RECENT DEVELOPMENTS IN GST

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RECENT DEVELOPMENTS IN GST

				By: Dr. Sanjiv Agarwal
				December 23, 2021
All Articles by: Dr. Sanjiv Agarwal View Profile

Contents

According to MoF, economic recovery may further strengthen in current H2 of 2021-22 owing to positive market sentiment, exports, vaccination drive, capex expenditure etc. The current mood is backed by governmental policies as well as Reserve Bank’s actions. Still, however, risking inflation, interest rate reversal, commodity prices, rupee weakening, slower consumer demand etc are some causes to worry about. Omicron may not be that deadly as large scale vaccination may offer required protection. Initial indications are that it may not have severe impact.

According to latest RBI report also, the Indian economy continues to forge ahead and actually emerging out of the shackles of Covid pandemic. Going forward, the emergence of the Omicron strain has heightened the uncertainty in the global macroeconomic environment, accelerating risks to global trade with resumption of travel restrictions/quarantine rules at major ports and airports. On the other hand, former Chief Economic advisor, Mr. Arvind Subramanian has opined that it is too early to celebrate India’s economic recovery.

The countdown to Union Budget 2023 has begun. Prime Minister and Finance Minister, both are meeting various stakeholders across sectors like banking, healthcare, telecom, venture capital, CEOs from all across etc. Industry has demanded to maintain tax stability and continued thrust on growth and reforms. Financial sector has demanded for centralized registration on pan India basis for GST. The Budget is to be presented on February 1, 2022 for the Financial Year 2022-23.

The next meeting of GST Council is expected to take place in new year only in January, 2022. While it may deliberate on rationalization of GST rates and inverted duty structure, it may also have pre-budget discussions leading to recommendations related to GST.

The economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. GST compensation of ₹ 1,30,464 crore has been released to all States/ UTs to partly meet the compensation payable for the period April' 20 to March' 21 as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement. This issue of shortfall in release in GST compensation was deliberated in 41st & 42nd GST Council meetings and accordingly, Centre had borrowed loan of ₹ 1.1 lakh crore from open market and passed on as back-to-back loan to States/UTs to meet their resource gap due to short release of GST Compensation for FY 2020-21.

The GST shall be levied on restaurant services provided through e-commerce operators we.f. new year i.e., 01.01.2022. CBIC has clarified various issued on taxability TCS, returns, registration etc vide Circular No. 167 dated 17.12.2021.

It is high time that Tribunals in GST law should commence functioning, as soon as possible. This will fast track the litigation disposes and reduce burden on Courts.

Compensation Cess

Notification No. 1/2018-(GST Compensation) dated 14.11.2018 notified various Acts of Central Government and State Governments under which specified taxes were subsumed into the Goods and Services Tax (GST).
The said notification has since been amended to the effect that for the State of Tamil Nadu, cess, surcharge or fee leviable under ‘Tamilnadu Sugar Cane Cess (Validation) Act, 1963’, the Act has been substituted by ‘Tamil Nadu Sugar Factories Control Act, 1949’.
The said amendment shall be effective from 16.12.2021.

(Source: Notification No. 1/2021-(GST Compensation) dated 17.12.2021)

GST on Restaurant Services through E-commerce Operators (ECOs)

CBIC has issued clarifications on levy of GST on supply of restaurant services through E-Commerce Operators (ECOs) w.e.f. 1.1.2022. Following clarifications seek to ensure necessary compliances:

TCS

As ‘restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the ECO shall be liable to pay GST on restaurant services provided, with effect from the 1^stJanuary, 2022, through ECO.
The ECOs will no longer be required to collect TCS and file GSTR 8 in respect of restaurant services on which it pays tax in terms of section 9(5) of CGST Act, 2017.
On other goods or services supplied through ECO, which are not notified u/s 9(5), ECOs will continue to pay TCS in terms of section 52 of CGST Act, 2017 in usual manner as per law.

Registration

As ECOs will already be registered in accordance with rule 8(in Form GST-REG 01) of the CGST Rules, 2017 (as a supplier of their own goods or services), there would be no mandatory requirement of taking separate registration by ECOs for payment of tax on restaurant service under section 9(5) of the CGST Act, 2017.

Liability to pay GST

ECOs will be liable to pay GST on any restaurant service supplied through them including by an unregistered person.
ECO can not utilize input tax credit with respect to restaurant services. The liability of payment of tax by ECO as per section 9(5) shall have to be discharged in cash.

Aggregate Turnover

The aggregate turnover of person supplying restaurant service through ECOs shall be computed as defined in section 2(6) of the CGST Act, 2017 and shall include the aggregate value of supplies made by the restaurant through ECOs.
For threshold consideration or any other purpose in the Act, the person providing restaurant service through ECO shall account such services in his aggregate turnover.

Inward supplies of ECO

The supplies of restaurant service made through ECOs can not be recorded as inward supply of ECOs (liable to reverse charge) in GSTR 3B.
ECOs are not the recipient of restaurant service supplied through them. Since these are not input services to ECO, these are not to be reported as inward supply (liable to reverse charge).

Reversal of proportionate ITC by ECOs

ECO shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5) of the CGST Act, 2017.
On restaurant service, ECO shall pay the entire GST liability in cash (No ITC could be utilised for payment of GST on restaurant service supplied through ECO).

GST rate on supplies other than restaurant through ECOs

On any supply that is not notified under section 9(5), that is supplied by a person through ECO, the liability to pay GST continues on such supplier and ECO shall continue to pay TCS on such supplies.
On such supplies (other than restaurant services made through ECO) GST will continue to be billed, collected and deposited in the same manner as is being done at present. ECO will deposit TCS on such supplies.

Invoices

Considering that liability to pay GST on supplies other than ‘restaurant service’ through the ECO, and other compliances under the Act, including issuance of invoice to customer, continues to lie with the respective suppliers (and ECOs being liable only to collect tax at source (TCS) on such supplies).
It is advisable that ECO raises separate bill on restaurant service in such cases where ECO provides other supplies to a customer under the same order.
The invoice in respect of restaurant service supplied through ECO under section 9(5) will be issued by ECO.

GST returns

The ECO may, on services notified under section 9 (5) of the CGST Act,2017, including on restaurant service provided through ECO, may continue to pay GST by furnishing the details in GSTR 3B, reporting them as outward taxable supplies for the time being.
ECO may also, for the time being, furnish the details of such supplies of restaurant services under section 9(5) in Table 7A(1) or Table 4A of GSTR-1, as the case maybe, for accounting purpose.
Registered persons supplying restaurant services through ECOs under section 9(5) will report such supplies of restaurant services made through ECOs in Table of GSTR-1 and Table 3.1 (c) of GSTR-3B, for the time being.