47th GST Council Meeting - Decoding GST Council’s Recommendations with Taxmann’s Advisory Team Taxmann’s Indirect Tax Advisory & Research Team 30th June 2022 1
Refund in case of inverted tax structure CHANGE
OUR COMMENTS
• Change in manner of calculation of refund under Inverted Duty Structure is made for the rationalization of such refund.
• Changes have been proposed on the direction of SC Judgement in case of VKC Footwear wherein it was held refund of input services is not available under inverted duty structure scheme
• Pro-rata deduction is to be allowed in the ratio of utilization of ITC in respect to inputs and input services.
• Before the Apex Court arguments were made to deduct the ITC on inputs services utilized under IDS Scheme • However, the Council has allowed proportionate deduction pertaining to the utilization of inputs and input services. • Notably, refund of input services under inverted duty structure scheme is continue to 2 be barred
GST rate linked to LMA on specified goods CHANGE
OUR COMMENTS
• Currently, no GST is payable on unbraded specified food items such as rice, natural honey etc.
• Currently, the branded specified items attract a 5% tax
• Exemption is also available where right on brand has been forgone • Recommendation has been made to withdraw exemption in respect to for prepackaged and pre-labelled retail pack in terms of Legal Metrology Act
• Taxpayers generally argues that selling products by indicating their name on the product are unbranded as showing the name is only an internal mechanism to indicate quality variation. • Authorities argue that actionable claim/enforceable not forgone and thus these are branded products
• Withdrawal of exemption is to put the debate of branded vs unbranded items to rest & remove the scope of any revenue 3 leakage.
GST on low cost hotel accommodation CHANGE
OUR COMMENTS
• Currently, exemption on Hotel accommodation services priced up to Rs. 1000/day is exempted
• Threshold for registration would continue to be available to hotels where aggregate turnover is less than Rs. 20 Lakh in a Financial year
• Recommendation has been made to withdraw tax exemption • Proposed rate recommended would be 12% on value of services
• Above threshold would be available even if value of services are provided through ECO • Notably, in respect of services provided through ECO, GST would be liable to paid by ECO • Arrangement with hotel aggregators should be reviewed 4
GST on specified works contract services CHANGE
OUR COMMENTS
Increase in GST rate on following supplies of works contract w.e.f. July 18, 2022:
• Contractors may face challenges to recover differential GST where ‘change in law’ clause is not given in contracts. In such cases, contractors should pro-actively represent their case
From 12% to 18% • Roads, bridges, railways, metro, effluent treatment plant, etc. • Where supplied to CG, SG, UT, local authorities for historical monuments, canals, pipelines, educational institutions, hospitals etc. & sub-contractor From 5% to 12% • Where supplied to CG, SG, UT & local authorities involving predominantly earthwork and sub-contracts
• GST rate on transitional transactions Section 14 of the CGST Act would apply • Benefit of existing lower GST rates would be available where services are provided as well as invoice is raised before July 18, 2022
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GST on electric vehicles CHANGE • Electronic vehicle eligible for concessional rate of 5% • Law defines Electronic operated vehicles as vehicles which run solely on electrical energy derived from external source or from one or more electrical batteries fitted to such road vehicles and includes E-bicycles
• Clarification would be issued to provide fitting of battery pack is not a relevant condition for eligibility 5% GST rate
OUR COMMENTS • Battery cost generally accounts for nearly 3540% of total EV value • Confusions were whether fitting of battery is a pre-condition for vehicle to qualify as EV as per law • Contradicting advance rulings on the point • Recommendation to issue clarification would remove scope of limitation on availing lower GST rate
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GST on fly ash bricks CHANGE
OUR COMMENTS
• Clarification would be issued to provide that all fly ash bricks attract same concessional rate irrespective of fly ash content (i.e. 6%)
• The term used in rate notification is “Fly ash bricks or fly ash aggregate with 90 percent or more fly ash content”.
• Further, condition of 90% fly ash content with respect to fly ash bricks applies only to fly ash aggregate, and not fly ash bricks.
• As a simplification measure, condition of 90% content is being omitted.
• It was creating confusions as to whether condition of 90% is applicable to fly ash aggregates only or to fly ash bricks as well • AAR-Gujarat held that the condition of 90% of fly ash content is applicable to fly ash bricks as well
• Clarification is a welcome step for Brick klins Industry as it would remove any scope of litigation
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GST rate on treated waters CHANGE
OUR COMMENTS
• Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] is exempt from GST
• Sewage water is converted into treated water by treating the sewage through various processes to make it suitable for industrial use
• Clarification would be issued to provide sewage treated water is exempted from GST and is not the same as purified water • Further, word 'purified' would be omitted from notification to make this amply clear
• As the water is not purified, it is not fit for human consumption and contains certain impurities such as bacteria, virus, and e-coli. • Authorities were arguing that it’s a purified water hence exemption is not available • To avoid any ambiguity Council has recommended that sewage treated water is exempted from GST
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GST on health care services – Room rent CHANGE
OUR COMMENTS
GST RATE ON ROOM RENTAL CHARGES
• GST may be levied on entire value of room rent charged where value of room rent exceeds Rs. 5000
• Council has recommended to tax the service of room rent (excluding ICU) exceeding Rs 5000 per day per patient charged by a hospital at 5% without ITC
• Is it not a composite supply of health care services?
• Whether break-up of composite supply valid, in order to tax one of the component of supply separately out of the bundle? • Will showing rental amount separately in bill impact position of composite supply? • Refer Union of India Vs Mohit Minerals
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GST on PLC in case of long term lease CHANGE
OUR COMMENTS
• Clarification to be issued to provide that allowing choice of location of plot is part of supply of long term lease of plot of land
• Issue was whether PLC would form part of supply of long term lease or would it be considered as a separate supply hence exigible to GST at the rate of 18%
• Therefore, location charge or preferential location charges (PLC) are to be considered as part of consideration charged for long term lease of land and would get the same treatment under GST
• Clarification is a welcome move
• It may also help cases for real estate developers charging PLC
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Real Estate – Developed plots CHANGE
OUR COMMENTS
• Clarification to be issued that sale of land after leveling, laying down of drainage lines etc. is sale of land.
• Schedule III excludes the Sale of land from the ambit of GST
• Therefore, GST would not be leviable on sale of such land
• Ambiguity was there regarding whether the sale of lands after levelling, drainage etc. will be chargeable to GST or not (i.e. developed plots etc.) • Gujarat HC held no GST on developed plots
Munjaal Manishbhai Bhatt [2022] 138 taxmann.com 117 (Gujarat)
• Council recommendation to clarifies is in line with HC decision
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Real Estate – Renting of Residential Dwelling Whether leasing services for further renting to hostel accommodation exempt under GST?
Exempt under GST where residential dwelling is used for residential purposes
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Real Estate – Renting of residential dwelling CURRENT POSITION
OUR COMMENTS
• Karnataka High Court held benefit of impugned exemption can’t be denied on ground that lessee is not using the premise and is further renting to others for residential purposes
• Exemption withdrawn to override impact of Karnataka High Court Judgment
• Exemption entry does not require the lessee itself use the premises as residence Taghar Vasudeva Ambrish vs AAAR, Karnataka [2022] 135 taxmann.com 287 (Karnataka)
• Amendment would also impact where Corporates are using given services for their employees, etc. • Landlords would not required any registration where aggregate turnover is less than threshold limit
CHANGE • Exemption withdrawn for renting of residential dwelling to business entities i.e. registered persons
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GST Registration for ECOs suppliers CHANGE • Recommendation to waive mandatory registration requirement for person supplying goods through E-Commerce Operators (‘ECO’) subject to following conditions: •
Aggregate turnover on all India basis does not exceed threshold limit
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Person is not making inter-state taxable supply
OUR COMMENTS • Currently, suppliers making supply of goods through ECO are mandatorily required to obtain registration (No threshold limit) • Welcome move
• Change would be beneficial in case making grocery supplies, medicine supplies, etc. locally through ECO • ECO to make requisite changes in their softwares to implement the above changes 14
Composition scheme for ECOs suppliers CHANGE
OUR COMMENTS
• Composition taxpayers would be allowed to make intra-State supply through ECOs subject to certain conditions
• Normal registration is mandatory for making supplies through ECO. Therefore, option to register as composition dealer is not available • Changes may be implemented from January 01, 2023
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Other changes proposed CHANGE
CHANGE
• Clarification would be issued for providing manner for reporting of ITC (ineligible/ blocked/ reversal) and correct reporting of inter-state supplies in GSTR3B
• Clarification on utilization of amount available in Electronic Credit Ledger and Electronic Cash Ledger for tax and other liabilities
• Clarification on issues pertaining to refund claimed by the recipient on deemed export would be issued
• UPI and IMPS would be an acceptable mode for payments under GST
• Clarification on issues on interpretation of section 17(5) would be issued
• Amendment would to provide no reversal of ITC on DFS (Duty Free Scripts) (such as RODTEP, ROSTL, MEIS, SEIS etc.)
• Clarification would be issued on issue of perquisites provided by employer to employee as per contractual agreement
• Form GSTR 3B would be changes (draft changes would be placed in public domain 16 for comments)
Other changes proposed CHANGE • GoM to evaluate and suggest taxability on online gaming, race course and casinos • GoM has been created for formation of Appellate Tribunal under GST
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