The Council has also proposed measures to facilitate trade, to enhance the initial collection of revenue and agreed to adopt the GoM’s recommendation for establishing Appellate Tribunal for GST.
The 49th meeting of the GST Council took place on the day of Shivratri i.e. 18th February 2023. This congregation was convened at the majestic Vigyan Bhawan, New Delhi. The gathering was led by the learned Union Finance & Corporate Affairs Minister, Smt. Nirmala Sitharaman. Together, they pondered upon and discussed a range of matters pertinent to the execution and administration of the GST regime. Such a spirit of dedication and collaboration of great minds, under the gracious patronage of our nation, is sure to overlay the way for a brighter and prosperous future.
The Government of India has, pursuant to the provisions of the Goods and Services Tax (Compensation to States) Act of 2017, deliberated upon pending GST compensation dues for June 2022. It has been determined that the entire pending balance of INR 16,982 crores, shall be cleared by the Centre, despite there being no corresponding amount in the GST compensation Fund. These payments would be later recouped from future compensation cess collection.
It is believed that with the release of said compensation dues, the Centre shall have fulfilled its obligation to clear the provisionally admissible compensation due to the States for a period of five years, as stipulated by the GST (Compensation to States) Act of 2017. Furthermore, the Centre shall also disburse the admissible final GST compensation, in the amount of INR. 16,524 crores, to those States who have provided revenue figures as certified by the Accountant General of the States. This decision shall significantly impact the country’s fiscal policies, particularly regarding the management and allocation of revenue among the States. It shall bring about a sense of equity and fairness in the distribution of compensation dues. It is also expected to foster a more collaborative and harmonious relationship between the Centre and the States.
Further, the Council agreed to adopt the GoM’s recommendation for establishing Appellate Tribunal for GST. The chairperson is authorized to finalize the draft amendments to GST laws. The same shall be circulated to the members for their comments in order to ensure that the final draft amendments are robust, balanced, and fair. Once the final draft amendments are formulated and agreed upon by the Members, they will not be tabled before the GST Council, as Council has authorized chairperson to finalsie the same.
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Furthermore, the Council has also approved the recommendations of the GoM to improve revenue collection from commodities like pan masala, gutkha, and chewing tobacco by taking measures to prevent leakage and evasion. The approved recommendations include not prescribing a capacity-based levy, implementing compliance and tracking measures to prevent evasion. However, it recommended to only allow exports of such commodities with a Letter of Undertaking (LUT), refund of accumulated Input Tax Credit (ITC), and changing the compensation cess levied on such commodities from an ad valorem tax to a specific tax-based levy.
These measures aim to enhance the initial collection of revenue. The impact of the recommendations approved by the Council on businesses in the pan masala, gutkha, and chewing tobacco industries could be significant..The change in the compensation cess levied on such commodities from an ad valorem tax to a specific tax-based levy could result in a change in the pricing of the products.
The Council has decided to extend the exemption from payment of GST under the reverse charge mechanism to the Courts and Tribunals for taxable services they provide, such as renting out premises to telecommunication companies for tower installation and chambers to lawyers. This is expected to ensure compliance for businesses and a level playing field for Courts and Tribunals. This move is also likely to reduce the compliance burden on the judicial system and increase its efficiency.
The Council has also proposed measures to facilitate trade, including an extension of the time limit for revocation of registration and an amnesty for past cases. The amendment to Section 30 of CGST Act, 2017 and Rule 23 of CGST Rules, 2017 suggests increasing the time limit for applying for revocation of cancellation of registration from 30 days to 90 days. If the registered person fails to apply within 90 days, the commissioner may extend the time period for up to 180 days.
In addition, an amnesty would also be provided to those whose registration was canceled due to the non-filing of returns, allowing them to file an application for revocation by a specified date, subject to certain conditions. The impact of this decision on businesses will be a relief from penalties and an opportunity to regularize their registration status without additional financial burden.
The Council has recommended rationalizing the late fee for delayed filing of annual returns in FORM GSTR-9 for FY 2022-23 onwards. Amnesty scheme will also be ceded in respect of pending returns in FORM GSTR-4, FORM GSTR-9, and FORM GSTR-10 is likely to significantly impact businesses, especially, small and medium-sized enterprises (SMEs). By providing relief in the form of conditional waiver or reduction of late fees, the amnesty scheme will likely encourage more taxpayers to file their pending returns and comply with GST regulations. This would help reduce the burden of pending returns and ensure that more businesses are operating transparently and compliant.
Overall, the amnesty scheme is likely to positively impact businesses as it would encourage compliance with GST regulations and provide relief to taxpayers who may have been struggling to file their returns.The decisions taken in the council meeting aim to facilitate trade, improve revenue collection, and simplify the GST laws. The release of pending compensation and admissible final GST compensation will help the states to manage their finances effectively. Changing compensation cess levied on certain commodities from ad valorem to specific tax-based levies and plugging leakages and evasions in such commodities are expected to boost the first stage collection of revenue. The extension of time limits and one-time amnesty for past cases and allowing exporters to furnish LUTs for the current and next financial year will likely ease the compliance burden on taxpayers.
Gazing into the horizon of possibilities, one cannot help but anticipate the advent of a harmonious and collaborative federal system, wherein the GST council shall rise above the clutches of partisan politics and propel economics to the forefront of decision-making. The prospects that lie ahead, where the amalgamation of diverse perspectives shall pave the way for a more equitable and just distribution of resources, and the ultimate flourishing of our nation’s economy!
