Changes in GST rates of services

As per Latest GST updates of council meeting, in following services there is proposal for increase in GST rates. GST Notification 11/2017 Central Tax (Rate) gives the list of services with their SAC and rates of services. This notification now will be amended by issuing latest gst notification to changes rates of services in GST as under. It is recommended to change in rates of services from 18th July, 2022

Note-1 GST rate @ 5% with ITC of services

GST exemptions are being withdrawn in certain goods

As per 47th gst council meeting 2022, it has been recommended to remove the exemption in following goods. GST exemption notification for goods is 02/2017 Central Tax (Rate). This notification will be amended to remove exemption w.e.f 18th July, 2022

5% GST on un-branded, pre-packed food items

Exemption of GST will be withdraw on non branded food items

• Hitherto, GST was exempted on specified food items, grains etc when not branded, or right on the and has been foregone.
• It has been recommended to revise the scope of exemption to exclude from it prepackaged and pre-labelled retail pack in terms of Legal Metrology Act, including pre-packed, pre-labelled curd, lassi and butter milk.

Example-

At present Meat of bovine animals, frozen is exempt but it this product is sold under Brand name then it is taxable at 5%. Not such product will be taxable even if sold wihout any brand name

GST Exemptions will be withdrawn in following services

As per 47th gst council meeting 2022, it has been recommended to remove the exemption in following services. GST exemption notification for services is 12/2017 Central Tax (Rate). This notification will be amended to remove exemption.

Passenger Transport Services under GST

Transport of passengers by air to and from NE states & Bagdograis being restricted to economy class now.

GST on Transportation  of railway equipment

Transportation by rail or a vessel of railway equipment and material will not be exempt now

GST on Storage or warehousing of commodities

Storage or warehousing of commodities which attract tax (nuts, spices, copra, jaggery, cotton etc.). will be removed from exemption

GST on Warehouse of agricultural produce.

Fumigation in a warehouse of agricultural produce is exempt at present. This exemption will also be withdawn

GST on Services by RBI,IRDA,SEBI,FSSAI,

Many services are provided by Reserve Bank of India, Insurance Regularly Authority , SEBI and FSSAI. Very surprisingly, these services are also will be taxed now by government. As per my opinion, GST on reverse charge may be imposed on service recipient in these kind of services.

GST on GSTN

The Goods and Service Tax Network (GSTN) is a non-profit, non-government organization which manages the entire IT system of the GST portal. Now all its activities will also be brought in the net of GST

 GST on Renting of residential dwelling

As per notification 12/2012 Central Tax (Rate), residential dwelling unit used for residence purpose is exempt. Many business entities take houses on rental basis for accommodation for their employees. So now this activity will be taxed by government. In short it will not be treated as used for residence, but will be treated as business use. So all owners of such residential units will have to pay now GST.

GST on Preservation of stem cells

Services provided by the cord blood banks by way of preservation of stem cells will also be now taxable

GST on Common bio-medical waste treatment facilities

Like CETPs, common bio-medical waste treatment facilities for treatment or disposal of biomedical waste shall be taxed at 12% so as to allow them ITC

GST on Hotel Accommodation service

Hotel accommodation priced up to Rs. 1000/day shall be taxed at 12%.

Analysis

Supply of hotel accommodation, where amount charged per unit is unto 1000/-, is exempted from GST. Now the same will attract GST Rate of 12%

This exemption is available to hostels also. So now the question is that whether this exemption is being withdrawn only for hotels or hostels also. As per my opinion, exemption should not be withdrawn for hostels, otherwise its going to effect to students as they will have to bear such extra cost of GST

GST on Room rent by Hospitals

Room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital shall be taxed to the extent of amount charged for the room at 5% without ITC.

Analysis

• The charges towards the room provided to the patient for the treatment is a composite supply wherein the principal supply is the health care service which is exempted from GST as per Notification no. 12/2017 Central Tax (Rate), dated 28.06.2017.
• The GST Act does not provide for segregating the elements of the composite supply.
• The above amendment may result in litigation in future.

GST on Re recreational activities

Tax exemption on training or coaching in recreational activities relating to arts or culture, or sports is being withdrawn now.

GST rate clarifications for goods

In this 47th gst council meeting 2022, it has been recommended to clarify GST rates on following goods to resolve litigations in GST.

GST rate of Electric Vehicles

Electric vehicles whether or not fitted with a battery pack, are eligible for the  concessional GST  rate of 5%.

GST rate of Fly ash bricks

All fly ash bricks attract same concessional rate irrespective of fly ash content

GST rate of Stones

Stones covered in S. No.123 of Schedule-I (such as Napa stones), even if they are ready to use and polished in minor ways [not mirror polished], attract concessional GST rate of 5%

GST rate of Mango

The GST rate on all forms of mango under CTH 0804, including mango pulp (other than mangoes  sliced, dried) attract GST at the 12%. Entry is also being amended to make this amply clear. Raw  or fresh mangoes continue to be exempt.

GST on Sewage treated water is exempt

Sewage treated water is exempted from GST and is not the same as purified water provided in S. No. 99 of notification 2/2017-CT(Rate). The word ‘purified’ is being omitted to make this amply clear.

GST rate of Nicotine Polarilex

Nicotine Polarilex Gum attracts a GST rate of 18%.

GST rate of Fly ash

The condition of 90% fly ash content with respect to fly ash bricks applies only to fly ash aggregate,

GST rate clarification for services

In this 47th gst council meeting 2022, it has been recommended to clarify GST rates on following services to resolve litigations in GST.

GST on Service by University

Application fee charged for entrance or for issuance of eligibility certificate for admission or issuance of migration certificate by universities is exempt from GST.

Rationalization of exemption of Ginned or baled fibre

Ginned or baled fibre is covered in entry 24B of notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 in the category of raw vegetable fibres. The exemption under this entry is being rationalized

Exemption on Transit cargo to and from Nepal and Bhutan

Services associated with transit cargo both to and from Nepal and Bhutan are covered by exemption under entry 9B of notification No. 12/2017-CT(R) dated 28.06.2017.

GST on Space for advertisement

Activity of selling of space for advertisement in souvenirs published in the form of books is eligible  for concessional GST at 5%.

GST on Renting of Vehicle

Renting of vehicle with operator for transportation of goods on time basis is classifiable under Heading 9966 (rental services of transport vehicles with operators) and attracts GST at 18%. GST on such renting where cost of fuel is included in the consideration charged is being prescribed at 12%.

No GST on Choice for location of plot

Allowing choice of location of a plot is part of supply of long term lease of plot of land. Therefore, location charge or preferential location charges (PLC) are part of consideration charged for long term lease of land and shall get the same treatment under GST.

Our Analysis

There was an ambiguity among taxpayers regarding treatment of Preferential Location Charges under GST. Ø In order to avoid litigation GST Council has recommended that the PLC charges forms part of consideration charged for lease and exemption would be extended to the portion of PLC charges.

Guest Anchors service is taxable in GST

Services provided by the guest anchors to TV channels in lieu of honorarium attract GST.

GST on Toll Charges

 Additional fee collected in the form of higher toll charges from vehicles not having Fastag is essentially payment of toll for allowing access to roads or bridges to such vehicles and shall be given the same tax treatment as given to toll charges

ART/IVF is exempt in GST

Services in form of Assisted Reproductive Technology (ART)/ In vitro fertilization (IVF) are covered under the definition of health care services for the purpose of exemption under GST.

GST on Sale of developed land

Sale of land after leveling, laying down of drainage lines etc. is sale of land and does not attract GST.

Analysis

• There were certain advance ruling stating that sale of lend after leveling activity or plotting will be treated as supply of services and will be liable to GST.
• To remove the ambiguity, it has been clarified that the sale of land after leveling will also be treated as sale of land and continues to be exempted from GST.

GST on Renting of motor vehicles

Renting of motor vehicles for transport of passengers to a body corporate for a period (time) is  taxable in the hands of body corporate under RCM.

GST on Transportation of passengers by vessel

Passenger Transport Services under GST. The expression ‘public transport’ used in the exemption entry at SI No. 17(d) of notification No. 12/2017-CT(R), which exempts transport of passengers by public transport other than predominantly for tourism purpose, in a vessel between places located in India, means that such  transport should be open to public for point to point transport [e.g. such transport in Andaman  and Nicobar islands].

Clarification on GST rate of Ice Cream

 The curious case of GST on ice cream parlours is to tax at 5% or 18%. Due to ambiguity in GST rates on supply of ice-cream by ice-cream parlors, GST charged @ 5%  without ITC on the same during the period 1.07.2017 to 5.10.2021 shall be regularized to avoid unnecessary litigation.

Analysis

• There was ambiguity among taxpayers regarding whether sale of ice cream will be treated as supply of goods or supply of Restaurant Service.
• A Circular No. 164/2021 dated 06.10.2021 was issued in this regard stating that it will be treated as supply of Goods.
• It was clarified that the ice cream parlors do not cook / prepare ice cream for consumption like restaurant and therefore, the supply of ice cream is considered as supply of  goods and not supply of services, even if the supply has certain ingredients of Service and  accordingly the same will be liable to be taxed at the rate of 18%.
• But  most all the ice cream retails outlets were charging GST @ 5% from 01/07/2017 and therefore there was a great fear on such ice cream retails outlets that they will have to face instigation In future
• But now the Government has come out with proposal of clarification to regularize 5% GST Rate (Without ITC) on supply of ice-creams by Ice cream parlors for the period between 01.07.2017 to 05.10.2021 in order to avoid litigation.
• But make sure that GST will be 18% on ice cream sold by retail outlets  after 06.10.2021

GST on Service by Department of posts

All taxable service of Department of Posts would be subject to forward charge. Hitherto certain taxable services of Department of post were taxed on reverse charge basis.

Goods Transport Agency under GST

Goods transport agency (GTA) is being given option to pay GST at 5% or 12% under forward charge; option to be exercised at the beginning of Financial Year. RCM option to continue.

Analysis

 At present, two options are available to GTA

1. Option of Forward Charge – GST Rate – 12% with ITC

2. Option of Reverse Charge – GST Rate – 5% with ITC

 Now three options are proposed for GTA

1. Option of Forward Charge – GST Rate – 12% with ITC

2. Option of Forward Charge – GST Rate – 5% without ITC

3. Option of Reverse Charge – GST Rate – 5% with ITC

GTA need to exercise one out of the above three options at the beginning of the Financial Year

GST on Tour operator services  

Service provided by Indian Tour operator to a foreign resident for a tour partially in India and partially outside India is to be subject to tax proportionate to the tour conducted in India for such foreign tourist subject to conditions that this concession does not exceed half of tour duration.

GST on Casinos, Race Course and Online Gaming

The Council directed that the Group of Ministers on Casino, Race Course and Online Gaming reexamine the issues in its terms of reference based on further inputs from

States and submit its report within a short duration

Refund of accumulated ITC under GST

          Refund accumulated ITC not to be allowed on following goods

• Edible oils
• Coal

No GST Registration for suppliers supplying through E-Commerce Operators

• Government has proposed to waive the mandatory requirement of registration u/s 24 of CGST Act, 2017 for the person supplying goods through E-Commerce Operator.
• Composition taxpayers will be allowed to make intra state supply through E-Commerce Operators.
• The above amendments are expected to be implemented with effect from 01.01.2023.

Analysis

• At present, a person supplying through E-Commerce Operator has to compulsorily obtain the  registration even though his turnover does not cross the threshold limit of Rs.20lakhs / 40 lakhs, as applicable.
• Now the said compulsion is proposed to be removed.
• However, for making interstate supply, they need to apply for registration.
• The above relaxations would be very helpful for the Retail Traders engaged in dealing with ECommerce Operators. (like, Amazon, Flipkart etc.)

Refund of GST under Inverted Duty Structure

The ITC on account of inverted tax structure can be claimed at the end of any tax period where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies

Now in order to calculate such refund a formula has been prescribed in Rule 89(5) of CGST Rules, 2017.

So, now in this 47th council meeting, a change has been proposed in formula for calculation of refund under Rule 89(5) of CGST Rules, 2017 to take into account ITC of Input Services also.

Analysis

• At present, in case of refund under Inverted Rated Structure, formula for calculation of Refund considers only Inputs used for making Outward Supply of Inverted rated supplies.
• There was a judgement of Gujarat High Court in case of VKC Footsteps Ltd. that refund under Inverted Duty Structure can also be claimed for Input Services. Later on the said judgement was truck down by the Supreme Court.
• Now the Government is proposing an amendment in the Formula of Refund of Inverted Duty Structure to allow the refund of ITC of Input Services. Industry will get benefit out of this proposed amendment.

Pending IGST refund claims

In this latest gst council meeting, it is recommended to make Amendment in CGST Rules for handling of pending IGST Refund claims.

• The refund claims in respect of export of goods are suspended or withheld in cases as mentioned below:
• Where exporter is identified as a risky exporter requiring verification by GST Officers or
• Where there is violation of provision of Customs Act
• An amendment has been proposed for transmission of IGST Refund Claims on the Portal in a system generated form RFD-01 to the jurisdictional GST Authorities for processing which would result in expeditious disposal of such GST Refunds.

Re-credit in electronic credit ledger using FORM GST PMT-03A

Re-Credit in Electronic Credit ledger using FORM GST PMT-03A

• In cases, where erroneous refund has been sanctioned to the taxpayer on account of accumulated ITC or IGST paid on Zero rated supply of goods or services in contravention to the  CGST Rules, 2017 then the same is required to be deposited by that taxpayer along with interest  and penalty, wherever applicable.
• In those cases, there is a proposal to introduce a new form PMT – 03A to get the re credit of the erroneous refund in their Electronic Credit Ledger.

Transfer of balance of GST from one Electronic Cash Ledger to another

• An amendment was proposed in the Finance Act, 2022 to provide for the transfer of balance in  Electronic Cash Ledger of a registered person to the Electronic cash ledger of a distinct person.
• Sub Section (10) Section-49 of CGST Act 2017 was proposed to be amended by Section 110 of Finance Act 2022. Not it has been decided to give effect to this section as soon as earlier

 Analysis

• The amendment in Section9 will provide for transfer of balance in Electronic Credit Ledger between distinct person which will result in improving liquidity and cash flow of such taxpayers.
• At present any amount in form of tax, interest, penalty, fees or any other amount can be transferred from CGT to IGST, SGST, UTGST or CESS or it can be transferred from any tax to anther tax in GST in any manner.
• But if more than one registration in GST taken on same PAN, then it is not possible at present to transfer the amount from Electronic Cash Ledger of one GSTN to Electronic Cash Ledger to another GSTN even both GSTN are on same PAN.
• So now it allowable to transfer CGST and IGST from Electronic Cash Ledger of one GSTN to Electronic Cash Ledger of another GSTN of the same PAN.
• However, this relaxation is given only for CGST and IGST. Means amount in form of late fees, penalty or any other amount will not be a transferred from Electronic Cash Ledger of one GSTN to Electronic Cash Ledger to another GSTN

No interest proceedings for Ineligible ITC availed but not utilised in GST

• A retrospective amendment has been proposed in Section 50(3) of CGST Act, 2017 to provide that the interest will be payable on the wrongly availed ITC only when the same is utilized.
• The rules providing for the manner of calculation of interest under section 50 of CGST Act have also been recommended for more clarity. This will remove ambiguities regarding manner of calculation of interest
• In this council meeting it has been decided to give effect to amendment in Section 50(3) of CGST Act, 2017 as soon as early 

Late fees for GSTR-4 waived till 27.07.2022

In this council meeting it has been recommended for waiver of Late Fee u/s 47 for delay in filing of Form GSTR-4 for F.Y.2021-22 from 30.06.2022 to 28.07.2022.

Analysis

GSTR-4 is to be filed by Composition dealer and its due date for the year 2021-22 is 30.04.2022. If GSTR-4 is filed after this date, then late fees is applicable. However this late fees was already waived till 30.06.2022 by Notification No. 07/2022 Central Tax, dated 26.05.2022.

Now the government is again planning to waive late fees till 28.07.2022. That means late fees will not be applicable if GSTR-4 is filed on or before 28.07.2022. It will be applicable if it is filed after 28.07.2022

Due date of CMP-08 April to June 2022

The due date for filing of CMP-08 for the 1st Quarter of F.Y.2021-22 has been extended from 18.07.2022 to 31.07.2022. CMP-08 is filed quarterly by composition tax payer under Section 10 of CGST Act, 2017

 Exemption on Import of goods  

Present Exemption of IGST on import of goods under AA/EPCG/EOU scheme to be continued and E-Wallet scheme not to be pursued further.

GST Circulars will be issued to give clarifications on following issues

In this 47th Council meeting, it has been recommended to issue GST Circulars 2022 to clarify the following matters

Refund of GST under Inverted Duty Structure

Clarification on issue of claiming refund under Inverted Duty Structure where supplier is supplying goods under some concessional Notification

Fake Invoices in GST

Clarification on applicability of demand and penalty provisions on transactions involving fake invoices

Details to be Mentioned in GSTR-3B Form

Clarification on furnishing of correct and proper information of Inter state supplies and amount of ineligible / blocked ITC and reversal thereof in GSTR-3B.

GST Refund under Deemed Export

Clarification on issues pertaining to refund claimed by recipient of supplies regarded as deemed exports

Block credit under GST

Section 17(5) of CGST Act 2017 talks about the block credit in GST

In this meeting it has been decided to give clarification on various issues relating to interpretation of Section 17(5) of CGST Act, 2017

GST on Perquisites provided by Employer to employees

Clarification on the issue of perquisites provided by employer to the employees as per Contractual Agreement

Electronic Credit Ledger in GST

 Clarification on utilisation of the amounts available in the Electronic Credit Ledger and Electronic Cash Ledger for payment of tax and liabilities.

GST Annual return exemption

Exemption from filing of GSTR-9 / GSTR-9A for F.Y.2021-22 to taxpayers having Annual Aggregate Turnover upto Rs. 2 Crores. For that GST annual return exemption notification will be issued.

Analysis

Earlier the above exemption was available for F.Y.2017-18 to F.Y.2020-21. Now the said benefit has been extended to F.Y.2021-22. This would reduce the compliance work of small taxpayers having turnover up to 2 Crore.

ITC Reversal under Rule 43

Rule 43 will be amended to provide that there is no requirement of reversal of ITC for exempted supply of Duty Credit Script by the Exporters.

Analysis

• Duty Credit Script are the benefits given to the Exporter under the Customs Act. The said duty credit script can be sold in the Market.
• Goods exemption notification is 02/2017 Central Tax (Rate), dated 28.06.2017
• The said duty Credit Script are considered as supply of Goods and the same has been exempted under this exemption notification.
• Practically, when the said duty credit script are sold, no input, input service or capital goods are used for supplying such Duty Credit Script.
•  However, the ITC relating to common Input, Input Service and Capital Goods was required to be reversed under Rule 42 & Rule 43 as it is an exempt supply.
• Now the government has proposed to exclude the said exempt supply from the calculation of Exempt Turnover under Rule 42 & Rule 43 and no ITC is required to be reversed for the same.
• The above amendment will be beneficial to the Exporters.

Modes of Payment of GST

 UPI and IMPS will be provided as the additional mode of payment of GST under Rule 87(3) of CGST Rules, 2017.

Refunds related to supplies to SEZ under GST

In respect of refunds pertaining to supplies to SEZ Developer/Unit, an Explanation to be inserted in sub-rule (1) of rule 89 of CGST Rules to clarify that “specified officer” under the said sub rule shall mean the “specified officer” or “authorized officer”, as defined under SEZ Rules, 2006

Unutilised  ITC for export of electricity

CGST rues will be amended to provide for the refund of unutlised ITC in case of Export of Electricity.

GST on Duty Free Shops

Supply from Duty Free Shops (DFS) at International Terminal to outgoing International Passengers will be treated as exports by DFS and consequential refund benefit to be available to them on such supplies.

Measures for steaming compliance in GST

GST Registration suspension

Automatic Revocation of suspension of registration, where  the said registration has been  suspended due to non-filing of GST Returns, once the said pending returns are filed by the  taxpayer.

Analysis

• How to activate suspended GST number is crucial for taxpayers as practically it is very difficult to handle this issue.
• At present, GST Registrations are suspended when GST returns are not filed for the specified period.
• The said suspension is not being revoked even after filing all the pending returns. Taxpayers need to take unnecessary follow up with GST department to revoke the GST registration.
•  Government has proposed an amendment to provide for automatic revocation of suspension of the registration, once all the pending returns are filed.
• The above amendment would be very beneficial and would surely avoid litigation relating to revocation of registration.

Changes in GSTR-3B

Major changes in GSTR-3B reporting and filling will be made. For that proposal for changes in GSTR-3B will be put in public domain for seeking suggestion from stakeholders.

GST Refund application

Time period from 01.03.2022 to 28.2.2022 to be excluded from the calculation of the limitation period for filing of refund claim by applicant under Section 54 & Section 55 of CGST Act, 2017

 Analysis

• The Hon’ble Supreme Court by Order in Cognizance for Extension of Limitation, In re [2021] issued further directions that in computing the period of limitation in any Suit, Appeal, Application and or proceedings, the period from 15th March 2020 till 28th February 2022 shall stand excluded.
• There was a judgment from the Bombay High Court in case of Saiher Supply Chain Consulting Pvt. Ltd. v/s Union of India [2022]  that the said Limitation extension
• order passed by Supreme Court in view Covid-19 would also be applicable to applications filed for refund of GST
• To provide the benefit to the taxpayers at large Government has extended the said benefit for filing of refund  application also.

Recovery of erroneous refund under GST

Time period from 01.03.2022 to 28.2.2022 to be excluded for Issuance of demand order by proper office in respect of erroneous refunds under Section 73  of CGST Act, 2017

Order under Section 73 of CGST Act 2017

Limitation period for issuance of order under Section 73 of CGST Act  in respect of demand relating to F.Y.2017-18 to be extended till 30.09.2023

Our Analysis

• As per Section 73 of the CGST Act, 2017, the last date of passing of order u/s 73 was 3 years from the end of the due date of filing of Annual Return.
• The due date for filing of Annual return for F.Y.2017-18 was 05.02.2020 for the State of Gujarat.
• Hence, the Order u/s 73 was required to be passed on or before 04.02.2023. The said date has been extended to 30.09.2023.

GST Appellate Tribunal

Council has decided to constitute a group of ministers to address various concerns raised by the states in relation to constitution of GST Appellate Tribunal and make recommendations for appropriate amendments in CGST Act.

Artificial Intelligence in GST 2022

Government has recommended to implement the Artificial Intelligence or Machine Learning based mechanism to monitor the behavior of the taxpayer post registration so that non-compliant taxpayers could be identified in their infancy and appropriate action could be taken so as to minimize the risk to exchequer.

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