GST Council recommends rate rationalization and changes in GST law and procedure

This Tax Alert summarizes a recent press release issued by the Ministry of Finance. The 47th meeting of Goods and Services Tax (GST) Council was held on 28 and 29 June 2022 in Chandigarh.

The key decisions are as follows:

• Recommendations and clarifications relating to GST rate on various goods and services (including rate rationalization to address inverted tax structure, withdrawal of exemption/ concessional rates). The changes shall be effective from 18 July 2022.
  
  
• Changes in GST law and procedure including trade facilitation measures such as modification in the formula for claiming refund on account of inverted duty structure, continuation of exemption of Integrated tax (IGST) on import of goods under Export Promotion Capital Goods (EPCG)/ Advance Authorisation (AA)/ Export Oriented Units (EOU) scheme etc.
  
  
• Time period from 1 March 2020 to 28 February 2022 to be excluded while calculating limitation period for filing refund claims and issuance of order by proper officer in respect of erroneous refunds.
  
  Further, the limitation period for issuance of order for FY 2017-18 in respect of other demands linked with due date of annual return is extended till 30 September 2023.
  
  
• ITC reversal will not be required in respect of sale of duty credit scrips by the exporters.
  
  
• Group of Minister to re-examine issues on services of casino, race-course and online gaming.
  
  
• Decision to constitute a Group of Ministers to address concerns raised by the States on constitution of GST Appellate Tribunal and make recommendations for appropriate amendments in the Central Goods and Services Tax Act, 2017 (CGST Act).

Comments

• The rate changes to address inverted tax structure for some of the industries including construction, electronics is part of trade facilitation measures to eliminate inefficiency and distortions. While the same is likely to reduce the ITC accumulation, in few cases it may increase the cost for the end consumer.
  
  
• Allowing composition dealers to supply through ECOs and relaxation in registration requirement for online suppliers may boost MSME sector.
  
  
• Amendment in the formula for refund on account of inverted tax structure is a welcome measure and could improve the working capital of the taxpayers due to higher refund eligibility. Earlier, SC had also suggested the Council to address the anomalies in the formula.
  
  
• Non-reversal of ITC in case of sale of duty credit scrip will benefit the exporters and should be made effective retrospectively.
  
  
• While CBIC circular on applicability of SC ruling extending the limitation period seems to suggest that refund claims are not covered by the SC order, various High Courts have ruled otherwise. The current extension is likely to settle the matter providing clarity to the taxpayers.
  
  
• Currently, if the supplier relinquishes the brand, the food items are exempt. This results into revenue leakage. The Council has now addressed this issue. 
  
  
• The taxability of lease rentals charged by the landlord to registered businesses in respect of renting of residential dwellings is likely to impact the industry. One may need to analyze the credit eligibility in respect of such services.