GST appellate tribunal gets nod; States being paid dues

The money comes from the exchequer’s own coffers as the GST Compensation Cess Fund does not have an adequate balance, and will be recouped from future cess collections.

February 18, 2023 05:23 pm | Updated 11:22 pm IST - NEW DELHI  

Union Finance Minister Nirmala Sitharaman addresses a press conference on GST in New Delhi on February 18, 2023.

Union Finance Minister Nirmala Sitharaman addresses a press conference on GST in New Delhi on February 18, 2023. | Photo Credit: R.V. Moorthy

The Goods and Services Tax (GST) Council on Saturday reached a broad consensus on the long-awaited constitution of the GST Appellate Tribunal to resolve the rising number of disputes under the 68-month old indirect tax regime that are now clogging High Courts and other judicial fora. The Council reduced the tax levy on a few items, including pencil sharpeners. 

Finance Minister Nirmala Sitharaman, who chairs the Council, also announced that the Centre was releasing GST compensation dues to States amounting to ₹33,506 crore on Saturday. The money comes from the exchequer’s own coffers as the GST Compensation Cess Fund does not have an adequate balance, and will be recouped from future cess collections.

“The entire pending balance of GST Compensation of ₹16,982 crore for June 2022 [the last month of the five-year period since GST’s launch for which such recompense was payable to States] will be cleared,” Ms. Sitharaman said. 

Six States and Union Territories, including Telangana, Odisha and Puducherry, are also being paid ₹16,524 crore as additional compensation based on certificates from their respective Accountant Generals. A bulk of this sum will go to Karnataka (₹7,806 crore), Tamil Nadu (₹4,223 crore) and Delhi (₹2,393 crore).    

   

Meeting in person after a gap of nearly eight months, the Council that includes representatives of all States, also approved lower penal charges for delayed filing of annual returns by businesses with a turnover of up to ₹20 crore a year. An amnesty scheme for taxpayers unable to file three statutory returns, that entails conditional waivers or reductions in late fees for such filings, also got the Council’s nod.   

Rate changes

The GST rate on Raab, a kind of liquid jaggery typical to sugarcane-growing States like Uttar Pradesh, will be reduced from 18% to nil, if it is sold loose, and 5%, if it is pre-packaged and labelled, Ms. Sitharaman said. “Then there has been quite a lot of discussion on pencil sharpeners, which is being reduced from 18% to 12%,” she added.    

“The Council also decided to extend the GST exemption available to educational institutions and Central and State educational boards for conducting entrance examinations to any authority, board or a body set up by the Central Government or State Government, including National Testing Agency for conduct of entrance examination for admission to educational institutions,” the Finance Ministry said in a statement.  

 

Tag-tracking devices or data loggers already affixed on containers will no longer attract a separate GST levy of 18% and Customs norms will be amended to grant ‘nil’ GST treatment for them.  

Plugging tax evasion

The Council accepted the report of a ministerial group on whether capacity-based taxation and special composition scheme should be considered for evasion-prone sectors like pan masala and gutkha. While no special dispensation will be offered for such sectors, the Council has decided to switch the compensation cess levied on these commodities from an ad valorem basis to a specific tax-based levy “to boost the first stage collection of the revenue” and mandated that exports only be allowed against letters of undertaking assuring of GST compliance. 

Revenue Secretary Sanjay Malhotra indicated that the specific tax levy to replace the ad valorem cess will be determined in due course, even as GST officials will pursue fresh compliance and tracking measures to plug tax evasion. 

Tribunal in Finance Bill

For industry and tax practitioners, the most significant outcome of Saturday’s meet was the progress made on the constitution of the GST Appellate Tribunal, with Ms. Sitharaman stating that a ministerial group’s recommendations on the issue have been “accepted with slight modifications in the language”. 

 

The changes will be shared with States by Sunday and a final draft will be readied with States’ consent by March 1, so that this year’s Finance Bill can incorporate the enabling legislative provisions for the Tribunal, the Minister conveyed. 

“The Council has authorised the chairperson to take the final view and incorporate it in the Finance Bill, since there is not much time for the Council to meet again,” she added. Central Board of Indirect Taxes and Customs chairperson Vivek Johri noted that the operationalisation of the Tribunals will bring significant respite for taxpayers.  

“It is difficult to pinpoint a specific number of cases that may come to the Tribunals, as there are writ petitions filed in High Courts. But as and when they are set up, the Tribunals will provide a big relief, because anecdotally, many taxpayer and department disputes are not able to find a resolution,” he said. 

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