The Council agreed on rationalization of GST rates by increasing tariffs on a host of goods and services (such as LED lamps, solar water heater, leather, works contract services for specified works) for correction of inverted duty structure to avoid the accumulation of input tax credit resulting in blockage of working capital. Various exemptions on goods and services have also been withdrawn, such as taxing hotel accommodation priced up to Rs 1,000 and hospital accommodation (excluding ICU) exceeding Rs 5,000 per day. Increase in GST rates may not be timely amidst the high inflation prevalent in the country today.
Recommendation for sin rate of 28% on casino, horse racing and online gaming has been deferred by the Council and the matter is to be re-examined. Taxing online gaming at 28% would have an adverse impact on this growing industry. Hence, there is a requirement to distinguish between skill-based games and game of chance, before increasing the rate to 28%.
Various clarifications have been issued by the Council in relation to the taxability of goods and services such as 5% GST on electric vehicles whether or not fitted with a battery pack, treatment of preferential location charges (PLC) to be part of consideration for land (which is not subject to GST). Such clarification would benefit the auto industry to enjoy concessional rate of 5% on sale of electric vehicles even when sold without battery pack. Further, treatment of PLC as part of consideration for land will aid real estate sector to certain extent, by way of reduced cost to the consumer.
Further, measures have also been taken to ease trade by waiving requirement of mandatory GST registration for supply of goods through e-commerce platforms by a person having turnover below prescribed threshold limit. Also, composition taxpayers have now been allowed to operate through e-commerce platforms. Though the scheme is to be worked out and will be tentatively implemented with effect from 1 January 2023, this has been a long awaited ask by the SME and MSME sectors to have access to large e-commerce platforms.
Some of the other important trade facilitation measures include:
- Refund under inverted duty structure proposed to be allowed for ITC on input services which will reduce the accumulation of credit.
- Period from 1 March 2020 to 28 February 2022 proposed to be excluded from limitation period for filing refund applications or issuance of demand/order (by proper officer) in respect of erroneous refunds. Extension of the limitation period in case of refunds is likely to reduce pending litigations on account of rejection of refunds being time barred and augment taxpayers in their working capital requirements.
The Council has also proposed to clarify some of the following aspects:
- Various issues pertaining to interpretation of provisions relating to restriction on availment of ITC
- Issue of perquisites provided by an employer to employees per a contractual agreement
The long-awaited requirement to set up a Tribunal under GST law was also deliberated, and the Council has recommended to set up a ministerial panel to make recommendations for appropriate amendments to the CGST Act. Setting up of Tribunal will help taxpayers file appeals in the Tribunal and reduce burden of litigations at various high courts across India.
Since the introduction of GST, significant achievements have been made during last five years towards government’s ‘one nation one tax’ philosophy. Increased role of technology, common GSTN portal for interaction between the authorities and taxpayers have changed the perspective of indirect taxes. The industry has viewed the transition to GST as a positive move and has appreciated the government’s initiative on automating tax compliances. While significant progress has been witnessed to streamline and simplify the GST system, this Council meeting, just before the fifth anniversary of GST in India, has also addressed multiple issues which required government’s attention.
(The writer is Partner, Deloitte India)