Outcome of 45th GST Council Meeting held on 17th September 2021

GST

The GST Council met for the 45th time on 17th September 2021 at Lucknow. The Council discussed and approved:

(I) Recommendations relating to GST rates on Goods and Services;

(II) Issue of Compensation Scenario; and

(III) Recommendations relating to GST Law and Procedure.

I. Recommendations relating to GST rates on goods and services 

1. Extension of existing concessional GST Rates on Covid-19 treatment drugs 

Sl. No.Proposal CategoryDrug NameLower Rate benefit Extended Upto
1Extension of Existing Concessional GST Rates on following Covid-19 treatment drugs i. Amphotericin B -nilii. Remdesivir – 5%iii. Tocilizumab -niliv. Anti-coagulants like Heparin -5%Extended till 31st Dec 2021 (presently extended upto 30th Sep 2021)
2Reduction of GST rate to 5% on more Covid-19 treatment drugs:i. Itolizumabii. Posaconazoleiii. Infliximabiv. Favipiravirv. Casirivimab & Imdevimabvi. 2-Deoxy-D-Glucosevii. Bamlanivimab & EtesevimabExtended till 31st Dec 2021 (presently extended upto 30th Sep 2021)

2. Changes in GST Rates on Goods and Services (With Effect From 1st Oct,2021)

S. NoItemCurrent RateNew Rate
1Retro fitment kits for vehicles used by the disabledAppl. Rate5%
2Fortified Rice Kernels for schemes like ICDS etc.18%5%
3Medicine Keytruda for treatment of cancer12%5%
4Biodiesel supplied to OMCs for blending with Diesel12%5%
5Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others5%18%
6Specified Renewable Energy Devices and parts5%12%
7Cartons, boxes, bags, packing containers of paper etc.12% or 18%18%
8Waste and scrap of polyurethanes and other plastics5%18%
9All kinds of pens12% or 18%18%
10Railway parts, locomotives & other goods in Chapter 8612%18%
11Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff12%18%
12IGST on import of medicines for personal use, namely I. Zolgensma for Spinal Muscular Atrophy II. Viltepso for Duchenne Muscular Dystrophy III. Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.12%NIL
13IGST exemption on goods supplied at Indo-Bangladesh Border haatsApp. RateNIL
14Unintended waste generated during the production of fish meal except for Fish OilNil (for the period 1.7.2017 to 30.9.2019)

3. Other Changes relating to GST rates on Goods

Sl. NoCategoryDecision taken by the GST Council
1Supply of Mentha Oil→ Supply of mentha oil from unregistered person has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
2Brick Kilns→ Brick kilns would be brought under special composition scheme with threshold limit of Rs. 20 lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.

4. Correction in Inverted Duty structure in Footwear and Textiles sector

Sl. No CategoryDecision taken by the GST Council
1Inverted Duty Structure in Footwear and Textiles Sector→ GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as it was discussed in earlier GST Council Meeting will now be implemented with effect from 1st Jan, 2022

5. Major GST changes in relation to rates and scope of Exemption of Services (With Effect From 1st Oct,2021)

S. NoItemCurrent RateNew Rate
1Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022._NIL
2Services by way of grant of National Permit to goods carriages on payment of fee18%NIL
3Skill Training for which Government bears 75% or more of the expenditure [presently exemption applies only if Govt funds 100%].18%NIL
4Services related to AFC Women’s Asia Cup 2022.18%NIL
5Licensing 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%
6Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media)12%18%
7Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.
8E Commerce Operators are being made liable to pay tax on following services provided through them:(i) transport of passengers, by any type of motor vehicles through it (w.e.f. 1st January, 2022)(ii) restaurant services provided through it with some exceptions (w.e.f. 1st January, 2022)
9Certain 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.

6.Clarification in relation to GST rate on Goods

ItemHSN CodeGST Rate
Pure henna powder and paste, having no additives145%
Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues23035%
All laboratory reagents and other goods382212%
Scented sweet supari and flavored and coated illachi falling under heading 2106 attract GST at the rate of 18%  
Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice28% plus 12% Cess
Tamarind seeds fall under heading 1209, and hitherto attracted nil rate irrespective of use. However, henceforth they would attract 5% GST rate (w.e.f. 1.10.2021) for use other than sowing. Seeds for sowing will continue at nil rate12095%
External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [28% for batteries other than lithium-ion battery] while UPS/inverter would attract 18% 28% / 18%
GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for goods and services, respectively, during the period from 1.7.2017 to 31.12.2018, in the same manner as has been prescribed for the period on or after 1st January 2019  
Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12% GST in the past have been regularized. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated. 18%
Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;  
All pharmaceutical goods300612%
Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.  

7. Clarification in relation to GST rate on Services

ItemHSN CodeGST Rate
Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST Exempt
Services by cloud kitchens/central kitchens are covered under ‘restaurant service’  5% (No ITC)
Ice cream parlor sells already manufactured ice- cream. Such supply of ice cream by parlors 18%
Overloading charges at toll plaza are exempt from GST being akin to toll. Exempt
The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption Exempt
The services by way of grant of mineral exploration and mining rights 18% (w.e.f. 01-07-17)
Admission to amusement parks having rides etc. attracts GST rate of 18%. The GST rate of 28% applies only to admission to such facilities that have casinos etc. 18%
Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products 

 II. On the issue of Compensation Scenario

8. Issue of Compensation Cess 

On the issue of compensation scenario, a presentation was made to the Council wherein it was brought out that the revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22.

III. Recommendations relating to GST Law and Procedure 

8A. Measures for Trade Facilitation –

ProposalMeasures
Form ITC-04Aggregate Turnover (ATO) in Preceding Financial Year1. Above 5 Crs – Half Yearly2. Below 5 Crs – Annually
Interest is to be charged only in respect of net cash liability.Section 50 (3) of the CGST Act to be amended retrospectively, w.e.f. 01.07.2017,Interest in such cases should be charged on ineligible ITC availed and utilized at 18% with effect from 01.07.2017Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having Same PAN but registered in different states)
Interest is to be paid on “IneligibleITC availed and utilized” and not on “Ineligible ITC availed”Interest is to be paid on “Ineligible ITC availed and utilized” and not on “Ineligible ITC availed” and Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred
Issuance of the Circulars in order to remove ambiguity and legal disputes on various issuesa. Clarification on scope of “intermediary services”b. Clarification relating to interpretation of the term “merely establishment of distinct person” in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services :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 the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services;
Clarification in respect of certain GST related issues:1. W.e.f. 01.01.2021, the date of issuance of debit note (and not the date of underlying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;2. There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;3. Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC
Provision to be incorporated in in CGST Rules, 2017 for Refundfor removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

8B. Measures for Streamlining compliances in GST

ProposalMeasures
Aadhaar authentication of registration to be made mandatoryFor being eligible for filing refund claim and application for revocation of cancellation of registration.
Late fee for delayed filing of FORM GSTR-1To be auto-populated and collected in next open return in FORM GSTR-3B.
Bank Account for payment of RefundRefund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 (Blocking of filing of Form GSTR 1)To provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month.
Amendment in Rule 36(4) of CGST Rules, 2017 (Eligible Invoices for availment of ITC)Once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.

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