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20 September 2021

Recommendations of 45th GST Council Meeting held on 17th September, 2021.

The GST Council has made following recommendations relating to changes in GST rates and GST law & procedure in 45th GST council meeting:

Petroleum Products: In context of specified petroleum products, the Council is of the view that it is not appropriate to cover in ambit of GST at this stage.

Issues Covered:
  1. Interest u/s 50
  2. Unutilized balance in CGST and IGST cash ledger
  3. E-Commerce Operator
  4. RCM on Mentha Oil
  5. ITC availment in respect of Debit Notes
  6. Return Related Issues in respect of Form ITC-04, Rule 36(4), GSTR 1 filing & late fees,
  7. Refund Related Issues
  8. GST Rates on Goods and Services
  1. Interest u/s 50: In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. 01.07.2017.
  2. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.
  3. E-Commerce Operator
  4. In addition to services notified under section 9(5) of the CGST Act, w.e.f. 1st January, 2022, E Commerce Operators will be liable to pay tax on:
    • transport of passengers, by any type of motor vehicles through it
    • restaurant services provided through it with some exceptions
  5. RCM on Mentha Oil: Supply of Mentha oil from unregistered person has been brought under reverse charge. Besides RCM, exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
  6. ITC availment in respect of Debit Notes: Earlier, ITC of debit note was not available if debit note relating to any invoice was issued after the due date of furnishing of the return under section 39 for the month of September or furnishing of the relevant annual return, whichever is earlier.
  7. Section 16(4) of the CGST Act has been amended w.e.f. 01.01.2021 (vide Finance Act, 2020) to provide that date of debit note shall be considered for the purpose of ITC availment irrespective of date of original invoice to which such debit note pertains.

    In view of amended provisions, GST council has only clarified that w.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017.

  8. Return Related Issues:
    1. Relaxation in the requirement of filing FORM GST ITC-04:
    2. Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed as under:

      Current Provision Recommended Provision
      Form GST ITC-04 was filed quarterly irrespective of the aggregate turnover of the taxpayer Taxpayers whose annual aggregate turnover in preceding financial year is above Rs.5 crores shall furnish ITC-04 once in six months;
      Taxpayers whose annual aggregate turnover in preceding financial year is upto Rs.5 crores shall furnish ITC-04 annually
    3. Rule 36(4) of CGST Rules, 2017 :
      • Presently, no clarification is respect of matching of ITC with GSTR 2A or GSTR 2B
      • As per rule 36(4), ITC can be availed in excess of 5% of eligible ITC as available in GSTR 2A/2B. However, newly inserted section 16(2)(aa) (yet to be notified) states that ITC can be availed only for invoice as available in GSTR 2A/2B.

      Rule 36(4) to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified viz. to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.

      With reference to the amendment proposed in Finance Act 2021 for Section 16 (2) of the CGST, the above recommendation is made to amend Rule 36(4) in same regards.

    4. GSTR 1 can not be filed on account of failure in filing GSTR 3B for preceding month
    5. Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.

      Presently, as per the provisions for Rule 59(6) of the CGST Rules,2017 a registered person was not allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months.

    6. Compulsory Late fees for delay in filing of GSTR 1:
    7. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.

  9. Refund related Issues:
    1. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
      Presently, while applying for refund, details of the relevant bank account were to be provided in which the refund was sought to be received. However, after the recommendations of the council, refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
    2. Aadhaar Authentication mandatory in following cases
    3. The CBIC had issued a notification on 23rd March 2020, about Aadhaar authentication for GST registration from 1st April 2020.

      But, now on recommendations of the GST Council, Aadhaar authentication of registration to be made mandatory for being eligible for

      • filing refund claim and
      • application for revocation of cancellation of registration.

      Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

    4. Correction in Inverted Duty structure in Footwear and Textiles sector
    5. It was decided in 39th GST Council meeting that the issue of calibrating/adjusting the rate of other items like footwear, textiles for removing inversion will be decided at a later stage.

      Such changes to correct inverted duty structure with such respect will be implemented w.e.f. 01.01.2022 as decided in 45th council meeting.

    6. Clarification w.r.t. Refund:
      • Only those goods which are actually subjected to export duty i.e., on which 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 availment of refund of accumulated ITC.
      • Relating to interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services;
  10. Recommendations relating to GST rates on Services
    1. Change proposed in GST rate on services w.e.f. 10.2021
    2. S. No. Description Current Rate Proposed Rate
      Increase in Tax Rate
      1. Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [to bring parity between distribution and licencing services] 12% 18%
      2. 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%
      Reduction of Tax Rate
      1. Services by way of grant of National Permit to goods carriages on payment of fee 18% Nil
      2. Skill Training for which Government bears 75% or more of the expenditure [presently exemption applies only if Govt. funds 100%]. 18% Nil
      3. Services related to Asian Football Confederation (AFC) Women's Asia Cup 2022. 18% Nil
    3. Changes in scope of exemption w.e.f. 10.2021:
      1. Exemption on transport of goods by vessel and air from India to outside India is extended upto 30.09.2022.
      2. Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn
      3. IGST exemption relating to import of goods on lease, where GST is paid on the lease amount, so as to allow this exemption even if (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.
    4. Clarification in relation to GST Rate on Services:

    5. Description Rate
      Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” Exempt
      Services by cloud kitchens/central kitchens are covered under ‘restaurant service’ 5% without ITC
      Overloading charges at toll plaza Exempt being akin to toll
      Services by way of grant of mineral exploration and mining rights 18%
      Admission to amusement parks having rides etc. 18%
      Admission to such facilities that have casinos etc. 28%
      Supply of pre-manufactured ice creams 18%
      Renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption
      Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.
  11. Recommendations relating to GST rates on Goods
    1. GST Rate concession for Covid-19 relief measure:
    2. Concessional GST rates on following Covid-19 treatment drugs has been extended upto 31stDecember, 2021 which is presently valid till 30th September, 2021:
      • Amphotericin B – Nil
      • Remdesivir – 5%
      • Tocilizumab – Nil
      • Anti-coagulants like Heparin – 5%
      1. Current GST rates has been reduced to 5% on following Covid-19 treatment drugs, up to 31stDecember, 2021-
      Itolizumab, Posaconazole, Infliximab, Favipiravir, Casirivimab & Imdevimab, 2-Deoxy-D-Glucose & Bamlanivimab & Etesevimab  
      1. Change in GST rate of following items has been proposed w.e.f. 10.2021:
      S. No. Description Current Rate Proposed Rate
      Increase in Tax Rate
      1. Retro fitment kits for vehicles used by the disabled Appl. Rate 5%
      2. Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others 5% 18%
      3. Specified Renewable Energy Devices and parts 5% 12%
      4. Cartons, boxes, bags, packing containers of paper etc. 12%/18% 18%
      5. Waste and scrap of polyurethanes and other plastics 5% 18%
      6. All kinds of pens 12% 18%
      7. Railway parts, locomotives & other goods in Chapter 86 12% 18%
      8. Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff) 12% 18%
      9. IGST on import of following medicines for personal use: ·     Zolgensma for Spinal Muscular Atrophy ·     Viltepso for Duchenne Muscular Dystrophy ·     Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals. 12% 18%
      Reduction of Tax Rate
      1. Fortified Rice Kernels for schemes like ICDS etc. 18% 5%
      2. Medicine Keytruda for treatment of cancer 12% 5%
      3. Biodiesel supplied to OMCs for blending with Diesel 12% 5%
      4. IGST exemption on goods supplied at Indo Bangladesh Border haats Appl. rate Nil
      5. Unintended waste generated during the production of fish meal except for Fish Oil Nil (for the period 1.7.2017 to 30.9.2019)
      1. Other changes relating to GST Rate:
      • Brick kilns would be brought under special composition scheme with threshold limit of Rs.20 lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.
      1. Clarification in relation to Goods
      2. Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.
      3. Rates Clarification
      Description Rate
      Pure henna powder and paste, having no additives (Chapter 14) 5%
      Brewers' Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues (HSN Code 2303) 5%
      All laboratory reagents and other goods (Heading 3822) 12%
      Scented sweet supari and flavored and coated illachi (Heading 2106) 18%
      Carbonated Fruit Beverages of Fruit Drink" and "Carbonated Beverages with Fruit Juice" 28% Cess: 12%
      Tamarind seeds used for sowing (Heading 1209) Nil
      Tamarind seeds used for use other than sowing (w.e.f. 1.10.2021) 5%
      External batteries sold along with UPS Systems/ Inverter (other than lithium-ion battery) 28%
      UPS/inverter 18%
      Specified Renewable Energy Projects (1.7.2017 to 31.12.2018) 70:30 (Goods & services)
      Pharmaceutical goods (Heading 3006) 12%