Kudos to Gstat, Amnesty and Compensation Authorization – A preview of the 49th Gst Board Meeting

A few weeks after the first Amrit Kaal budget, the GST Board met for the 49th time on February 18, 2023 at New Delhi. While Budget 2023 proposed several legislative changes in GST laws, the industry expected clarification on GST Appeals Tribunal (“GSTAT” / “Tribunal”) and online gambling and demanding amnesty plans for the past period.

Of course, the GST Council meeting responded to the industry demands by serving a bunch of desired recipes. However, the decision concerning the Tribunal and payment of pending compensation rights should be seen as the icing on the cake.

Clearance of pending GST set-off rights

The Goods and Services Tax (States Compensation) Act 2017 was enacted to compensate States with the loss of revenue due to the introduction of the GST. The accumulated pending balance of GST Compensation Cess has always been a favorite question posed to central government. However, the 49th The GST Board meeting took a brave and bold step in clearing all outstanding GST balance Compensation Cess Rs. 16,982 crores for June 2022 from its own resources. With this version, the The central government has paid all provisionally admissible compensation due to the States for five years.

In addition, it was also decided that the central government should clear the final GST Compensation Cess Rs. 16,524 crores to states that provided certified revenue figures by the Accountant General.

The clearance of pending central government compensation contributions is clearly a positive and welcome development for the GST in the years to come as it will give states confidence to decide on the inclusion of petroleum products within the scope of the GST. As they say, “we can come from different states, places but our hearts are one i.e. INDIA” and so with greater cooperation and coordination between the Center and the States we will progress towards the first economy in the world.

GSTAT

A strong appeal mechanism in any law is a sign of a strong judiciary as it ensures that justice is done to injured parties. The GST Act provides for an appeal mechanism at four levels, viz. Commissioner (Appeals), GSTAT, High Court and Supreme Court. However, as a natural corollary, the GSTAT could not be constituted due to several complexities and diversities. To add to the dismay, the provisions relating to GSTAT were overturned by Madras High Court in Revenue Bar Association v. Union of India

While discussions on the constitution of GSTAT have been the subject of many meetings of the GST Board, this was during the 47th meeting of the GST Council held in June 2022, during which a committee of the group of ministers (“GoM”) was formed for this. The GoM submitted its report which was accepted by the GST Board and paved the way for GSTAT. Legislative drafting flaws have been corrected and such the changes will be incorporated into the 2023 finance law.

The constitution of GSTAT will pave the way for GST 2.0 because it to be a game changer in bringing clarity to many contentious issues. This will help reduce the burden of Writs Courts, as previous taxpayers had to invoke writs jurisdiction under Section 226 of Indian Act Incorporation after Commissioner’s negative order (appeals). The author also thinks that the States have flexibility in fixing the number of courts and the government should seek to introduce electronic filing mechanism for these appeals.

Tariff Changes

GST rates are an area that is still marred by changes. The 49th meeting of the GST Council recommended for price changes for certain products such as “Rab”, “Pencil sharpeners”, etc. The board also extended the GST exemption on the conduct of examinations by the NTA and further expanded the reverse charge field including the services rendered by the Courts / Tribunals through the rental of rooms etc.

Really, one of the most important recommendations here is the extension of compensation exemption when coal rejects are supplied to coal laundries. This exemption is a welcome measure and will certainly bring enormous relief to the coal industry. In this regard, the author would like to point out that the intention of the 28th GST Board meeting was to exempt the transaction from coal releases from both legs, however, the exemption was extended to one leg only. Therefore, this exemption should be granted retroactive effect.

Changes in Trade Facilitation

In a definite move, the 49th meeting of the GST Council recommended the deletion of the provision provide for the place of supply of the transport of goods where the supplier or the recipient is located in India. This modification now moves the place of supply to the place of the acquirer instead of the first being the destination of the goods. Consequently, taxpayers would be required to reanalyze their tax positions on these transactions.

There has been a relaxation of the respect of deadlines with regard to the request for revocation of cancellation of GST registration, filing of a declaration in the event of a best judgment assessment. further there was a streamlining of late fees for filing annual returns starting in fiscal year 2022-23.

It seems that this GST Council meeting heard the unheard of by proposing amnesty plans for filing of a request for revocation or cancellation of registration and allowing the filing of declarations with with interest, late fees and thus withdraw the assessment based on the best judgment. SSuch extension of time limits and amnesty regimes are likely to benefit the the industry is huge and so is a welcome clarification from the GST Board.

Conclusion

Although few announcements were significant, there was no discussion of online games. It is hope the GoM will publish its report to provide clarity on online gambling. The GST Council has guaranteed to stem the tide of huge litigation in the High Courts thanks to the introduction of GSTAT and relieved taxpayers through amnesty plans. It would be interesting to observe closely Agenda of the GST Council when it reaches half a century of its meetings !!!

—The author, Abhishek A RastoguiEast A Partner at Khaitan & Co. Opinions expressed are strictly personal.