Key decisions taken in 45th GST Council Meeting

A.    

Export by establishment of distinct person: On the recommendation of the council meeting, Central Board of Indirect Tax and Customs (“CBIC”) vide Circular No. 161/17/2021-GST dated 20 September 2021, has clarified that a person incorporated under the laws of India and a person incorporated under the laws of any other country are to be treated as separate legal entities and not establishment of distinct person.

Comment: Although the law was clear, field formations were denying refund to a large number of BPOs working as back-office or call centres of the parent companies. This clarification is likely to reduce avoidable litigation and speed up the refunds.

B.     

Scope of ‘intermediary services’: On the recommendation of the council meeting, CBIC vide Circular No. 159/17/2021-GST dated 20 September 2021 has clarified meaning and scope of intermediary service. Few illustrations have been provided to remove ambiguity in the interpretation.

Comment: This is an important move forward from the already meddled split opinion as provided by High Courts. Illustrations provided in the clarification are likely to reduce litigation.

C.     

Relevant date for debit/credit note: On the recommendation of the council meeting, CBIC vide Circular No. 160/17/2021-GST dated 20 September 2021 has clarified that relevant financial year for the debit/credit note would be the date of issuance of such notes. Date of issuance of debit note has been delinked from the date of issuance of the underlying invoice for purposes of availing ITC.

D.    

Refund of tax wrongly paid: CBIC vide Circular No.162/17/2021-GST dated 25 September 2021, has clarified that refund under Section 77 of CGST Act / Section 19 of IGST Act 2017 can be claimed before the expiry of two years from the date of payment of tax under the correct head, i.e., integrated tax paid in respect of subsequently held inter-State supply, or central and state tax in respect of subsequently held intra-State supply, as the case may be.

A.    

Correction in Inverted Duty Structure

The council has acknowledged and recommended that a correction in inverted duty structure for footwear, textiles, and other sectors is required.

Comment: GoM in this case will be tasked with correction of inverted duty structure for major sectors and rationalise rates. It appears that increasing the GST rate for sectors like ores, metals, railway parts, locomotives etc., stems from a two-pronged purpose of improving tax collections and reducing the accumulation of ITC. The GST rate changes for correction in inverted duty structure are to be implemented from January 2022.

B.     

Improvement in Technological Infrastructure

The council meeting has recommended a committee of GoM to review the existing technology and suggest concrete improvements for e-way bill systems, e-invoices, and FASTag data utility among others. The technological enhancement is aimed at strengthening the institutional mechanism for sharing of intelligence and taking coordinated enforcement actions.

Comment: The initial years of GST implementation had been riddled with technical glitches and its spill over to litigation at various levels is still abreast. Therefore, this approach of the Government to address the exiting technological gaps and enhance the same for smooth implementation of a uniform indirect tax regime, is pragmatic.

1.     

Aadhaar authentication of registration to be made mandatory for – (a) Being eligible to file refund claim and (b) Application to revoke cancellation of registration.

2.     

Rule 59(6) of the CGST Rules is to be amended with effect from 1 January 2022 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. 

3.     

Clarification is proposed to the effect that, restriction imposed under Section 54(3) of CGST Act, 2017 from availing refund of accumulated ITC will only be applicable in cases where some export duty has been paid at the time of export.

4.     

Removal of ambiguity regarding procedure and time limit for filing refund of wrong tax paid.

5.     

Services by cloud kitchens/central kitchens are covered under ‘restaurant service’ and to attract 5% GST without ITC and 12% with ITC.

6.     

The council has suggested a host of other changes with respect to applicable rate on various goods and services and rationalization therewith.

7.     

Refund to be disbursed in the bank account, that is linked with same PAN on which registration has been obtained under GST.

8.     

With effect from 1 January 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.