GST Council paves way for CGST Act amendments during Budget session

FinMin says some changes may take effect from April

The Goods and Services Tax (GST) Council has paved the way for several amendments to the CGST Act, including a retrospective change to reverse the Supreme Court’s judgment in the Safari Retreats case, during the Budget session. Other proposed amendments include provisions empowering the government to enforce a track-and-trace mechanism for specified evasion-prone commodities.

 

In a statement, the Ministry of Finance said the proposals would come into force after the amendments to the law. Many of these amendments are proposed to take effect from April 1, 2025.

 

At its 55th meeting in Jaisalmer on Saturday, the GST Council recommended an amendment to Section 17(5)(d) of the CGST Act, 2017 to clarify the language by replacing the phrase “plant or machinery” with “plant and machinery”. This amendment will apply retroactively from July 1, 2017, ensuring a consistent interpretation of these terms as explained in the law. The implementation of this amendment in GST law will overturn the Supreme Court ruling, which allowed realtors to claim input tax credit (ITC) on construction costs if the building was used for rental purposes.

 

“The proposed retrospective amendment with respect to GST input tax credits may have to pass the test of constitutional validity as this amendment is merely to defeat the Supreme Court's judgment,” said Abhishek Rastogi, founder of Rastogi Chambers, who had argued for a dozen petitioners before the Supreme Court on this issue.

 

The Council also decided to enhance compliance within the GST framework by introducing a new provision under the CGST Act, 2017. The proposed Section 148A will empower the government to implement a track-and-trace mechanism for commodities such as tobacco and alcoholic beverages, which are prone to evasion. This system will use a Unique Identification Marking applied to the goods or their packaging. By establishing a legal framework for this mechanism, the government aims to facilitate the tracing of specified commodities throughout the entire supply chain, thereby improving transparency and reducing instances of tax evasion.

 

The Council further proposed amendments to Sections 107 and 112 of the CGST Act 2017, regarding the payment of pre-deposits when appealing orders that involve only penalties. For appeals to the Appellate Authority, the required pre-deposit will be reduced from 25 per cent to 10 per cent of the penalty amount. A similar reduction to 10 per cent will also be introduced for appeals to the Appellate Tribunal.

 

As measures of trade facilitation, the GST Council also cleared the amendment in Schedule III of CGST Act to explicitly provide that supply of goods warehoused in a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) to any person before clearance of such goods for exports or to the Domestic Tariff Area, will be treated neither as supply of goods nor as supply of services. “This brings transactions relating to supply of goods warehoused in SEZ/FTWZ on par with the existing GST provisions for transactions in Customs-bonded warehouses,” the ministry statement said.

 

To allow multi-state businesses to distribute input tax credit for inter-state reverse charge mechanism transactions, the GST Council approved a proposal to amend Section 2(61) and Section 20(1) of the CGST Act, as well as the CGST Rules.

 

The Council also cleared amendments to various sections and rules of the CGST Act to simplify the provision of input tax credit through the recently launched Invoice Management System, which will help businesses in tracking GST liabilities. 

Key decisions at GST council meet

 

> GST rate on fortified rice kernel reduced to 5%

> GST on gene therapy fully exempt

> Old and used vehicles, including EVs, to face 18% tax

> No GST on transactions of vouchers

> RBI-regulated payment aggregators now exempt from GST

> States reject proposal to bring ATF under GST