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Key Highlights of 53rd GST Council Meeting

calendar25 Jun, 2024
timeReading Time: 6 Minutes
53rd GST Council Meeting

To date, the most recent changes under the Goods and Service Tax Act were presented during the 53rd GST Council meeting, which was held on June 22nd, 2024, in New Delhi.

Being headed by the Union Finance Minister, Smt. Nirmala Sitharaman, the 53rd GST Council Meeting aimed at the betterment of the Tax structure and forming strategies for better implementation of the laws along with easing the burden on the taxpayers.

Below are the key highlights and decisions from the 53rd GST Council Meeting, focusing on the adjustments of the Tax rates and procedural changes that are likely to have broad implications for businesses and consumers alike.

Changes in GST Rates and Exemptions from the 53rd GST Council Meeting

The changes in GST Rates and the Exemptions on certain goods from the 53rd GST Council Meeting are as follows:

  1. Aircraft Parts and Tools: The Council in the meeting decided that it would be appropriate to charge an Integrated GST at the rate of 5% on the imports of parts, components, testing equipment, tools, and tool-kits of aircraft. This decision is expected to benefit the aviation industry to a large extent mainly due to reduced cost of essential imports.
  1. Milk Cans: Previously, all the milk cans made of steel, iron, or aluminium from July 5th, 2017, were exempted from the GST. However, all such cans will now be subjected to a 12% GST. This uniform rate is intended to simplify the tax rate for milk and other dairy products so that it also becomes easy for producers and farmers to deal with it.
  2. Carton Boxes: The GST has been cut to 12% from 18% on carton boxes including cases of both corrugated and non-corrugated paper. It can be observed that through this reduction, packaging industries will see a decrease in the costs of their production, which subsequently will go a long way in promoting sustainable production.
  3. Solar Cookers: The current measure of the GST is 12% for all solar cookers, including single-energy and dual-energy sources. This change is beneficial because when people apply for solar cooking solutions, they make renewable energies more affordable.
  4. Poultry Machinery Parts: The GST for the poultry-keeping machinery has been set at 12%. Through this adjustment, it is expected that the overall operational costs of the poultry farmers will be cut.
  5. Sprinklers: The previous complex system of supplying fire safety sprinklers has been replaced by a single rate of 12% GST for all sprinklers including the fire safety sprinklers and irrigation sprinklers. This measure is intended to eliminate structural inconsistencies in tax rates and improve the accessibility of the rates for different uses.

Additional Exemptions and Recommendations

There are certain additional exemptions as well as recommendations that were brought into light in the 53rd GST Council Meeting. Some of them are mentioned below-

  • Exemptions for Corporate Guarantees

Among those exemptions is the exemption relating to corporate guarantees, where one corporate body offers a guarantee to another corporate body that controls or is controlled by it.

To ensure there was no misunderstanding, the Council further explained and stated that no GST would be applicable on corporate guarantees when the services were exported, or the recipient could claim full input tax credit. This exemption, to take effect from 26th October 2023, will remove tax cascading on transactions between members of corporate groups and promote efficiency in their transactions.

 It is useful for multinational companies and large domestic firms that often organise several inter-company financial operations.

  • Waiver of Interest and Penalties

The Council suggested that in order to avail the demand notice for Section 73 of the CGST Act financial years 2017-18, 2018-19 & 2019-20 in order to relieve the stress of earlier non-compliance, the interest and penalties on it should be waived.

This waiver applies if the outstanding tax is paid in full by the third year of the expenditure for the programme, which is by March 2025. It aims at addressing rather high litigation risks by offering an opportunity for a clean bill for past dues from taxpayers.

  • Extension of Input Tax Credit Deadline

Another crucial exemption relates to the extension of additional provisions that have to do with the time limit for claiming Input Tax Credit (ITC) in respect of invoices or debit notes as relating to the financial years up to 2020-21. The development is made to allow taxpayers to claim ITC for any GSTR- 3B return filed by November 30th, 2021.

Within the general amendment rule, this change applies to all returns filed with effect from July 1st, 2017. This extension affords businesses more time to balance their accounts and recover credits than otherwise, which will help to increase their cash flow as well as compliance. Timely GST return filing is something that must be done on a timely basis.

  • Reduction in Pre-Deposit Amounts for Appeals

The Council also recommended the minimum amounts of pre-deposit that must be paid when filing appeals under the GST framework. The Appellate Authority has been proposing the maximum amount which can be filed for appeal by reducing Rs. 25 Crore (CGST) and Rs. 25 Crore (SGST) to Rs. 20 Crore (CGST) and Rs. 20 Crore (SGST).

 For the appeals to the GST Appellate Tribunal, the pre-deposit has been reduced from 20% of the disputed amount with a limit of Rs. 50 Crore each for CGST and SGST to the rate of 10% with a limit up to Rs. 20 Crore each for CGST and SGST. These alterations shall help in reducing the financial burden on taxpayers seeking legal recourse and increase access to justice.

  • Input Tax Credit (ITC)

The ITC on the invoices/debit notes that can be claimed as per Section 16(4) for the years 2017-18 to 2020-21, and for which the taxpayer has not availed credit in the initial filing of GSTR-3B before 31st October 2020 is payable up to 30th November 2021 for those taxpayers who have filed their return by 31st October.

  • Monetary Limits for GST Appeals

In the case of departmental appeals, money limits pertaining to the GST Appellate Tribunal are up to Rs. 20 lakhs, High Court up to Rs. 1 Crore, and Supreme Court up to Rs. 2 Crores.

  • Aadhaar Authentication

The GST Council permitted a phased rollout across the country of biometric-based Aadhaar authentication for GST registration applicants. This facility will improve the quality of registration and help in the fight against deceptive Input Tax.

  • Appeal Filing Period

Modify the CGST Act to commence the time period for filing of appeals to the GST Appellate Tribunal from a certain date, as three months from the date of order or such other period as may be prescribed by the Government.

  • Interest Waiver

Interest on the delayed return filing will not be levied if the amount required is available in the Electronic Cash Ledger on the due date.

  • Anti-Profiteering

For new applications regarding ATO, the Sunset Clause will apply from the 1st of April, 2025.

  • TCS Rate reduction through Electronic Commerce Operators (ECOs):

The TCS rate levied by Electronic Commerce Service Providers will be applicable for the Goods and Services Tax, which was charged as per the rates specified under the Central GST Act, 2017, which is 5%, 12%, 18%, or 28%.

Now, the Electronic Commerce Operators (ECOs) have reduced TCS from 1% to 0.5% to reduce the fiscal cost imposed on suppliers.

  • Exemption of GST on Extra Neutral Alcohol

It is proposed to remove Extra Neutral Alcohol from the ambit of GST, particularly for the use in the production of alcoholic drinks.

Service-related Variations from the 53rd GST Council Meeting

Some of the prominent service-related variations are showcased below-

  • Re-insurance Commission: It is categorised under Schedule III as no supply, with previous precedents made legal in subsequent rulings.
  • GST on Reinsurance Services: As enacted or proposed in the legislation, with necessary adjustments done on an ‘as is where is’ basis for specified insurance schemes.
  • Co-insurance Premium: Initially, placing outside the scope of supplies as per Schedule III and then making the previous cases conform to the structure.
  • Retrocession Clarification: We now have a situation where retrocession, which is the re-insurance of re-insurance, is now a shed coefficient eligible for exemption.
  • RuPay Debit Cards: These incentives are tax-free as per the definitions set by NPCI and without the assistance of the IT department of India.
  • RERA Collections: The applicant is now considered as GST exempted as included under entry 4 of Notification No. 12/2017-CTR.

Broader Economic Implications from the 53rd GST Council Meeting

These decisions of the GST Council are expected to have reverberations on the economy of India. The Council strives to increase transparency by simplifying taxation by increasing the clarity of rates to improve compliance procedures so that ease of doing business in India can be boosted.

The idea of reducing the rates of GST for essential commodities and services aligns with the government’s broader strategies of promoting environmental sustainability and focusing on sectors which are of paramount importance to the general public.

The extension of the Sunset Clause to counter anti-profiteering measures also gives a clear indication of moving forward towards a liberalised free market-oriented pricing mechanism, which will, in turn, help in bringing a balanced economic environment. This move aims at decreasing the level of regulations and thereafter increasing the flexibility of businesses in the economy thereby promoting economic growth.

Future Directions

The decisions made by the GST Council also squarely lay the foundation for subsequent reforms. The ongoing discussions about including petrol and diesel under the GST framework indicate a willingness to tackle complex tax-related issues. This change has to be made through a regulation that has to be adopted by the states. However, the Centre has been very clear on this matter, and therefore, a radical shift in tax reform may be needed.

Conclusion

In the 53rd GST Council meeting, the following key changes were proposed in order to simplify the tax system, to sustain and to cut down unnecessary litigations. These measures are expected to help a large number of stakeholders, starting with the small business houses and going up to large corporations and can happen to form a more streamlined and dynamic GST regime in India.

Frequently Asked Questions

  1. What is the new GST rate for aircraft parts and tools?

    The Council decided to charge a uniform 5% Integrated GST on imports of parts, components, testing equipment, tools, and tool-kits of aircrafts.

  2. What change was made to the GST rate on milk cans?

    All milk cans made of steel, iron, or aluminium will now be subject to a uniform 12% GST, replacing the previous exemption.

  3. When will the sunset clause for anti-profiteering take effect?

    The Council proposed a sunset clause for new anti-profiteering applications, which will apply from April 1st, 2025.

  4. What changes were made to the pre-deposit amounts for GST appeals?

    The maximum pre-deposit for appeals to the Appellate Authority was reduced from Rs. 25 Crore each for CGST and SGST to Rs. 20 Crore each. For appeals to the GST Appellate Tribunal, it was reduced from 20% of the disputed amount (with a limit of Rs. 50 Crore each) to 10% (with a limit of Rs. 20 Crore each) for CGST and SGST.

  5. What is the new GST rate for carton boxes?

    The GST rate on carton boxes, including both corrugated and non-corrugated paper or paperboard cases, has been reduced from 18% to 12%.

Read our article: A Guide On GST Audit Checklist For Businesses

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