GST Council proposes measures for rate rationalization, trade facilitation and streamlining compliance in its 55th meeting

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 55th meeting held on 21 December 2024.

The key recommendations are:

• Following shall neither be supply of goods nor supply of services: 
  • Transactions in vouchers (both specific and general-purpose voucher)
  • Supply of goods warehoused in a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) to any person before clearance of such goods for exports or to Domestic Tariff Area (DTA)
• Section 17(5)(d) to be amended retrospectively w.e.f. 1 July 2017 to replace the phrase "plant or machinery" with "plant and machinery".  
• Sponsorship service provided by a body corporate to be covered under forward charge. 
• Input Service Distributor (ISD) provisions to be amended to include reference of supplies covered under section 5(3) and 5(4) of the Integrated Goods and Services Tax Act, 2017 (IGST Act) i.e., inter-state RCM transactions.
• Various provisions to be amended in CGST Act and CGST Rules in respect of functionality of Invoice Management System (IMS).
• Pre-deposit to be reduced for filing an appeal before the Appellate Authority in cases involving only penalty without involving the demand of tax. 

Comments

• Classification of vouchers as neither supply of goods nor supply of services simplifies GST compliance, reducing administrative complexity and costs for businesses. Through such amendment, plethora of ambiguity on the time and place of supply of voucher stands resolved.
• It is relevant to note that Haryana Appellate Authority for Advance Ruling in case of Loyalty Solutions and Research Pvt. Ltd. held that GST is leviable on breakage income.
• Treating supplies of warehoused goods within SEZ/ FTWZ as not a supply under GST is likely to eliminate double taxation since at the time of removal of goods into DTA, customs duties are payable.
• SC in the case of Safari Retreat Pvt. Ltd. [2024-TIOL-101-SC-GST] has assigned distinct meaning to the expression “plant and machinery” and “plant or machinery” used in clause (c) and clause (d) of section 17(5) of the CGST Act and concluded that the term “plant” needs to be analyzed basis functionality test.

[1]  Press release dated 21 December 2024