malt are taxed at 5%, aligning with "job work in relation to food and food products," instead of the previous 18% rate.
- GST on Bus Transportation Services: Liability to pay GST on bus transportation services supplied through Electronic Commerce Operators (ECOs) has been placed on the ECO. However, bus operators organized as companies may be excluded from this provision, allowing them to pay GST using their Input Tax Credit (ITC).
- District Mineral Foundations Trusts (DMFT): DMFTs set up by State Governments are considered Governmental Authorities and eligible for the same GST exemptions as other Governmental Authorities.
- Indian Railways: Supply of all goods and services by Indian Railways will be taxed under the Forward Charge Mechanism to enable them to avail ITC, ultimately reducing costs for Indian Railways.
Measures for Facilitation of Trade
- Amnesty Scheme for Appeals: An amnesty scheme has been recommended for filing appeals against demand orders under section 73 or 74 of the CGST Act, 2017. Taxpayers who couldn't file appeals within the specified time can now do so until 31st January 2024, subject to condition of payment of 12.5% of the tax as amount of pre-deposit under dispute, out of which at least 20% should be debited from Electronic Cash Ledger.
- Clarifications on Guarantees: Clarifications have been provided regarding the taxability of personal guarantees offered by directors to banks and corporate guarantees provided for related persons, including value determination for corporate guarantees between related parties.
- Automatic Restoration of Attached Property: Provision for automatic restoration of provisionally attached property after one year has been recommended, facilitating the release of such properties without the need for separate specific written orders.
- Place of Supply Clarifications: Clarifications on various issues related to the Place of Supply have been recommended, providing clarity for businesses involved in transportation, advertising, and co-location services.
- Export of Services: A circular will be issued to clarify the admissibility of export remittances received in Special INR Vostro accounts for the purpose of considering supply of services as exports.
- Supplies to SEZ Units/Developers: Amendments have been recommended to allow suppliers to Special Economic Zone (SEZ) developers or units for authorized operations to make supplies on payment of integrated tax and claim a refund.
Other Measures Pertaining to Law and Procedures
- Tribunal Reforms: Provisions of the CGST Act, 2017 are aligned with the provisions of the Tribunal Reforms Act, 2021 regarding the appointment of President and Member of the proposed GST Appellate Tribunals.
- Input Service Distributor (ISD) Procedure: Amendments have been proposed to make the ISD procedure mandatory for distribution of Input Tax Credit (ITC) for certain input services procured by Head Offices (HO) from third parties but attributable to both HO and Branch Offices (BO) or exclusively to one or more BOs.
If you want to know more and understand decisions, relaxations, and recommendations in detail, contact ASC Group. We will connect you with GST Experts to assist you in all your matters relating to Goods and Services Tax.
Also, Read- Key Recommendation of 50th GST Council Meeting