The Goods and Services Tax (GST) Council on Saturday gave its nod to a long-pending proposal for an appellate tribunal for the levy, broadly accepting the report of a ministerial group. The proposal will be included in the Finance Bill 2023.
In its 49th meeting held on Saturday, the council also adopted another group of ministers’ (GoM) report on plugging revenue leakages for sectors such as pan masala and gutkha, and decided to reduce the GST rates on rab (liquid jaggery) and pencil sharpeners.
Finance minister Nirmala Sitharaman, who chaired the day-long meeting, also decided to immediately release compensation cess dues to states totalling over Rs 33,500 crore.
This includes the pending dues of Rs 16,982 crore to 23 states for June 2022, the last month of the five-year compensation period, as well as another Rs 16,524 crore as final GST compensation outgoes for six states that have submitted the respective accountant general certificates.
“Since there is no amount in the GST compensation fund, the Centre has decided to release this amount from its own resources and the same will be recouped from future compensation cess collections,” Sitharaman said after the council’s meeting. Though the compensation period ended, the cesses will continue till 2025-26, to service the loans taken by the Centre to make good the shortfall in the compensation kitty.
The GST Tribunal will have one principal bench in New Delhi and as many benches or boards in states as decided by each state, subject to approval of the council. The council agreed to make some changes in the final text relating to the number of members and the selection of the members, revenue secretary Sanjay Malhotra said.
The principal bench and state boards would have two technical and two judicial members each, with equal representation from the Centre and states. But all four members would not sit for hearing each case, which is likely to be decided based on the threshold or value of dues involved.
Indicating urgency over setting up the tribunals, the finance minister said the changes would be circulated to states by Sunday and it is expected that the draft would be finalised before March 1, when Parliament would convene for the Budget session, so that the amendments can be taken forward with the Finance Bill, 2023, for Parliament’s approval. While no official timeline was given for the setting up of the tribunals, they are expected to start functioning by the end of this year.
“We welcome the move of having the principal bench in New Delhi and regional benches in different states, which will provide a unified structure to the tribunal under one umbrella. It appears that the number of technical members would not exceed the judicial member, aligning with the decisions of the Supreme Court,” said Charanya Lakshmikumaran, partner, Lakshmikumaran & Sridharan Attorney.
Abhishek Jain, tax partner, KPMG, called it a positive move and said industry players would hope that their long wait for GST tribunal will soon be over.
In another development, the council also approved the GoM report on sectors like pan masala, gutkha and chewing tobacco.
The recommendations include compliance and tracking measures to plug leakages and evasions, permitting exports of such commodities only against letter of undertaking with consequential refund of accumulated input tax credit, as well as changing the compensation cess levied on such commodities from ad valorem to specific tax-based levy to boost the first stage collection of the revenue. However, a capacity-based levy has not been prescribed for the sector.
The council also reduced the GST on rab to 5%, if it is sold in a pre-packaged and labelled form, and to nil in loose form. The GST on pencil sharpeners will also be reduced to 12%. Both these items are currently taxed at 18%.
The council also recommended to rationalise the provision of place of supply for services of transportation of goods by deleting Section 13(9) of the IGST Act, 2017. This would provide that the place of supply of services of transportation of goods will be the case of the recipient of services, in cases where the location of the supplier or recipient of services is outside India.
“As a result, tax will be made applicable when the service recipient is in India, even though the movement of goods is from India to outside India (or the destination of the goods will be outside of India),” said Abhishek A Rastogi, founder, Rastogi Chambers.
However, no decision was taken on reducing the GST on millets and cement, as well as a review of the compensation cess on multi utility vehicles. These, along with the GoM report on online gaming, casinos and horse racing, may be taken up in the next meeting of the Council, though a date has not been decided for it.
The council also approved a number of measures for trade facilitation, including rationalisation of late fee for filing annual returns as well as an amnesty for taxpayers’ pending returns in forms GSTR-4, GSTR-9 and GSTR-10.
At present, a late fee of Rs 200 per day subject to a maximum of 0.5% of the turnover in the state or UT is payable in case of delayed filing of annual return in Form GSTR-9. This will now be reduced to 50 per day subject to a maximum of an amount calculated at 0.04% for registered persons with an aggregate turnover of `5 crore and to `100 per day with a cap of 0.04% for registered persons with an aggregate turnover of over `5 crore and up to `20 crore.
Vivek Jalan, partner, Tax Connect Advisory, said filing GST Annual Return in Form GSTR 9 on time has been a task for small taxpayers due to various reconciliations required. “This year as the time barring period for taking ITC was shifted to November 30, filing annual return by December 31 was difficult.”
It also approved an extension of time limit for application for revocation of cancellation of registration and one-time amnesty for past cases. In such cases, an amnesty may be provided in the past cases, where registration has been cancelled on account of non-filing of the returns, but application for revocation of cancellation of registration could not be filed within the specified time period. The person would be allowed to file an application for revocation by a specified date, subject to certain conditions.