After the fractured verdict in the 2024 general elections, there was a general impression that the Central Government would have to adopt a conciliatory approach during their third term in power due to their dependence on other parties for maintaining their numbers in Parliament. A look at the decisions taken at the 53rd meeting of the GST Council would seem to confirm this impression.

Almost 6 decisions were proposed at the meeting which included 14 changes in GST rates, 8 changes in other areas of services, 21 measures and 11 clarifications to facilitate trade and 6 other changes of administrative nature. If we compare this with the 19 decisions taken at the 52nd meeting of the Council, it is easy to conclude that the word cooperative federalism is actually beginning to work in GST. It is ironical that many decisions that were proposed in the 53rd meeting could have been proposed and implemented in earlier meetings.

53rd GST Council meeting

The Council proposed that a separate entry be created in Notification No. 12/2017- CTR 28.06.2017 under heading 9963 ( Accommodation services) to exempt accommodation services having value of supply of accommodation up to Rs. 20,000/- per month per person subject to the condition that the accommodation service is supplied for a minimum continuous period of 90 days. A similar benefit would be extended to past cases.

The Council has proposed 5 changes in taxability of insurance/re-insurance services. For instance, transaction of ceding commission/re-insurance commission between insurer and re-insurer may be declared as no supply under Schedule III of CGST Act, 2017. The Council has also stated that past cases may be regularised on a “ as is where is basis”- a phrase that seems to have caught the fancy of the Council since it has been used at least 7 times in the proposals.

One hopes that when the Notifications are issued, there is clarity on how this phrase is to be implemented. Else, this could lead to an addition to the existing backlog of litigation. The GST Council should instruct the Ministry of Finance to replace the phrase “ may be regularised” to “ should be regularised”.

73 or 74?

A new Section 128A is being proposed to be introduced in the CGST Act which would waive interest and penalties for demand notices issued under Section 73 of the CGST Act for the fiscal years 2017-18, 2018-19 and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice till 31.03.2025.

The waiver does not cover demand of erroneous refunds. Section 73 headlines as “ Determination of tax not paid short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful- misstatement or suppression of facts”.

Section 74 headlines as “Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts”. The proposed waiver of interest and penalty is only for cases where Section 73 has been invoked. There have been instances of trigger-happy officers invoking Section 74 even when there has been no fraud, wilful misstatement or suppression of facts. The waiver will work well only if there are clear instructions given to the assessing officers on the distinction between Section 73 and Section 74.

Easier appeals

Establishment of GST Appellate Tribunals has been the biggest let-down to the taxpayer. Some of these Tribunals are expected to be up and running this year but are bound to be flooded with a huge backlog of cases. Sensing this, the GST Council is proposing that monetary limits subject to certain exclusions for filing appeals from the Tribunal to the Supreme Court.

The threshold limits being proposed are ₹20 lakhs ( Tribunal), ₹1 crores ( High Court) and ₹2 crores ( Supreme Court). While this a welcome move, CBIC should make sure that the sentence “ subject to certain exceptions” is not made a rule but remains an exception. The GST Council would also do well to list out a few areas of dispute where they would not recommend litigation irrespective of the amount.

For instance, for the differences between input tax credit as per GSTR 3B and GSTR 2A, there is an existing procedure that can be further refined. If the procedure is followed by the taxpayer, there is no necessity for the department to go on appeal. In a taxpayer-friendly gesture, the amount of pre-deposit required to file an appeal is also being reduced. The proposal to introduce an amendment to GSTR 1 is also a welcome move.

The Finance Minister has also announced the establishment of a fitment committee to recommend rationalisation of GST rates.

Good and Simple tax?

The conciliatory approach of the GST Council would ensure that tax laws are reasonable and will spring no surprises in the future. If assessing officers at the ground level are trained to be reasonable and not spring any surprises, we could actually be moving towards a good and simple tax- seven years after the phrase was coined.

The writer is a chartered accountant