52nd GST Council Meet Round-Up: From ENA Levy To Extra Time On Appeal Filing

The GST Council, in its 52nd meeting held on Saturday, led by the Union Finance Minister and attended by state counterparts, approved range of noteworthy decisions.

The outcome of the 52nd Goods and Services Tax Council meeting includes technical and procedural clarities apart from approving exemptions on millet-based powdered foods, coastal cruises and a rate clarity on Extra Neutral Alcohol (ENA) for industrial use.

The federal body also discussed the issue of tax demand notices to online gaming companies with the Centre and the states of Delhi and Goa in opposite camps on the interpretation of retrospective levy. The centre on Saturday, defended its stance on a 28% levy as always existing.

On the legal front, additional time for appeal filing has been given till January 31, 2024, for orders issued till March 31, 2023. The age limits extension in the tenure of president and member posts in tribunals and the eligibility of advocates with 10 years of experience for the post of a judicial member in appellate tribunals are among other key recommendations.

Corporate guarantee given by a parent to a subsidiary company is set at 18% GST on 1% of the amount of such guarantee offered, or the actual consideration, depending on whichever is higher.

The zero tax on powdered-millet foods found a unanimous approval from the GST council, according to Union Finance Minister Nirmala Sitharaman. Speaking at the post-meeting press conference, she noted that the GST rates on food preparation of millet flour in powder form, which contains at least 70% millets by weight would attract 'nil tax' if sold loose and without pre-packaging and labelling and 5% if sold in pre-packaged and labelled form.

An exemption for foreign vessels converted for coastal runs, which previously attracted a 5% Integrated Goods and Services Tax (IGST) was also announced by the Finance minister, in what she added was aimed at promoting tourism.

The council also weighed in on differentiating the tax liability for ENA used for the manufacture of alcoholic liquor for human consumption and ENA for industrial use. The latter will attract 18% GST while ENA for human consumption remains outside the purview of the GST council.

The council's right to tax ENA is well-established...but the council has ceded the right to (impose) a tax on states, Sitharaman added on Saturday.

GST rate on molasses was slashed from 28% to 5%, in a move to increase liquidity with mills and enable faster clearance of cane dues to sugarcane farmers.

Tax exemption on the supply of services provided to Central/State/UT governments and local authorities for carrying out public works in supply to governmental authorities was clarified by Revenue Secretary Sanjay Malhotra who was also present at the post-meeting press conference.

In a move that will offer a breather to appeal filers and reduce the pendency of writ petitions for time relief, the Council recommended providing an amnesty scheme for extending the time for filing an appeal for orders passed on or before March 31, 2023, till January 31, 2024.

This would be subject to the payment of a pre-deposit of 12.5% of the tax under dispute, out of which at least 2.5% should be debited via the electronic cash ledger facility, according to a government release on the matter.

The differentiation between zero taxability of personal guarantee offered by directors to the bank against the credit limits/loans and corporate guarantee was received as a 'welcome move.'

Abhishek Jain, indirect tax head and partner, KPMG noted that the taxability of corporate and personal guarantees has been a vexing issue since the inception of GST. The move, he added would 'contain unwarranted litigations on the issue.' However, he cautioned that the taxability for the past period and in scenarios where full credit is not available, and valuation is subjective may still be challenged by the industry.

• The council directed that a clarification note be issued for the receipts in the recently optionally special Rupee Vostro accounts to be admitted as valid receipts for export claims purposes.

• Imitation zari thread or yarn made out of metallised polyester film or plastic film was clarified to attract a 5% GST rate but it would not be up a refund on account of inversion.

• The council also recommended allowing taxpayers to supply authorised goods to Special Economic Zones (SEZ) on payment of IGST and claim the refund of tax so paid from Oct 1, 2023.

KPMG’s Jain added that the ambiguity in claiming a refund for GST paid on supplies made by domestic suppliers to SEZ comes to a rest with the explicit inclusion of such supplies for the rebate route. He added that the move would help prevent apprehended potential working capital concerns for domestic industry engaged in SEZ supplies.