Major Updates from the 54th GST Council Meeting
| Topic | Decision/Change |
|---|---|
| Reduction in TCS for E-commerce | TCS reduced from 1% to 0.5% (0.25% CGST + 0.25% SGST). Helps suppliers on e-commerce platforms. |
| Refund on Exported Goods | Simplified refund mechanism for exporters, allowing claims on additional IGST paid after export. |
| GST on Cancer Drugs | GST on life-saving cancer drugs like Trastuzumab reduced from 12% to 5%. |
| B2C E-Invoicing Pilot | Voluntary B2C e-invoicing pilot program to be introduced in select sectors. |
| Time Extension for GST Appeals | 3-month window for filing appeals to the Appellate Tribunal, starting from a date to be notified. |
| Composition Taxpayers | GSTR-4 filing deadline extended from April 30 to June 30 for composition taxpayers starting FY 2024-25. |
| ITC for Initial GST Years | Retrospective amendment to Section 16(4), allowing ITC claims for FY 2017-18 to FY 2020-21. |
| Refund on Upward Price Revisions | Mechanism to claim refunds on additional IGST paid after export due to price changes. |
The 54th GST Council Meeting, held on September 9, 2023, introduced significant changes that will impact various sectors. This meeting, chaired by Finance Minister Nirmala Sitharaman, covered critical reforms in GST regulations, providing much-needed clarity and relief for businesses, especially exporters and e-commerce operators. Let's break down the key takeaways for you.
Reduction in TCS for E-commerce Operators (ECOs)
One of the major decisions was to reduce the Tax Collected at Source (TCS) for ECOs from the current 1% to 0.5%. This includes a breakdown of 0.25% CGST + 0.25% SGST. This will help ease the financial burden on suppliers who sell through these platforms, enabling better liquidity and potentially boosting business activity for e-commerce sellers.
New Rules for Refunds on Exported Goods
Exporters have long struggled with the refund mechanism under GST, especially those benefiting from exemptions or concessional duty. To address this, the Council has decided to simplify the refund process by omitting certain rules (96(10), 89(4A), 89(4B)) from the CGST Rules, 2017. This change is expected to expedite refunds and reduce complications.
Moreover, a new mechanism will be introduced to help exporters claim refunds on additional IGST paid due to price revisions after exporting goods. This is a significant relief for exporters who often face increased costs post-export.
GST on Cancer Drugs Reduced
Recognizing the importance of affordable healthcare, the Council slashed GST rates on certain cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, from 12% to 5%. This move will make life-saving drugs more accessible, easing the financial burden on patients.
Sector-Specific Benefits
The decisions taken during the 54th GST Council meeting aren’t just limited to the overall economy; they have specific benefits for certain sectors. For instance, the reduction in GST rates on cancer drugs will positively impact the healthcare sector, particularly patients who require life-saving treatments. By lowering the GST from 12% to 5%, the government aims to make these treatments more affordable, aligning with its broader objective of reducing healthcare costs for Indian citizens.
Namkeens and some snacks, such as aloo bhujia, now have a 12% GST rate. Previously, there was an 18% GST on some of these goods. Both customers and small food businesses should feel relieved by this.
A new regulation states that when buying metal scrap from unregistered sellers, buyers (who are registered under GST) must now pay the tax. The goal of this action is to guarantee more seamless compliance and stop tax evasion.
If universities, research associations, and government agencies use grants from public or private sources, the council has decided to exempt them from paying GST on research and development services. Increased R&D activity in India will result from this action.
If you're taking a flying course from a DGCA-approved Flying Training Organisation, good news: There is no GST on your courses!
Moreover, the clarifications regarding place of supply for advertising and data hosting services will provide much-needed clarity for service providers. These clarifications are essential for ensuring that businesses can comply with GST regulations without ambiguity, reducing the likelihood of disputes and legal challenges.
B2C E-Invoicing: Pilot Rollout
Building on the success of B2B e-invoicing, the Council announced a pilot program for B2C e-invoicing. Initially, this will be voluntary and rolled out in select sectors and states. This initiative aims to improve transparency and efficiency in the retail sector by allowing customers to verify invoices.
GST Council's Focus on Simplifying Compliance
Over the past few years, the GST Council has consistently worked towards simplifying compliance for businesses, especially small and medium enterprises (SMEs). The 54th meeting continues this trend, introducing several measures aimed at reducing the complexities that have long plagued businesses under the GST regime.
One such example is the e-invoicing initiative, that we already discussed. The rollout of B2C e-invoicing will help businesses in the retail sector streamline their invoicing processes, minimizing the errors and discrepancies that often arise in manual invoicing. For consumers, it will ensure transparency by allowing them to verify invoices directly on the GST portal. As the pilot progresses, the feedback will likely shape future iterations of e-invoicing in retail, potentially becoming mandatory in years to come.
Time Extension for Filing GST Appeals
To give taxpayers more time, the Council recommended changes to Section 112 of the CGST Act. This change will allow a three-month window to file appeals before the GST Appellate Tribunal, starting from a future date to be notified by the government. This will help taxpayers manage their appeal cases more efficiently.
Focus on the Future of Compensation Cess
Another significant aspect of this meeting was the focus on the future of Compensation Cess. A Group of Ministers (GoM) has been formed to study the future of this cess, which is a key revenue mechanism for states.
This decision is particularly crucial as the GST compensation period ended in June 2022, leaving many states concerned about potential revenue losses. The GoM’s findings will provide a clearer roadmap for how this cess will be handled in the coming years.
The compensation mechanism was introduced to help states transition smoothly to GST by compensating them for any loss of revenue for five years post-GST implementation. Now, with the expiry of this period, it’s essential for the government to assess whether the cess should continue and, if so, in what form. The GoM is expected to present its report in the upcoming months, providing much-needed clarity on this issue.
Changes for Composition Taxpayers
The due date for filing GSTR-4 for composition taxpayers has been extended from April 30 to June 30 for each financial year, starting with FY 2024-25. This change provides more breathing room for small businesses to file their returns.
Clarifications on Place of Supply and Input Tax Credit (ITC)
The Council also issued clarifications on several important topics to reduce confusion and disputes:
- Place of supply for advertising services to foreign entities
- ITC availability on demo vehicles for vehicle dealers
- Place of supply for data hosting services provided to international cloud providers.
Impact on Startups and MSMEs
Startups and MSMEs (Micro, Small, and Medium Enterprises) are likely to benefit the most from the decisions taken during this meeting. The reduction in TCS rates for e-commerce operators is expected to have a trickle-down effect, benefiting small sellers who use platforms like Amazon and Flipkart. Lowering the TCS rate will free up capital for these businesses, allowing them to invest more in growth and operations.
Additionally, relaxation of input tax credit rules for earlier years (FY 2017-18 to FY 2020-21) will benefit small businesses that may have missed claiming ITC in the early years of GST implementation. This is especially relevant for businesses that struggled with understanding and complying with GST’s complexities during its initial rollout.
Other Notable Changes
- Section 16(4) of the CGST Act will be retrospectively amended to extend the time limit for claiming ITC on invoices from FY 2017-18 to FY 2020-21.
- A new Reverse Charge Mechanism (RCM) Ledger and an Invoice Management System (IMS) are being introduced to enhance the current GST return framework. The IMS will allow taxpayers to accept, reject, or keep invoices pending, improving ITC reconciliation.
What Does This Mean for Businesses?
The 54th GST Council meeting brought several changes aimed at easing compliance, improving refunds, and making critical goods more affordable. Whether you’re an e-commerce seller, an exporter, or a taxpayer dealing with appeals, these updates could make a significant difference in how you handle your GST obligations.
As these recommendations get implemented, businesses should stay updated with the upcoming circulars and notifications from the GST authorities to fully leverage these benefits.
The decisions taken during this meeting reflect the government's effort to streamline GST processes, making them more business-friendly while continuing to support the larger economy. If you’re running a business or involved in accounting, it's essential to stay informed on how these changes might affect you.
Read more here: Press Release:Press Information Bureau
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