CBIC clarifies ambiguity on GST on pre-packaged items, new rates from Monday

Source: Economic Times, 17 July 2022

The Central Board of Indirect Taxes and Customs (CBIC) on Sunday clarified that all pre-packaged items containing a quantity up to 25 Kg, will attract a GST of 5%.

The CBIC said that the items, which are pre-packaged in above 25 Kg, in a single packet will be exempt from GST.

Also the clarification said that if several packages intended for retail sale to the ultimate consumer, say 10 packages of 10 Kg each, are sold in a larger pack, then GST would apply to such supply. Such a package may be sold by a manufacturer through a distributor.

For instance a package of rice containing 50 Kg would not be considered a pre-packaged and labelled commodity for the purposes of GST levy, even if rule 24 of Legal Metrology (Packaged Commodities) Rules, 2011, mandates certain declarations to be made on such wholesale items.

The CBIC also clarified that packaged commodities supplied for consumption by industrial consumers or institutional consumers are excluded from the purview of the Legal Metrology Act. Therefore no GST will be attracted to this.

In case a manufacturer is supplying to distributor, to dealer and to retailer then GST will be applicable to it but the manufacturer/wholesaler/retailer would be entitled to input tax credit on GST charged by his supplier in accordance with the Input Tax Credit provisions in GST.

The clarification came after many businesses said that the notification issued by the CBIC has left much ambiguity and may be subject to multiple interpretations.

The Finance Ministry has notified GST rates for various goods sold as pre-packaged and pre-labelled beside others, which was decided by the 47th GST council meeting held in Chandigarh.

The notification, said that “expression ‘pre-packaged and labelled’ means a ‘pre-packaged commodity’ as defined in clause (l) of section 2 of the Legal Metrology Act, 2009.

Under the Legal Metrology Act “pre-packaged commodity” means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity.

Experts said that the notification mentioned about retail sales only, so, the issue is will declaration on packages of above 25 kgs also required and they sought clarification from the government.

Saurabh Agarwal, Tax Partner, EY India, said, “The specified pre-packaged and labelled commodities (without registered brand name) such as wheat, rice, maize, makhana, specified flours, etc would be liable to 5% GST from 18 July 2022 increasing the cost for the customer”.

He added that it is important for industry to examine whether the specified pre-packaged commodities are required to have a declaration on it under the Legal Metrology Act, 2009 as the levy of GST on such products have been linked to the declarations under the said Act.

Small Traders Protests
Trade bodies from across the country have been writing to the finance minister to withdraw the five percent GST imposed on unbranded pre-packaged food items.

Sanjay Chhabria, Director Nexdigm, adds,” This move is likely to have adverse implications on the small traders and retailers who hitherto were outside the GST net and had neither obtained any GST registration nor undertaken any compliances”.

He added that with such pre-packaged and pre-labelled food items getting costlier for the end consumers, the levy could lure them to more established brands, or prefer items which are loosely sold given that they continue to be exempt from GST.

Changes in GST rates to take effect from July 18

Source: Financial Express, 23 June 2022

The fitment committee of the Goods and Services Tax (GST) Council has suggested a cut in the tax rate on ostomy appliances from 12% to 5% and a uniform tax of 5% on orthopedic implants.

The panel, whose recommendations will be considered by the Council on June 28-29 in Chandigarh, also proposed to clarify that mango pulp attracts 12% GST not 5% and nepa stones 5%.

The fitment committee suggested reduction in the GST rate on ostomy appliances, used by patients suffering from ulcerative colitis such as pouch, flange wafer and stoma adhesive, to bring them at par with the concessional rate of 5% for urine bags.

To avoid complexities involved in taxing of orthopedic implants at the rate of 5% or 12% on different items, the council suggested a uniform tax rate of 5%. Currently, GST is levied at the rate of 12% on splints, other fracture appliances, artificial parts of the body and other appliances which are worn or carried.

Currently, polished stone tiles attract 18% GST. However, Kota stone and ceramic stiles attract 5% GST. Andhra Pradesh had requested the council that minor polished stones can not be treated with mirror polished stones which attract 18% GST and sought 5% GST on nepa stones, a variety of dimensional limestone. The fitment panel has recommended that nepa stones without mirror polishing should be taxed at 5%.

GST Council to consider lowering tax on ostomy and orthopedic items

Source: Financial Express, 23 June 2022

The fitment committee of the Goods and Services Tax (GST) Council has suggested a cut in the tax rate on ostomy appliances from 12% to 5% and a uniform tax of 5% on orthopedic implants.

The panel, whose recommendations will be considered by the Council on June 28-29 in Chandigarh, also proposed to clarify that mango pulp attracts 12% GST not 5% and nepa stones 5%.

The fitment committee suggested reduction in the GST rate on ostomy appliances, used by patients suffering from ulcerative colitis such as pouch, flange wafer and stoma adhesive, to bring them at par with the concessional rate of 5% for urine bags.

To avoid complexities involved in taxing of orthopedic implants at the rate of 5% or 12% on different items, the council suggested a uniform tax rate of 5%. Currently, GST is levied at the rate of 12% on splints, other fracture appliances, artificial parts of the body and other appliances which are worn or carried.

Currently, polished stone tiles attract 18% GST. However, Kota stone and ceramic stiles attract 5% GST. Andhra Pradesh had requested the council that minor polished stones can not be treated with mirror polished stones which attract 18% GST and sought 5% GST on nepa stones, a variety of dimensional limestone. The fitment panel has recommended that nepa stones without mirror polishing should be taxed at 5%.

Goods and Services Tax Council may revise norms for GST levy

Source: Financial Express, 20 April 2022

With companies complaining about the levy of tax on allocation of salary cost of head-office employees to branches under the so-called cross-charge mechanism, the Goods and Services Tax Council will likely refer the matter to its law committee to review its applicability.

The levy has increased the cost of firms in sectors currently exempt from goods & services tax (GST) and raised the compliance burden for most others.

“References have come from many places, including some industry associations on the matter. It will be taken to the GST law committee,” a senior official told FE.

Industry sources said there has been a sudden surge in the Directorate General of GST Intelligence (DGGI) investigation where issues such as inclusion of salary in cross-charge is being raised. GST is 18% on supply of services under cross charge.

In December 2021, the Appellate Authority for Advance Ruling (AAAR), Maharashtra had ruled in the case of Cummins India that allocation and recovery of the salary of the employees of the head office from the branch office/units will be subject to GST. The company had sought a ruling on the applicability of GST on allocation and recovery of the salary cost of the head office’s employees from the branch offices in different states.

The objective of cross-charge was to pass on the input tax credit from head office to branch offices in different states seamlessly for GST paid on common services of a company such as rent, IT and advertisement, industry sources said. However, there are no specific guidelines on the manner and structure of cross charge or whether to include salary costs of head office staff or not in it for taxation purpose.

“The GST Council needs to examine whether cross charge mechanism should continue and in what form. The most important issue is as to whether salary of one office (typically head office) staff has to be included in this for levying GST,” said Pratik Jain, Partner, Price Waterhouse & Co LLP.

The most impacted sectors are those exempt from GST such as healthcare, education, electricity and petroleum as input tax credit is not available, Jain said. It is also adversely impacting sector such as restaurants and real estate which don’t get input tax credit on taxes paid on input services and it becomes an additional cost for them.

Companies in these sectors, which were already suffering from GST on cross charges for common services, will see further rise in operational cost due to inclusion of salary. For other companies, it is more sort of a compliance burden as taxes paid in supply of services to branches are recovered through ITC mechanism.

In the pre-GST regime, any supply of service between head office and branch office was not taxable. Hence, it has been a matter of dispute between companies and tax officials after the GST was rolled out in July 2017. Inclusion of salary in cross charges for GST has further complicated the matter as industry is of the view that employees work for the company as a whole and not employed for head office or branches.

Steady rise in generation of e-way bills so far in February

Source: Financial Express, 22 February 2022

Generation of e-way bills for inter-state trade under the goods and services tax (GST) system stood at 24.27 lakh in the week ended February 20, 3.2% higher than in the week ended January 23, reflecting an improvement in commerce.

The daily e-way bills averaged 23.83 lakh in the first 20 days of February, with the number coming in at 4.77 crore. Generation of daily e-way bills had declined 4% on month to 22.2 lakh in January, compared with 23.1 lakh in December.

E-way bills generation is a proxy of GST revenues. Gross GST collections came in at Rs 1.41 lakh crore in January (December sales), the highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

Even though e-way bills generation has declined by 4% in January over December, the GST collections could still be around Rs 1.3 lakh crore for February (January sales) going by the recent trend.

Bills generation at 7.35 crore in October was the highest monthly data, thanks to a spurt in goods dispatches for stocking ahead of the festival season by shopkeepers and traders.

Government extends FY21 GST annual return filing deadline till February 28

Source: Financial Express, 30 December 2021

The government has extended by two months till February 28 the deadline for businesses to file GST annual returns for 2020-21 fiscal ended March 2021.

“The due date for furnishing annual return in FORM GSTR-9 & self-certified reconciliation statement in FORM GSTR-9C for the financial year 2020-21 has been extended from 31.12.2021 to 28.02.2022,” the Central Board of Indirect Taxes & Customs (CBIC) said in a late-night tweet on Wednesday.

GSTR 9 is an annual return to be filed yearly by taxpayers registered under the Goods and Services Tax (GST). It consists of details regarding the outward and inward supplies made or received under different tax heads. GSTR-9C is a statement of reconciliation between GSTR-9 and the audited annual financial statement.

Furnishing of the annual return is mandatory only for taxpayers with aggregate annual turnover above Rs 2 crore while a reconciliation statement is to be furnished only by the registered persons having aggregate turnover above Rs 5 crore.

A host of changes in GST law will come into effect from January 1

Source: Economic Times, 27 December 2021

The GST regime will see a host of tax rate and procedural changes coming into effect from January 1, including liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services. Also, the correction in inverted duty structure in footwear and textile sectors would come into effect from Saturday wherein all footwear, irrespective of prices will attract GST at 12 per cent while all textile products, except cotton, including readymade garments will have 12 per cent GST.

While the passenger transport services provided by auto rickshaw drivers through offline/ manual mode would continue to be exempt, such services when provided through any e-commerce platform would become taxable effective January 1, 2022, at 5 per cent rate.

The procedural changes that would come into effect include e-commerce operators, such as Swiggy and Zomato, being made liable to collect and deposit GST with the government on restaurant services supplied through them from January 1. They would also be required to issue invoices in respect of such services.

There would be no extra tax burden on the end consumer as currently restaurants are collecting and depositing GST. Only, the compliance of deposit and invoice raising has now been shifted to food delivery platforms.

The move comes after government estimates showed that tax loss to exchequer due to alleged underreporting by food delivery aggregators is Rs 2,000 over the past two years.

Making these platforms liable for GST deposits would curb tax evasion.

The other anti-evasion measures which would come into effect from the new year include mandatory Aadhaar authentication for claiming GST refund, blocking of the facility of GSTR-1 filing in cases where the business has not paid taxes and filed GSTR-3B in the immediate previous month.

Currently, the law restricts the filing of returns for outward supplies or GSTR-1 in case a business fails to file GSTR-3B of the preceding two months.

While businesses file GSTR-1 of a particular month by the 11th day of the subsequent month, GSTR-3B, through which businesses pay taxes, is filed in a staggered manner between the 20th-24th day of the succeeding month.

Also the GST law has been amended to allow GST officers to visit premises to recover tax dues without any prior show-cause notice, in cases where taxes paid in GSTR-3B is lower based on suppressed sales volume, as compared to supply details given in GSTR-1.

The move would help curb the menace of fake billing whereby sellers would show higher sales in GSTR-1 to enable purchasers to claim input tax credit (ITC), but report suppressed sales in GSTR-3B to lower GST liability.

E-way bill generation shows steady rise

Source: Financial Express, 21 December 2021

Daily e-way bill generation under the Goods and Services Tax (GST) system came in at 22.85 lakh for the week-ended December 19, 2.6% higher than the daily average for the previous week, showing a steady increase in goods transportation.

The daily e-way generation was 20.38 lakh in November, down 14% on month compared with 23.71 lakh in October. The daily e-way bill generation at 22.08 lakh in the first 19 days of December indicates demand pick up and stocking by traders ahead of year-end vacations. E-way bill generations stood at 4.2 crore in the first 19 days of December.

E-way bill generation was registering a steady rise since June 2021 after falling to below 4 crore in May when the second wave of the Covid pandemic was at its peak. October e-way bills were at a record 7.35 crore, the highest monthly data since the indirect tax regime was rolled out in July 2017, reflecting an upswing in economic activities in the festival season and improved compliance.

E-way bill generation came in at 6.12 crore for November, the lowest in five months, reflecting moderation in goods dispatches post-festivities. E-way bill generation by businesses rose to 6.79 crore for September from 6.59 crore in August, 6.42 crore in July and 5.47 crore in June.

Higher e-way bills generation is reflected in higher GST revenues. Gross goods and services tax (GST) collections came in at Rs 1,31,526 crore in November (October sales) 2021, the second-highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

E-way bill generation drops to lowest in 5 months in November

Source: Financial Express, 07 December 2021

The daily e-way generation was 20.38 lakh in November, down 14% on month compared with 23.71 lakh in October. However, the daily e-way bill generation at 21.1 lakh in the first five days of December indicate possibility of demand pick up ahead of year-end vacations.

Number of e-way bills for inter-state commerce under the goods and services tax (GST) system came in at 6.12 crore for November, the lowest in five months, reflecting moderation in goods dispatches post-festivities.

E-way bill generation has been registering a steady rise since June 2021 after falling to below 4 crore in May when the second wave of the Covid pandemic was at its peak. October e-way bills were at a record 7.35 crore, highest monthly data since the indirect tax regime was rolled out in July 2017, reflecting an upswing in economic activities in the festival season and improved compliance.

The daily e-way generation was 20.38 lakh in November, down 14% on month compared with 23.71 lakh in October. However, the daily e-way bill generation at 21.1 lakh in the first five days of December indicate possibility of demand pick up ahead of year-end vacations.

E-way bill generation by businesses rose to 6.79 crore for September from 6.59 crore in August, 6.42 crore in July and 5.47 crore in June.

Higher e-way bills generation is reflected in higher GST revenues. Gross goods and services tax (GST) collections came in at Rs 1,31,526 crore in November (October sales) 2021, the second highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

Finance ministry notifies 12 per cent GST rate on MMF, yarn, fabrics from January 1; corrects duty anomaly

Source: Financial Express, 19 November 2021

The finance ministry has notified uniform 12 per cent GST rate on manmade fibre (MMF), yarn, fabrics and apparel, thereby addressing the inverted tax structure in the MMF textile value chain.

Currently, tax rate on MMF, MMF yarn and MMF fabrics is 18 per cent, 12 per cent and 5 per cent, respectively.

The taxation of inputs at higher rates than finished products created build up of credits and cascading costs. It further led to accumulation of taxes at various stages of the MMF value chain and blockage of crucial working capital for the industry.

The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state finance ministers, had in its previous meeting on September 17 decided that the inverted duty anomalies in the textile sector would be corrected from January 1, 2022.

Giving effect to this decision, the Central Board of Indirect Taxes and Customs (CBIC) on November 18 notified 12 per cent GST rate for MMF, MMF yarn and MMF fabrics.

Experts said though there is a provision in GST law to claim the unutilised Input Tax Credit (ITC) as a refund, there were other complications and resulted in more compliance burden. The inverted tax structure caused an effective increase in the rate of taxation of the sector.

The world textiles trade has been moving towards MMF but India was not able to take advantage of the trend as its MMF segment was throttled by the inverted tax regime, they said, adding the correction in duty anomaly will help the segment grow and emerge as a big job provider.

EY Tax Partner Bipin Sapra said the rate changes in the textile industry is the first of the changes promised by the GST Council with an aim to rectify inverted duty structure and bring an efficient tax structure for a given sector.