GST Update: Summary of decisions taken in 53rd GST Council meeting

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GST Update: Summary of decisions taken in 53rd GST Council meeting

Tejasvi

@tejasvi

June 25, 2024

Public Policy

257

The Goods and Services Tax (GST) Council convened the 53^rd council meeting on June 22, 2024 after eight-months. The Council's recommendations include amendments to GST law entailing rate rationalisation, clarifications on various issues and simplification of compliance process to facilitate ease of doing business. Some of the important GST asks from our industry perspective have been resolved. Nasscom had been advocating on these issues for more than a year, highlighting the challenges faced by IT/ ITeS and ecommerce companies. We are encouraged to see our efforts culminate into positive clarifications for the industry in single GST council meeting. These demonstrate a commitment to creating a more business-friendly tax environment and improve tax certainty.

Key wins for IT-BPM industry:

Reduction in pre-deposit amount for filing appeals under GST: We have been highlighting the fact that the high pre-deposit amount under GST regime. This was resulting in unnecessary blockage of working capital due to the tedious litigation process. The GST council has decided to reduce the pre-deposit amount as follows:

For appeals to first appellate authority: Maximum pre-deposit reduced from INR 50 crores (CGST+SGST) to INR 40 crores (CGST+SGST)
For appeals to Appellate Tribunal: Pre-deposit reduced from 20% of disputed tax, subject to maximum INR 100 crores (CGST+SGST) to 10% of disputed tax, subject to maximum INR 40 crores (CGST+SGST).

Clarification regarding valuation of import of services by a related person which is eligible to full Input Tax Credit (ITC): The Council has recommended to clarify that where foreign affiliate provide services to its related domestic entity who is eligible for full ITC, the value declared in invoice shall be considered as the open market value. If no invoice is issued, the value may be treated as zero and considered the open market value. This clarification will help in resolving legislative ambiguities relating to valuation of services imported from related persons. Accordingly, where IT/ ITeS companies have entered into advance pricing agreements for free of cost supplies like usage of trademarks, brand names, etc., it is now clarified that no cross-charge will be required. This change will reduce potential disputes in valuing related-party transactions, especially for companies with international operations.
Clarification on taxability of re-imbursement of securities/shares as stock option provided by a company to its employees – Foreign owned domestic unlisted companies (Indian Company) in IT-BPM sector generally provide its employees shares of foreign listed companies. Authorities at ground level were levying GST on such transactions, resulting in litigation. The council has now recommended to issue a clarification on taxability of re-imbursement of securities/shares as stock option provided by a company to its employees. We will have to await the detailed circular for specifics of this clarification.
Clarification on valuation of corporate guarantee provided between related persons – Currently, value of supply in case of corporate guarantee between related parties is higher of a) 1% of guarantee amount or b) actual consideration. The Council has now clarified that the above valuation of services for related parties would not be applicable in case of export of such services and also in case of inward supplies where the recipient is eligible for full ITC. This is a welcome clarification considering these transactions are revenue neutral in nature. We will have to await the detailed circular for specifics of this clarification.

Key wins for e-commerce industry:

Reduction of Tax Collection at Source (TCS) rate to be collected by Ecommerce Operators (ECO) - As per GST law, ECOs are required to collect and deposit TCS @ 1% of sales made by sellers through such ecommerce portals. This was resulting in working capital blockages for small sellers who operate on low margins. TCS is only a mechanism to monitor sales made by online sellers through ECO, which can be achieved even by reduction in the rate of TCS. Based on our representations, the GST council has now decided to reduce the TCS rate from 1% to 0.5%. This will ease the financial burden on the suppliers’ making supplies through such ECOs.
Clarification on place of supply of goods where delivery address is different from the billing address – The GST law was amended to provide that place of supply for supplies made to unregistered persons is the address captured on the invoice. An ambiguity existed as to which address (delivery/ billing address) on invoice would be deemed as place of supply. The GST council has recommended to issue a clarification on determination of place of supply of goods in such instances. This will provide certainty to the industry.
Applicability of specified penal provisions only on ECOs required to collect tax at source - Budget 2023 introduced penal provisions under GST law for any ECO who contravenes provisions relating to supply of goods/ services made through them by unregistered person or composition taxpayer. This was resulting in onerous burden on ECOs who were not even liable to collect TCS. In line with our suggestion, the Council proposes to introduce retrospective amendment w.e.f. 1 October 2023 to clarify that the said penal provisions will apply only on ECOs required to collect tax at source and not on other ECOs.

Other important updates

Facility for amendment of GSTR-1 to report/correct outwards turnover – Proposal to introduce an optional facility to facilitate taxpayers to amend the details in FORM GSTR-1 for a tax period and/ or to declare additional details, if any, before filing of return in FORM GSTR-3B for the said tax period.
Interest under Section 50 of CGST Act - The GST council has recommended not charging interest on delayed payment of tax to the extent, amount is available in electronic cash ledger on the due date and the same is debited when the delayed Form GSTR-3B is filed by the taxpayer.
Bio-metric based Aadhaar authentication for registrations under GST – Proposal to roll out of bio-metric based Aadhaar authentication on pan-India basis in a phased manner. This will ensure that only genuine businesses are granted GST registration, thereby reducing identity theft and fraudulent activities.
Time for filing appeals in GST Appellate Tribunal – The current provision under GST law makes the timeline for filing appeals solely contingent upon the appointment date of the President of the Tribunal. Hence, the Council has recommended to allow the three-month period for filing appeals before Appellate Tribunal to start from a date to be notified by the Government in respect of appeal/ revision orders passed before the date of said notification. This will give sufficient time to the taxpayers to file appeal before the Appellate Tribunal in the pending cases.
Amnesty Scheme for waiver of interest and penalty – Proposal to waive interest and penalties on tax demands raised in cases other than fraud, suppression or wilful misstatement, etc. for fiscal years 2017-18, 2018-19 and 2019-20, if the full tax demanded is paid up to March 31, 2025.
Clarification on time limit for reverse charge credit: Proposal is to clarify that in cases of in case of supplies liable to tax under RCM received from unregistered suppliers and invoice is issued by such recipient, the relevant period for calculation.

We hope you will find the update useful. Please refer to the attached press release for update on other decisions taken by the government in 53rd GST Council meeting.

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