[Opinion] Significant Developments | Insights from the 50th GST Council Meeting

Dipak N Joshi – 152 taxmann.com 289 (Article)

Introduction

The 50th GST Council Meeting, held on July 11, 2023, in New Delhi, produced notable highlights and improvements in the sphere of Goods and Services Tax (GST). The meeting commenced with an emphasis on the reduction of rates of taxes on certain goods/services. Finality is also given to pending issues such as the taxation of online gaming, the applicability of ISD and cross charges, etc. The implemented changes aim to foster a business and taxpayer-friendly environment. An attempt is made to cover all such important changes as recommended by the council, except changes made in rates of tax on the supply of goods or services. It is important to note that a precise conclusion can be reached only after the required notifications or circulars are issued.

1. Changes in Reverse charge mechanism

• Supply of raw cotton by the agriculturist: Raw cotton purchased from an agriculturist by any registered person is subject to payment of tax under RCM w.e.f. 15-11-2017. Now it is clarified that the supply of raw cotton including kala cotton by the agriculturist to the cooperatives is also subject to RCM.
• Services supplied by the GTA: Currently, services supplied by the GTA are covered under both the reverse charge mechanism and the forward charge mechanism. GTA requires to choose the option to opt for a forward change mechanism before 15th March of the preceding financial year. It has now been decided to allow GTA to file a declaration to opt for a forward charge mechanism before 31st March of the preceding financial year. GTA can apply for a declaration from 1st January of the preceding financial year. Further, there is no need to apply for redeclaration to opt for the forward charge mechanism next year unless GTA wants to opt back for RCM.
• Services supplied by the directors: Services supplied by a director to the company are subject to payment of tax under the reverse charge mechanism. Many times, the director provides various services to the company in his personal capacity. Clarification was needed as to whether such services are also subject to the payment of tax under RCM. It has now been clarified that services given by the director in his personal/private capacity are not subject to payment of tax under RCM. Only services given in the capacity of a director to the company are subject to the payment of tax under RCM.

2. GST Appellate Tribunal

Section 119 & 110 of CGST Act, 2017 regarding the constitution of the Appellate Tribunal and the appointment of the president and members of the Appellate Tribunal were substituted vide the Finance Act, 2023. It has now been decided to notify such provisions w.e.f. 01st August, 2023. Rules related to the Constitution of the appellate tribunal are also endorsed by the GST council.

3. Annual returns & reconciliation statement (GSTR-9 & 9C)

Relaxation in the filing of FORM GSTR-9 for a registered person having an aggregate turnover up to Rs. 2 crores as given for FY 2021-22 are also extended for FY 2022-23. Further, relaxation in reporting certain information, such as HSN-wise details of inward supply in FORM GSTR-9 as provided for FY 2021-22 vide the Central Goods and Services Tax (Amendment) Rules, 2022, are also extended for FY 2022-23. If a registered person fails to submit Form GSTR-9 or 9A by the deadline, a notice in Form 3A will be sent to them.

4. Input Service Distributor

A registered person is required to distribute the credit in respect of common services availed to the distinct person through a separate registration called ISD. It is clarified that for the past period, using the ISD route to pass on the credit is not mandatory. However, the Council has also recommended that an amendment be made to the GST law to make the ISD mechanism mandatory prospectively for the distribution of common credit. It is also decided to issue a clarification in respect of services generated in-house and supplied to distinct persons (Cross charge mechanism).

5. Reversal of ITC

Issues are raised regarding taxability in case of replacement of parts under warranty. It is clarified that no GST is chargeable by the manufacturer on such replacement of parts and/ or repair services and also, no reversal of input tax credit is required to be made by the manufacturer.

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