53rd GST Council Meeting | Key Exemptions and Reforms in Tax Framework

The 53rd Meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman on 22nd June 2024, presented several significant recommendations to simplify the GST framework and ease compliance burdens for various sectors. These recommendations, detailed in this release, encompass crucial decisions regarding Indian Railways, the insurance sector, and e-commerce operators. Stakeholders should note that these recommendations will be formalized through relevant circulars, notifications, and law amendments, which will hold the legal authority.

Table of Contents

1. Sector-Specific Updates from the GST Council Meeting
2. Enhancements in GST Filing and TCS Mechanisms
3. GST Compliance Reliefs
4. Strengthening GST Compliance and Simplification
5. Streamlining GST Legal Framework
6. Changes in GST Rates
7. Conclusion

1. Sector-Specific Updates from the GST Council Meeting

1.1 Major GST Exemptions for Indian Railways Services

One of the key highlights from the GST Council meeting is the proposed exemptions for services provided by Indian Railways. The Council recommended exempting GST on services such as the sale of platform tickets, use of retiring rooms, waiting rooms, cloakroom services, and battery-operated car services. Additionally, intra-railway transactions will be exempted from GST. These changes will be regularized from October 20, 2023, to the date of the exemption notification, aiming to reduce the financial burden on the general public and streamline railway operations.

1.2 Reforms in Insurance Sector: No Supply Declaration for Co-Insurance and Re-Insurance

The Council also addressed complexities in the insurance sector by recommending that co-insurance premiums and re-insurance commissions be classified as “no supply” under Schedule III of the CGST Act, 2017. This means that co-insurance premiums shared between lead insurers and co-insurers, as well as transactions involving re-insurance commissions, will not be considered taxable supplies. This move is expected to simplify the tax landscape for insurers and reinsurers and will be applied to past cases on an ‘as is where is’ basis.

1.3 Mechanism for Refund of Additional IGST on Export Price Revisions

The Council also recommended a new mechanism for claiming refunds on additional Integrated GST (IGST) paid due to upward revisions in the price of exported goods. This measure will aid exporters in reclaiming additional IGST paid when export prices are adjusted, thereby simplifying the refund process and supporting the competitiveness of Indian exports on the global stage.

1.4 Section 11A: Regularizing GST Non-Levy Due to Trade Practice

The GST Council has proposed adding a new Section 11A to the CGST Act. Upon the Council’s recommendation, this section would empower the government to authorize the regularization of situations where GST has not been levied or has been under-levied. This adjustment applies in cases where the tax was underpaid or not paid at all due to prevalent trade practices.

2. Enhancements in GST Filing and TCS Mechanisms

2.1 Reduced TCS Rate for Electronic Commerce Operators

In an effort to ease the financial load on suppliers using electronic commerce platforms, the GST Council recommended reducing the Tax Collected at Source (TCS) rate for Electronic Commerce Operators (ECOs) from 1% to 0.5%. This reduction is anticipated to create a more favorable business environment for e-commerce and encourage growth in the sector by reducing the tax burden on suppliers.

2.2 New Optional Facility for GSTR-1 Amendments

To enhance the accuracy of tax filings, a new optional facility via FORM GSTR-1A will be introduced. This facility allows taxpayers to amend or add details in FORM GSTR-1 before filing returns in FORM GSTR-3B. This measure aims to streamline the filing process, reduce errors, and ensure that taxpayers’ liabilities are correctly reflected, thereby facilitating compliance and reducing the risk of discrepancies.

3. GST Compliance Reliefs

3.1 Extended Deadlines and Amendments in Interest Calculation for Taxpayers

For composition taxpayers, the GST Council proposed extending the deadline for filing returns in FORM GSTR-4 from April 30 to June 30 for the financial year 2024-25 onwards. This extension provides additional time for taxpayers to comply with filing requirements.

3.2 Rule 88B: Interest Calculation

An amendment to Rule 88B of the CGST Rules, 2017, was recommended to exclude amounts available in the Electronic Cash Ledger on the due date from the interest calculation for delayed return filings, ensuring a fair and transparent assessment of interest charges.

3.3 Section 128A: Conditional Waiver of Interest and Penalty

The GST Council proposes adding Section 128A to the CGST Act to waive interest and penalties for demand notices issued under Section 73 for FY 2017-18, 2018-19, and 2019-20. To avail the benefit, taxpayers must pay the full tax by 31.03.2025. This waiver does not apply to erroneous refunds.

4. Strengthening GST Compliance and Simplification

4.1 Nationwide Roll-Out of Biometric-Based Aadhaar Authentication

To enhance the integrity of the GST registration process and combat fraudulent claims, the GST Council proposed the nationwide roll-out of biometric-based Aadhaar authentication for registration applicants. This phased implementation will strengthen the registration process and help prevent fraudulent input tax credit claims, thereby safeguarding the GST system against misuse.

4.2 Extensive Reporting and Exemptions for Small Taxpayers

The Council recommended lowering the threshold for reporting Business-to-Consumer (B2C) inter-State supplies invoice-wise in FORM GSTR-1 from Rs. 2.5 lakh to Rs. 1 lakh. Additionally, annual return filings in FORM GSTR-9/9A for the financial year 2023-24 will be exempted for taxpayers with an aggregate annual turnover of up to Rs. 2 crore, simplifying compliance for small businesses and reducing their administrative burden.

4.3 Monthly Filing Requirement for FORM GSTR-7 and Late Fee Waivers

The GST Council proposed that returns in FORM GSTR-7, filed by persons required to deduct tax at source under section 51 of the CGST Act, should be submitted monthly, regardless of whether any tax has been deducted. It was also recommended that no late fee should be payable for delayed filing of Nil FORM GSTR-7 returns. Additionally, invoice-wise details may be required in the return, promoting better compliance and ensuring accurate record-keeping for taxpayers.

5. Streamlining GST Legal Framework

5.1 Monetary Limits for GST Appeals

The 53rd GST Council meeting has proposed setting monetary thresholds for filing appeals in GST cases to minimize government litigation. These thresholds limit the department’s appeals to significant cases and exclude minor disputes. The recommended monetary limits are as follows:

These measures are expected to streamline legal processes and reduce the burden of unnecessary litigation.

5.2 Sunset Clause for Anti-Profiteering and GSTAT Handling

The 53rd GST Council meeting has recommended amending Sections 171 and 109 of the CGST Act, 2017, to introduce a sunset clause for anti-profiteering provisions. Further, this amendment will transfer the responsibility for handling anti-profiteering cases to the Principal Bench of the GST Appellate Tribunal (GSTAT). Additionally, a deadline of 01.04.2025 has been set for the submission of new anti-profiteering applications.

6. Changes in GST Rates

The following recommendations outline proposed changes to the GST rates applicable to various categories of goods.

7. Conclusion

The recommendations from the 53rd GST Council meeting reflect a concerted effort to simplify the GST framework and address sector-specific issues, providing relief to taxpayers and enhancing compliance mechanisms. While these recommendations offer valuable insights into the forthcoming changes, they will be formalized through official circulars, notifications, and law amendments, which will have the final legal authority. Stakeholders are encouraged to stay updated on these developments to ensure compliance and take advantage of the proposed benefits.