Highlights From 49th GST Meet: Rate Cuts, Compensation And More

The 49th GST Council met on Saturday after the last virtual meeting in December, and agreed upon setting appellate tribunals, rate cuts for pencil sharpeners and liquid jaggery among others, the release of pending compensation dues pertaining to June 2022, while ruling against capacity based taxation on tobacco and tobacco products.

Here's a snapshot of all the decisions taken at the GST council meeting:

Compensation To The States

23 states will get Rs 16,982 crore pertaining to GST compensation for the month of June 2022.

Rs 16,892 crore will be released by the Centre from its resources and recouped later from the future GST Compensation Cess collection in the following year. GST compensation cess is currently being levied till 2026 to repay loans taken from the RBI to pay GST compensation to states during the pandemic when collections were muted.

This marks the centre clearing all 'provisionally admissible' compensation dues for the entirety of the compensation period agreed upon during the implementation of GST.

Additionally, a sum of Rs. 16,524 crore was released to 6 states/union territories - Delhi, Karnataka, Odisha, Puducherry, Telangana and Tamil Nadu who provided the revenue figures as certified by the Accountant General (AG) of the states.

Speaking at the post budget press conference, the union finance minister explained that the AG certificate authorisation is required for the clearance or the payment of the money.

"...Awaiting the AG certificate doesn't mean we don't release anything at all," Sitharaman said, "Nearly 90% of the compensation as provisional amount is released to the states and 5-8% is retained, subject to the AG's certificate reaching us." 

Revenue Secretary Sanjay Malhotra who was also present added that 50% of the provisional amount of the total dues for June 2022 was already released earlier.

"For June 2022, the provisional amount, 50% of which was released earlier based on availability of funds expected till 31 March 2023. That amount was Rs 34,000 crores. 50% we are releasing now, that's Rs 16,982 crores..." he said.

GST Appellate Tribunal

The GST Group of Ministers discussed on the setting up of Goods and Services Appellate Tribunal which was deferred in the 48th GST Council meeting due to paucity of time. Following which, the proposal was passed, subject to tweaks in language of the law.

P Thiaga Rajan, the finance minister of Tamil Nadu told reporters on the sidelines that initially 13 states expressed reservations on some parts of the recommendations of the GoM report, leading to a longer discussion on the subject.

The agenda item was passed by the Council, subject to changes in the language. The revised and compiled tribunal mechanism is expected to be passed in the finance bill in early March.

"The final draft amendments to the GST laws shall be circulated to Members for their comments. The Chairperson has been authorised to finalise the same," a government press release clarified.

Capacity-Based Taxation

The council also discussed on plugging leakages and improving the revenue collection from tobacco and tobacco products like pan masala, gutka, etc.

The recommendations of the GoM on capacity-based taxation and Special Composition Scheme in certain sectors on GST, headed by Odisha Finance Minister Niranjan Pujari was accepted by the council. 

These included greater level of compliance and tracking, not levying tax based on a factory's manufacturing capacity, levying compensation cess on specific tax basis and not ad valorem, and exports to be allowed only against Letter of Undertaking with consequential refund of accumulated input tax credit.

GST Rate Cuts And Tax Exemptions 

GST rates on pencil sharpeners and rab were slashed and additional tax exemptions were given on some items.

The GST levy on rab (liquid jaggery) was reduced to 5% from 18% when sold in pre-packaged and labelled form and 'nil' rate when sold loose. Tax rate on pencil sharpeners was reduced to 12% from 18%.

Other changes:

• For any tracking device or data logger that is already affixed on a container, no separate IGST will be levied and the rate will be 'nil'.

• Exemption benefit covering both coal rejects supplied to and by a coal washery, on which compensation cess has been paid and no input tax credit has been availed.

• Exemption granted to government educational institutions for conducting entrance examinations, will now be extended to other educational bodies/authorities like the National Testing Agency.

• Payment of GST under reverse charge mechanism will be extended to the Courts and Tribunals for taxable services supplied by them such as renting of premises to telecommunication companies for installation of towers, renting of chamber to lawyers etc.

Measures For Trade Facilitation

The Council recommended to rationalise late fee on delayed payment. One-time amnesty was also granted for certain cases.

The council approved extending the time limit for applying for revocation of cancellation of registration. It has agreed to offer one-time amnesty for past cases (subject to conditions) and some pending returns.

The late fees payable on delayed filing on annual returns in Form GSTR-9 for registered persons having aggregate turnover in a financial year up to Rs 20 crore will also be rationalised from FY23.

Additionally, the provision of place of supply for services such as transportation of goods was also rationalised.