GST Council meeting addresses procedural matters, big decisions still awaited

After a gap of over eight months, the Goods and Services Tax (GST) Council met on June 22. Coming as it did after a brief hiatus brought about by the General Elections, the meeting was keenly awaited by trade and industry, which was hoping for clarity on many issues.

The Council, chaired by Union Finance Minister Nirmala Sitharaman with representatives from all states—including as many as 11 new members—clearly had a busy agenda and announced as many as 52 decisions. Almost all of them were procedural and compliance-related and gave respite to industry and taxpayers by improving the ease of doing business and providing certainty on tax rates.

Some of these decisions include extending the due date for input tax credit, setting monetary limits to file appeals under the GST Appellate Tribunal, reducing the quantum of pre-deposit for filing appeals, and rolling out the biometric-based Aadhaar authentication of registration applicants on a pan-India basis in a phased manner. It also approved a sunset date of April 1, 2025, for anti-profiteering matters—cases can only be filed under this provision up to that date. The Council also decided to provide a new optional facility for form GSTR-1A to help amend details in form GSTR-1 that deals with monthly or quarterly returns.

The Council also provided clarity on tax rates on several items, including the exemption on hostel accommodation outside educational institutions up to Rs 20,000 per month and specified services offered by the Railways to the public, such as the sale of platform tickets, the facility of retiring rooms, and cloakrooms. Its clarifications around co-insurance and reinsurance, stating that no tax will be levied on these, will also provide relief to industry.

Pratik Jain, Partner at professional services firm PwC India, terms it a very positive and fruitful meeting. “In the first GST Council meeting after the formation of the new government at the Centre, several important and trade-friendly measures have been taken, with key themes being ‘ease of doing business’ and bringing certainty to the tax regime,” he says.

However, the Council did not take up the expected review of the 28% tax on online gaming, horse racing, and casinos that was eagerly awaited by players in the sector. Sitharaman said it was neither on the agenda of the meeting nor was it taken up for discussion.

She also said that the long-awaited reform on rate rationalisation will now be taken up in the next meeting of the Council, which is likely to be held in the middle of August.

Addressing reporters after the meeting, Sitharaman said the GST Council has decided that in its next meeting, the new chairperson of the Group of Ministers (GoM) on rate rationalisation will give a report on the status of the exercise and what more has to be done. Bihar Deputy Chief Minister Samrat Choudhary is the new Chair of the GoM.

The GoM was set up way back in September 2021. There have been expectations since that it would submit its report soon and help simplify the current GST rate structure—with five broad slabs of zero, 5%, 12%, 18%, and 28%, as well as a cess—into three slabs. The GoM had submitted an interim report in June 2022 recommending changes in rates for some goods and services.

Jain of PwC says the stress on rate rationalisation and discussions around the GoM have given industry renewed hope that the GST rate structure would be simplified in 12 to 18 months.

Abhishek A. Rastogi, Founder of legal services firm Rastogi Chambers, says, “While comprehensive rate rationalisation to reduce the number of slabs may still take some time, the GST Council has pragmatically addressed some of the rate issues with an objective to provide tax certainty and curb inflation to an extent.”

At the press conference, Sitharaman explained that the decision to include diesel and petrol in the indirect tax levy rests with the states, although the proviso for this already exists in the GST Act.

One other issue is that of the compensation cess, instituted to compensate states for revenue losses after GST’s introduction. Sources indicate that this will be discussed at the next meeting. In its last meeting, the Council decided to discuss the modalities for appropriating the revenue collected by levying a compensation cess on luxury, sin, and demerit goods beyond March 2026.

Experts have called for more clarity on some of the measures. Rastogi says while the sunset clause on anti-profiteering is a showstopper, industry was awaiting clarity on the methodology to be followed. “In the absence of any announcement for the determination of methodology, the industry players will have to continue their litigation before courts and different forums,” he says.

Saurabh Agarwal, Tax Partner at consulting firm EY, says more measures are needed. “Dispute resolution requires a multi-faceted approach. We advocate for an amnesty scheme, a national authority for advance rulings, and full appointment of the Goods and Services Tax Appellate Tribunal (GSTAT),” he says, adding that industry engagement and audit efficiency can be improved through sectoral committees and standardised compliance manuals.

Given the Council’s focus on hearing out stakeholders and clarifying issues they raise, it is likely to work on many of these areas in the coming months. For now, the wait is on for the Council’s next meeting.

@surabhi_prasad