Lok Sabha Question No. 1225 (UNSTARRED), answered on 2023-12-11
Subject: Meeting of 52nd GST Council
Ministry: FINANCE
Asked by: Su Thirunavukkarasar, Ravneet Singh

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA UNSTARRED QUESTION NO. 1225

TO BE ANSWERED ON MONDAY, 11 th  December, 2023 Agrahayana 20, 1945 (Saka)

## Meeting of 52 nd  GST Council

1225. SHRI THIRUNAVUKKARASAR SU: SHRI RAVNEET SINGH BITTU:

Will the Minister of FINANCE will be pleased to state:

- (a) whether the meeting of 52nd GST Council was held at Delhi recently;
- (b) if so, the details thereof along with the details of issues that came up for discussion therein;
- (c)  whether a  major relief to farmers, particularly sugarcane cultivators and coarse grain,  millet  producers and  various  other issues  have  also  come  up  for  discussion therein and if so, the details thereof;
- (d)  whether  certain  exemptions  and  tax  cuts  have  been  announced  on  certain commodities and services for the benefit of the common man of the country and if so, the details thereof;
- (e) if so, the action taken or proposed to be taken by the Government thereon;
- (f) whether the Government has released all pending GST dues to States and if not, the details thereof the pending amount, State-wise including Tamil Nadu; and
- (g) whether any decisions have been taken in the meeting for the further facilitation of trade in the country and if so, the details thereof and if not, the reasons therefor?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (b) Yes sir, the 52nd GST Council Meeting was held on 07 th  October 2023 at New Delhi. Details of the meeting alongwith the issues that came up for discussion are attached as Annexure.

(c) to (e) GST rates/rate slabs/exemptions applicable on supply of goods and services are prescribed on the recommendation of the GST Council, which is a constitutional body comprising representatives from States/UTs and Centre.

As regards the recommendation of the GST Council in its 52 nd  meeting, held on 7 th October, 2023,-

## Goods:

- (i)  GST rate on supply of molasses, falling under HS 1703, has been reduced from 28% to 5%. This step is likely to increase liquidity with mills and enable faster clearance of cane dues to sugarcane farmers and also lead to reduction in cost for  manufacture  of  cattle  feed  as  molasses  is  also  an  ingredient  in  its manufacture.
- (ii)  GST  rate  on  supply  of  food  preparation  of  millet  flour,  in  powder  form, containing  at  least  70%  millets  by  weight,  falling  under  HS  1901,  has  been reduced from 18% to 5%, when sold as pre-packaged and labelled, and nil, when sold otherwise. This is likely to promote such food preparation of millet flour and boost its consumer base.

Services: Services of water supply, public health, sanitation conservancy, solid waste management  and slum improvement and upgradation supplied to Governmental Authorities has been exempted from GST.

The necessary notifications have been issued to implement the aforesaid recommendations of the GST Council.

(f) As  per  section 18 of the Constitution (One Hundred and First Amendment) Act, 2016,  compensation  to  the  States  for  loss  of  revenue  arising  on  account  of implementation of the goods and services tax is payable for a period of five years. As per the provisions of section 7(2) of Goods and Services Tax (Compensation to States) Act,  2017,  enacted  by  Parliament,  the  compensation  payable  to  a  State  shall  be provisionally calculated and released at the end of every two-month period, and shall be finally calculated for every financial year after the receipt of final revenue figures, as audited by the Comptroller and Auditor General of India. Government of India has already released the entire amount of provisionally admissible GST compensation to all States/UTs including Tamil Nadu for five years i.e., from 1st July, 2017 to 30th June, 2022.  Final  Compensation  arising  out  of  reconciliation  of  provisional  figures  with audited figures is released immediately on receipt of AG's certificate and no amount where final AG's certificate has been received is pending for release to the states/UTs. Final GST compensation arising out of reconciliation of provisional figures with audited figures to the State of Tamil Nadu has been released for the period upto 31.03.2022 and is pending for release for first quarter of 2022-23 (April to June, 2022) as AG's certificate has not been received so far.

(g) Based on the decisions taken in the 52 nd  GST Council meeting, following trade facilitation measures have been taken by the Government:

(i) Amnesty has been given for filing of appeals on or before January 31, 2024 against demand orders issued upto 31 st  March 2023 in cases where appeal could not be filed within the allowable time period.

(ii) Clarification has been issued regarding taxability of personal guarantee offered by directors to the bank against the credit limits/loans being sanctioned to the company and regarding taxability of corporate guarantee provided for related persons including corporate  guarantee  provided  by  holding  company  to  its  subsidiary  company. Amendment  has  been  made  in  Central  Goods  and  Services  Tax  Rules,  2017  to provide for taxable value of supply of corporate guarantee provided between related parties  as  one  per  cent  of  the  amount  of  such  guarantee  offered,  or  the  actual consideration, whichever is higher.

(iii)  Provision  has  been  made  for  automatic  restoration  of  provisionally  attached property  after  completion  of  one  year.  This  will  facilitate  release  of  provisionally attached  properties  after  expiry  of  period  of  one  year,  without  need  for  separate specific written order from the Commissioner.

(iv) Clarification has been issued to clarify the place of supply in respect of the following supply of services:

- i.  supply of service of transportation of goods, including through mail and courier;
- ii.  supply of services in respect of advertising sector; and
- iii. supply of the 'co-location services'.

(v)  Clarification  has  been  issued  to  clarify  the  admissibility  of  export  remittances received  in  Special  INR  Vostro  account,  as  permitted  by  RBI,  for  the  purpose  of consideration of supply of services to qualify as export of services in terms of the provisions of sub-clause (iv) of clause (6) of section 2 of the Integrated Goods and Services Tax Act, 2017.

(vi) Necessary amendments  in  Notification No. 01/2023-Integrated tax dated 31.07.2023  has  been  made  to  allow  the  suppliers  to  a  Special  Economic  Zone developer or the Special Economic Zone unit for authorised operations to make supply of goods or services to the Special Economic Zone developer or the Special Economic Zone unit on payment of integrated tax and thereafter claim the refund of tax so paid.

## Annexure referred to in part (a) to (b) of reply to Lok Sabha unstarred question No 1225 to be answered on 11.12.2023 regarding recommendations of 52 nd  GST Council Meeting

The 52nd GST Council met under the Chairpersonship of Union Minister for Finance &  Corporate  Affairs  Smt.  Nirmala  Sitharaman  in  New  Delhi  on  07.10.2023.  The meeting  was  also  attended  by  Union  Minister  of  State  for  Finance  Shri  Pankaj Chaudhary, Chief Ministers of Goa and Meghalaya holding finance portfolio, besides Finance Ministers of States & UTs (with legislature) and senior officers of the Ministry of Finance & States/ UTs.

The GST Council inter-alia made the following recommendations relating to changes in  GST tax rates, measures for facilitation of trade and measures for streamlining compliances in GST.

## A. Recommendations relating to GST rates on goods and services

## I. Changes in GST rates of goods

1. GST rates on 'Food preparation of millet flour in powder form, containing at least 70% millets by  weight',  falling  under  HS  1901,  with  effect from  date  of notification, have been prescribed as: 0%  if sold in other than pre-packaged and labelled form5% if sold in pre-packaged and labelled form.
2. To clarify that imitation zari thread or yarn made out of metallised polyester film /plastic film, falling under HS 5605, are covered by the entry for imitation zari thread or  yarn  attracting  5%  GST rate. However, no refund will be allowed on polyester film (metallised) /plastic film on account of inversion.
3. Foreign going vessels are liable to pay 5% IGST on the value of the vessel if it converts to coastal  run. GST Council recommends conditional IGST exemption to foreign flag foreign going vessel when it converts to coastal run subject to its reconversion to foreign going vessel in six months.

## II. Other changes relating to Goods

1. GST  Council  recommended  to  keep  Extra  Neutral  Alcohol  (ENA)  used  for manufacture  of alcoholic  liquor  for  human  consumption  outside  GST.  Law Committee will examine suitable amendment in law to exclude ENA for use in manufacture of alcoholic liquors for human  consumption from ambit of GST.
2. To reduce GST on molasses from 28% to 5%. This step will increase liquidity with mills and enable faster clearance of cane dues to sugarcane farmers. This will also lead to reduction in cost for manufacture of cattle feed as molasses is also an ingredient in its manufacture.
3. A separate tariff HS code has been created at 8 digit level in the Customs Tariff Act to cover rectified spirit for industrial use. The GST rate notification will be amended to create an entry for ENA for industrial use attracting 18% GST.

## III. Changes in GST rates of services

1. Entries at Sl. No. 3 and 3A of notification No. 12/2017-CTR dated 28.06.2017 exempts pure and composite services provided to Central/State/UT governments  and  local  authorities  in  relation  to  any  function  entrusted  to Panchayat/ Municipality under Article 243G and 243W of the Constitution of India.  The  GST  Council  has  recommended  to  retain the  existing  exemption entries with no change.
2. Further, the GST Council has also recommended to exempt services of water supply,  public  health,  sanitation  conservancy,  solid  waste  management  and slum improvement and upgradation supplied to Governmental Authorities.

## IV. Other changes relating to Services

1. To clarify that job work services for processing of barley into malt attracts GST @ 5% as applicable to "job work in relation to food and food products' and not 18%.
2. With effect from 1st January 2022, liability to pay GST on bus transportation services supplied through Electronic Commerce Operators (ECOs) has been placed on the ECO under section 9(5) of CGST Act, 2017. This trade facilitation measure was taken on the representation of industry association that most of the bus operators supplying service through ECO owned one or two buses and were not in a position to take registration and meet GST compliances. To arrive at a balance between the need of small operators for ease of doing business and  the  need  of  large  organized  players  to  take  ITC,  GST  Council  has recommended that bus operators organised as companies may be excluded from the purview of section 9(5) of CGST Act, 2017. This would enable them to pay GST on their supplies using their ITC.
3. To clarify that District Mineral Foundations Trusts (DMFT) set up by the State Governments across the country in mineral mining areas are Governmental Authorities and thus eligible for the same exemptions from GST as available to any other Governmental Authority.
4. Supply  of  all  goods  and  services  by  Indian  Railways  shall  be  taxed  under Forward Charge Mechanism to enable them to avail ITC. This will reduce the cost for Indian Railways.

## B. Measures for facilitation of trade:

- i) Amnesty Scheme for filing of appeals against demand orders in cases where appeal could not be filed within the allowable time period:

The  Council  has  recommended  providing  an  amnesty  scheme  through  a  special procedure under section 148 of  CGST  Act,  2017  for  taxable  persons,  who  could not  file  an  appeal  under section  107  of  the  said  Act, against the demand order under section 73 or 74 of CGST Act, 2017 passed on or before the 31st day of March, 2023, or whose appeal against the said order was rejected solely on the grounds that the said appeal was not filed within the time period specified in sub-section (1) of section 107. In all such cases, filing of appeal by the taxpayers will be allowed against such orders upto 31 st  January 2024 , subject to the condition of payment of an amount of pre-deposit of 12.5% of the tax under dispute, out of which at least 20%  (i.e.  2.5%  of  the  tax  under  dispute)  should  be  debited  from  Electronic  Cash Ledger. This  will  facilitate  a  large  number  of  taxpayers,  who  could  not  file appeal in the past within the specified time period .

- ii) Clarifications  regarding  taxability  of  personal  guarantee  offered  by directors to the bank against the credit limits/loans being sanctioned to the company and regarding taxability of corporate guarantee provided for related persons including corporate guarantee provided by holding company to its subsidiary company: The Council has inter alia recommended to:
- (a) issue a circular clarifying that when no consideration is paid by the company to  the  director  in  any  form,  directly  or  indirectly,  for  providing  personal guarantee to the bank/ financial institutes on their behalf, the open market value of the said transaction/ supply may be treated as zero and hence, no tax to be payable in respect of such supply of services.
- (b) to insert sub-rule (2) in Rule 28 of CGST Rules, 2017, to provide for taxable value of supply of corporate guarantee provided between related parties as one  per  cent  of  the  amount  of  such  guarantee  offered,  or  the  actual consideration, whichever is higher.
- (c) to clarify through the circular that after the insertion of the said sub-rule, the value  of  such  supply  of  services  of  corporate  guarantee  provided  between related parties would be governed by  the proposed sub-rule (2) of rule 28 of CGST Rules, 2017, irrespective of whether full ITC is available to the recipient of services or not.
- iii) Provision for automatic restoration of provisionally attached property after completion of one year: The Council has recommended an amendment in sub-rule (2) of Rule 159 of CGST Rules, 2017 and FORM GST DRC-22 to provide that the order for provisional attachment in FORM GST DRC-22 shall not be valid after expiry of one year from the date of the said order. This will facilitate release of provisionally attached properties after expiry of period of one year, without need for separate specific written order from the  Commissioner.
- iv) Clarification on various issues related to Place of Supply: The Council has recommended to issue a  Circular to clarify the place of supply in respect of the following supply of services:
- (i) Supply of service of transportation of goods, including by mail or courier, in cases where the location of supplier or the location of recipient of services is outside India;
- (ii) Supply of advertising services;
- (iii) Supply of the co-location services.
- v) Issuance of clarification relating to export of services-: The Council has recommended to issue a circular to clarify the admissibility of export remittances received in Special INR Vostro account, as permitted  by RBI, for the purpose of consideration of supply of services to qualify as export of services in terms of the provisions of sub-clause (iv) of clause (6) of section 2 of the IGST Act, 2017.
- vi) Allowing supplies to SEZ units/ developer for authorised operations for IGST refund route by amendment in Notification 01/2023-Integrated Tax dated 31.07.2023: The  Council  has  recommended  to  amend  Notification  No.  1/2023Integrated Tax dated 31.07.2023 w.e.f. 01.10.2023 so as to allow the suppliers  to a Special Economic Zone developer or a Special Economic Zone unit for authorised operations to make supply of goods or services (except the commodities like pan masala, tobacco, gutkha, etc. mentioned in the  Notification No. 1/2023-Integrated Tax  dated  31.07.2023)  to  the  Special  Economic  Zone  developer  or  the  Special Economic Zone unit for authorised operations on payment  of integrated tax and claim the refund of  tax so paid.

## C. Other measures pertaining to law and procedures:

- i) Alignment  of  provisions  of  the  CGST  Act,  2017  with  the  provisions of the Tribunal Reforms  Act, 2021 in respect of Appointment of President and Member  of  the proposed  GST  Appellate  Tribunals: The Council has recommended amendments in section 110 of the CGST Act, 2017 to provide  that:
- an advocate for ten years with substantial experience in litigation under indirect tax laws in the Appellate Tribunal, Central Excise and Service Tax Tribunal, State VAT Tribunals, by whatever name called, High Court or Supreme Court to be eligible for the appointment as judicial member;
- the minimum age for eligibility for appointment as President and Member to be 50 years;
- President and Members shall have tenure up to a maximum age of 70 years and 67 years respectively.
5. ii) Law  amendment  with  respect  to  ISD  as  recommended  by  the  GST Council in its 50th meeting:

GST Council in its 50 th meeting had recommended that ISD (Input Service Distributor) procedure as laid down in Section 20 of the CGST Act, 2017 may be made mandatory prospectively  for  distribution  of  ITC  in  respect  of  input  services  procured  by  Head Office (HO) from a third party but attributable to both HO and Branch Office (BO) or exclusively to one or more BOs. The Council has now recommended amendments in Section 2(61) and section 20 of CGST Act, 2017 as well amendment in rule 39 of CGST Rules, 2017 in respect of the same.

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