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45th GST Council Meeting: Latest Updates of Tax Deduction and New GST Rates

The 45th GST Council meeting of the Goods and Service Tax Council (GST Council) was held on 17th September 2021 at Lucknow and was chaired by the Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council Meeting was convened physically for the first time after a span of 22 months with a packed agenda.

In this meeting, the GST Council discussed various aspects related to the legal and procedural changes to remove ambiguity/ disputes, exemptions on COVID-19-related medical goods, changes in GST rates of goods and services, and few compliance-related relief measures.

45th GST Council Meeting

Highlights of the 45th GST Council Meeting

Inverted Duty Structure

GST Council Meeting had earlier discussed changes to correct inverted duty structure for the footwear and textile industry. This has now been deferred and will be implemented from 1st January 2022.

Inverted duty structure anomalies for Ores and specified metals were discussed for correction, but the date has not yet been decided for this.

Petroleum products under GST

In light of the recent directions of the Hon’ble High Court of Kerala, the issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After rounds of discussion, the Council decided that it was not appropriate to do so. Hence, petroleum products will not fall under the purview of GST.

Covid related and other medicinal related relief

GST concession on covid medicines such as Remdesivir and Tocilizumab has been extended till 31st December 2021. At the same time, drugs such as Favipiravir will be charged at a reduced rate of 5 per cent. However, the concessional tax benefits for medical equipment have not been extended and will end on 30th September 2021.

Another important update is that the GST rates on Cancer-related drugs (like Keytruda) have now reduced to 5% from 12%.

Online aggregators

The GST Council has approved a proposal to make E-Commerce Operators (like Swiggy/ Zomato/Ola/Uber) responsible for collecting and depositing 5 per cent GST to the Government. This amendment will stand effective 1st January 2022.

At present, if a person orders food using Swiggy or Zomato, they collect a 5 per cent tax on food from the customer and pass it on to the restaurant. However, the Government explained that some restaurants had not deposited their tax despite high turnover. Therefore, effective from 1st January 2022, these apps will collect the tax on behalf of the restaurant and deposit it with the Government.

Also, this will have no impact on the customers as there is no change in the tax rate. However, there will be an increased compliance burden for small restaurants and online aggregators.

End of state’s compensation

The Finance Minister highlighted that the payment for compensation to states for the shortfall in revenue of states resulting from subsuming taxes such as VAT in GST would end in June next year. She further added that the compensation cess will continue to be collected on luxury goods until March 2026.

Relaxation in filing Form GST ITC-04

Form GST ITC-04 is required for filing details related to inputs or capital goods dispatched or received from a job worker. In this regard following relaxations have been announced:

  • Taxpayers shall furnish ITC-04 once in six months if the annual aggregate turnover in the preceding financial year is above Rs. 5 crores;
  • Taxpayers shall furnish ITC-04 annually, whose annual aggregate turnover in the preceding financial year is upto Rs. 5 crores.

Summary of other announcements

  1. Aadhaar authentication for GST registration has been made mandatory for revocation of cancellation of registration and GST refund.
  2. Late fee for delayed filing of FORM GSTR-1 shall be auto-populated and collected from the next month Form GSTR-3B.
  3. Refund to be disbursed in the bank account linked with the same PAN on which registration has been obtained under GST.
  4. A registered person shall not be allowed to furnish FORM GSTR-1 if he has not furnished the FORM GSTR-3B for the preceding month.
  5. Unutilised balance in cash ledger may be transferred between distinct persons (entities having the same PAN but registered in different states) without going through the refund procedure, subject to certain safeguards.
  6. Section 50 (3) of the CGST Act to be amended retrospectively, from 1st July 2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilised” and not on “ineligible ITC availed”. It has also been decided that interest rate shall be charged at 18% from 1st July 2017.
  7. Two groups of ministers (GoMs) were formed to look at rate rationalisation related issues and second for E-way bills, Fastags, Technology, compliance, and compensation schemes. This GoM will submit their reports in two months.
  8. The date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for section 16(4) of CGST Act, 2017;
  9. Tamarind seeds fell under heading 1209 and hitherto attracted nil rate irrespective of use. However, now, they will attract a 5% GST rate (w.e.f. 1st October 2021) for use other than sowing. Seeds utilised for sowing will continue at nil rate;
  10. There is no need to carry the physical copy of the tax invoice in cases where the supplier has generated the invoice in the manner prescribed under rule 48(4) of the CGST Rules, 2017;
  11. Only those goods subject to export duty, i.e., some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availing of refund of accumulated ITC.
  12. Admission to amusement parks having rides etc. attracts a GST rate of 18%. The GST rate of 28% applies only to admission to such facilities that have casinos etc.;
  13. Alcoholic liquor for human consumption is not “food and food products” for the entry prescribing 5% GST rate on “job work services concerning food and food products”.
  14. Ice cream parlour sells already manufactured ice- cream. Such supply of ice cream by parlours would attract GST at the rate of 18%;
  15. Scented sweet supari and flavoured and coated elaichi falling under heading 2106 attract GST at the rate of 18%;
  16. It has been clarified that “Carbonated fruit beverages of fruit drink” and “carbonated beverages with fruit juice” attract a GST rate of 28% and cess of 12%.
  17. Supply of mentha oil from an unregistered person has been brought under reverse charge. Further, exports of Mentha oil should be allowed only against LUT and consequential refund of ITC;
  18. Brick kilns would be brought under a special composition scheme with a threshold limit of INR 2 Mn., with effect from 1st April 2022. Bricks would attract GST at the rate of 6% without ITC under the scheme, and GST rate of 12% with ITC would otherwise apply to bricks.
  19. Several other changes in GST rates of goods and services were made. These mainly were to reduce the tax rates on goods like medicines and services like skill training ( where the Government bears 75% or more of the expenditure), Services related to AFC Women’s Asia Cup 2022 and others.

Change in Rates

Significant GST Changes Concerning Rates and Scope of Goods

S. No. Particulars Existing rate (%) Proposed rate* (%)
1. Retro fitment kits for vehicles used by the disabled Applicable rate 5
2. Fortified Rice Kernels for schemes like ICDS etc. 18 5
3. Medicine Keytruda for treatment of cancer 12 5
4. Biodiesel supplied to OMCs for blending with Diesel 12 5
5. Ores and concentrates of metals such as iron, copper, aluminium, zinc and few others 5 18
6. Specified Renewable Energy Devices and parts 5 12
7. Cartons, boxes, bags, packing containers of paper etc. 12/ 18 18
8. Waste and scrap of polyurethanes and other plastics 5 18
9. All kinds of pens 12/ 18 18
10. Railway parts, locomotives & other goods in Chapter 86 12 18
11. Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff) 12 18
12. IGST on import of medicines for personal use, namely:

  • Zolgensma for Spinal Muscular Atrophy.
  • Viltepso for Duchenne Muscular Dystrophy.
  • Other medicines used in treating muscular atrophy are recommended by the Ministry of Health and Family Welfare and the Department of Pharmaceuticals.
12 Nil
13. IGST exemption on goods supplied at Indo-Bangladesh Border haats. Applicable rate Nil
14. Unintended waste generated during the production of the fish meal except for Fish Oil Nil (for the period 1st July 2017 to 30th September 2019)

*The changes will be effective from 1st October 2021.

Significant GST Changes Concerning Rates and Scope of Exemption on Services

S. No. Particulars Existing rate (%) Proposed rate* (%)
1. The validity of the GST exemption on transporting goods by vessel and air from India to outside India is extended to 30th September 2022. Nil
2. Services by way of grant of National Permit to goods carriages on payment of a fee 18 Nil
3. Skill Training for which Government bears 75% or more of the expenditure [presently exemption applies only if Govt funds 100%] 18 Nil
4. Services related to AFC Women’s Asia Cup 2022. 18 Nil
5. Licensing services/ the right to broadcast and show original films, sound recordings, radio, and television programmes [to bring parity between a distribution and licensing services] 12 18
6. Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with colour printing of images from film or digital media) 12 18
7. Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.
8. E-Commerce Operators are being made liable to pay tax on the following services provided through them:

  • Transport of passengers, by any motor vehicles through it [w.e.f. 1st January 2022]
  • Restaurant services offered through it with some exceptions [w.e.f. 1st January
9. Certain relaxations have been made in conditions relating to IGST exemption pertaining to import of goods on a lease, where GST is paid on the lease amount, to allow this exemption even if:

  • Such goods are transferred to a new lessee in India upon expiry or termination of the lease; and
  • The lessor located in SEZ pays GST under forward charge.

*The changes will be effective from 1st October 2021.

You can access the press release version of the 45th GST Council Meeting held on 17th January 2021 here

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