GST Council meeting: Procedural adjustments chosen over broad reforms

The 53rd meeting of the GST Council, chaired by Union finance minister Nirmala Sitharaman, spotlighted procedural and sector-specific compliance issues, steering away from broader economic reforms.

While the council has been pivotal in refining the goods and services tax (GST) framework over the past seven years, this session saw technical adjustments aimed at easing compliance burdens and streamlining administrative processes.

Notably, there was no discussion on key issues such as rate rationalisation and the fuel levy, leaving significant economic reforms unaddressed until August.

Through collaborative efforts, the council addressed critical issues, aiming to facilitate trade, ease compliance burdens, and provide substantial relief to taxpayers nationwide.

One of the pivotal decisions was the waiver of interest and penalties on demand notices for the financial years 2017-18, 2018-19, and 2019-20.

Taxpayers who settle the full tax amount by 31 March 2025 will benefit from this relief, alleviating the financial strain particularly felt during the initial GST implementation phase. Notably, this waiver does not apply to cases where interest and penalties have already been paid.

In addressing the longstanding challenge of input tax credit (ITC) mismatches, the council extended the time limit for claiming ITC through GSTR-3B returns filed up to 30 November 2021, for FY 2017-18 to 2020-21.

This retrospective relief, effective from 1 July 2017, is poised to significantly aid taxpayers who struggled with claiming ITC within the prescribed timelines. The ITC claimed by the person has to match the details specified by his supplier in his GST return. In case of any mismatch, the supplier and recipient will be communicated regarding discrepancies after the filling of GSTR-3B. This move is expected to facilitate trade and reduce litigation.

To streamline dispute resolution, the council recommended setting monetary limits for government litigation at Rs 20 lakh for the GST appellate tribunal, Rs 1 crore for high courts, and Rs 2 crore for the Supreme Court. Taxpayers can still pursue appeals beyond these limits.

For instance, if a taxpayer prevails before the commissioner (appeals), the government can appeal to the tribunal only if the matter exceeds Rs 20 lakh.

Further easing legal proceedings, the pre-deposit amount required for filing appeals before the appellate authority has been reduced from Rs 25 crore each (CGST and SGST) to Rs 20 crore each. The percentage of pre-deposit for appeals to the tribunal has also been reduced from 20 per cent (capped at Rs 50 crore each) to 10 per cent (capped at Rs 20 crore each).

This amendment applies only to future cases, and no refunds will be available for those who have already paid pre-deposits exceeding the new limits. The filing of appeals before the Tribunal will commence on a date notified by the government, with a three-month window for taxpayers to file.

A notable introduction was GSTR-1A, allowing taxpayers to report transactions missed or not reported in their GSTR-1 for the current tax period before filing GSTR-3B for the current period. This form is not applicable for previous tax periods.

The council also extended the deadline for filing GSTR-4 from 30 April to 30 June for FY 2024-25 and announced the phased implementation of biometric verification via Aadhaar authentication for taxpayers nationwide.

Rate clarifications included a uniform 12 per cent rate for products like milk cans, carton boxes, sprinklers, and solar cookers.

Additionally, services provided by Indian Railways to the common man and hostel services with a value of supply up to Rs 20,000 per person per month (subject to a minimum stay of 90 continuous days) will be exempt from GST. Rectified spirits/extra neutral alcohol (ENA) supplied for manufacturing alcoholic beverages will be excluded from GST purview.

In clarifying the valuation of corporate guarantees, the council stated that the prescribed valuation as of 26 October 2023, will not apply if the taxpayer can avail full ITC.

The anti-profiteering clause under GST has been extended till 1 April 2025. The council also recommended that the invoice value be deemed the open market value of services between foreign and Indian affiliates where ITC is fully eligible.

While these reforms are being seen as a positive step, observers expected further action to realise a simplified and taxpayer-friendly GST regime fully. Key industry demands include GST rate rationalisation and reducing the high 28 per cent GST rate burden on the online gaming industry.

An amnesty scheme for past GST disputes and clarity on GST treatment for deemed import of services by foreign airlines and shipping lines are also vital considerations that have not been addressed.

The 54th GST council meeting post-Budget in August presents an opportunity to address these priorities, paving the way for a more efficient and taxpayer-centric GST system.