RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

The exercise for next year’s Budget to the presented on 1^st February, 2022 is going to start now. Pre-budget meeting are scheduled from 12^th October, 2021. The pre-budget meetings as well as meetings to discuss the revised estimates will start from 12^th October, 2021 till second week of November, 2021. This involves internal discussion on macroeconomic numbers (GDP, revenue, fiscal deficit etc), inter- ministry interaction, discussion with chambers, trade bodies and corporate houses.

Credit growth has turned positive at 0.1% for the first time in 2021-22 in the month of September, 2021 on YoY basis indicating a pick up. RBI’s monetary policy has retained the GDP forecast @ 9.5% for financial year 2022 while revising the inflation estimate to 5.3% from 5.7%. The economic activities are normalizing since June, 2021 with the second Covid wave ebbing, restrictions relaxing and vaccination drive going well and urban demand accelerating amid long festive season ahead.

Moody’s has upgraded India outlook from ‘negative’ to ‘stable’ on the factors such as receding financial risks to allow growth to support debt stabilization, economic recovery, selective use of restrictions in second wave, downside risk to growth from infection owing to rise in vaccination etc. However, Fitch ratings  has cut its GDP growth projection for financial year 2022 to 8.7%, down from 10% due to Covid second wave despite its observation that there is a strong rebound in economy as business activities are returning back to pre-pandemic levels. 

While Indian economy continues to recover from pandemic hit disruption, it still needs a stable and careful policy management on all economic fronts to improve its fiscal profile.

The Central Government has released a sum of ₹ 40,000 to States and Union Territories to meet GST Compensation short fall under back-to-back loan facility to meet such short fall. Earlier, ₹ 75000 crore was released in July, 2021. This is for the financial year 2021-22. As reported, no additional market borrowing by the centre is envisaged on account of such amount.

CBIC has issued two detailed Circulars Nos. 163 and 164 dated 06.10.2021 clarifying various issues on taxability, GST rate, classification and exemptions on goods and services based on recent notifications / changes as per the recommendations of GST Council. Such clarifications would help the taxpayers, professionals and the tax officers in understanding and complying with the law.

Clarifications on  GST rates and classification of goods

CBIC has clarified issues about taxability, classification and rate of GST on various goods based on 45^th GST Council meeting:

• Applicability of GST on fresh and dried fruits and nuts
• Applicability of GST on tamarind seeds
• Clarification of definition of Copra
• Applicability of GST on pure henna powder and leaves
• Applicability of GST on scented sweet supari & flavored and coated illaichi
• Applicability of GST on Brewers' Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues
• Scope of GST rate on all pharmaceutical goods falling under heading 3006
• All laboratory reagents and other goods falling under heading 3822
• Requirement of Original/ import Essentiality certificate, issued by the Directorate General of Hydrocarbons (DGH) on each inter-State stock transfer of goods imported at concessional GST rate for petroleum operations

 [For details, refer to text of Circular]

(Source: Circular No. 163/19/2021- GST dated 06.10.2021)

Clarification on GST rate and exemptions on services

CBIC has clarified issues on taxability, GST rates and exemptions on various services based upon 45^th GST Council meeting held on 17.09.2021 on the following :

• Services by cloud kitchens/central kitchens
• Supply of ice cream by ice cream parlors
• Coaching services supplied by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities’
• Satellite launch services provided by NSIL
• GST on overloading charges at toll plaza
• Renting of vehicles to State Transport Undertakings and Local Authorities
• Services by way of grant of mineral exploration and mining rights
• Admission to indoor amusement parks having rides etc.
• Services supplied by contract manufacturers to brand owners for manufacture of alcoholic liquor for human consumption

[For details, refer to text of Circular]

(Source: Circular No. 164/20/2021- GST dated 06.10.2021)

Group of Ministers on GST System Reforms

Terms of reference for the GoM on GST system reforms under the convenorship of  Dy. Chief Minister, Maharashtra as per GST Council have been identified as follows :

1. review the IT tools and interface available with tax officers and suggest measures to make the system more effective and efficient including changes in business processes;
2. identify potential sources of evasion and suggest changes in business processes and IT systems to plug revenue leakage;
3. identify possible use of data analysis towards better compliance and revenue augmentation and suggest use of such data analysis;
4. identify mechanisms for better coordination between Central and State tax administration and tax administration of different States; and
5. suggest timelines for changes recommended.

(Source: GSTN Letter No. GSTN/Services / GoM/01/2017Pt.I  dated 06.10.2021)