GST Modifications

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GST Modifications

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  • Penalty & Late Fees Modifications​
  • GST Returns Modifications​
  • Digital Initiatives for GST​
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GST Modifications

Goods and Services Tax (GST) in India is subject to periodic modifications, which can affect tax rates, compliance procedures, or administrative aspects. Below are the key modifications under GST, including major updates and changes that have been introduced recently (as of 2023-24)

GST Rates Modifications

Increase or decrease in GST rates: GST Council regularly reviews and modifies the tax rates for different goods and services based on economic conditions and public demands. For example:

  • 18% GST on certain services: Recently, services like renting of motor vehicles and various financial services now attract 18% GST.
  • Food and beverages: Items like pre-packed and labelled food products such as cereals, pulses, and flour are charged at 5%.
  • E-commerce: Online platforms (such as food delivery apps) are required to collect 5% GST on restaurant services.
  • Gold and precious metals: The GST rate on gold has been increased to 3%.
  • Clothing & Footwear: A uniform GST rate of 12% was applied to textiles and footwear priced below ₹1,000, while rates above ₹1,000 attract 18% GST.

Compliance Modifications

  • E-invoicing: E-invoicing has been made mandatory for businesses with turnover exceeding ₹5 crore from August 2023. It simplifies compliance, standardizes data, and reduces fraud.
  • GSTR-2B auto-populated: To streamline Input Tax Credit (ITC) claims, the GSTR-2B form is now auto-populated for taxpayers. This helps identify eligible and ineligible ITC, aiding in easier reconciliation.
  • Quarterly Return Monthly Payment Scheme (QRMP): Applicable to small taxpayers, this scheme allows taxpayers with a turnover of up to ₹5 crore to file quarterly returns and make monthly payments.

Threshold Modifications

  • Composition Scheme Limit Increased: The turnover limit for businesses opting for the Composition Scheme (lower GST rates and simplified returns) has been raised to ₹1.5 crore.
  • Exemption Limit: For service providers, the GST exemption threshold has been increased to ₹20 lakh annually. For goods, it remains at ₹40 lakh.

Input Tax Credit (ITC) Changes

  • Restricted ITC for suppliers not filing GSTR-1: ITC can only be claimed if suppliers have filed their GSTR-1 returns. This measure is to ensure compliance and reduce fake ITC claims.
  • Amendments in Section 16: To avail of ITC, the recipient must pay the invoice within 180 days from the issue of the invoice. Non-payment will result in a reversal of the ITC.

Penalty & Late Fees Modifications

  • Late Fee Reductions: Late fees for filing GSTR-1, GSTR-3B, and GSTR-4 have been reduced significantly for small taxpayers to ease compliance.
  • Penalty for E-way Bill: If a business transports goods without an e-way bill, penalties will be levied, which could include seizure of goods.

GST Returns Modifications

  • Changes to GSTR-1 & GSTR-3B: The GSTR-1 (sales) return filing system has been made more user-friendly with several changes. GSTR-3B filings are now auto-populated based on GSTR-1 and GSTR-2B for more accurate reporting.
  • Matching of returns: The process of matching the returns (GSTR-1 and GSTR-3B) has been further streamlined to reduce discrepancies.

GST on E-Commerce & Digital Economy

  • Tax Collection at Source (TCS): E-commerce operators are required to collect 1% TCS under GST on the net value of taxable supplies made through the e-commerce platform. This is to improve tracking and reduce tax evasion.
  • Online Gaming: The GST Council has proposed levying a 28% GST on the entire value of the consideration, including bets in online gaming.

GST Amnesty Scheme

To clear past dues, the government introduced an amnesty scheme for taxpayers with pending GST returns. This allows businesses to file their returns with reduced or waived late fees and penalties.

Changes in GST Refund Process

Faster processing: The GST refund process has been simplified with digital measures in place to ensure faster clearance.

Export-related refunds: Businesses involved in exports can now apply for refunds electronically through the ICEGATE portal.

GST for SMEs

Simplified Compliance for MSMEs: Small businesses have been given the option of filing quarterly returns under the QRMP scheme. This reduces the compliance burden and allows easier payments.

 

Recent Legal Changes (2023-24)

  • Changes in GST Appellate Tribunal: The GST Council has recommended setting up a GST Appellate Tribunal (GSTAT) to resolve disputes. This is expected to be implemented soon to address unresolved tax issues.
  • New rules for tax evasion: Penalties for tax evasion have been tightened, and new provisions for arrest and prosecution have been introduced under the GST Act.

GST Audits and Assessments

  • Self-Certification for Annual Returns: Businesses with an annual turnover of up to ₹5 crore no longer need to get their accounts audited by a chartered accountant. They can now self-certify their annual returns (GSTR-9). This reduces the compliance burden on small and medium enterprises.
  • Scrutiny and Assessments: Tax authorities can now initiate scrutiny of returns based on mismatches between GSTR-1 (outward supply details) and GSTR-3B (tax payable details). Businesses are advised to ensure consistency between their returns to avoid scrutiny.

Sector-Specific GST Modifications

Real Estate & Construction

  • GST on Affordable Housing: The GST rate on affordable housing projects has been reduced to 1% without an input tax credit. For other residential projects, a 5% GST rate without ITC is applicable.
  • Works Contracts: Construction services under works contracts (such as for government projects) continue to attract 12% GST, but there have been clarifications regarding the scope and eligibility for input credits.

Automobile Sector

  • GST on Electric Vehicles (EVs): The GST rate on electric vehicles was reduced to 5%, and for EV chargers and charging stations, the GST is now 12%. This is in line with the government’s push toward electric mobility.
  • Automobile Parts: Higher GST rates (typically 28%) continue to apply to luxury and commercial vehicle parts. However, there have been revisions to certain essential parts that now attract lower rates.

Tourism & Hospitality

  • Tour Operators: The GST rate for tour operators is now 5%, but the input tax credit is not allowed. This ensures a simplified compliance structure for small and medium travel agencies.
  • Hotels and Accommodation: For room tariffs below ₹1,000 per day, there is no GST. Rooms priced between ₹1,000 to ₹7,500 are taxed at 12%, and for rooms above ₹7,500, a 18% GST is applicable.

Healthcare and Pharma

  • Pharmaceuticals: Key life-saving drugs and medical equipment continue to attract 5% GST. However, standard pharmaceuticals and over-the-counter medicines are taxed at 12%.
  • Health Insurance: Health insurance policies now attract an 18% GST, but discussions have been ongoing to potentially reduce this rate due to the rising demand for insurance post-pandemic.

Digital Initiatives for GST

  • GSTN Portal Enhancements: The GST Network (GSTN) portal has undergone significant upgrades to ensure smoother filing and compliance. Recent updates include better load handling, quicker filing times, and a new payment gateway for easier tax payments.
  • GST Suvidha Providers (GSPs): The GST Council continues to encourage the use of third-party applications (GSPs) for easier filing and reconciliation. GSPs provide tailor-made solutions, especially for large enterprises that need to file numerous invoices.
  • Biometric Authentication: To curb fake registrations, the government has introduced biometric authentication for high-risk entities. New businesses in sensitive sectors must complete biometric verification as part of their GST registration process.

GST Changes for Exports

  • Zero-Rating of Exports: Exporters continue to enjoy zero-rated GST. This means that no GST is charged on export goods, and exporters can claim refunds on the input tax credit (ITC) paid on inputs used in production.
  • LUT (Letter of Undertaking): Businesses can export without paying GST by furnishing a Letter of Undertaking (LUT). This exemption continues, making it easier for businesses involved in exports to manage cash flow.
  • Deemed Exports: Certain supplies, like those to Export Oriented Units (EOUs), are treated as deemed exports, meaning they are eligible for refunds of taxes paid on inputs.

ST Modifications in Penalties and Litigation

  • Interest on Delayed Payments: Interest will now only be levied on the net tax liability (i.e., the portion of tax not covered by input tax credit). This modification reduces the financial burden on businesses that may have missed deadlines.
  • Voluntary Disclosure: Taxpayers are now encouraged to voluntarily disclose under-reported or wrongly declared transactions in returns. By paying the due taxes voluntarily, businesses can avoid steep penalties or litigation.
  • GST Appeals Process: A more streamlined system for appeals has been introduced, with online submissions and real-time tracking of case progress. This aims to reduce delays in resolving disputes.

GST Modifications Impacting Specific Businesses

Startups

  • Composition Scheme for Startups: Startups with a turnover below ₹1.5 crore can opt for the Composition Scheme and pay taxes at a lower rate (1% for manufacturers, 5% for restaurants). This reduces their compliance burden and simplifies the tax payment process.

MSMEs (Micro, Small & Medium Enterprises)

  • Simplified Returns for MSMEs: Quarterly return filing under the QRMP scheme, as well as ITC auto-population, reduces the manual workload and filing mistakes for small businesses.
  • GST Amnesty for MSMEs: The government has introduced an amnesty scheme that allows MSMEs to file late returns with reduced penalties to encourage compliance and clear backlogs.

Proposed Future Modifications

  • Petroleum Inclusion in GST: Discussions are ongoing regarding the inclusion of petroleum products like petrol, diesel, and natural gas under GST. If this happens, it could lead to lower prices for these essential commodities.
  • Simplification of GST Structure: There have been talks of reducing the number of GST slabs (currently at 0%, 5%, 12%, 18%, and 28%) to simplify the tax structure, making it easier for businesses and reducing classification disputes.

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