Dear Reader,

The GST Council met for the 48th time (through a virtual mode) on December 17, 2022. While there was no decision on GST on online gaming and setting of GST Appellate Tribunal, the Council made several recommendations on GST rates, clarifications on issues and amendments to the GST Law.

GST rate changes

• No GST is payable (under the reverse charge mechanism) on renting of residential dwelling, where the registered person uses the same in personal capacity, as own residence and on his/her own account.
• Compensation Cess of 22% is applicable to motor vehicle which fulfils all four conditions, namely (a) popularly known as SUV, (b) has engine capacity exceeds 1500 CC, (c) has length exceeding 4000 mm, and (d) has a ground clearance equal to or more than 170 mm.

GST Law and Procedures

Substantive changes

• Insertion of merchanting sales, bonded warehousing sales and high-seas sales, described in Schedule III of the Central Goods and Services Tax Act, 2017 (‘CGST Act’) to have a retrospective effect from July 1, 2017. No refund available on tax paid on such transactions (from July 1, 2017 to January 31, 2019).
• Rule 37(1) of Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) to be retrospectively amended w.e.f. October 1, 2022 to provide for proportionate input tax credit (‘ITC’) reversal in cases where proportionate invoice amount and tax thereon has not been paid to the supplier.
• A new Rule 37A will be introduced to prescribe mechanism of ITC reversal in case of non-payment of GST by a supplier by a specified date and its re-availment, upon payment by the supplier.
• A new Rule 109C and Form APL-01/03 W will be introduced to provide for the facility of withdrawing an appeal (up to a specified stage).
• Rule 12(3) of the CGST Rules is to be amended to empower registered persons, who are required to collect tax at source or deduct tax at source, to apply for suo-moto cancellation of registration.
• Proviso to Section 12(8) of the Integrated Goods and Services Tax Act, 2017 (‘IGST Act’), which provides that the place of supply in cases of transportation of goods outside India shall be the destination of goods, shall be omitted.

Clarifications

• Issues pertaining to the supply of goods transportation services (export) and availability of ITC on such services to the recipient.
• Procedure for verification of ITC in cases of differences in ITC as per Form GSTR-3B vis-à-vis Form GSTR-2A during the FY 2017-18 and 2018-19.
• No claim bonus offered by insurance companies to the insured is admissible as deduction from valuation of insurance services.
• Applicability of e-invoicing to an entity.

Streamlining compliances

• To place a check on fake and fraudulent registrations, a pilot project will be started in Gujarat for biometric based Aadhar authentication and risk based physical verification.
• PAN linked mobile number and email address (as per Central Board of Direct Taxes database) to be automatically fetched while filing a registration application.
• Time limit of three (3) years, from the concerned due date, to be enforced for filling Form GSTR-1, Form GSTR-3B, Form GSTR-9 and 9C and Form GSTR-8.
• Rule 88C is to be inserted in the CGST Rules and Form GST DRC-01B introduced as intimation to taxpayers on difference between liability reported in Form GSTR-1 and Form GSTR-3B, where such difference exceeds a specified amount and / or percentage. Further, the facility of filing Form GSTR-1 shall be disabled in case such differential tax is not paid within given timeframe or, reply is not furnished.

Other proposals

Rationalization of penal provisions

• Minimum threshold for launching prosecution under GST Law to be increased from INR 1 crore to INR 2 crores, except for case where invoices are issued without supply of goods or services (limit of INR 1 crore shall continue to operate for such offence).
• No prosecution against specified offences including (a) obstruction or preventing any officer in discharge of his duties, (b) deliberate tempering of material evidence, and (c) failure to supply information.
• Compounding amount to be reduced from 50% to 150% of tax amount to 25% to 100% of tax amount.

Refund to unregistered persons

• Mechanism to be introduced for unregistered buyers to claim refund of tax borne where contract for supply of services like construction of flat, long term insurance policy is cancelled and the due date to issue credit note (by the supplier) is over.

We shall update this summary with detailed analysis and insights once the fine print of clarifications and recommendations are in the public domain.