GST WEEKLY UPDATE : 38/2022-23 (18.12.2022) By CA Vipul Khandhar

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1. Recommendations By 48^th Council Meeting Regarding declared rate of tax, clarification & new procedure for the pending issues:

Clarification on GST Rate:

· Husk of pulses including chilka and concentrates including chuni/churi, khanda 5% to Nil

· Ethyl alcohol supplied to refineries for blending with motor spirit (petrol) 18% to 5%

· It was also decided to include supply of Mentha arvensis under reverse charge mechanism as has been done for Mentha Oil.

· Rab (rab-salawat) is classifiable under CTH 1702 which attracts GST at the rate of 18%.

· Fryums manufactured using the process of extrusion is specifically covered under CTH 19059030 and attract GST at the rate of 18%.

· The higher rate of compensation cess of 22% is applicable to motor vehicle fulfilling all four conditions, namely, it is popularly known as SUV, has engine capacity exceeding 1500 cc, length exceeding 4000 mm and a ground clearance of 170 mm or above

· Goods falling in lower rate category of 5% under schedule I of notification No. 1/2017-CTR imported for petroleum operations will attract lower rate of 5% and the rate of 12% shall be applicable only if the general rate is more than 12%

· No GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

· Incentive paid to banks by Central Government under the scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.

Refund to unregistered persons (Refund allowable on cancellation of flat booking or cancellation of agreement)

The GST Council has inter-alia made the recommendation for amendment in the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) along with issuance of a circular, to prescribe the procedure for filing application of refund by the unregistered buyers in cases, where there is no procedure for claim of refund of tax borne by the unregistered buyers in cases where the contract/ agreement for supply of services, like construction of flat/house and long-term insurance policy, is cancelled and the time period of issuance of credit note by the concerned supplier is over.

Decriminalization under GST

To decriminalize certain offences under Section 132 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) i.e. ‘Punishment for certain offences’, increase in threshold of amount of tax for prosecution and reduction in amount of compounding in GST. In this regard, the Council has recommended to-

Raise the minimum threshold of tax amount for launching prosecution under GST from Rs. One Crore to Rs. Two Crores, except for the offence of issuance of invoices without supply of goods or services or both;
Reduce the compounding amount from the present range of 50% to 150% of tax amount to the range of 25% to 100%;
Decriminalize certain offences specified under clause (g), (j) and (k) of sub-section (1) of Section 132 of CGST Act, viz.-
obstruction or preventing any officer in discharge of his duties;
deliberate tempering of material evidence;
failure to supply the information.

Incentive paid to banks by Central Government are in the nature of subsidy and thus not taxable:

The recommendation that incentive paid to banks by Central Government under the scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and thus not taxable.

No GST payable on residential dwelling rented to a registered person in its personal capacity for use of his/her residence.

The recommendation that no GST is payable where the residential dwelling is rented to a registered person if it is rented it in his/her personal capacity for use as his/her own residence and on his own account and not on account of his business.

Facility to allow unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators

The recommendation to allow unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators and to implement the scheme w.e.f. October 01, 2023, for development of the requisite functionality on the portal as well as for providing sufficient time for preparedness by the E-Commerce Operators.

Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants fall under Gujarat state:

Proposal to conduct a pilot in State of Gujarat for Biometric-based Aadhaar authentication and risk-based physical verification of registration applicants. Amendment in Rule 8 and Rule 9 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”) to be made to facilitate the same. This will help in tackling the menace of fake and fraudulent registrations.

New procedure for the GST registration link with income tax.

PAN-linked mobile number and e-mail address (fetched from CBDT database) to be captured and recorded in FORM GST REG-01 and OTP-based verification to be conducted at the time of registration on such PAN-linked mobile number and email address to restrict misuse of PAN of a person by unscrupulous elements without knowledge of the said PAN-holder.

High sea sales and supply of warehoused goods before their home clearance, outside the purview of GST for the period 01.07.2017 to 31.01.2019.

Schedule-III items – Paras 7, 8(a) and 8(b) were inserted in Schedule III of CGST Act, 2017 with effect from 01.02.2019 to keep certain transactions/ activities, such as supplies of goods from a place outside the taxable territory to another place outside the taxable territory, high sea sales and supply of warehoused goods before their home clearance, outside the purview of GST. In order to remove the doubts and ambiguities regarding taxability of such transactions/ activities during the period 01.07.2017 to 31.01.2019, the Council has recommended to make the said paras effective from 01.07.2017. However, no refund of tax paid shall be available in cases where any tax has already been paid in respect of such transactions/ activities during the period 01.07.2017 to 31.01.2019.

Reversal of input tax credit, if payment has not made within 180 days only proportionate to the amount not paid to the supplier vis a vis the value of the supply, including tax payable.

Change in Clause of Payment to be made in 180 days – The Council has recommended to amend sub-rule (1) of rule 37 of CGST Rules, 2017 retrospectively with effect from 01.10.2022 to provide for reversal of input tax credit, in terms of second proviso to section 16 of CGST Act, only proportionate to the amount not paid to the supplier vis a vis the value of the supply, including tax payable.

Reversal of input tax credit by a registered person in the event of non-payment of tax by the supplier by a specified date and mechanism for re-availment of such credit:

Change in Clause of Payment to be made in 180 days – The Council recommended to insert Rule 37A in CGST Rules, 2017 to prescribe the mechanism for reversal of input tax credit by a registered person in the event of non-payment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently. This would ease the process for complying with the condition for availment of input tax credit under section 16(2)(c) of CGST Act, 2017.

Appeal filing procedure Changed–

Sub-rule (3) of rule 108 and rule 109 of the CGST Rules, 2017 to be amended to provide clarity on the requirement of submission of certified copy of the order appealed against and the issuance of final acknowledgment by the appellate authority. This would facilitate timely processing of appeals and ease the compliance burden for the appellants.

Return can be filed belated up to 3 years from the due date.

Restriction imposed to file GSTR-1/ GSTR-3B/ GSTR-9/ GSTR-9C after three years from due date – Section 37, 39, 44 and 52 of CGST Act, 2017 to be amended to restrict filing of returns/ statements to a maximum period of three years from the due date of filing of the relevant return / statement.

Amendment in FORM GSTR-1 – FORM:

GSTR-1 to be amended to provide for reporting of details of supplies made through ECOs, covered under section 52 and section 9(5) of CGST Act, 2017, by the supplier and reporting by the ECO in respect of supplies made under section 9(5) of CGST Act, 2017

Automated notice & assessment by the portal in the case of gstr-1 & gstr-3B difference & generation of self assessment tax challan:

Rule 88C and FORM GST DRC-01B to be inserted in CGST Rules, 2017 for intimation to the taxpayer, by the common portal, about the difference between liability reported by the taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period, where such difference exceeds a specified amount and/ or percentage, for enabling the taxpayer to either pay the differential liability or explain the difference.

Further, clause (d) to be inserted in sub-rule (6) of rule 59 of CGST Rules, 2017 to restrict furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation nor has furnished a reply explaining the reasons for the amount remaining unpaid. This would facilitate taxpayers to pay/ explain the reason for the difference in such liabilities reported by them, without intervention of the tax officers.

Amendment in definition of “non-taxable online recipient”

Under Section 2(16) of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and definition of “Online Information and Database Access or Retrieval Services (“OIDAR”) under Section 2(17) of the IGST Act so as to reduce interpretation issues and litigation on taxation of OIDAR Services.

The clarification has been issued on the following issue:

Rule 109C and FORM GST APL-01/03 W to be inserted in the CGST Rules, to provide the facility for withdrawal of an application of appeal up to certain specified stage. This would help in reducing litigations at the level of appellate authorities.
To clarify that No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for valuation of insurance services.
The issue of treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalised under Insolvency and Bankruptcy Code, 2016. Rule 161 of the CGST Rules, and FORM GST DRC-25 also to be amended for facilitating the same.
Sub-rule (3) of rule 12 of the CGST Rules, to be amended to provide for facility to the registered persons, who are required to collect tax at source under section 52 or deduct tax at source under Section 51 of the CGST Act, for cancellation of their registration on their request.
The issues pertaining to the place of supply of services of transportation of goods in terms of the proviso to sub-section (8) of Section 12 of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and availability of input tax credit to the recipient of such supply. It has also been recommended that proviso to sub-section (8) of Section 12 of the IGST Act, may be omitted.
To remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:

(a) Procedure for verification of input tax credit in cases involving difference in input tax credit availed in FORM GSTR-3B vis a vis that available as per FORM GSTR-2A during FY 2017-18 and 2018-19.

(b) Clarifying the manner of re-determination of demand in terms of sub-section (2) of section 75 of the CGST Act.

AAR & Judicial Decisions:

(i) AAR On Works contract services for constructing warehouses, cold storage and godowns for Telangana State Industrial Infrastructure Corporation Limited (“TSIICL”), would be liable @18%

(Applicant – M/s Shree Constructions)

The contracts involved in the case overtly fall under Sr. No. 3(vi) of Notification No. 11/2017-Central Tax Rate dated June 28, 2017 (“Notification”) as the same is related to the composite supply of works contracts. The said Notification was further amended by Notification No. 31/2017-Central Tax (Rate) dated October 13, 2017, through which the terms “Government Authority’ & ‘Government entity’ were inserted. Hence, making the TSIICL a government entity for the purpose of GST. The Notification provided concessional rate of 6% of CGST & SGST each to Government entities and Governmental Authorities.

However, the concessional rate of 6% of CGST & SGST under the Notification was provided to Government entities and Governmental Authorities only if such construction is predominantly for use other than for commerce, industry or any other business or profession.

In the present case, the contract is for construction of warehouse & cold storage and godowns, which would further be given on rent by TSCIIL. Therefore, concessional rate of tax is not applicable to the services provided by the Applicant.

Disclaimer:

This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.