Category: GST Intelligence

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A Comprehensive Review of the 50th Council Meeting of GST

GST Council Meet

The 50th meeting of the Goods and Services Tax (GST) Council was held on July 11, 2023, in New Delhi, with Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman leading the proceedings. This landmark meeting marked a significant milestone in the journey of the GST Council, as it deliberated on a range of important recommendations. From changes in GST rates to measures aimed at facilitating trade and streamlining compliances, the 50th GST Council meeting addressed key issues impacting the Indian economy. In this article, we will delve into the noteworthy recommendations made during this meeting and shed light on their implications.

Recommendations on Changes in GST Rates

The GST Council put forth several recommendations pertaining to changes in GST tax rates on goods and services. These recommendations aimed to simplify the taxation system, provide exemptions where necessary, and promote certain industries. Let’s explore the key changes in GST rates discussed during the meeting:

  1. Changes in GST Rates of Goods: To promote ease of doing business and encourage specific sectors, the Council recommended the following changes in GST rates for certain goods:
    • Reduced Rates for Snack Pellets and Imitation Zari Thread: The Council decided to reduce the GST rate on uncooked/unfried snack pellets from 18% to 5%. This move aims to make these products more affordable for consumers. Additionally, the GST rate on imitation zari thread or yarn, known by any name in trade parlance, has been lowered from 12% to 5%. This reduction is expected to benefit the textile industry.
    • Exemptions for Medicines and Food for Special Medical Purposes: In a significant step towards supporting the treatment of rare diseases listed under the National Policy for Rare Diseases, 2021, the Council announced exemptions on IGST for medicines and Food for Special Medical Purposes (FSMP) when imported for personal use. This exemption also extends to FSMP imported by Centres of Excellence for Rare Diseases or any person or institution recommended by these centers. Moreover, the Council granted IGST exemption on Dinutuximab (Quarziba) medicine when imported for personal use, aiming to alleviate the financial burden on patients.
    • Promoting Environmental Protection and Utilization: In a bid to encourage better utilization of LD slag and protect the environment, the GST rate on LD slag has been reduced from 18% to 5%. The Council recognizes the importance of promoting sustainable practices and aims to incentivize the use of LD slag in various industries. Additionally, the GST rate on fish soluble paste has been reduced from 18% to 5%, aligning it with the GST rates of other similar products.
  2. Changes in GST Rates of Services: Apart from changes in GST rates for goods, the Council also recommended certain changes in the GST rates of services. These changes aim to address industry-specific concerns and streamline tax obligations. Here are the key service-related changes discussed during the 50th GST Council meeting:
    • GST Rate Reduction for Food Served in Cinema Halls: The Council decided to reduce the GST rate on foods served in cinema halls from 18% to 5%. This reduction follows the clarification that the supply of food and beverages in cinema halls is taxable as a restaurant service, as long as it is supplied by way of or as part of a service and is supplied independently of the cinema exhibition service. However, in cases where the sale of cinema tickets and the supply of food and beverages are bundled together as a composite supply, the entire supply will attract GST at the rate applicable to the service of exhibition of cinema, which is the principal supply.
    • Taxation of Online Gaming and Casinos: In a significant development, the Council decided to levy a 28% GST rate on the full value of online gaming, casinos, and horse racing. This decision eliminates the distinction between games of skill and chance in the case of online gaming. The tax will be applicable on the face value of the chips purchased in the case of casinos, the full value of the bets placed with bookmakers/totalisators in the case of horse racing, and the full value of the bets placed in the case of online gaming. These changes will come into effect after an amendment in the GST law.

Measures for Facilitating Trade and Streamlining Compliances

Apart from changes in GST rates, the 50th GST Council meeting focused on measures aimed at facilitating trade and streamlining compliances. These measures are aimed at making the GST system more efficient and business-friendly. Let’s explore the key recommendations made in this regard:

  1. Utility Vehicle Classification: To bring clarity and consistency in the classification of utility vehicles, the Council decided to amend the entry 52B in the compensation cess notification. As per the amendment, all utility vehicles meeting the parameters of Length exceeding 4000 mm, Engine capacity exceeding 1500 cc, and having Ground Clearance of 170 mm & above will be included under the compensation cess notification. Additionally, the Council provided an explanation clarifying that ‘Ground clearance’ means ground clearance in an unladen condition.
  2. Inclusion of Banks for IGST Exemption on Gold, Silver, and Platinum Imports: The Council recommended the inclusion of RBL Bank and ICBC Bank in the list of specified banks for which IGST exemption is available on imports of gold, silver, or platinum. This move aims to expand the list of eligible banks/entities and streamline the IGST exemption process.
  3. Clarifications on Compensation Cess and Retail Sale Price: To address concerns related to the levy of Compensation Cess on products where it is not legally required to declare the retail sale price, the Council decided to notify the earlier ad valorem rate that was applicable on March 31, 2023, for the levy of Compensation Cess on products such as pan masala and tobacco. This step aims to ensure compliance with the Compensation Cess regulations.
  4. GST Appellate Tribunal and Compliance Relaxations: The Council recommended the rules governing the appointment and conditions of the President and Members of the proposed GST Appellate Tribunal. These recommendations aim to enable the smooth constitution and functioning of the GST Appellate Tribunal. Furthermore, the Council recommended the continuation of the relaxations provided in the financial year 2021-22 for various tables of FORM GSTR-9 and FORM GSTR-9C in the financial year 2022-23. Additionally, to ease the compliance burden on smaller taxpayers, the exemption from filing an annual return (in FORM GSTR-9/9A) for taxpayers with an aggregate annual turnover of up to two crore rupees will be continued for the financial year 2022-23 as well.
  5. TCS Liability Clarification for E-commerce Operators: The Council decided to issue a circular to provide clarification regarding Tax Collected at Source (TCS) liability under Section 52 of the CGST Act, 2017, in cases where multiple e-commerce operators (ECOs) are involved in a single transaction of supply of goods or services. This clarification aims to address any ambiguity and ensure proper compliance with TCS obligations.
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GST Highest Revenue collection for April 2022

GST

The gross GST revenue collected in the month of April, 2022 is Rs 1,67,540 crore of which CGST is Rs 33,159 crore, SGST is Rs 41,793 crore, IGST is Rs 81,939 crore (including Rs 36,705 crore collected on import of goods) and cess is Rs 10,649 crore (including Rs 857 crore collected on import of goods).

The gross GST collection in April 2022 is all time high, Rs 25,000 crore more than the next highest collection of Rs. 1,42,095 crore, just last month.

The government has settled Rs 33,423 crore to CGST and Rs 26962 crore to SGST from IGST. The total revenue of Centre and the States in the month of April 2022 after regular settlement is Rs 66,582 crore for CGST and Rs 68,755 crore for the SGST.

The revenues for the month of April 2022 are 20% higher than the GST revenues in the same month last year. During the month, revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) are 17% higher than the revenues from these sources during the same month last year.

For the first time gross GST collection has crossed Rs 1.5 lakh crore mark. Total number of e-way bills generated in the month of March 2022 was 7.7 crore, which is 13% higher than 6.8 crore e-way bills generated in the month of February 2022, which reflects recovery of business activity at faster pace.

Month of April 2022 saw the highest ever tax collection in a single day on 20th April 2022 and highest collection during an hour, during 4 PM to 5PM on that day. On 20th April 2022, Rs 57,847 crore was paid through 9.58 lakh transactions and during 4-5 PM, almost Rs 8,000 crore was paid through 88,000 transactions. The highest single day payment last year (on the same date) was Rs 48,000 crore through 7.22 lakh transactions and highest one hour collection (2-3PM on the same date last year) was Rs 6,400 crore through 65,000 transactions.

During April 2022, 1.06 crore GST returns in GSTR-3B were filed, of which 97 lakh pertained to the month of March 2022, as compared to total 92 lakh returns filed during April 2021. Similarly, during April 2022, 1.05 crore statements of invoices issued in GSTR-1 were filed. Till end of the month, the filing percentage for GSTR-3B in April 2022 was 84.7% as compared to 78.3% in April 2021 and the filing percentage for GSTR-1 in April 2022 was 83.11% as compared to 73.9% in April 2021.

This shows clear improvement in the compliance behaviour, which has been a result of various measures taken by the tax administration to nudge taxpayers to file returns timely, to making compliance easier and smoother and strict enforcement action taken against errant taxpayers identified based on data analytics and artificial intelligence.

The chart below shows trends in monthly gross GST revenues during the current year. The table shows the state-wise figures of GST collected in each State during the month of April 2022 as compared to April 2021.

State-wise Growth of GST revenues during April 2022

State

Apr-21

Apr-22

Growth

Jammu and Kashmir

509

560

10%

Himachal Pradesh

764

817

7%

Punjab

1,924

1,994

4%

Chandigarh

203

249

22%

Uttarakhand

1,422

1,887

33%

Haryana

6,658

8,197

23%

Delhi

5,053

5,871

16%

Rajasthan

3,820

4,547

19%

Uttar Pradesh

7,355

8,534

16%

Bihar

1,508

1,471

-2%

Sikkim

258

264

2%

Arunachal Pradesh

103

196

90%

Nagaland

52

68

32%

Manipur

103

69

-33%

Mizoram

57

46

-19%

Tripura

110

107

-3%

Meghalaya

206

227

10%

Assam

1,151

1,313

14%

West Bengal

5,236

5,644

8%

Jharkhand

2,956

3,100

5%

Odisha

3,849

4,910

28%

Chattisgarh

2,673

2,977

11%

Madhya Pradesh

3,050

3,339

9%

Gujarat

9,632

11,264

17%

Daman and Diu

1

0

-78%

Dadra and Nagar Haveli

292

381

30%

Maharashtra

22,013

27,495

25%

Karnataka

9,955

11,820

19%

Goa

401

470

17%

Lakshadweep

4

3

-18%

Kerala

2,466

2,689

9%

Tamil Nadu

8,849

9,724

10%

Puducherry

169

206

21%

Andaman and Nicobar Islands

61

87

44%

Telangana

4,262

4,955

16%

Andhra Pradesh

3,345

4,067

22%

Ladakh

31

47

53%

Other Territory

159

216

36%

Center Jurisdiction

142

167

17%

Grand Total

1,10,804

1,29,978

17%
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GST Council may do away with 5% rate move items to 3% & 8% slabs

GST Council

With Most states on board to raise revenue so that they do not have to depend on center for compensation, the GST Council as its meeting to next month is likely to consider a proposal to do away with the 5 percent slab by moving some goods of mass consumption to 3 percent and the remaining to 8 percent categories, sources said.

Currently, GST is a four-tier structure of 5, 12, 12 and 28 percent. Besides, gold and gold jewellery attract 3 percent tax.

In addition, there is an exempt list of items like unbranded and unpacked food items which do not attract the levy.

Sources said in order to augment revenue the Council may decide to prune the list of exempt items by moving some of the non-food to 3 percent slab.

Sources said that discussions are on to raise the 5 percent slab to either 7 or 8 or 9 percent, a final call will be taken by the GST council which comperises finance ministers of both centre and states.

As per calculations, every 1 percent increase in the percent slab, which mainly includes packaged food items, would roughly yield an additional revenue of Rs 50,000 crore annually.

Although various options are under consideration, the council is likely to settle for an 8 percent GST for most items that currently attract 5 percent levy.

Under GST, essential items are either exempted or taxed at the lowest rate while luxury and demerit items attract the highest tax. Luxury and sin goods also attract cess on top of the highest 28 percent slab. This cess collection is used to compensate states for the revenue loss due to GST roll out.

With the GST compensation regime coming to an end in June, it is imperative that states become self-sufficient and not depend on the Centre for bridging the revenue gap in GST collection.

The council had last year set up a panel of state ministers, headed by Karnataka Chief Minister Basavaraj Bommai, to Suggest ways to augment revenue by rationalising tax rates and correcting anomalies in the tax structure.

The Group of Ministers is likely to finalise its recommendations by early next month, which will be placed before the council in its next meeting, likely by mid-may, for a final dicision.

At the time if GST implementation on July 1, 2017, the centre had agreed to compensate states for five years till June 2022 and protect their revenue at 14 percent per annum over the base year revenue of 2015-16.

The GST Council over the years has often succumbed to the demands of the trade and industry and lowered tax rates. for example, the number of goods attracting the highest 28 percent tax came down from 228 to less than 35.

With center sticking on its stand not to extend GST compensation beyond five years, states are realizing that raising revenues through higher taxes is the only option before the council.

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CGST officials bust network of 23 firms for claiming input tax credit of Rs 91 crore

GST

Based upon specific intelligence, the officers of the Anti Evasion branch of Central Goods and Service Tax (CGST) Commissionerate, Delhi (West) have unearthed a case of availment/utilization and passing on of inadmissible input tax credit (ITC) through goods less invoices of Rs 91 crore (approx). The modus operandi involved floating of multiple firms with the intent to avail/utilize & passing on of inadmissible credit.

The firms involved in this network are M/s Girdhar Enterprises, M/s Arun Sales, M/s Akshay Traders, M/s Shree Padmavati Enterprises and 19 others. These 23 firms were floated in order to generate goods-less invoices with an intent to pass on fraudulent ITC without paying actual GST to the government. Late Shri Dinesh Gupta, Shri Shubham Gupta, Shri Vinod Jain and Shri Yogesh Goel were associated in the said business of generating/selling fake invoices. These entities are dealing in various commodities and involved in generation of goods-less invoices worth Rs. 551 croreand passing inadmissible ITC amounting to Rs. 91crore(approx.). All the three accused tendered their voluntary statement admitting their guilt.

Therefore, Shri Shubham Gupta, Shri Vinod Jain and Shri Yogesh Goel knowingly committed offences under Section 132(1)(b) and 132(1)(c) of the CGST Act, 2017 which are cognizable and non-bailable offences as per the provisions of Section 132(5) and are punishable under clause (i) of the sub section (1) of Section 132 of the Act ibid. Accordingly, they were arrested under Section 132 of the CGST Act on 10.07.2021 and remanded to judicial custody by the duty Metropolitan Magistrate for 14 days. Further Investigations are in progress.

Delhi Zone has been making sustained efforts to check evasion of GST, leading to detection of Rs. 91.256 crore in the present FY and 3 persons have been arrested in these matters.

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GST Revenue collection for June2021

GST Revenue Collection

The gross GST revenue collected in the month of June’ 2021 is₹92,849 crore of which CGST is ₹16,424 crore, SGST is ₹20,397, IGST is ₹49,079 crore (including ₹25,762 crore collected on import of goods) and Cess is ₹6,949 crore (including ₹809 crore collected on import of goods).The above figure includes GST collection from domestic transactions between 5thJune to 5th July’2021 since taxpayers were given various relief measures in the form of waiver/reduction in interest on delayed return filing for 15 days for the return filing month June’21 for the taxpayers with the aggregate turnover uptoRs. 5 crore in the wake of covid pandemic second wave.

During this month the government has settled ₹ 19,286 crore to CGST and ₹ 16,939 crore to SGST from IGST as regular settlement.

The revenues for the month of June 2021 are 2% higher than the GST revenues in the same month last year.

GST collection after posting above Rs. 1 lakh crore mark for eight months in a row, the collection in June’2021 dropped below Rs. 1 lakh crore. The GST collection for June’2021 is related to the business transactions made during May’2021. During May’2021, most of the States/UTs were under either complete or partial lock down due to COVID. The e-way bill data for the month of May 2021 shows that during the month, 3.99 crore e-way bills were generated as compared to 5.88 crore in the month of April 2021, down by more than 30%.

However, with reduction in caseload and easing of lockdowns, the e-way bills generated during June 2021 is 5.5 crore which indicates recovery of trade and business. The daily average generation of e-way bill for the first two weeks of April 2021 was 20 lakh, which came down to 16 lakh in last week of April 2021 and further to 12 lakh in the two weeks between 9th to 22nd May. Thereafter, the average generation of e-way bills has been increasing and has reached again to 20 lakh level since week beginning 20th June. Therefore, it is expected that while the GST revenues have dipped during the month of June, the revenues will see an increase again from July 2021 onwards.

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The 43rd GST Council meet takeways Key

GST Council Meet

The 43rd GST Council Meeting, Finance Minister Nirmala Sitharaman said the council has decided to exempt IGST on free COVID related supplies upto August 31st 2021. So far the IGST exemption was available only when it was imported free of cost.

The GST Council’s meeting, the first this year, comes at a time when the country is reeling under the second wave of coronavirus infections that have derailed the economics recovery. Though the council is required to meet once every quarter, the last meeting was held in October last year.

Issues that dominated discussion at the 43rd GST council meeting

  1. Council has decided to exempted export of relief items and is being extended till August 31, 2021.
  2. Export of medicine for black fungus, that is Amphotericin B, has also been included into the exempted category.
  3. Import of Covid related Relief items, even if purchase and meant for donating to government or to any relief-agencies upon recommendation for state authority, to be exempted from IGST till August 31, 2021.
  4. FM Nirmala Sitharaman announced Amnesty Scheme to reduced late fee returns. Small taxpayers can file pending returns under this scheme.
  5. A group of Ministers will be quickly formed who will submit their report within 10days on or before june 8, 2021 so that if there are any further reductions which need to be done will be done, in the sense, that rates will be decided by them.

Inverted Tax Structure

The council had extensive talks on inverted talk structure. Inverted duty essentially refers to tax rates on input being higher than those levied on finished products. Several states have said that a course correction is required in the regard, particularly in sectors such as fertiliser, steel utensils, solar panels, tractors, tyres, electrical transformers, pharma, textile, cloth and railway locomotives

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Getting Notice for Reversal of genuinely availed Input Tax Credit? Here’s what to do Next!

Ever received a Notice for the reversal of Input Tax Credit even when you had availed it after paying the amount to the Seller?

Heard of such scenarios and wondering what to do in such cases?

Read the article to know why this is an unfair practice, and you can protect yourself by citing the appropriate rules and documents.

We are sharing a Court Ruling and a Press Release by CBIC that clearly explains the processes.

Understanding the Court Case

The case we discuss is 2021-VIL-308-MAD, IN THE HIGH COURT OF JUDICATURE AT MADRAS.

In this particular case, the buyer had paid the due amount of Tax to the Seller, but the Seller did not deposit the same amount to the Govt.

The buyer availed Input Tax Credit on the said amount, thinking that the Seller has paid the amount, but that was not the case. The Department then made efforts to recover the ITC amount directly from the buyer.

The Court ruled against the order asking for the Tax recovery from the buyer stating the Department’s approach was wrong and that the Department should have initiated action against the Seller.

The Press Release by the CBIC

In a Press Release dated 4th of May, 2018, CBIC clearly talked about No automatic reversal of credit.

The fourth point of the Press Release stated that there shall not be any automatic reversal of input tax credit from buyer on non-payment of Tax by the Seller.

The recovery shall be made from the Seller. However, the authorities do have the power to demand the Tax from the buyer but only in exceptional situations like missing dealer, closure of business by supplier or supplier not having adequate assets etc.

The first approach should always be to demand and collect the Tax from the Seller of goods/services.

But I still face such issues; what to do?

It has been seen in numerous cases that the Department issues a notice directly to the buyer without trying to collect the Tax from the Seller.

If you also face such a situation, you can counter question the Officer about the proper procedure and request the Department to issue the notice to the Seller instead.

But make sure that you do this politely and professionally, as the biggest reasons for litigation and Tax problems are actually the wrong ways of communicating and presenting yourself in front of the Officer.

With the proper citing of the appropriate Court Rulings and Press Releases like the ones we discussed, the complete process of getting the notice reversed becomes way easier!

CBIC Press Release Notifications

Judgements

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Gurugram Zonal Unit of the Directorate General of GST Intelligence (DGGI) arrests two businessmenin a case of fraudulent issuance of Input Tax Credit (ITC) invoices without actual supply of goods

 

Gurugram Zonal Unit of the Directorate General of GST Intelligence (DGGI) have arrested two businessmen, namely, Sh. Vikas Goel, Director of M/s Mica Industries Ltd, Delhi and Bhiwadi& M/s. Satellite Cables Pvt Ltd., Bhiwadi and Sh. Raju Singh Proprietor of M/s Galaxy Metal Products on 14.09.2018 in a case of fraudulent issuance of Input Tax Credit invoices without actual supply of goods, involving evasionof approximately Rs. 79.21 crores on the taxable value of concocted supplies of Rs. 450 crores.This quantum of evasion and the gravity of the offence is cognizable and non bailable under the CGST Act, 2017 under the provisions of sub section (5) of Section 132 (1). Thus, both of them were arrested under Section 69 (1) of the CGST Act,2017 and produced before the Hon’ble  Judicial Magistrate 1st Class (JMIC), Gurugram.

Searches were conducted at several places during which various incriminating documents and evidence were found. During investigation it was revealed that these businessmen heading M/s Mica Industries Ltd. had floated two entities namely M/s. Galaxy Metal Products, Delhi and M/s. Sri Ram Industries, Delhi for issuing such fake invoices. They are involved in issuing fake bills/invoices to each other in a Circular manner without any concomitant movement of goods or payments for such transactions thereby wrongfulavailing and utilizing fake ITC. On verification of corroborated documentary evidences and statements of various persons it was established that there was no movement of goods against the invoices raised. Both the Directors of companies and both the proprietor of firms have admitted that all payments for the transactions were made by third party adjustments and which were done at the end of the year. There was no actual payment invoice wise.

Further investigations are underway and the quantum of evasion is likely to go up. Officers are not ruling out the possibility of existence of several other fake firms as the investigation moves ahead. Sh. Vinay Gupta, the other Director of M/s Mica Industries Ltd. and Sh. Vinod Kumar Aggarwal, Proprietor of M/s Sri Ram Industries, Delhi are absconding. Efforts are being made to trace them. (Source – PIB)