GST Council okays setting up tribunals, specific levy for pan masala firms

GST Council also decided to clear the entire dues of GST compensation pending to states

The all-powerful 49th GST Council meeting on Saturday approved the two key proposals of the ministerial state panels, including setting up dedicated appellate tribunal to resolve GST-related disputes and tightening norms for evasion-prone commodities such as pan masala and gutka.

The government expects the appellate tribunal to be operational by the end of this year. The final draft of the framework is likely to be a part of the Finance Bill 2023. On the other hand, to curb tax evasion by gutka companies, a specific levy will be worked out soon.

Two separate group of ministers (GoM)—submitted its report to the Council, which were deliberated in details during the meeting.

 “The Group of Ministers (GoM) report on the establishment of the GST Appellate Tribunal has been accepted with slight modifications in the language that will be shared with states on Sunday and following which a final draft of the Tribunal’s setting up will be worked out, Finance Minister Nirmala Sitharaman said while briefing the media after the Council meeting. 

“Now that the GST Council has agreed on the tribunal, the changes required in the text will be finalised by March 1, so that this year’s Finance Bill itself can help set up the tribunal,” she added. 

While addressing the policy matters, the Council also decided to clear the entire dues of GST compensation pending to states. 

Under which, the Centre will release Rs 33,506 crore to states by way of pending GST compensation. This includes Rs 16,982 crore for June 2022 (entire pending provisional compensation) along with final compensation of Rs 16,524 crore to six states which have given calculation certified by their accountant generals. 

“The entire pending balance of GST Compensation though it is not available in the GST Compensation Fund as of now and will be recouped from future cess collections after being paid out from the Centre’s coffers.” finance minister explained. 

Notably, provisional dues are pertaining to the month of June last year.

Further, the Council also slashed the GST rate on pencil sharpener from current 18 per cent to 12 per cent. It also lowered the tax rate on liquid form of jaggery or 'rab' from 18 per cent to 5 per cent, if packaged and labelled and to zero if sold loose. 

However, the proposal of reducing GST on millet-based health products has been deferred as the federal body did not reach consensus on the percentage of millet to be the part of health product. 

Moreover, issue of tax treatment of multi-utility vehicles on par with sports utility vehicles (SUVs) also being postponed. Besides, the Council also decided to lower the late fee for filing annual returns by small businesses with upto Rs 20 crore annual turnover. 

“There is a decision taken on rationalisation of late fee for delayed filing of annual returns for smaller taxpayers having an aggregate turnover of Rs 20 crore and for registered entities with turnover of Rs 5 crore to Rs 20 crore. An amnesty scheme is also being introduced for some returns as well” FM has said.

The GST Council also extended the tax exemption available to educational institutions including National Testing Agency (NTA) for conducting entrance examination for admission to educational institutions.

GoM reports

GoM led by Dushyant Chautala, deputy chief minister of Haryana recommended that the states will have benches as much as required, depending on the state’s size. It suggested to have one judicial member and a technical member, who could be either from Centre or state in 50:50 ratio in every state. On the contrary, the states wanted to have two technical members each from the Centre and states. 

Another GoM on capacity-based taxation on pan masala, did not recommend capacity-based taxation for these sectors. 

However, it recommended that compensation cess levied on such commodities to be changed from ad valorem to specific tax-based levy to boost the first stage collection of the revenue. The report also suggested slew of compliance and tracking measures to plug revenue leakage and tax evasion.

“A finality on the setting up of GST Tribunals would expedite the pending litigations of the taxpayers who were constrained to approach the high courts for the resolutions, Saurabh Agarwal, Tax Partner, EY.