GST Update No 227 on recommendations of 47th GST Council meeting

On 28^th and 29^th June 2022, 47^th Council meeting was held under the chairmanship of Hon’ble Finance Minister Smt. Nirmala Sitharaman. A lot of changes in GST rates on supply of goods and services and provisions have been notified under the GST Law. The recommendations of the Council will be effective from the date of issuance of notifications in this regard. The highlights of the meeting are being summarized in the present update.
The key take aways of the GST Council meeting are as follows: -
1.       Waiver of mandatory requirement of taking registration under Section 24 of CGST Act, 2017 in case of supplies made through ECO: The GST council waived the requirement of taking compulsory registration under Section 24 of CGST Act, 2017 in case of supplies made through Electronic Commerce Operator [ECO]. The conditional waiver is subject to restrictions that the aggregate turnover computed on all India basis should not exceed the threshold limits as defined under Section 22 of CGST Act, 2017. Furthermore, it is prescribed that person should not be engaged in making inter-state outward taxable supply of goods. It seems that conditions imposing restriction on making inter-state outward supply is absurd and arbitrary which should be reconsidered since the ideology behind implementation of GST related to “One nation one tax” will not sustain.

2.       Composition taxpayers would be allowed to make intra-state supply through ECO: The GST Council will release a detailed scheme worked by Law Committee of the Council which would be effective from 01.01.2023. The above decision is in line with Government’s agenda in respect of facilitating E-commerce and boosting up the concept of Digital India. The change will invite more players in the market to route their transaction through E-Commerce platforms.

3.       Amendment in formula prescribed under Rule 89(5) of CGST Rules, 2017: In the recent GST Council meeting, it is decided to change the formula for calculation of refund of unutilized Input Tax Credit on account of inverted tax structure. It is thereby deliberated to consider amount of input tax credit in respect of input and input services for discharging output tax liability in case of inverted tax structure in the same ratio in which input tax credit is availed during the said tax period. This change is in line with the recent pronouncement of Apex Court in the case of Union of India & Others V/s V.K.C. Footsteps India Pvt. Ltd. wherein it was held that it is beyond the scope of Hon’ble Supreme Court to redesign the formula related to claiming refund of inverted tax structure. However, looking at the anomalies, SC urged the GST Council to reconsider the formula.

4.       Amendment in CGST Rules for handling of pending IGST refund claims: After considering the current scenario of risky exporters wherein they were required to get their documents verified failing which refund claims of goods would get suspended/withheld, the GST Council recommended to provide transmission of IGST refund claims to the Jurisdictional GST Authorities to get them processed. This facility shall be routed on common portal electronically through Form GST RFD-01. In our opinion, instead of simplifying the process, the cumbersomeness in the process will increase since the GST authorities will now demand in-depth and detailed information considering L1 and L2 suppliers as well. This will further, increase the hardships of the exporters.

5.       Re-credit of amount in credit ledger: It is decided that in case of erroneous refund sanctioned to the taxpayers on account of accumulated input tax credit or zero rated supply, amount shall be re-credited back to his account on the condition that the same is deposited along with interest and penalty. This facility is introduced which can be enabled by filing Form GST PMT-03 which will prove to be beneficial for taxpayers.

6.       Introduction of Section 110 and 111 clause (c) of Finance Act, 2022: The Council has decided to prescribe rules for establishing manner of calculation of interest which is to be calculated as per retrospective amendment under Section 50 (3) of CGST Act, 2017 w.e.f. 01.07.2017 wherein it is prescribed that interest will be payable on wrong availment and utilization of input tax credit. Furthermore, amendment under Section 49(10) of CGST Ac, 2017 regarding transfer of balance available in cash ledger of a registered person to cash ledger of distinct person is also taken into consideration. It is decided to frame out rules in this respect so that liquidity and cash flows of the taxpayers can be managed efficiently.

7.       Waiver of late fee for delay in filing GSTR-4 for FY 2021-22 and extension of due date of CMP-08 for Quarter-I of FY 2022-23: It has been decided by the Council to extend the waiver of late fee u/s 47 of the GST Act related to delay in filing of GSTR-4 for FY 2021-22 for a period of 4 weeks i.e. till 28.07.2022. Further, it is also decided to extend due dates of filing CMP-08 for 1^st quarter of FY 2022-23 from 18.07.2022 to 31.07.2022. Moreover, GSTN is also directed to resolve the issues related to negative balance displayed in credit ledger.

8.       Exemption of IGST on import of goods under AA/EPCG/EOU to continue and E-wallet scheme not to be continued further: It is agreed to continue exemptions of IGST available on import of goods under Advance Authorization/ EPCG/ Export oriented Unit. Further, to recollect, earlier it was proposed to have an e-wallet for every exporter which would be credited with notional or virtual currency by the DGFT based on the past record of exports. This facility would be used by exporters so that liquidity can be maintained and funds do not remain blocked. However, this facility will be discontinued in future.

9.       Provision for automatic revocation of suspension of registration: It is decided in the GST Council meeting that in case suspension of registration is done by system as per Rule 21A(2A) of CGST Rules, 2017 for violation of Section 29(2)(b)/(c) of CGST Act,2017, there would be automatic revocation once all pending returns are duly filed by the taxpayer. Therefore, the above relaxation is provided only in case of suspension of registration and not in case of cancellation of registration. Hence, in case registration is cancelled suo-moto by the proper officer, revocation of registration would be effective in accordance with provisions of Section 30 of CGST Act, 2017. The taxpayer will have to apply for revocation of registration within a period of 30 days which can be extended further by Additional/Joint Commissioner for a period not exceeding 30 days and further by the Commissioner for a period not exceeding 30 days on sufficient cause being shown. This can be exercised only after filing of all pending returns.

10. Time period from 01.03.2020 to 28.02.2022 to be excluded in calculation of filing refund claim: It is clarified that for the purpose of filing of refund claim in accordance with provisions of Section 54 and 55 of CGST Act and for the purpose of issuance of demand as regards erroneous refunds under Section 73 of CGST Act, 2017, the above said period shall be excluded. This is done in alignment with various Judicial Pronouncements. To illustrate, Madras High Court in the case of M/s GNC Infra LLP V/s Assistant Commissioner (Circle) and Bombay High Court in case of Saiher Supply Chain Consulting Pvt. Ltd. has held that Suo-Moto Extension of limitation period delivered by Apex Court’s vide Miscellaneous Application No. 21 of 2022 would be applicable in case of refund application as well. Furthermore, it is decided that limitation under Section 73 pertaining to FY 2017-18 related to issuance of order in respect of other demands linked with annual return is extended till 30.09.2023.

11. GST rate supply by ice cream parlour: There had been various disputes regarding levy of GST rates on supply of ice-cream by ice cream parlour. In this respect, it is clarified that GST at the rate of 5% can be charged without ITC during the period from 01.07.2017 to 05.10.2021. This is regularized by the GST Council to put an end to unnecessary and unwanted litigations.

12. Sale of land after leveling, laying down of drainage lines: The GST council in its recent meeting decided that in case land is sold out after leveling and laying down of drainage lines, no GST shall be attracted on the leveling services. This is decided to put an end to confusion created by way of adverse Advance rulings being delivered on this issue. Further, it is in alignment with the concept of composite supply as defined under Section 8 of CGST Act, 2017 since the principal supply of sale of land is out of purview of GST as prescribed under Schedule III of CGST Act, 2017.

13. Goods transport agency (GTA) is being given option to pay GST at 5% or 12% under forward charge:- The option is required to be exercised at the beginning of the financial year. RCM option is to continue.

14. Following exemptions are also withdrawn:

·          Renting of residential dwelling provided to registered business entities. This is against the present exemption which is based on the use of dwelling rather than the service recipient.
·          Storage and warehousing of commodities which attracts levy of tax such as nuts, spices, jaggery etc.
·          Fumigation in warehouse of agriculture produce
·          Hotel accommodation which are priced upto Rs. 1000/day shall be chargeable at the rate of 12%.

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GST Update No 227 on recommendations of 47th GST Council meeting

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