GST Council Meeting: Pie In The Sky Agenda Ends With Some Wins
“Apart from a couple of important agenda points, the GST Council seems to have ticked off plenty of items from its list.”
The 47th Goods and Services Tax Council meeting held in Chandigarh was a long-awaited event, coming after six whole months of waiting. Interestingly, the meeting was being held at the cusp of the fifth anniversary of GST, hence the chatter around the expectations, agenda and implications. However, the meeting that ended on Wednesday evening may disappoint many. With the full-blown agenda, there is not too much for the trade to rejoice post such a meeting. Our top 15 takeaways from the meetings are given below:
Based on media reports, the GST Council has now finally referred the setting of GST tribunals to a group of ministers. No action taken on this particular aspect for five years vitiates the sanctity of justice available under the regime. However, businesses may finally see a ray of hope as far as litigation hierarchy is concerned. Relief may be also seen in the writ petitions being filed in the high court once tribunals are finally set up.
E-way bills for intra-state transfers may not be a very welcome move for the jewellery industry but shall certainly help revenue leakages. The bigger question here is how would the government track the movement as these are high-valued items which can be carried in pockets and still be priced above the threshold.
A blow to the healthcare industry may come as hospital rooms with a rent of more than Rs 5,000 will attract GST @ 5% but without input tax credit. The industry is already reeling on account of the non-availability of ITC due to exempt output.
As expected, rate fitment was carried out for various goods and services and exemptions were withdrawn accordingly, including hotel rooms with a tariff of less than Rs 1,000, e-waste, coffee beans, green leaves of tea, and services provided by FSSAI to food business operators, etc. Tomorrow will be a new day and discussion on varied topics can be looked forward to.
No discussion on petroleum or virtual digital assets–while this was not even expected, these industries are tired of not being on the top list of the GST Council. With clarity from the CBDT, the crypto industry is disenchanted by the GST Council’s deferment of its taxability.
A detailed list of exemptions changes and correction of inversions is awaited but the date of implementation has been announced for July 18, 2022. It will be interesting to see the items brought under this list. Though, the exemption from government entities like SEBI, FSAAI, RBI etc. has been withdrawn.
No decision has been yet made on GST rate rationalisation which was a big expectation. The GoM has been given three more months to come up with their report.
Another agenda which was discussed at length–the GST rate on online gaming, casinos, etc.–has been deferred. The GoM report on the same shall be submitted on July 15, 2022. The industry is expecting the GST rate to hike from 18% to 28%. This shall put the gaming industry on the backfoot especially when compared with its global counterparts.
Unfortunately for the states, though an ask for an extension of compensation cess has been made for five years, no promises have been yet made by the centre. However, a couple of days back, the government notified an extension of compensation cess till 2026. Therefore, there is a high likelihood that the states shall stand to benefit from it.
On the trade facilitation front, the council has approved relaxation in provisions for suppliers supplying through e-commerce operators which include a waiver in registration for small businesses, composition taxpayers may make supplies through e-commerce operators, etc.
The most important takeaway of this council meeting will be the proposed change in the formula of computing refunds on account of the inverted duty structure to include input services. This is a major breakthrough post the Supreme Court’s unfavourable judgment in the case of VKC Footsteps.
Reiterating the proposal of transfer of credit between distinct persons, the council has agreed to notify such change at the earliest. The taxpayers who have a presence in multiple states shall benefit massively from this step as it clearly would free up working capital relied upon by businesses.
Multiple clarifications are to be issued in days to come; key ones being issues relating to applicability of demand and penalty provisions under the CGST Act in respect of transactions involving fake invoices; furnishing of correct and proper information of inter-state supplies and amount of ineligible/blocked input tax credit and reversal thereof in return in FORM GSTR-3B; interpretation of section 17(5); perquisites provided by an employer to the employees, etc.
Clarification has been provided that no requirement of reversal of input tax credit for an exempted supply of Duty Credit Scrips by the exporters, etc. A clarification that exporters were waiting for has finally come.
Credit where it’s due–the GST Council has seemed to have put the monster of litigation of all times for real estate players to rest. A clarification has been provided which states that the sale of land after levelling, laying down of drainage lines, etc. is a sale that does not attract GST. However, the clarification may not be enough for the department to stop issuing notices, or for the AARs to decide otherwise. The clarification can be read with a narrow view also unless a detailed circular comes to our rescue.
Other points related to compliance include comprehensive changes in GSTR 3B post public consultation. Moreover, AI and ML mechanisms will be implemented to verify the antecedents of the registration applicants and improved risk-based monitoring of their behaviour after registration so that non-compliant taxpayers could be identified in their infancy and appropriate action be taken so as to minimise risk to the exchequer. While the thought of technology improvements is progressive, the worry that tingles in one’s mind is that if like any other tech reform, this goes wrong, we are looking at yet another avenue of litigation.
With a promise to meet in Madurai, in the first week of August, the GST Council dispersed. Apart from a couple of important agenda points, the GST Council seems to have ticked off plenty of items from its list. The circulars in the days to come would be a watchful event as the council has rightly picked the pain points and decided to clarify them.
States, though, would be disappointed as the buoyant revenues from GST and extension in compensation cess have not transposed in the extension of their bit of revenue. Nonetheless, as they say, you win some, you lose some… with the celebratory event of GST’s fifth anniversary around the corner, the council has given enough to the common man to celebrate.
Jigar Doshi is Founding Partner, Nikita Maheshwari is Senior Manager, at Tax Technology Managed Services LLP.
The views expressed here are those of the author, and do not necessarily represent the views of BQ Prime or its editorial team.