RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

During last one month, there have been five major announcements by Union Finance Minister offering tax sops, economic reliefs and credit / export related measures which ensures ease of doing business in ongoing economic recession. All such measures are other than GST. In its latest move, corporate income tax rates have been slashed, from 30% to 22%, from 25% to 15% for new companies and MAT from 18.5% to 15%. This led to unprecedented upsurge in stock indices too. Such measures are expected to revive the ailing industry and support GDP growth. While these moves are considered bold, fiscal management would remain a challenge.  Now the income tax rate India is below the global average of 23%.

The 37^th meeting of GST Council was held on 20^th September, 2019 at Goa where in several taxpayer friendly measures have been announced which inter alia include GST rate reduction on hotels, few exemptions, lower rate on diamond related job works and outdoor catering, measures to boost export, few clarifications and relaxation in filing annual returns etc. However, no change has been made in audit requirements. It has been assured that GSTR-9 returns will be further simplified and that new returns shall be made applicable from next fiscal.

Decisions taken at 37^th GST Council meeting at Goa on 20.09.2019

GST Council in the 37^th meeting held on 20th September, 2019 (Friday) at Goa inter-alia, decided to lower GST rates on hotel tariff, outdoor catering and other miscellaneous items.

1. Hotel / Restaurant / Catering

GST Rates on hotel room tariffs

A comparative analysis of the rates earlier and rates proposed is as follows:

S.No.	Transaction Value per Unit (Rs) per day	Present GST rate	Proposed GST rates w.e.f. 01.10.2019
	₹ 1000 and less	Nil	Nil
	₹ 1,001-2,500	12%	12%
	₹ 2,501-7,500	18%	12%
	₹ 7,501 and more	28%	18%

GST Rate on outdoor catering

S.No.	Particulars	Present GST rate	Proposed GST rates w.e.f. 01.10.2019
	Institutions other than in premises with daily room tariff of ₹ 7,500 or more	18% with ITC	5% without ITC
	Catering in premises with daily tariff of unit of accommodation being ₹ 7501 and above	18% with ITC	18% with ITC

GST Rate on caffeinated drinks (including energy drinks)

• Increased to 28 per cent from 18 per cent.
• Additional 12 per cent compensation cess would also be imposed on such beverages.

Present GST rate	Proposed GST rate w.e.f. 01.10.2019
	GST rate	Compensation Cess	Total
18 percent	28 percent	12 percent	40 percent

GST rate reduction on other items

Item	Present GST Rate	Proposed GST rate w.e.f 01.10.2019
Dried tamarind	5%	Nil
Plates and cups made up of leaves / flowers / bark	5%	Nil

2. Insurance

• To exempt “BANGLA SHASYA BIMA” (BSB) crop insurance scheme of West Bengal Government.
• To exempt services of life insurance business provided or agreed to be provided by the Central Armed Paramilitary Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under the respective Group Insurance Schemes of these Central Armed Paramilitary forces.

3. Export promotion

• To exempt services provided by an intermediary to a supplier of goods or recipient of goods when both the supplier and recipient are located outside the taxable territory.
• To issue a notification under Section 13(13) of IGST Act notifying the place of supply of specified R&D services (such as Integrated discovery and development, Evaluation of the efficacy of new chemical/ biological entities in animal models of disease, Evaluation of biological activity of novel chemical/ biological entities in in-vitro assays, Drug metabolism and pharmacokinetics of new chemical entities, Safety Assessment/ Toxicology, Stability Studies, Bio Equivalence and Bio Availability Studies, Clinical trials, Bio analytical studies) provided by Indian pharma companies to foreign service recipients, as the place of effective use and enjoyment of a service i.e. location of the service recipient.
• To clarify that the place of supply of chip design software R&D services provided by Indian companies to foreign clients by using sample test kits in India is the location of the service recipient and section 13(3)(a) of IGST Act, 2017 is not applicable for determining the place of supply in such cases. Miscellaneous
• To allow the registered authors an option to pay GST on royalty charged from publishers under forward charge and observe regular GST compliance.
• To notify grant of liquor licence by State Governments against payment of license fee as a “no supply” to remove implementational ambiguity on the subject.
• To exempt services related to FIFA Under-17 Women's World Cup 2020 similar to existing exemption given to FIFA U17 World Cup 2017.

4. Other decisions

• Diamond Job-work GST rate reduced at 1.5% and Other Job-work GST rate reduced to 12% from 18%.
• Council amended rules regarding Refund by Appellate Authority.
• Council amended rules regarding GST Practitioners and Consumer Welfare Fund.
• GST Annual Returns GSTR-9, 9A Optional for those with turnover upto 2cr for FY 17-18 & 18-19.
• Those with turnover above 2crore to still file GSTR-9.
• No relief in case of GSTR-9C as its applicable only where turnover exceeds 2 crore.
• GSTR-9 also to be made “Saral”.
• Exemption to Fishmeal for the period 01.07.17 to 30.09.19. There were doubts as regards taxability of fishmeal in view of the interpretational issues. However, any tax collected for this period shall be required to be deposited.
• Mere heating of leguminous vegetables (gram/lentil) for removing moisture, or to soften and puff it or removing the skin, and not subjecting to any other processing or addition of any other ingredients (salt, oil etc.) would be classified under HSN Code 0713.
• Almond milk is classifiable under HSN code 22029990 and attracts GST rate of 18%.
• It is proposed to defer the implementation of new return system from April, 2020.
• To increase the validity of conditional exemption of GST on export freight by air or sea by another year, i.e. till 30.09.2020.
• To exempt prospectively services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea.

(Note: The GST rate changes shall be made effective with effect from 1^st October, 2019 after being notified)

The recent recommendations are welcome and shall ensure better compliance, relief to taxpayers and customers and were need of the hour.