Update: Summary of decisions taken in 50th GST Council meeting

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Update: Summary of decisions taken in 50th GST Council meeting

Tejasvi

@tejasvi

July 26, 2023

Public Policy

The 50th meeting of the GST Council was held in Delhi on July 11, 2023. Some of the important updates pursuant to the meeting are as follows:

Key decisions:

Clarification that holding shares in a subsidiary cannot be taxed under the GST

Nasscom had been advocating on this issue for more than 1 year with the GST officials. Given the magnitude of the issue, especially for Global Capability Centres in our industry, we met the key Central & State Government officers, highlighting the fact that if such an interpretation is adopted, then all subsidiaries in India will end up paying GST in all cases where there is an equity holding by overseas parent/ affiliate. This interpretation could have severe impact on overseas investments into India. Our submission on this issue can be accessed from here.

Based on our representations, Circular 196/04/2023-GST has been issued to clarify that the activity of holding of shares of subsidiary company by the holding company per se cannot be treated as a supply of services and hence, cannot be taxed under GST. This issue was quite prevalent in the state of Karnataka. This will provide relief to many companies in our industry, including the GCC companies.

Clarification on the mechanism for apportionment of tax credit of common costs by head office for its branches

Nasscom had been advocating on this issue for more than 1 year with the GST officials. Given the magnitude of the issue for our industry, we made several representations and had multiple meetings with the Central & State Government officers. Our submission on this issue can be accessed from here.

Based on our representations, Circular 199/11/2023-GST has been issued to clarify that Input Service Distribution (ISD) mechanism is not mandatory for distribution of tax credits of common input services procured from third parties as well as making ISD mandatory prospectively. This has been a long-standing demand of our Industry. This development is expected to provide clarity to the industry on the method to be used for distribution of cost of common functions. Further, the tax demands raised by GST authorities in the past are likely to get settled.

Steps to operationalise Goods and Services Tax Appellate Tribunal (GSTAT). This is a positive development that we have been pursuing. After 6 years of GST implementation, GST appellate tribunal is all set to be formed. With the rules coming in place effective August 01, 2023, will help in bringing the GST Appellate Tribunal in operation at the earliest. Even during the press release, the Revenue Secretary updated the media that Tribunal should be running in another 6 months’ time period.

Other updates:

Circular 194/06/2023-GST provides clarification regarding applicability of Tax Collection at Source (TCS) provisions in case of multiple E-Commerce Operators (ECOs) in one transaction. The liability for TCS would be on the ECO settling the payment (seller side app). In case the seller side app is also the seller, then it will be the buyer side app.
Circular 193/05/2023-GST provide clarification regarding various aspects to deal with difference in ITC availed in Form GSTR-3B vis-à-vis GSTR-2A for the period April 1, 2019 to December 31, 2021. The Circular provides that Circular 183 (which provides for self-certification/ CA certification from supplier to enable the recipient to avail credit) can be applied but the ITC will still be subject to the ITC limit set under Rule 36(4), ie, 20%, 10% and 5%.
Circular 197/09/2023-GST clarifies on various refund related issues such as sanctioning of refund basis GSTR-2B, modification in requirement of undertaking in RFD-01, manner of calculation of adjusted total turnover for export of goods and other issues.
Circular 192/04/2023-GST has been issued to clarify that where wrong availed IGST credit is subsequently reversed, there will not be any interest liability if the balance of ITC under the heads of IGST, CGST and SGST taken together has never fallen below the amount of wrongly availed IGST credit, during the time period starting from such availment and up to subsequent reversal. This will apply even if available balance of IGST credit in electronic credit ledger individually falls below the amount of such wrongly availed IGST credit. Further, credit of compensation cess in electronic credit ledger cannot be considered for the balance to calculate interest under sub-rule (3) of rule 88B of CGST Rules in respect of wrongly availed and utilized IGST, CGST or SGST credit.

We hope you will find the update useful.

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Tejasvi

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