GST Council approves 'Track and Trace Mechanism' to curb evasion
Jaisalmer | In a significant move to plug leakage, the GST Council on Saturday approved a proposal to implement 'Track and Trace Mechanism' for specified evasion-prone commodities, under which a unique mark will be affixed on such goods or packages to trace them throughout the supply chain.
This is to insert an enabling provision in CGST Act, 2017 through Section 148A so as to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities.
"The system shall be based on a Unique Identification Marking which shall be affixed on the said goods or the packages thereof. This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain," the finance ministry said while listing out decisions taken in the 55th Council meeting here.
"To clarify that in respect of supply of 'Online Services' such as supply of online money gaming, OIDAR services, etc. to unregistered recipients, the supplier is required to mandatorily record the name of the state of the unregistered recipient on the tax invoice and such name of state of recipient shall be deemed to be the address on record of the recipient for the purpose of section 12(2)(b) of IGST Act, 2017 read with proviso to rule 46(f) of CGST Rules, 2017," it said.
With regard to the decision taken about GST rate on goods, Finance Minister Nirmala Sitharaman said, the Council has decided to cut the rate on fortified rice kernel (FRK) to 5 per cent from 18 per cent and also exempted GST on gene therapy.
Besides, she said, it was decided to reduce the rate of compensation cess to 0.1 per cent on supplies to merchant exporters at par with GST rate on such supplies and to exempt from IGST imports of all equipment and consumable samples by Inspection Team of the International Atomic Energy Agency (IAEA) subject to specified conditions.
As regards services, she said, the Council decided to exempt GST on the contributions made by general insurance companies from the third-party motor vehicle premiums collected by them to the Motor Vehicle Accident Fund, constituted under section 164B of the Motor Vehicles Act, 1988.
This fund is constituted for providing compensation/cashless treatment to the victims of road accidents including hit and run cases.
In addition, she said, GST Council recommended no GST on transaction of vouchers as they are neither supply of goods nor supply of services.
The provisions related to vouchers is also being simplified, she said, adding, the Council recommended to amend the definition of 'pre-packaged and labelled' to cover all commodities that are intended for retail sale and containing not more than 25 kg or 25 litre, which are 'pre-packed' as defined under the Legal Metrology Act, or a label affixed thereto is required to bear the declarations under the provisions of the Act and rules.
It was also clarified that no GST is payable on the 'penal charges' levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.
The Council too approved issuance of clarifications through circulars to remove ambiguity and legal disputes in certain issues.
The panel recommended reduction of payment of pre-deposit for filing an appeal before the appellate authority in respect of an order passed, which involves only a penalty amount.
Thiruvananthapuram/Jaisalmer | The 55th meeting of the Goods and Services Tax (GST) Council held in Jaisalmer, Rajasthan, on Saturday, made key decisions aimed at supporting the small-scale sector and preventing market monopolisation, the Kerala Finance Minister's office said.
The council also introduced measures expected to boost the business sector, a significant step taken during the meeting, according to an official release.
Kerala has been demanding for a long time to ensure accuracy in the Integrated Goods and Services Tax (IGST).
One of the key decisions was to mandate that bills for online services clearly specify the state where the service is provided, it added.
Currently, many inter-state transactions lack proper documentation of the service's location, resulting in the state of consumption not receiving the applicable tax. This change is expected to address the issue and ensure more accurate tax distribution, the release said.
In the previous GST Council meeting, it was decided that if unregistered individuals rent out buildings to businesses, the tenant would be required to pay GST on the rent under the reverse charge mechanism. However, this created an additional burden for traders under the composition scheme, as they are not eligible to claim input tax credit for such payments.
To address this, the GST Council meeting has decided to exempt traders registered under the composition scheme from the reverse charge tax liability on rent, the release added.
The Council meeting also intervened in key issues such as the tax rate on food in hotels with premium room rents, taxes on medicines for specific cancer treatments, and the imposition of late fees on GST returns.
In response to Kerala's demand for accurate IGST settlement, the GST Council has formed a committee of officials to examine various aspects of the IGST process. This committee is tasked with providing recommendations to improve the accuracy of settlements.
The release stated that these effort will further continue to ensure accuracy in this area and will strengthen the state treasury.
During discussions on including aviation turbine fuel in the GST framework, Kerala firmly opposed any move that could undermine the limited taxing powers of the states post-GST implementation, the release added.
Additionally, while Kerala was granted permission to collect a flood cess after the 2018 floods, Andhra Pradesh has also sought approval from the Council to levy a cess.
Kerala not only supported this demand but also called for state governments which are better attuned to local issues to be allowed in mobilising the necessary resources, the release added.