Concessional GST Rates Due to COVID-19
- Concessional GST rates currently valid till September 30, 2021 on the following COVID-19 treatment drugs have been extended up to December 31, 2021, such as Remdesivir, Amphotericin-etc.
- Reduction of GST rates to 5% on more Covid-19 treatment drugs up to December 31, 2021 namely Itolizumab, Infliximab etc.
GST Rate Changes in Relation to Goods with Effect from October 1, 2021 Unless Otherwise Stated
- Biodiesel supplied to OMCs for blending with Diesel rate reduced from 12% to 5%.
- Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others rate increased from 5% to 18%.
- Specified Renewable Energy Devices and parts increased from 5% to 12%.
- Cartons, boxes, bags, packing containers of paper etc. increased from 12% to 18%.
- Railway parts, locomotives & other goods in Chapter 86 increased from 12% to 18%.
Other Changes on Goods
- Brick kilns to be brought under special composition scheme with effect from April 1, 2022 with a threshold limit of Rs. 20 lakhs. Bricks would attract GST at the rate of 6% without ITC under the scheme and 12% with ITC.
Inclusion of Petroleum Products
- The issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After due deliberation, the Council was of the view that it is not appropriate to do so at this stage.
Correctional Rate Changes in Inverted Duty Structure
- In order to correct inverted duty structure for footwear and textiles sector, the GST rate changes as discussed in earlier GST Council Meeting and deferred would now be implemented with effect from January 1, 2022.
GST Changes in Relation to Rates and Exemption on Services w.e.f. January 1, 2021 (Unless Otherwise Stated)
- Validity of GST exemption on transport of goods by vessel and air from India to outside India has been extended up to September 30, 2022.
- Rate of Services by way of grant of National Permit to goods carriages on payment of fee reduced from 18% to Nil.
- Exemption on leasing of rolling stock by IRFC to Indian Railways has been withdrawn.
- E-Commerce Operators are being made liable to pay tax on following services provided through them:
- transport of passengers, by any type of motor vehicles through it [w.e.f. January 1, 2022]
- restaurant services provided through it with some exceptions [w.e.f. January 1, 2022]
- Certain relaxations have been made in conditions for IGST exemption relating to import of goods on lease, where GST is paid on the lease amount so as to allow this exemption even if:
- such goods are transferred to a new lessee in India upon expiry or termination of lease; and
- the lessor located in SEZ pays GST under forward charge.
Clarification on GST Rate on Goods
- All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of 12%.
- Carbonated Fruit Beverages of Fruit Drink" and "Carbonated Beverages with Fruit Juice" attract GST rate of 28% and Cess of 12%.
- External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18%.
- GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from July 1, 2017 to December 31, 2018, in the same manner as has been prescribed for the period on or after January 1, 2019.
- All pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [not 18%].
Clarification on GST Rate on Services
- The Services by cloud kitchens/central kitchens are covered under ‘restaurant service’ and attract 5% GST [without ITC].
- Ice cream parlor sells already manufactured ice- cream. Such supply of ice cream by parlors would attract GST at the rate of 18%.
- Overloading charges at toll plaza are exempt from GST being akin to toll.
- The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption.
- The services by way of grant of mineral exploration and mining rights attracted GST rate of 18% w.e.f. July 1, 2017.
- Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.
Measures for Trade Facilitation and Streamlining Compliances
- Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed as under:
- Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months;
- Taxpayers whose annual aggregate turnover in preceding financial year is up to Rs. 5 crores shall furnish ITC-04 annually.
- In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, Section 50(3) of the CGST Act to be amended retrospectively, w.e.f. July 1, 2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% w.e.f. July 1, 2017.
- Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.
- Rule 59(6) of the CGST Rules to be amended with effect from January 1, 2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.
- Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.
- Issuance of the following circulars and clarifications in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:
- Clarification on scope of “intermediary services”.
- Clarification on interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services.
- W.e.f. January 1, 2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;
- There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;
- Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.
- Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.
This update has been contributed by the Indirect Tax Team – Ajay Sanwaria (Counsel), Shreya Mundhra (Senior Associate) and Ritwika Pati (Associate).
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