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key takeaways Recommendations -45th GST Council Meeting

45th GST Council Meeting

the GST council held its 45th GST Council meeting On the 17th of September, 2021, which resulted in revisions to the GST rate on goods and services, clarifications in various areas, and procedural improvements.

All of the Recommendations and Changes are detailed here.

  • Life-saving drugs Zolgensma and Viltepso used in the treatment of Spinal Muscular Atrophy are exempt from GST when imported for personal use.
  • Existing concessional GST rates on certain COVID-19 treatment drugs are extended until December 31, 2021.
  • GST rates on seven other medicines recommended by the Department of Pharmaceuticals are reduced from 12% to 5% until December 31, 2021.
  • GST rates on retro fitment kits for cars used by people with special abilities have been cut to 5%.
  • The GST rate on Fortified Rice Kernels for programmes such as ICDS has been lowered from 18% to 5%.

I. GST Rate Recommendations for Goods and Services

A. GST rate reductions as a COVID-19 alleviation measure

  1. Extending existing concessional GST rates (currently valid through September 30th, 2021) for the following Covid-19 therapy medicines to December 31st, 2021, namely-
    • nil- amphotericin B
    • Remdesivir – 5%
    • nil-tocilizumab
    • Anticoagulants such as Heparin – 5%
  1. Reduced GST rate to 5% for additional Covid-19 therapy medicines till December 31, 2021, namely-
    • Itolizumab
    • Posaconazole
    • Infliximab
    • Favipiravir
    • Casirivimab and Imdevimab
    • 2-Deoxy-D-Glucose
    • Etesevimab and Bamlanivimab

B. Major proposals on GST rate adjustments for Goods [effective January 1, 2020, unless otherwise indicated]

S. No. Description From To
GST rate changes
1. Kits for retrofitting cars used by the handicapped Appl. rate 5%
2. Rice kernels for programmes such as ICDS, etc. 18% 5%
3. Keytruda – Medicine for treatment of cancer 12% 5%
4. OMCs are supplied with biodiesel for mixing with diesel. 12% 5%
5. Metal ores and concentrates such as iron, copper, aluminium, zinc, and a few others (Metals Will Become Expensive) 5% 18%
6. Renewable Energy Devices and Components 5% 12%
7. Cartons, boxes, bags, and packaging containers, for example (Packaging to get Expensive) 12%/18% 18%
8. Polyurethane and other plastic waste and debris 5% 18%
9. Various types of pens 12%/18% 18%
10. In Chapter 86, you’ll find railway parts, locomotives, and other products. 12% 18%
11. Paper goods of many types, such as cards, catalogues, and printed material (Chapter 49 of tariff) 12% 18%
12. IGST on import of medicines for personal use, namely

1.       Zolgensma for Spinal Muscular Atrophy

2.       Viltepso for Duchenne Muscular Dystrophy

3.       Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.

 12% Nil
13. IGST exemption on goods supplied at Indo-Bangladesh

Border haats

 Appl. rate Nil
14. Unintended waste generated during the production of fish

meal except for Fish Oil

 Nil (for the period

1.7.2017 to 30.9.2019)

 C. Additional revisions to GST rates on goods

  • An unregistered person’s supply of mentha oil has been brought under reverse charge. Furthermore, the Council has proposed that exports of Mentha oil be permitted only against LUT, with a corresponding return of input tax credit.
  • Beginning on 1.4.2022, brick kilns will be subject to a specific composition scheme with a threshold limit of 20 lakhs. Under the plan, bricks would be subject to a 6% GST without ITC. Otherwise, a 12 percent GST rate plus ITC would apply to bricks.

D. Revision of the Inverted Duty Structure in the Footwear and Textiles Sector

GST rate modifications to rectify an inverted tax structure in the footwear and textiles sectors, as addressed at a previous GST Council Meeting and delayed for a suitable period, will take effect on January 1, 2022. The interest rate will rise from 5% to 12%.

E. In accordance with the recent orders of the Hon’ble High Court of Kerala, the Council was asked to evaluate whether certain petroleum products should be brought under the scope of GST. After careful consideration, the Council concluded that it is not suitable to do so at this time.

F. Significant GST Rate & Exemption adjustments for services [effective 1.10.2021 unless otherwise specified]

No. Description From To
1. Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended up to 30.9.2022. – Nil
2. Services by way of grant of National Permit to goods carriages on payment of fee 18% Nil
3. Skill Training for which Government bears 75% or more of the expenditure [presently exemption applies only if Govt. funds 100%]. 18% Nil
4. Services related to AFC Women’s Asia Cup 2022. 18% Nil
5. Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licensing services] 12% 18%
6. Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Color printing of images from film or digital media) 12% 18%
7. Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.
8. E Commerce Operators are being made liable to pay tax on following services provided through them {Directly Effects Companies Like Ola, Uber ,Swiggy / Zomato etc.)

  • transport of passengers, by any type of motor vehicles through it [w.e.f. 1st January, 2022]
  • restaurant services provided through it with some exceptions [w.e.f. 1st January, 2022]
9. Certain relaxations have been made in conditions relating to 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 (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.

G. Explanation of the Goods and Services Tax (GST) rates

  1. Under Chapter 14, pure henna powder and paste with no additions are subject to a 5% GST charge.
  2. Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble (DDGS), and other similar residues coming under HS code 2303 are subject to 5% GST.
  3. All laboratory reagents and other products falling under category 3822 are subject to a 12% GST.
  4. Under category 2106, scented sweet supari and flavored and coated illachi are subject to 18% GST.
  5. Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice” are subject to a GST rate of 28 percent and a Cess of 12 percent, as specified in the GST rate schedule.
  6. Tamarind seeds fall under category 1209 and have hitherto been subject to a zero rate regardless of use; however, they will now be subject to a 5% GST rate (effective 1.10.2021) for uses other than planting, but seeds for sowing will remain exempt.
  7. External batteries sold in conjunction with UPS Systems/Inverters are subject to the GST rate applicable to batteries [28 percent for batteries other than lithium-ion batteries], whereas UPS/inverters are subject to 18 percent.
  8. GST on selected Renewable Energy Projects can be paid in the 70:30 ratio for goods and services, respectively, from 1.7.2017 to 31.12.2018, in the same manner as stipulated for the period commencing on or after January 1, 2019.
  9. Due to uncertainty in the relevant GST rate on Fibre Drums, previous supplies made at 12% GST have been regularized. A consistent GST rate of 18 percent would be applied to all paper and paper board containers, corrugated or non-corrugated, going forward.
  10. The distinction between fresh and dried fruits and nuts is being defined in order to apply the GST rates of “nil” and 5% /12%, respectively.
  11. It is clarified that all pharmaceutical items falling under category 3006 are subject to GST at the rate of 12% [not 18%].
  1. An essentiality certificate issued by the Directorate General of Hydrocarbons on imports, would suffice; there would be no need to take a certificate every time there was an inter-state stock transfer.

H. Clarification of the GST rate on services

  1. Coaching services supplied to students by coaching institutions and non-governmental organizations (NGOs) under the central sector plan of “Scholarships for Students with Disabilities” are free from GST.
  2. Services provided by cloud kitchens/central kitchens are classified as ‘restaurant services’ and are subject to a 5% GST [without ITC].
  3. An ice cream shop sells ready-made ice cream. The supply of ice cream by parlours would be subject to GST at the rate of 18%.
  4. Because they are similar to tolls, overloading costs at toll plazas are exempt from GST.
  5. For the purposes of GST exemption, the rental of vehicles by State Transport Undertakings and Local Authorities is covered by the term ‘giving on hire.’
  6. Beginning on July 1, 2017, services involving the award of mineral exploration and mining rights were subject to an 18% GST rate.
  7. Admission to amusement parks with rides, etc., is subject to an 18% GST charge. The GST rate of 28% only applies to entry to such facilities as casinos, etc.
  8. For the purposes of the item prescribing a 5% GST rate on job labour services related to food and food products, alcoholic liquor for human use is not food and food goods.

A presentation was made to the Council on the compensation scenario, in which it was stated that the revenue collected from the Compensation Cess in the period beyond June 2022 until April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22. Various possibilities, as proposed by various committees/forums, were given in this context.

The Council debated on the matter for a long time. The Council resolved to form a Group of Ministers to look into the problem of correcting the inverted duty structure for important industries, rationalizing rates, and reviewing exemptions from GST in terms of revenue augmentation.

It was also decided to establish a GoM to discuss ways and means of using technology to improve compliance, such as monitoring through improved e-way bill systems, e-invoices, FASTag data, and strengthening the institutional mechanism for intelligence sharing and coordinated enforcement actions by the Centre and the States.

Recommendations concerning GST legislation and process

I Trade Facilitation Measures:

Relaxation of the obligation to file FORM GST ITC-04: under rule 45 (3) of the FORM GST ITC-04, the requirement to file FORM GST ITC-04 is relaxed.

The requirement to file CGST Rules has been reduced as follows:

    • Taxpayers whose annual aggregate turnover in the preceding fiscal year exceeds 5 crores must submit ITC-04 every six months;
    • Taxpayers whose annual aggregate turnover in the preceding fiscal year is less than 5 crores must submit ITC-04 yearly.
  1. Only in terms of net cash liability Section 50 (3) of the CGST Act is to be modified retroactively, w.e.f. 01.07.2017, in the spirit of an earlier Council decision that interest is to be imposed, to specify that interest is to be paid by a taxpayer on “ineligible ITC availed and utilised” rather than “ineligible ITC availed”. It has also been determined that in such instances, interest on invalid ITC availed and utilised at 18% shall be levied.
  2. Unutilized balances in the CGST and IGST cash ledgers may be transferred between distinct individuals (entities with the same PAN but registered in different states) without going through the refund procedure, subject to specific protections.
  3. Issuance of the following circulars to reduce uncertainty and legal conflicts on different subjects, therefore helping taxpayers in general:

Clarification of the scope of “intermediary services”; Will Discuss Separately

    • In “Clarification pertaining to the meaning of the phrase “merely establishment of separate personcondition (v) of Section 2 (6) of the IGST Act 2017 for service export.” A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by condition (v) of sub-section (6) of section 2 of the IGST Act 2017 from considering a supply of services as an export of services;

Clarification on certain GST-related issues:

    • Beginning on January 1, 2021, the date of issue of the debit note (rather than the date of the underlying invoice) will determine the appropriate fiscal year for the purposes of section 16(4) of the CGST Act, 2017.
    • There is no requirement to carry a physical copy of a tax invoice if the invoice was prepared by the supplier in accordance with Rule 48(4) of the CGST Rules, 2017.
    • Only products that are genuinely subject to export duty, i.e., on which some export duty must be paid at the time of export, shall be exempt from the restriction imposed under section 54(3) of the CGST Act, 2017.
  1. A provision should be included in the CGST Rules, 2017, to remove uncertainty about the method and time limit for filing refunds of tax erroneously paid, as provided in sections 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

J. GST Compliance Streamlining Measures

  1. Making Aadhaar authentication of registration essential for submitting refund claims and applications for revocation or cancellation of registration.
  2. A delayed filing fee for FORM GSTR-1 will be auto-populated and paid in the following open return in FORM GSTR-3B.
  3. Refund to be paid into the bank account associated with the same PAN used to acquire registration under GST.
  4. Rule 59(6) of the CGST Rules to be modified with effect from January 1, 2022, to stipulate that a registered person shall not be permitted to file FORM GSTR-1 if he has not filed FORM GSTR-3B for the prior month.
  5. Once the proposed subsection (aa) of section 16(2) of the CGST Act, 2017 is notified, Rule 36(4) of the CGST Rules, 2017 would be changed to restrict availment of ITC in respect of invoices/ debit notes to the extent the details of such invoices/ debit notes are given by the supplier in FORM.
  6. GSTR-1/IFF and are informed to the registered individual using FORM GSTR-2B.

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