On 11-7-2023, the Goods and Services Tax (‘GST’) Council in its 50th Meeting recommended changing GST tax rates, discussed measures for facilitation of trade and measures for streamlining compliances in GST.
Key Points:
1. Recommendations relating to GST rates on Goods-
• Changes in GST rates- Goods (Uncooked/ Unfried Snacks)- reduced to 5%
• Other Changes-
✓ IGST exempted on Dinutuximab (Quarziba) medicine (when imported for personal use).
✓ IGST exempted on medicines and Food for Special Medical Purposes (‘FSMP’) used in treatment of rare diseases enlisted under the National Policy for Rare Diseases, 2021 (when imported for personal use/ imported by Centres of Excellence for Rare Diseases).
✓ Supply of Raw Cotton by agriculturists to cooperative is taxable under reverse charge mechanism.
✓ GST on “Zari Thread” reduced to 5%.
✓ GST on LD Slag reduced to 5%.
✓ Matters relating to trauma, spine and arthroplasty implants for period prior to 18-7-2022 will be on “as is basis” in view of genuine interpretational issues.
✓ GST on Fish soluble paste reduced to 5%.
✓ On products where it is not legally required to declare the retail sale price, such as pan masala, tobacco products etc., the earlier as valorem rate as was applicable on 31-3-2023 will be notified in order for levy of Compensation Cess.
✓ RBL Bank and ICBC Bank are included in the list of specified banks for which IGST exemption is available.
✓ The GST Council recommended amending the rate of compensation cess applicable to utility vehicles having length of 4000 mm, Engine Capacity exceeding 1500 cc, ground clearance of 170 mm. The meaning of Ground Clearance here means in un-laden condition.
Consideringrate of compensation cess applicable to SUVs Raghavan Ramabadran, Executive Partner, Lakshmikumaran & Sridharan said that “considering the myriad interpretations adopted by industry and Department alike on the rate of compensation cess applicable to SUVs, the GST council in their 50th meeting has put matters to rest (at least for time being) by recommending an amendment to the rate entry. The proposed amendment ensures that the rate entry is more precise in its intention and leaves little room for interpretation on the ambit of ground clearance which will have to computed in unladen state once the amendment is brought into force. Retrospective applicability of the amendment has to be tested in due course.”
2. Recommendations relating to GST rates on Services-
• Changes in GST rates- to encourage start ups, GST exemption on satellite launches by ISRO, Antrix Corporation Ltd and New Space India Limited will also be extended to such services supplied by organizations in private sector.
• Other Changes- Unless reverting to Reverse Charge Mechanism, the GTAs will not be required to file declaration for paying GST under forward charge every year.
3. GST on Casinos, Race Course and Online Gaming-
• will be taxed at the uniform rate of 28%.
• Amendments will be made to include Online Gaming and Horse Racing in Schedule III as Taxable Actionable Claims.
• Tax Applicable on-
✓ Casinos- on face value of Chips purchased
✓ Horse Racing- on full value of bets placed
✓ Online Gaming- on full value of bets placed
As per Badri Narayanan, Executive Partner, Lakshmikumaran & Sridharan“this is an unexpected development for the industry in the light of the positive steps in TDS and self-regulatory regime. After taxing 100% of the winning amount under new TDS regime, to tax full value of entry fee will have a significant impact on prize pool and incentive for players. The differential treatment for games of chance like casino and games of skill played in online gaming is arbitrary and will face legal challenges. The nexus of the supply by platform intermediary and contractual arrangements has not been appreciated. This decision will have an adverse impact on the nascent sector and future investments. As highlighted in GST Council, this will aid in the further development of grey market operators and dark web affecting customer interest. The approach of the GST Council is a deviation from internationally accepted taxation practice.”
Further, Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan said that “a major decision has been taken with respect to taxability of online gaming, casinos and horse racing during the 50th GST Council Meeting. The Council has decided to levy GST at the rate of 28% on the entire face value of the game as against the fee retained by the platform. It seems that the Council has decided not to differentiate between game of skill and game of chance for taxability. The changes recommended by the GST Council will require changes in the CGST Act which may be challenged before an appropriate forum. This move by the GST Council will impact the growth prospects and innovation in the industry.”
4. Measures for facilitation of Trade: GST Council recommended that the provision of the Finance Act, 2023 relating to GST Appellate Tribunal be notified by the Centre with effect from 1-8-2023.
5. In order to streamline compliances in GST, various amendments are recommended by the GST Council.
On Manner of calculation of interest under rule 88B Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan said that “another move that will ease the interest burden for the taxpayer is the proposed Clarification that the ITC under all the three heads i.e IGST, CGST, SGST to be taken together to calculate the interest liability in case of wrong availment and utilisation of IGST credit. This will mean that the interest clock will start to tick only when balance in all of the abovementioned credit ledgers become nil in case IGST has been wrongly availed and utilised.”
