Council recommends amending GST law and issuing clarifications for achieving rate rationalization, trade facilitation and reduction in ongoing litigation

This Tax Alert summarizes the recent press release[1] issued by the Ministry of Finance on various recommendations made by the Goods and Services Tax (GST) Council in its 53rd meeting held on 22 June 2024. The key recommendations are:

• Value of corporate guarantee as per Rule 28(2) of Central Goods and Services Tax Rules, 2017 (CGST Rules) will not apply in case of export of such services and also where the recipient is eligible for full input tax credit (ITC). 
  
• Section 11A to be inserted in Central Goods and Services Tax Act, 2017 (CGST Act) for granting power regarding non-recovery of duties not levied or short-levied as a result of general practice.
• Waiver of interest and penalty for demand notices issued under section 73 for FY 2017-18 to 2019-20, if entire tax demand is paid up to 31 March 2025.
• Time limit to avail ITC for FY 2017-18 to 2020-21 is extended till 30 November 2021 where the relevant GSTR-3B is filed upto such date. 
• Interest is not leviable where balance is available in Electronic Cash Ledger on the due date of filing GSTR-3B and the same is utilised while filing the return.
• Three-month time period for filing appeal before GST Appellate Tribunal (GSTAT) will start from a date to be notified.
• Quantum of pre-deposit required to be paid for filing appeals is reduced.
• Time limit to avail ITC basis self-invoice raised by the recipient shall be calculated from the date of the self-invoice.

Comments

• The recommendations made by the Council are likely to provide significant relief to taxpayers and enhance the ease of doing business through a set of measures designed to streamline GST procedures and reduce litigation.
  
• Since most of the SCNs are issued under section 74 alleging fraud, suppression or misstatement, it will need to be seen as to how the new amnesty provision on waiver of interest and penalty deal with such cases, particularly where allegations are litigated before appellate forum.
• Circular on various issues relating to corporate guarantee is much awaited by the industry. The benefit of Nil valuation can be explored where the recipient is eligible for full ITC. 
• Earlier, Andhra Pradesh High Court (HC) in case of Maithan Alloys held that GST Compensation Cess is not exempt on imports made by SEZ [TS-677-HC(AP)-2023-GST]. The retrospective grant of exemption is likely to provide significant relief to SEZ units/ developers.
• Mechanism to claim refund of additional IGST paid through debit note may facilitate a large number of exporters. Madras HC, in case of Vedanta Limited [2019-VIL-563-MAD] observed the lack of procedure and allowed refund of tax on debit note in relation to exports made on payment of tax.
• Levy of interest where sufficient balance was maintained in Cash Ledger has been a very litigious matter due to divergent High Court rulings. The Government should consider making the amendment retrospectively from 1 July 2017.
• Circular 199/2023-GST clarified that Nil value can be taken for cross-charge where recipient branch is eligible for full ITC. Extending the same to transactions between related persons may benefit the industry. 
• Even under the recently issued draft of Central Excise Bill, 2024, a single time limit has been provided for issuance of SCN and passing order in both fraud as well as non-fraud cases.
• Exemption to hostels under the category of “renting of residential dwelling” is pending before the Apex Court. The outcome may impact the exemption proposed by the Council.

^{_{[1] Press release dated 22 June 2024}}