The GST Council, in its 55th meeting on Saturday, approved several key measures aimed at improving compliance and addressing ambiguities in tax provisions. One of the significant decisions includes the introduction of a ‘Track and Trace Mechanism’ for specified evasion-prone commodities, designed to enhance supply chain transparency.
The mechanism will involve affixing a unique identification mark on goods or their packaging, enabling tracking throughout the supply chain. To facilitate this, an enabling provision will be inserted into the CGST Act, 2017, through Section 148A. The finance ministry stated that the mechanism will provide a legal framework to monitor specified commodities prone to tax evasion effectively.
In a related clarification, the Council specified that suppliers of online services such as online money gaming and OIDAR services to unregistered recipients must include the recipient’s state on the tax invoice. This state will be considered the address on record for tax purposes under the IGST Act, 2017.
The Council decided to reduce the GST rate on fortified rice kernels (FRK) from 18% to 5% and exempted gene therapy from GST. Additionally, the compensation cess rate on supplies to merchant exporters was lowered to 0.1%, aligning with the GST rate on such supplies. Imports of equipment and consumable samples by International Atomic Energy Agency (IAEA) inspection teams were also exempted from IGST, subject to specified conditions.
For services, the Council exempted GST on contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund. This fund provides compensation and cashless treatment to road accident victims, including hit-and-run cases.
Additionally, it was clarified that transactions involving vouchers are not subject to GST, as they do not constitute a supply of goods or services. The Council also proposed amendments to simplify provisions related to vouchers and redefine ‘pre-packaged and labelled’ commodities under the Legal Metrology Act for retail sales.
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The Council clarified that penal charges collected by banks and non-banking financial companies (NBFCs) for non-compliance with loan terms will not attract GST. It also approved the issuance of circulars to resolve ambiguities and legal disputes on specific issues.
To facilitate ease of compliance, the panel recommended reducing the pre-deposit requirement for filing appeals related to penalties before appellate authorities.
These measures, along with the implementation of the Track and Trace Mechanism, are aimed at improving tax compliance, reducing disputes, and ensuring a streamlined tax system.
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