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CBIC Clarifies GST Rates and Classification of Goods: Key Highlights from Circular No. 229/23/2024-GST

editor — Wed, 17 Jul 2024 05:20:54 +0000

The CBIC, through Circular No. 229/23/2024-GST dated July 15, 2024, has issued clarifications regarding GST rates and classification of goods based on the recommendations of the 53rd GST Council meeting held on June 22, 2024, in New Delhi. This circular, issued under section 168(1) of the Central Goods and Services Tax Act, 2017, addresses the following issues:

Clarification was sought on the appropriate classification and GST rate for solar cookers that use dual energy sources
The GST Council clarified that solar cookers operating on both solar energy and grid electricity fall under heading 8516 and attract a 12% GST rate as per SI. No. 201A of Schedule II of notification No. 1/2017-Central Tax (Rate) dated June 28, 2017.

Clarification was requested on whether the existing 12% GST rate for sprinklers also applies to fire water sprinklers.
The GST Council confirmed that all types of sprinklers, including fire water sprinklers, attract a 12% GST rate as per SI. No. 195 B of Schedule II of notification No. 1/2017-Central Tax (Rate) dated June 28, 2017.
Past liabilities are regularized on an "as is where is basis" due to prevailing genuine doubts.

Clarification was sought on the classification and GST rate for parts of poultry-keeping machinery.
Parts of poultry-keeping machinery are classified under tariff item 8436 91 00 and attract a 12% GST rate as per SI. No. 199 of Schedule II of notification No. 1/2017-Central Tax (Rate), dated June 28, 2017. This entry has been amended to explicitly include 'parts' of poultry-keeping machinery via notification No. 2/2024-Central Tax (Rate), dated July 12, 2024.
Past liabilities are regularized on an "as is where is basis" due to prevailing genuine doubts.

Clarification was requested on the scope of 'pre-packaged and labelled' for agricultural farm produce in light of amendments to the Legal Metrology (Packaged Commodities) Rules, 2011.
The definition of 'pre-packaged and labelled' in notification No. 1/2017-Central Tax (Rate) and notification No. 2/2017-Central Tax (Rate), both dated June 28, 2017, has been amended via notification No. 2/2024-Central Tax (Rate) dated July 12, 2024, and notification No. 3/2024-Central Tax (Rate) dated July 12, 2024, respectively. The amendments exclude agricultural farm produce packaged in quantities greater than 25 kilograms or 25 liters from the GST levy of 5%.
Past liabilities are regularized on an "as is where is basis" due to prevailing genuine doubts.

The full circular can be accessed here.

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CBIC Clarifies GST Applicability on Railways, RERA, Digital Payments, and Insurance Services | Circular No. 228/22/2024-GST

editor — Wed, 17 Jul 2024 04:49:06 +0000

The CBIC, through Circular No. 228/22/2024-GST dated July 15, 2024, has provided clarifications regarding the applicability of GST on certain services. This action is taken under the authority of section 168(1) of the Central Goods and Services Tax Act, 2017, following the recommendations of the 53rd GST Council meeting held on June 22, 2024, in New Delhi. The circular addresses the following issues:

Previous exemptions for Indian Railways' supplies were withdrawn effective October 20, 2023. The 53rd GST Council recommended reinstating exemptions for services provided to the general public, such as platform tickets, retiring rooms, cloakroom services, and battery-operated car services. These exemptions are effective from July 15, 2024, with past liabilities regularized from October 20, 2023, to July 14, 2024.

The full circular is available at: Circular No. 228/22/2024-GST.

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CBIC Updates GST Rates on Goods Following 53rd GST Council Meeting Recommendations

editor — Mon, 15 Jul 2024 04:56:44 +0000

Background:

The 53rd Meeting of the GST Council was held on June 22, 2024, in New Delhi, where changes to the GST rates of certain goods were recommended:

All milk cans (made of steel, iron, and aluminium) will now attract a GST rate of 12%.
The GST rate for cartons, boxes, and cases of both corrugated and non-corrugated paper or paper board (HSN 4819 10; 4819 20) will be reduced from 18% to 12%.
All solar cookers, whether single or dual energy source, will attract a GST rate of 12%.

Notification:

The CBIC, via Notification No.02/2024 – Central Tax (Rate) dated July 12, 2024, exercised its powers under sub-section (1) of Section 9 and sub-section (5) of Section 15 of the CGST Act to amend Notification No.1/2017-Central Tax (Rate) dated June 28, 2017. The changes are effective from July 15, 2024, as follows:

Electric instantaneous or storage water heaters and immersion heaters; electric space heating apparatus and soil heating apparatus; electro thermic hair-dressing apparatus (e.g., hair dryers, hair curlers, curling tong heaters) and hand dryers; electric smoothing irons; other electro-thermic appliances used for domestic purposes (excluding solar cookers); electric heating resistors (excluding those of heading 8545) (HSN 8516):

Effect of the Notification:

The CBIC has amended the base GST rate notification, changing the GST rate for all milk cans made of steel, iron, and aluminium to 6% instead of 9%, reducing the GST rate for cartons, boxes, and cases of both corrugated and non-corrugated paper or paperboard to 6% instead of 9%, and setting the GST rate for all solar cookers to 6%.

Similar notifications have been issued under the Integrated Goods and Services Tax Act, 2017 (IGST Act) and the Union Territory Goods and Services Tax Act, 2017 (UTGST Act).

For Notification No.02/2024 – CGST (Rate), IGST (Rate), and UTGST (Rate):
CLICK HERE

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Major Relief for Insurance Sector as ₹20,000 Crore DGGI GST Notices Nullified

editor — Sat, 06 Jul 2024 04:49:25 +0000

As the country celebrated the seventh anniversary of the Goods & Services Tax (GST) on July 1, the insurance sector received significant relief as ₹20,000 crore worth of GST notices were nullified, ending a long-standing dispute with GST authorities. This resolution came after the 53rd GST Council meeting, which approved clarifications in favor of the insurance companies, as reported by CNBC-TV18.

Over 100 notices issued by the Directorate General of GST Intelligence (DGGI) to various insurance companies since November 2022 will now be rendered null and void. The GST Council recognized the industry’s concerns regarding co-insurance, re-insurance, wreck and salvage, and provided clarifications that resolved the issues.

The insurance sector had been facing demands for unpaid GST, particularly concerning co-insurance agreements, reinsurance commissions, and the reinsurance of crop schemes. The lack of clarity in GST law had led to substantial financial burdens on insurance companies, with demands exceeding ₹20,000 crore.

Insurance companies escalated the issue to North Block and the Insurance Regulatory and Development Authority of India (IRDAI), seeking urgent relief. The matter was analyzed by the law committee and fitment committee under the GST Council’s framework. Their recommendations were subsequently approved by the 53rd GST Council on June 22 in New Delhi. The government has now notified these clarifications.

What Was the Issue?

In co-insurance arrangements, the lead insurer issues the invoice to the customer and pays GST on the entire premium. This premium is then shared with co-insurers. However, GST authorities demanded GST on the portion of the premium shared with co-insurers, treating it as a service consideration.

Recently, the Bombay High Court issued notices in 22 writ petitions filed by major insurance companies challenging the GST levy on co-insurance policies. In response to industry representations, the GST Council recommended that the co-insurance premium apportioned to the co-insurer be declared as “no-supply,” and past cases be regularized on an “as is where is” basis.

For reinsurance commissions, where the commission is deducted from the reinsurance premium paid by the insurer to the reinsurer, GST authorities had demanded GST on the commission, viewing it as the insurer’s income. The GST Council recommended that this also be declared as “no-supply,” with past cases regularized similarly.

Regarding the reinsurance of crop schemes, initial insurance was exempt from GST, but reinsurance of such schemes was not exempt until January 2018. The 53rd GST Council recommended an exemption for the period from July 2017 to January 2018.

An expert noted that the recommendation to regularize past cases on an “as is where is” basis means the amendment will apply to existing cases, even if pending before courts. Dropping these substantial demands will lead to a more transparent structure for insurance businesses in India and enhance the ease of doing business for insurance players. While the detailed amendment is awaited, the process for refunding taxes already paid by insurance companies needs to be clarified.

These GST Council recommendations provide much-needed relief to the insurance sector, which has struggled with complex tax demands and legal battles. Declaring co-insurance premiums and reinsurance commissions as “no-supply” and exempting the reinsurance of crop schemes for a specific period demonstrate a pragmatic approach to industry concerns. By regularizing past cases, the GST Council alleviates financial strain on insurance companies and fosters a more conducive business environment. This move is expected to bolster industry confidence and pave the way for smoother operations within the sector. The insurance industry can now focus on growth and innovation, knowing that regulatory support aligns with their business practices. The Council is also expected to address the GST rate on health policy premiums, with industry bodies advocating for a reduction from the current 18% to 5%.

An advocate representing companies before DGGI expressed similar sentiments, stating that availing credit by any recipient of supply is based on statutory conditions. When insurance companies meet these conditions, availing credit becomes a statutory right. Disputed expenses as per insurance regulations do not affect the legitimacy of these credits under GST provisions.

The advocate also highlighted the importance of issuing notices within statutory timelines in cases where there is no fraud and the issue relates to industry practice. Notices issued beyond statutory timelines can be challenged. Additionally, the GST Council announced a waiver of interest and penalty when notices are issued under section 73. Therefore, transactions of procurement become revenue-neutral, and tax is never a burden.

Source: CNBC-TV18

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Key Recommendations from the 53rd GST Council Meeting

editor — Tue, 25 Jun 2024 04:38:34 +0000

The 53rd GST Council meeting held on 22^nd June brought forth several crucial recommendations aimed at refining and easing the Goods and Services Tax (GST) system in India. These changes promise to streamline processes, provide relief to taxpayers, and ensure a more efficient tax administration. Let’s delve into the key highlights of this significant meeting.

Waiver of Interest and Penalty on Demand Notices

One of the standout decisions from the meeting is the waiver of interest and penalties on demand notices issued under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. This waiver applies to cases where the full tax payment is made by March 2025.

Impact on Taxpayers: This move is designed to reduce the burden on taxpayers, encouraging timely payments and compliance. By waiving off interest and penalties, businesses can focus more on settling their dues without the added pressure of extra financial penalties.

Extended Time Limit for ITC

The time limit to avail Input Tax Credit (ITC) under Section 16(4) has been extended for the financial years up to March 2021, with invoices filed by November 30, 2021, being eligible.

Explanation of ITC and Its Importance: ITC allows businesses to reduce their tax liability by claiming credit for taxes paid on purchases. Extending the time limit ensures that businesses have ample opportunity to claim their due credits, thus enhancing liquidity and reducing the effective tax burden.

Monetary Thresholds for Departmental Appeals

New monetary thresholds have been set for departmental appeals: ₹20 lakh for Tribunals, ₹1 crore for High Courts, and ₹2 crore for the Supreme Court.

Rationale Behind the Changes: These thresholds aim to reduce the litigation burden on the judiciary and streamline the appeal process. By setting higher limits, the council ensures that only significant cases reach higher courts, thereby expediting the resolution of minor disputes at lower levels.

Reduced Pre-deposit for Appeals

The maximum pre-deposit amount required for filing appeals before the Appellate Authority for CGST and SGST has been reduced from ₹25 crore to ₹20 crore.

Benefits for Appellants: This reduction lowers the financial barrier for taxpayers seeking to appeal decisions, making it easier for businesses to contest and resolve disputes without facing prohibitive upfront costs.

Pre-deposit for Appeals Before Tribunals

For appeals filed before Tribunals, the pre-deposit has been reduced to 20%, with a cap of ₹20 crore for CGST and SGST.

Expected Outcomes: This change is expected to provide relief to businesses with large disputed amounts, as it caps the maximum financial commitment required to pursue an appeal, thereby promoting fairness and accessibility in the appeal process.

Amendment for Appeal Filing Timeline

The law will be amended to provide a specific timeline for filing appeals before Tribunals, effective from the date notified by the government.

Importance of This Amendment: Establishing a clear timeline for appeal filings helps in maintaining consistency and predictability in the legal process, ensuring that taxpayers and authorities are aligned on deadlines and procedural requirements.

Extended Deadline for Filing GSTR-4

The deadline for filing GSTR-4 has been extended to June 30.

Who Benefits from This Extension?: This extension primarily benefits composition scheme taxpayers, giving them additional time to comply with their annual return filing requirements, thus reducing the risk of penalties and interest.

No Interest on Cash Ledger Balance

No interest will be charged on the available balance in the cash ledger when filing GSTR-3B.

How It Affects Taxpayers: This policy change means that taxpayers won’t incur interest charges on funds already available in their cash ledger, providing them with financial relief and encouraging timely tax filings.

New Form GSTR-1A for Corrections

The introduction of Form GSTR-1A allows taxpayers to make corrections in GSTR-1 before filing GSTR-3B.

Process for Making Corrections: This new form provides a streamlined process for rectifying errors in sales data, ensuring accuracy in tax filings and reducing subsequent notices and penalties for discrepancies.

Biometric-based Aadhaar Authentication

Biometric-based Aadhaar authentication will be implemented across India in a phased manner.

Benefits and Potential Issues: This initiative aims to enhance security and prevent fraudulent activities. While it offers robust verification, concerns around privacy and the practicalities of implementation in rural areas need to be addressed.

Clarifications on Various Issues

The Council issued clarifications on several topics, including a 12% tax rate for certain items.

Specific Items Addressed: These clarifications help clear ambiguities regarding tax rates and compliance requirements, aiding businesses in adhering to the correct practices without confusion.

Conclusion

The 53rd GST Council meeting has introduced a series of impactful recommendations aimed at simplifying the GST framework, providing relief to taxpayers, and enhancing the efficiency of tax administration. These measures are expected to foster a more business-friendly environment, encouraging compliance and reducing litigation. As these recommendations are implemented, businesses should stay informed and adapt to the changes to maximize their benefits.

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