GST Council decriminalises 3 offences, focus now on widening tax base

Finance Minister Nirmala Sitharaman

The GST Council on December 17 decided to decriminalise three types of offences and also clarified that insurance companies' no-claim bonus would not attract tax amid a series of decisions it took at its 48th meeting.

Meeting through video conference, the council decided that obstruction or preventing any officer in the discharge of duties, deliberate tempering of material evidence and failure to supply the information would no longer be an offence.

It also said the goods and services tax (GST) rate on ethyl alcohol supplied to refineries for blending with petrol would be cut to 5 percent from 18 percent.

The council clarified that the compensation cess of 22 percent was applicable on vehicles fulfilling all four conditions: being popularly known as an SUV (sports utility vehicle), engine capacity of at least 1500 cc, length greater than 4000 mm, and a ground clearance of more than 170 mm. Confusion had arisen after some states were treating SUVs differently.

Speaking at a post-meeting briefing, Finance Minister Nirmala Sitharaman said whether or not MUVs fall into the above category would be examined by the council's fitment committee.

"The clarification of SUV category is a welcome change," said Asish Philip, Partner, Lakshmikumaran and Sridharan Attorneys. "However, words like 'popularly known as SUV' will be the subject matter of interpretation and future disputes."

Some of the other decisions included the supply of Mentha arvensis (wild mint) under reverse charge mechanism and doubling the minimum threshold of tax amount for launching prosecution under GST to Rs 2 crore except for the offence of issuance of fake invoices

The council could only take up eight of the 15 items on its agenda. The remaining would be addressed at the next meeting.

The items which were not taken up included Groups of Ministers issues on capacity-based taxation of tobacco and gutka and setting up of GST appellate tribunals.

"This further delays the redressal mechanism of disputes at the ground and will continue to lead to a further increase in the number of writ appeals at the high courts," said Mahesh Jaising, Partner, Leader–Indirect Tax, Deloitte India. "This has been a long pending ask from industry that needs to be addressed soon."

According to a source, the council will likely meet in-person next after the Budget for 2023-24 is presented on February 1. The meeting will be held in Madurai, which was to host the 48th meeting.

Revenue secretary Sanjay Malhotra said the report of GoM on online gaming and casinos was received only a couple of days ago and there was not enough time to circulate it among the members of the council.

Expanding the tax base

Sitharaman said the Karnataka Chief Minister B Bommai-led GoMs' report on GST rate rationalisation was yet to be received.

In late June, the Bommai-led GoM was given three months to finalise its report. The GoM's terms of reference include reviewing the current GST slabs and expanding the tax base.

Sitharaman said members of the GST council agree, though it was not discussed at the meeting, that focus should now be on increasing the tax base.

Vivek Johri, chairman of the Central Board of Indirect Taxes and Customs, said discussions were on with states to devise a strategy to widen the tax base. This includes a proposal to conduct a pilot in Gujarat for biometric-based Aadhaar authentication and risk-based physical verification of registration applicants.

"This will help in tackling the menace of fake and fraudulent registrations," the government said in a statement.

Further, PAN-linked mobile numbers and email addresses, fetched from the CBDT database, would be captured and recorded and OTP-based verification conducted at the time of registration on such mobile numbers and email addresses to restrict misuse of PAN.

While monthly GST collections have consistently been above Rs 1.4 lakh crore for several months, the average GST rate is well below the intended revenue-neutral rate.