GST Council Announces Key Recommendations, Including Rate Changes and Compliance Measures

The GST Council, chaired by Finance Minister Nirmala Sitharaman, recently held its 50th meeting and announced several important recommendations regarding GST tax rates, trade facilitation measures, and compliance processes. These decisions aim to streamline operations, reduce tax burdens, and simplify compliance for businesses.

One of the significant recommendations pertains to changes in GST rates on goods. The council has decided to reduce the rate on uncooked/unfried snack pellets from 18% to 5%. Additionally, it has exempted IGST on imported medicines and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases listed under the National Policy for Rare Diseases, 2021. The GST rate on imitation zari thread or yarn has been reduced from 12% to 5%. Furthermore, the council has reduced the GST rate on LD slag from 18% to 5% to encourage its better utilization and protect the environment. The GST rate on fish soluble paste has also been reduced from 18% to 5%.

In a move that will benefit consumers and businesses, the council reduced the GST rate from 18% to 5% on food served in cinema halls. This decision is expected to boost consumer spending and encourage investment in the entertainment sector, signaling the council’s commitment to simplifying the tax regime and fostering a business-friendly environment.

The council also made recommendations to facilitate the functioning of the GST Appellate Tribunal, ensuring its smooth constitution and operation. It recommended continuing the relaxations provided in FY 2021-22 in respect of various forms related to annual returns and compliance for FY 2022-23. To ease the compliance burden on smaller taxpayers, the council proposed continuing the exemption from filing annual returns for taxpayers with an aggregate annual turnover up to Rs 2 crore for FY 2022-23. Additionally, clarifications will be provided regarding Tax Collection at Source (TCS) liability in cases involving multiple e-commerce operators in a single transaction of goods or services.

Further measures announced by the council include the clarification that the mere holding of securities of a subsidiary company by a holding company cannot be considered a supply of services and is therefore not taxable under GST. This decision brings relief to taxpayers and resolves the controversy surrounding the specific entry in the Services Accounting Code. The council’s recommendation to make the Input Service Distributor (ISD) mechanism non-mandatory for the distribution of input tax credit from common input services procured from third parties also received appreciation. This move will bring certainty to the taxation of these services and reduce disputes.

The GST Council’s recommendations aim to enhance operational efficiency, reduce tax disputes, and provide relief to taxpayers. By implementing these measures, the council aims to simplify compliance procedures, reduce tax burdens, and ensure a smoother functioning of the GST Appellate Tribunal. The recent increase in GST collections, with a 12% YoY growth of Rs 1.61 lakh crore in June, further indicates positive progress in tax revenue generation.

In summary, the GST Council’s recommendations reflect its commitment to refining the GST framework, providing relief to businesses, and promoting ease of compliance. The changes in tax rates, facilitation of trade, and streamlining of compliance processes will contribute to a more efficient and business-friendly environment while supporting India’s economic growth.

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