50th GST Council Meet: Key Updates on GSTAT and Rates

The 50th Goods and Services Tax (GST) Council meeting is in progress today, on July 11th, 2023. Chaired by Union Finance Minister Nirmala Sitharaman, this meeting holds paramount importance in discussing crucial taxation issues. It is important to note that the information shared is reflective of the present circumstances. We will continue to provide you with new updates

GST appellate tribunals discussion shall witness notable progress, as anticipated. The central government has been urged by a group of industrialists for adopting the temporary provision to accept the plea via accepting the half amount via assessee.

50th GST Council Meeting Updates

The GST Council talked about lowering the current 18% GST charge on Apple cartoons to 5 percent or nil. Himachal Pradesh Industry Ministry Harshwardhan Chauhan said that the decision also has been taken to send the proposal regarding the same to the GST Fitment Committee.

GST Council Meet 2023 LIVE Updates: Inclusion of GSTN under PMLA should be done only after discussions, some FMs say: During the GST Council meeting, finance ministers of some states expressed their opinion that the decision to bring GST under the ambit of the Prevention of Money Laundering Act (PMLA), thereby granting the Enforcement Directorate the authority to inspect small businesses for GST violations, should be approached with caution and thorough discussions. This concern was raised by finance ministers from several states, including Delhi, Punjab, Tamil Nadu, West Bengal, Himachal Pradesh, Karnataka, Chhattisgarh, and Rajasthan.

GST Council likely to clarify food, beverage supply at cinema attracts 5% GST

• In a move to provide clarity and eliminate any confusion, the Goods and Services Tax (GST) Council is expected to confirm that the supply of food and beverages at cinemas falls under the taxable bracket of 5 percent, similar to the taxation applied at restaurant services. According to a reliable source familiar with the matter said on July 6.
• He added that the fitment committee has recommended, just like cloud kitchens and take-away setups, as engaged in the service of cooking and preparing food. Consequently, it is proposed that they be categorized within the definition of restaurant services, thereby subject to GST at the rate of 5 percent. This recommendation will be thoroughly discussed by the Council.

Taxation of Multi Utility Vehicles: The fitment committee, consisting of esteemed tax officials from the central and state governments, has proposed that a 22 percent cess be imposed on all types of utility vehicles, irrespective of their name they called. However, this levy would apply only if these vehicles meet specific criteria: having a length exceeding 4 meters, an engine capacity surpassing 1,500 cc, and a ground clearance of more than 170 mm in an ‘un-laden condition’.

GST Council likely to define MUVs and XUVs for imposition of 22% cess: In a move to bring absolute clarity, the GST Council is expected to provide a precise definition for multi-utility vehicles (MUVs) and crossover utility vehicles (XUVs) in order to levy a 22% compensation cess, which will be imposed on top of the existing 28% GST rate. The Council is expected to address and resolve this matter on Tuesday.

Taxation of online utility vehicles on agenda

• The Council, which has already made around 1,500 decisions in the spirit of cooperation between the central and state governments, has consistently worked towards fostering harmonious relations, announced by the office of Nirmala Sitharaman through a tweet.
• The tweet says, in a momentous milestone, the GST Council, in its 50th meeting, is ready to discuss crucial matters, demonstrating the remarkable achievements of cooperative federalism and the establishment of an efficient and uncomplicated tax framework.
• During this highly anticipated meeting, the Council is expected to provide much-needed clarification regarding the applicable GST rates for food and beverages sold in multiplexes. Additionally, it aims to grant exemptions on GST for the import of the cancer drug Dinutuximab and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases.

Importing the cancer medication Dinutuximab (Qarziba) for personal use has been subjected to a 12 percent Integrated Goods and Services Tax (IGST). However, according to the fitment committee, this medicine, priced at Rs 36 lakh, should be spared from GST as patients typically rely on crowdfunding to gather funds for its procurement.

The Law Committee, consisting of tax officers from the Centre and states, has indicated that if the Input Tax Credit (ITC) claimed in the GSTR-3B return exceeds the amount available as per the automatically generated statement GSTR-2B, by a specific threshold, the registered individual may receive a notification on the portal regarding this difference. They will be instructed to either provide an explanation for the difference or to settle the excess ITC amount with applicable interest.

The GST Council is thinking about granting a tax exemption on Dinutuximab, a cancer medicine, when imported by individuals. Furthermore, the import of medicines and Food for Special Medical Purposes (FSMP) used for the treatment of rare diseases, both for personal use and by centres of excellence, is expected to receive an exemption from Integrated GST. Presently, these imports are subject to an IGST of 5% or 12%.

The Council is expected to address the TCS (Tax Collected at Source) liability of suppliers involved in e-commerce trading through the government’s Open Network for Digital Commerce (ONDC). Among various matters, this decision will be taken regarding the liability of these suppliers for TCS.

GST Council is considering the implementation of stricter regulations for registration

• In order to identify fake GST registrations and ensure authenticity, the Council may reduce the timeframe for submitting PAN-linked bank account details for registration from the current 45 days to 30 days.
• Additionally, the Council is likely to enforce mandatory physical verification of the business premises for applicants deemed “high-risk” before granting GST registration.
• As part of ongoing efforts to identify and catch fake registrations, GST officers are currently conducting a special campaign. During this initiative, approximately 17,000 GSTINs were discovered to be non-existent. Out of these, 11,015 GSTINs have been suspended, 4,972 have been canceled, and tax evasion amounting to ₹15,000 crore has been uncovered.

Stakeholders and experts emphasize the importance of prioritizing the rationalization of GST slabs.

• According to Chhattisgarh Deputy Chief Minister and GST Council member TS Singh Deo, the number of GST slabs should be lowered down to a maximum of two to three. He emphasized the need for the rationalization of GST slabs to be carried out.
• India currently has one of the highest numbers of GST slabs. It is crucial to bring it down to two or three slabs. Strengthening the E-way bill system and addressing loopholes in revenue collection are also essential aspects that need attention, he added.

New GST regulations are being considered, requiring businesses to explain discrepancies ITC claims.

• The GST Council is likely to make a decision regarding a new provision in the GST law, which would necessitate businesses to clarify the reasons behind excessive ITC claims or deposit the amount with the exchequer.
• As per the Committee’s recommendation, this provision would apply if the difference exceeds 20% and amounts to more than ₹25 lakh.
• Currently, businesses utilize the ITC received from their suppliers to offset their GST liabilities when filing taxes through GSTR-3B.
• In instances where the variance between the tax liabilities declared in GSTR-1 and GSTR-3B surpasses the specified threshold of ₹25 lakh and 20%, businesses will be required to provide an explanation for the discrepancy or submit the outstanding taxes accordingly.

Center focuses on implementing mandatory geotagging and biometric authentication to eliminate fraudulent entities under GST, says Vivek Johri. To eradicate the bogus entities registered under GST and prevent fake input tax credit (ITC) claims in the future, the government is actively pursuing the implementation of mandatory geotagging for all company addresses. Additionally, for entities flagged as high-risk, biometric authentication will be made compulsory, ensuring enhanced scrutiny and verification, says CBIC Chairman Vivek Johri.

In conclusion, The 50th meeting of the GST Council was a big deal because they talked about important tax matters. They discussed GST appellate tribunals, lowering taxes on apple cartoons, including GSTN under the Prevention of Money Laundering Act, figuring out how to tax food and drinks at theatres, and adding a 22% tax on multi-utility vehicles.

The meeting also focused on making GST registration stricter, simplifying the different GST rates, and explaining why some businesses claim too much Input Tax Credit (ITC). It’s also expected that the cancer drug Dinutuximab and special medical food for rare diseases will be exempted from GST when imported. However, problems like the inverted duty structure on textiles and limitations on working capital haven’t been solved yet. The government is supposed to address these concerns to prevent a shortage of working capital and promote local manufacturing.

Download Press Release of 50th GST Council Meeting Updates

Expectations of the 50th GST Council Meeting

It is been expected that the GST appellate tribunal does build considerable progress and that those states do enable to seek the formation of benches in their jurisdictions.

Since the system of tax would have been sustained, the officials would indeed mention that bigger GST rates and slab modification would not happen at the present time. At the present time, the complete redesign of the rate of structure does not get planned, as per the officials. Moreover, the revisions and examinations in the rate of some items when needed and to prevent confusion.

The council does not take up the report which has been made by the Group of Ministers (GoM) in the former meeting i.e. 49th GST Council Meeting. But it has been anticipated as an agenda for the 50th GST Council.

The official mentioned that the same is been expected that the case shall get solved without the vote of the council.

A GST fitment panel is now defining the variety of millet goods and related rates. As per the sources, the fitment panel was comprised of authorities from the Center and states who categorize the products where millets are a critical part.

In the forthcoming GST Council meeting, which is expected to be conducted at the end of July, the panel will probably make a classification recommendation.

Inverted Duty Structure (IDS) on Textiles

No timeline has been offered to rectify the inverted duty structure ((higher duty on raw materials and other inputs and lower duty on final product).

It is not just an economic issue but a much larger political one and considering the upcoming Gujarat assembly election, there is no chance of considering of inverted duty structure on textiles soon, said a senior Finance Ministry official.

In the month of December, the GST council would have chosen to postpone rectifying the inverted duty structure on the textile from 1st Jan 2022. It is planned that GoM on rationalization shall see into the problem and recommend the special rate post to correct the inverted duty structure. In its interim report, GoM thinks about the IDS amendment for some of the sectors and indeed upon the exemption. Currently, they used to work on making the other report, however, there shall be no declaration in the report that the textile sector will be discussed.

Experts Mentioned GST ITC Accumulation

Tax experts mentioned that the accumulation of ITC because of the inverted duty structure in the textiles segment is an older problem, saying that ITC accumulation could be amended either by rationalizing input or output GST rates or by permitting the industry to claim the cash refund of the accumulated ITC. Also, there shall be seeing no intention of the government to open up the refund route, the surged GST rates were previously taken back because of the protests by the industry (particularly from Gujarat).

Restriction of Working Capital

It is important that the government does not lose sight of the fact that the delay in implementing corrective measures has been causing businesses to have an enormous blockage of working capital, besides inflationary pressure, he said. Moreover, the inverted structure is encouraging imports of synthetic textiles, furnishing a significant blow to domestic manufacturers (along with under the Production Linked Incentive Scheme).

Read Also: GST Impact on Textile Industry in India

Tax experts stated, that amendment in the case of inverted duty goods could be acquired through the rising rates of goods being sold, which could be recovered through increasing the cost of goods. In the former times, it revealed that when GST rates were offered to surge for the textile industry. Various players from the industry would have protested against it. Textile companies may experience temporary relief if rate corrections are postponed while input tax credits continue to accumulate. Furthermore, the recent correction to the formula for refunding IDS should provide the sector with other respites, he added.