RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

The 51^st GST Council meeting has been held on 2^nd August, 2023, just within three weeks of the last meeting on 11 July, 2023. The urgency for such meeting appears from the fact that Government is keen to levy GST at the earliest on e-gaming, casinos, races etc and would not like to lose revenue. The tax rate decided is @28% but industry is opposing the same. The valuation and charging provisions which is a challenge, was discussed.

In one of the answers to questions in Parliament, Finance Minister has revealed that 2784 cases of GST evasion were detected in April – May 2023 involving Rs. 14302 crore of tax. There were 28 arrests in 2022-23, 15602 GST evasion cases amounted to Rs. 131613/- crore and recovery of Rs. 33226 crore. The Government has unleashed many measures to plug the problem of tax evasion including risk parameter based tracking and use of artificial intelligence.

W.e.f. 1^st August 2023, e-invoices have been made mandatory for smaller taxpayers whose aggregate annual turnover has exceeded Rs. 5 crore during any financial year from 2017 onwards w.e.f. 01.08.2023, the threshold turnover shall be Rs. 5 crore (Rs. 10 crore).

After bunch of Circulars, CBIC has issued a series of rate Notifications and other Notifications, i.e., Notification Nos. 6 to 10 (Rate) dated 26.07.2023 and Central Tax Notification Nos. 27 to 35, all dated 31.07.2023 and IGST Notification No. 1/2023-IGSTdated 31.07.2023. These pertain to rate changes, exemptions and GTA services. Compensation Cess on various tobacco products and utility vehicles have also been prescribed. Others relate to Rule 4A non-applicability to Puducherry, turnover based exemption to filing of annual return, account aggregators, exemption to e-commerce operators from registration and adjudication powers. Special procedure has also been prescribed to be followed by registered persons engaged in manufacturing of certain goods and for registered persons as per directions of Supreme Court in Filco Trade Centre case (Transition Credit). Also, provisions of sections 137 to 162 of Finance Act, 2023 have been notified for enforcement.

GST Collection for the month of July, 2023 is Rs. 1655105 crore with a 11% YoY growth. The tax collection has crossed Rs. 1.6 lakh crore for the 5^th time since July, 2017. The revenues for the month of July 2023 are 11% higher than the GST revenues in the same month last year. During the month, the revenues from domestic transactions (including import of services) are 15% higher than the revenues from these sources during the same month last year. It is for the fifth time, the gross GST collection has crossed Rs. 1.60 lakh crore mark. 

Effective date for Section 123 of Finance Act, 2021

• CBIC has notified that section 123 of Finance Act, 2021 shall come into force w.e.f. 1 day of October, 2023.
• section 123 of Finance Act, 2021 substituted section 16 of IGST Act, 2017. The substituted section 16 of  IGST Act, 2017 shall be effective from 01.10.2023.
• It relates to refund in case of zero rated supply empowering Government to prescribe conditions, safeguards and procedure for refund for class of persons and / or class of goods or services.

(Source: Notification No. 27/2023-Central Tax dated 31.07.2023)

Effective dates for enforcement of Finance Act, 2023 amendments

• CBIC has notified date of enforcement for various sections of Finance Act, 2023 in relation to goods and services tax (i.e., CGST and IGST).
• Accordingly,

• sections 137 to 162 (except sections 149 to 154) shall come into force w.e.f. 01.10.2023.
• sections 149 to 154 shall come into force w.e.f. 01.08.2023.

• Following sections shall come into force w.e.f. 01.08.2023:

Section of Finance Act, 2023	Related Section of CGST Act
149	109
150	110
151	114
152	117
153	118
154	119

• Following sections shall come into force w.e.f. 01.10.2023:

Section of Finance Act, 2023	Section of GST Act	Which Act
137	10	CGST
138	16	CGST
139	17	CGST
140	23	CGST
141	30	CGST
142	37	CGST
143	39	CGST
144	44	CGST
145	52	CGST
146	54	CGST
147	56	CGST
148	62	CGST
155	122	CGST
156	132	CGST
157	138	CGST
158	158A	CGST
159	Schedule III	CGST
160	2	IGST
161	12	IGST
162	13	IGST

(Source: Notification No. 28/2023-Central Tax dated 31.07.2023)

Special Procedure for Appeal against Order in Transitional Credit matters

• Special procedure has been prescribed which shall be followed by a registered person or an officer who intends to file an appeal against the order passed by the proper officer in accordance with Circular No. 182/14/2022-GST, dated 10th November, 2022.
• This relates to filing of manual filing of appeal against order issued by proper officer in terms of CBIC Circular No. 182/14/2022-GST dated 10.11.2022 in relation to transitional credit.
• An appeal against the order shall be made in duplicate in the Form appended to the notification at ANNEXURE-1 and shall be presented manually before the Appellate Authority.
• The time limitation u/s 107 shall be computed from the date of issuance of notification or the date of the said order, whichever is later.
• Any appeal against the order filed in accordance with the provisions of section 107 of the said Act with the Appellate Authority before the issuance of the notification, shall be deemed to have been filed in accordance with notification.
• An appeal filed under the notification shall be accompanied by relevant documents including a self-certified copy of the order and such appeal and relevant documents shall be signed by the person specified in sub-rule (2) of rule 26 of Central Goods and Services Tax Rules, 2017.
• Upon receipt of the appeal which fulfills all the requirements as provided in this notification, an acknowledgement, indicating the appeal number, shall be issued manually in FORM GST APL-02 by the Appellate Authority or an officer authorised by him in this behalf and the appeal shall be treated as filed only when the aforesaid acknowledgement is issued.
• The Appellate Authority shall, along with its order, issue a summary of the order in the Form as per ANNEXURE-2

(Source: Notification No. 29/2023-Central Tax dated 31.07.2023)

Special Procedure for Persons engaged in Manufacture of Specified Goods

• CBIC has notified special procedure which shall be followed by registered persons engaged in manufacturing of Pan Masala / Tobacco products along with additional records which shall be maintained by the registered persons manufacturing these goods.
• All the existing registered persons engaged in manufacturing of these goods shall furnish the details of packing machines being used for filling and packing of pouches or containers in FORM SRM-I, within 30 days of issuance of this notification, electronically on the common portal.
• They shall also submit a special statement for each month in FORM SRM-IV on the common portal, on or before the tenth day of the month succeeding such month.
• The details to be furnished relate to :

• Details of packing machines- installation and removal
• Additional records to be maintained
• Monthly statements- inputs, final goods, production etc.

(Source: Notification No. 30/2023-Central Tax dated 31.07.2023)

Non applicability of Rule 8 (4A) to Puducherry

• CBIC has notified that Rule 8 (4A) of CGST Rules, 2017 shall not apply to all the States / Union Territories  except state of Gujarat and Puducherry
• In other words, Rule 8 (4A) shall only apply to taxpayers in Gujarat and Puducherry states / UT.
• Rule 8(4A) relate to Aadhaar Authentication for purpose of registration
• Gujarat was specified vide Notification No. 27/2022-CT dated 26.12.2023
• Puducherry has been added w.e.f. 31.07.2023 for risk based biometric based Aadhaar Authentication 

(Source: Notification No. 31/2023-Central Tax dated 31.07.2023)

Exemption from filing of Annual Returns

• CBIC has notified exemption to registered persons from filing of annual return under section 44 of CGST Act, 2017.
• Such exemption from filing of annual shall be return provided to taxpayers whose aggregate taxpayer in the financial years 2022-23 is upto Rs. 2 crore
• This exemption shall come into force w.e.f. 31.07.2023 the financial year 2022-23

(Source: Notification No. 32/2023-Central Tax dated 31.07.2023)

Information sharing for Account Aggregators

• CBIC has notified ‘Account Aggregators’ as the systems with which information can be shared by the common portal under section 158A by the common portal (GSTN)
• Account aggregator means a non-financial banking company which undertakes the business of an Account Aggregator in accordance with the policy directions issued by the Reserve Bank of India under section 45JA of the Reserve Bank of India Act, 1934 and defined as such in the Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016.
• This shall come into force w.e.f. 01.10.2023.

(Source: Notification No. 33/2023-Central Tax dated 31.07.2023)

Exemption to specified E-commerce from Registration

CBIC has notified exemption from obtaining registration under section 22(1) of CGST Act, 2017 to :

• Persons making supplies of goods through e-commerce operators,
• Who is required to collect tax at source under section 52 of CGST Act, 2017, and
• Who is having aggregate turnover in preceding financial year and in current financial year not exceeding the amount of aggregate turnover above which supplier is liable to be registered.
• Such exemption shall be subject to following conditions :

1. such persons shall not make any inter-State supply of goods;
2. such persons shall not make supply of goods through electronic commerce operator in more than one State or Union territory;
3. such persons shall be required to have a Permanent Account Number issued under the Income Tax Act, 1961;
4. such persons shall, before making any supply of goods through electronic commerce operator, declare on the common portal their Permanent Account Number issued under the Income Tax Act, 1961, address of their place of business and the State or Union territory in which such persons seek to make such supply, which shall be subjected to validation on the common portal;
5. such persons have been granted an enrolment number on the common portal on successful validation of the Permanent Account Number declared as per clause (iv);
6. such persons shall not be granted more than one enrolment number in a State or Union territory;
7. no supply of goods shall be made by such persons through electronic commerce operator unless such persons have been granted an enrolment number on the common portal; and
8. where such persons are subsequently granted registration under section 25 of the said Act, the enrolment number shall cease to be valid from the effective date of registration.

• This shall come into force w.e.f. 1^st October, 2023.

(Source: Notification No. 34/2023-Central Tax dated 31.07.2023)

Refund of IGST on export of specified goods

• CBIC has notified that taxes taxpayers may seek refund of tax (IGST) on export of all goods except as specified when exported on payment of IGST.
• The non- eligible goods are 25 and mainly relate to pan masala, tobacco products, jarda etc.
• Export in respect of such goods shall be made only after payment of integrated tax and on which the supplier of such goods or services may claim the refund of tax so paid.
• This shall come into force w.e.f. 01.10.2023.

(Source: Notification No. 01/2023-Integrated Tax dated 31.07.2023)

Changes in Compensation Cess

• Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 has been amended to effect following changes w.e.f. 27.072023:

1. ‘Pan masala’  has been substituted with ‘pan masala with declared retail sale price’
2. Compensation Cess to be levied on various items of tobacco, hookah, smoking mixtures, jarda, snuff etc.
3. In entry No. 52B, utility motor vehicles to include all utility vehicles by whatever name called provided they meet the parameters of Length exceeding 4000 mm, Engine capacity exceeding 1500 cc and having Ground Clearance of 170 mm & above and to clarify by way of explanation that ‘Ground clearance’ means Ground Clearance in un-laden condition.

[Source: Notification No.3/2023 -Compensation Cess (Rate) dated 26.07.2023]

Declaration of option by GTA under Forward Charge

• CBIC has amended Notification No. 11/2017-CT(Rate) dated 28.06.2017 to simplify exercise of option by GTAs to pay GST under forward charge instead of reverse charge mechanism.
• The option to discharge GST liability under forward charge can be exercised on or after 1^st January of the preceding financial year but not later than 31^st March of the preceding financial year.
• Further, the option exercised by GTA to itself pay GST on the services supplied by it during a financial year shall be deemed to have been exercised for the next and future financial years unless the GTA files a declaration in Annexure VI to revert under reverse charge mechanism on or after the 1st January of the preceding Financial Year but not later than 31st March of the preceding Financial Year.
• Form for exercising option by a Goods Transport Agency intending to revert under reverse charge mechanism to be filed before the commencement of any financial year to be submitted before the jurisdictional GST Authority has been prescribed is Annexure VI.
• This amendment shall comes into force w.e.f. 27 July, 2023.

[Source: Notification No. 06/2023 –Central Tax (Rate) dated 26.07.2023]

Exemption to Satellite Launch Services

• CBIC has notified exemption to satellite launch services by amending entry No. 19C in Notification No. 12/2017-CT (Rate) dated 28.06.2017.
• Presently this exemption is available on Satellite  Launch Services provided by ISRO, Antrix Corporation Ltd. and New Space India Ltd. (NSIL)
• This exemption has now been extended to services provided by organizations in private sector also including start ups.
• This exemption shall come into force w.e.f. 27 July, 2023.

[Source: Notification No. 07/2023 –Central Tax (Rate) dated 26.07.2023]

Condition for availing tax payment under Forward Charge for GTAs

CBIC has amended and simplified condition for availing tax payment under forward charge for GTAs w.e.f. 27^th July, 2023.

Notification No. 13/2017-CT (Rate) dated 28.06.2017 has since been amended so that: 

• Declaration for opting forward charge for payment of tax will not be required to be made annually for every year.
• The wordings, ‘during the financial year – under forward charge’ itself has been amended so that such option would be deemed to be exercised for from the particular financial year till it is reverted to reverse charge by the taxpayer.
• In other words, if GTA has exercised the option for forward charge for a particular financial year, it will be deemed to have exercised the said option for the next and future financial years unless another declaration is filed to the effect that they want to revert back to reverse charge mechanism.

[Source: Notification No. 08/2023 –Central Tax (Rate) dated 26.07.2023]

Change in GST rates

CBIC has notified changes in GST rates in Notification No. 1/2017-CT (Rate) dated 28.06.2017 as under w.e.f. 27 July, 2023:

• Schedule I (2.5%)

Entry	Code	Item
99B	1905	Un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion
108A	2309	Fish soluble paste
156B	2619	Linz-Donawitz (LD) Slag
218AA	56050020	Imitation zari thread or yarn known by any name in trade parlance

• Schedule II (6%)

Metallised yarn other than

1. real zari thread (gold) and silver thread combined with textile thread
2. imitation zari thread or yarn known by any name in trade parlance”

• Schedule III (9%)

Substituted entries are:

• S.No. 16 : “toasted bread and similar toasted products, un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion.
• S.No. 28 : “Slag, dross (other than granulated slag), scalings and other waste from the manufacture of iron or steel, other than Linz-Donawitz (LD) slag”.

[Source: Notification No. 09/2023 –Central Tax (Rate) dated 26.07.2023]

Exemption to Intra-state Supply of Gold

• Notification No. 26/2018-Central Tax (Rate) dated 31.12.2018 exempts intra-state supply of gold when supplied by nominated agency when supplied by nominated agency under the scheme for ‘export against supply by nominated agency’ as referred to in Foreign Trade Policy / Hand book of Procedures.
• CBIC has notified the following policy / procedure for this purpose:

• “Foreign Trade Policy” means the Foreign Trade Policy, 2023, notified by the Government of India in the Ministry of Commerce and Industry vide notification No. 1/2023 dated the 31st March, 2023.
• “Handbook of Procedures” means the Handbook of Procedure, notified by the Government of India in the Ministry of Commerce and Industry vide Public Notice No. 01/2023 dated the 1st April, 2023.

[Source: Notification No. 10/2023 –Central Tax (Rate) dated 26.07.2023]

CBIC clarification on GST Rates / Classification of Goods

CBIC has issued following clarifications regarding GST rates and classification of certain goods based on the recommendations of the GST Council in its 50th meeting held on 11th July, 2023.

Applicability of GST on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion:

• Supply of uncooked/ un-fried extruded snack pellets, by whatever name called, falling under CTH 1905 will attract GST rate of 5% vide S. No. 99B of Schedule I of Notification No. 1/2017-Central Tax (Rate), dated the 28th June, 2017 with effect from 27th July,2023.
• Extruded snack pellets in ready- to-eat form will continue to attract 18% GST under S. No. 16 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated the 28th June, 2017.
• The issue for past period upto 27.7.2023 is hereby regularized on “as is” basis.

Applicability of GST on Fish Soluble Paste

• Fish soluble paste attracted 18% under the residual entry S No. 453 of Schedule III of Notification No. 1/2017-Central Tax (Rate), dated the 28th June, 2017.
• GST on fish soluble paste, falling under CTH 2309, has been reduced to 5%. Accordingly, the rate has been notified vide S. No. 108A with effect from 27th July, 2023.
• The issue for past period upto 27.7.2023 is hereby regularized on “as is” basis.

Desiccated coconut- Regularisation of the issue for past period from 01.07.2017 up to and inclusive of 27.07.2017:

• In view of the prevailing genuine interpretational issues regarding the applicability of GST rate on the desiccated coconut, falling under CTH 0801, the issue for past period from 01.07.2017 up to and inclusive of 27.07.2017 is hereby regularized on “as is” basis.

Biomass briquettes- Regularisation of the issue for past period from 01.07.2017 up to and inclusive of 12.10.2017:

• In view of the prevailing genuine interpretational issues regarding the applicability of GST rate on the Biomass briquettes, falling under any chapter, the issue for past period from 01.07.2017 up to and inclusive of 12.10.2017 is hereby regularized on “as is” basis.

Supply of raw cotton by agriculturist to cooperatives:

• Supply of raw cotton, including kala cotton, from agriculturists to cooperatives is a taxable supply and such supply of raw cotton by agriculturist to the cooperatives (being a registered person) attracts 5% GST on reverse charge basis under notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017.
• The issue for the past periods prior to issue of this clarification is hereby regularized on “as is basis”.

GST rate on imitation zari thread or yarn known by any name in trade parlance:

• Imitation zari thread or yarn known as “Kasab” or by any other name in trade parlance, would attract a uniform GST rate of 12% under tariff heading 5605.
• GST on imitation zari thread or yarn known by any name in trade parlance has been reduced from 12% to 5%. Accordingly, the rate has been notified vide S. No. 218AA with effect from 27th July, 2023.
•  In view of the confusion in the trade regarding the applicability of GST rate on these products, the issue for past period upto 27.7.2023 is hereby regularized on “as is” basis.

Plates, cups made from areca leaves

• Issues relating to GST on plates and cups made from areca leaves are hereby regularized on “as is basis” for the period prior to 01.10.2019.

GST rate on goods falling under HSN 9021

• On GST rates applicable to trauma, spine and arthroplasty implants falling under HSN heading 9021 for the period before 18.07.2022 stating, there are interpretational issues due to the duality of rates on similar items leading to ambiguity.
• The issue has arisen as prior to 18.07.2022 there existed two rates on the goods falling under HSN heading 9021 as per S. No. 257 of schedule I and S. No. 221 of schedule II of Notification No. 01/2017-CT (Rate) dated 28.06.2017.
• The GST rate on all such goods falling under heading 9021 would attract a GST rate of 5% and in view of prevailing genuine doubts, the issue for the past periods is hereby regularized on “as is basis”.
• No refunds will be granted in cases where GST has already been paid at higher rate of 12%.

• No refunds will be granted where GST has already been paid in all the above cases.

     [Source: Circular No. 200/12/2023 –GST  dated 01.08.2023]

Clarification on levy of GST on specified services

CBIC has clarified on levy of GST on:

• Services supplied by director of a company in his personal capacity such as renting of immovable property to the company or body corporate are subject to Reverse Charge mechanism

• Services supplied by a director of a company or body corporate to the company or body corporate in his private or personal capacity such as services supplied by way of renting of immovable property to the company or body corporate are not taxable under RCM.
• Only those services supplied by director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate shall be taxable under RCM in the hands of the company or body corporate under Notification No. 13/2017-CTR (Sl. No. 6) dated 28.06.2017.

• Supply of food or beverages in cinema hall is taxable as restaurant service

• Supply of food or beverages in a cinema hall is taxable as ‘restaurant service’ as long as:
  • the food or beverages are supplied by way of or as part of a service, and
  • supplied independent of the cinema exhibition service.
• Where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply.

[Source: Circular No. 201/13/2023 –GST  dated 01.08.2023]

GST Collection in July, 2023

• Gross GST collection crosses Rs.1.6 lakh crore mark for 5th time since inception of GST.
• Revenues from domestic transactions (including import of services) are 15% higher Year-on-Year basis.
• The gross GST revenue collected in the month of July, 2023 is Rs.1,65,105 crore of which CGST is Rs.29,773 crore, SGST is Rs.37,623 crore, IGST is Rs.85,930 crore (including Rs. 41,239 crore collected on import of goods) and cess is Rs.11,779 crore (including Rs. 840 crore collected on import of goods).
• States with more than 25% growth on YoY basis are J & K, Delhi, Sikkim, Mizoram, Meghalaya, Lakshadweep and Andman & Nicobar.
• While there is no negative growth in any state, single digit growth is shown by Rajasthan, Nagaland, Chhattisgarh, Gujarat, Puducherry, Telangana and Andhra Pradesh.

[Source: Press Release ID 1944590 dated 01.08.2023]