RECENT GST COUNCIL RECOMMENDATIONS

[Dr. Sanjiv Agarwal]

GST Council held its 52^nd meeting on 7^th October, 2023 at New Delhi and took wide ranging decisions including recommendations for conditions of appointment of Members and President of GST Appellate Tribunal. Its recommendations inter alia, include 18% tax on corporate guarantees, no GST on Extra Neutral Alcohol (ENA), reduction of tax on molasses and millet based flour, supplies to SEZ, automatic restoration of provisionally attached properties etc. On taxation of ENA, infact, Union of India has decided to cede the right to tax ENA when used for human consumption giving liberty to tax the same in light of Allahabad High Court judgment declaring the levy of UP-VAT on ENA as un-constitutional after 1^st July, 2017.

GST Council has also recommended to allow taxpayers to file time barring appeals till 31^st January, 2024 provided an extra pre-deposit of 2.5% is made. While all states have not yet amended state / UT legislations for taxation of online gaming, Union has decided to levy the same w.e.f. 1^st October, 2023 itself.

52^nd GST Council’s Decisions (7^th October, 2023)

• 52^nd GST Council meeting held on 7^th October, 2023 at New Delhi has inter alia, decided / recommended as follows:

• Conditions of appointment / age / eligibility for Members and President of proposed Appellate Tribunals (GSTAT)
• Amnesty scheme for filing of appeals against demand orders in cases where appeal could not be filed within the allowable time period. Appeals now can be filed upto 31^st January, 2024.
• Supply of goods & services by Indian Railways to be taxed under forward charge to enable availment of input tax credit.
• No GST on personal guarantee offered by directors of companies.
• Corporate guarantee to be taxed @ 18% on actual consideration or 1% of value, whichever is higher.
• Provisions of automatic restoration of provisionally attached property after one year.
• Allowing supplies to SEZ developer / SEZ unit for authorized operations for IGST refund route.
• GST on molasses to be reduced from 28% to 5%.
• No GST on Extra Neutral Alcohol (ENA) used to manufacture alcoholic liquor meant for human consumptions.
• GST exemption / concession for food preparation using millet flour.
• IGST exemption to foreign flag foreign going vessel when it converts to coastal run.
• Exemption to services of water supply / public health / sanitation conservation / solid waste management / slum improvement & up-gradation supplied to Governmental Authorities.

• These recommendations shall be implemented by way of amendment in law or rules / notification / circular in due course.

GST Council Recommendations

• GST Council in its 52^nd Council meeting held on 7^th October, 2023  clarified / recommended on taxation of guarantees given by corporates and directors in their individual capacity.
• Personal guarantees given by directors to banks / financial institutions for corporate borrowings on behalf of company

• Where company pays consideration to director in any form – directly or indirectly - to be taxed at open market value.
• Where no consideration is involved – value to be considered as zero and no tax payable

• Corporate guarantee on behalf of related parties / subsidiaries

• To be taxed on taxable value as per new Rule 28(2) in CGST Rules, 2017 @ equal to one percent of value of guarantee on actual consideration, whichever is higher, irrespective of whether full ITC is available to the recipient or net.
• To be taxed @18@GST

• Prospective in operation

Filing of Belated Appeals

• GST Council in its 52nd meeting held on 07.10.2023 approved Amnesty Scheme for filing of appeals against demand orders in cases where appeal could not be filed within the allowable time period.
• The Council has recommended providing an amnesty scheme through a special procedure under section 148 of CGST Act, 2017 for taxable persons, who could not file an appeal under section 107 of the said Act, against the demand order under section 73 or 74 of CGST Act, 2017  passed on or before the 31st day of March, 2023, or whose appeal against the said order was rejected solely on the grounds that the said appeal was not filed within the time period specified in section 107(1) of CGST Act, 2017.
• In all such cases, filing of appeal by the taxpayers will be allowed against such orders upto 31st January, 2024.
• However, this will be subject to the condition of payment of an amount of pre-deposit of 12.5% of the tax under dispute, out of which at least 20% (i.e. 2.5% of the tax under dispute) should be debited from Electronic Cash Ledger.
• It is expected that this will facilitate a large number of taxpayers, who could not file appeal in the past within the specified time period.

Amendments in relation to services

GST Council in its 52^nd meeting held on 07.10.2023 has recommended following amendments / clarifications in relation to services:

• Exempt services of water supply, public health, sanitation conservancy, solid waste management and slum improvement and upgradation supplied to Governmental Authorities.
• Clarify that job work services for processing of barley into malt attracts GST @ 5% as applicable to "job work in relation to food and food products” and not 18%.
• W.e.f. 1st January 2022, liability to pay GST on bus transportation services supplied through Electronic Commerce Operators (ECOs) to be placed on the ECO under section 9(5) of CGST Act, 2017.
• Bus operators organised as companies may be excluded from the purview of section 9(5) of CGST Act, 2017 to enable them to pay GST on their supplies using their ITC.
• Clarify that District Mineral Foundations Trusts (DMFT) set up by the State Governments across the country in mineral mining areas are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority.
• Supply of all goods and services by Indian Railways shall be taxed under Forward Charge Mechanism to enable them to avail ITC. This will reduce the cost for Indian Railways.

Appointment of Members and President of Appellate Tribunal

• 52^nd GST Council meeting held on 07.10.2023 recommended the conditions of appointment (i.e. age, eligibility) of president and members of GST Appellate Tribunal (Section 110 of CGST Act, 2017)
• The recommendations, inter alia, include :

• an advocate for ten years with substantial experience in litigation under indirect tax laws in the Appellate Tribunal, Central Excise and Service Tax Tribunal, State VAT Tribunals, by whatever name called, High Court or Supreme Court to be eligible for the appointment as judicial member; 
• the minimum age for eligibility for appointment as President and Member to be 50 years; 
• President and Members shall have tenure up to a maximum age of 70 years and 67 years respectively.

• With this, provisions of CGST Act will get aligned with the provisions of Tribunal Reforms Act, 2021.
• Necessary amendments will be carried out in Act / Rules.

Provisional attachment

GST Council in its 52^nd meeting held on 07.10.2023 has recommended the provision for automatic restoration of provisional attachment of property under section 83 of the CGST Act, 2017 after a period of one year.

• There will be an amendment in sub-rule (2) of Rule 159 of CGST Rules, 2017 and FORM GST DRC-22 to provide that the order for provisional attachment in FORM GST DRC-22 shall not be valid after expiry of one year from the date of the said order.
• This will facilitate release of provisionally attached properties after expiry of period of one year, without need for separate specific written order from the Commissioner.
• This change is intended to remove hardship of taxpayers where order for removal of attachment is not passed by Commissioner on completion of one year
• Necessary amendment shall be made in Rule 159 of the CGST Rules, 2017.

(Source: 52^nd GST Council meeting Press Release No. 1965431 dated 07.10.2023)