Highlights from the 53rd GST Council Meeting

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Several measures were proposed to ease compliance and reduce litigation for taxpayers 53rd GST council meeting.
Several measures were proposed to ease compliance and reduce litigation for taxpayers in the 53rd GST council meeting.

The 53rd meeting of the Goods and Services Tax (GST) Council was held on June 22 in New Delhi. Several recommendations were made at the meet to refine tax rates and service exemptions under the GST regime.

The meeting, chaired by Union Finance Minister Nirmala Sitharaman, deliberated on various proposals to streamline GST applicability across goods and services.

Many items were present on the agenda from this GST Council meeting. Further, before the GST Council meeting, the Union FM had a pre-budget consultation with various states and UTs. Union FM also clarified that as of 31st December 2023, less than 1.96% of GST taxpayers received the notices under GST (1,14,999 taxpayers).

Several measures were proposed to ease compliance and reduce litigation for taxpayers.

Here are the key highlights:

Ease of compliance burden of taxpayers

  • Changes will be allowed in GSTR-1 going forward within same tax period: The GST Council approved implementing a functionality for a new form GSTR-1A that allows taxpayers to add/amend particulars of GSTR-1 of current tax period/IFF for 1st and 2nd month of quarter, that is missed out before filing GSTR-3B.
  • Reporting B2C supplies in GSTR-1: The threshold for reporting Business-to-Consumers (B2C) interstate supplies invoice-wise in Table 5 of GSTR-1 will be reduced from Rs.2.5 lakh to Rs.1 lakh.
  • GSTR-4 Due Date Revised: Extension provided to the due date for filing GSTR-4 by the composition taxable persons from the present 30th of April to 30th of June 2024 from FY 2024-25 onwards.
  • TCS Rate Reduction: Electronic Commerce Operators (ECOs) had to collect Tax Collected at Source (TCS) at 1% (0.5% each under CGST and SGST/ 1% under IGST) on net taxable supplies under Section 52(1) of the CGST Act. It is recommended to reduce this to 0.5 % (0.25% under CGST and 0.25% under SGST/UTGST/0.5% under IGST).
  • Compulsory filing of GSTR-7: GSTR-7 must be filed mandatorily even if no TDS is deducted, reported invoice-wise and no late fee will be charged for nil filing.
  • GSTR-9/9A filing applicability: The filing of annual return in GSTR-9/9A for the FY 2023-24 would be exempted for taxpayers with an aggregate annual turnover upto Rs.2 crore.
  • Modification to Section 16(4): The time limit to avail ITC for invoices or debit notes in any GSTR-3B filed up to 30th November 2021 (applicable for fiscal years 17-18, 18-19, 19-20 and 20-21) may be deemed to be 30th November 2021, which will apply retrospectively from 1st July 2017. Furthermore, Section 16(4) shall be relaxed where returns for the period from the date of cancellation of registration/ effective date of cancellation of registration till the date of revocation of cancellation of the registration, are filed by the registered person within thirty days of the order of revocation.
  • Amendment to CGST Rule 88B: The GST Council has recommended not to charge interest on the amount available in the electronic cash ledger on the due date of filing GSTR-3B and is debited while filing the said return in cases of delayed filing of GSTR-3B.
  • New Section 128A: GST Council has waived interest and penalties for demand notices issued u/s 73 of CGST (applicable for fiscal years 17-18, 18-19 and 19-20) for cases not involving fraud, suppression and misstatement. It is applicable to cases where the taxpayer pays the full amount in the notice by 31st Mar 2025.
  • Changes in Section 73 and 74: A common time limit will be set for issuing demand notices and orders under both these provisions without differentiating cases as fraud/non-fraud. The time limit for the taxpayers to claim the benefit of reduced penalty, by paying the tax demanded along with interest, would be increased from 30 to 60 days.
  • Monetary Limits set for GST Appeals: The recommended monetary limits for filing appeals by the department before these legal fora are Rs.20 lakh for GST Appellate Tribunal, Rs.1 crore for HC and Rs.2 crore for SC. 
  • Amending Sections 107 and 112:  The maximum amount for pre-deposit for filing appeal before appellate authorities shall be reduced from Rs.25 crore under CGST and Rs.25 crore under SGST to Rs.20 crore respectively. Moreover, the amount of pre-deposit for appeal before the GST Appellate Tribunal has been reduced from 20% with a maximum amount of Rs.50 crores under CGST and Rs.50 crores under SGST to 10% with a maximum of Rs.20 crores under CGST and Rs.20 crores under SGST.
  • Sunset Clause to amend Sections 109 & 117: Sunset clause to be added for anti-profiteering cases pending and decision taken to shift the hearing panel from CCI to principal bench of GSTAT. The GST Council has also recommended the sun-set date of 1st April 2025 for receiving any new application regarding anti-profiteering.
  • Time limit to file appeals before the GSTAT: The GST Council recommended modifying Section 112 to provide a 3 months time for filing appeals before the GST Appellate Tribunal. It will start from a date yet to be notified by the Government, most likely to be announced by 5th August 2024 as this is the last date.
  • New Section 11A: The new provision allows regularization of non-levy or short levy of GST, where tax was being underpaid or unpaid due to common trade practices. 
  • IGST Refund due to upward price revisions after exports: A mechanism is being introduced for claiming refund of additional IGST paid due to any upward revision in price of the goods after their export, helping taxpayers claim refunds for paying additional IGST due to such move.
  • No refund of IGST in specific case: Where export duty is payable, IGST will not be refunded by modifying Sections 16 and 54. This applies for both exports and supplies to SEZ unit/developer with or without payment of tax.
  • Biometric-based Aadhaar Authentication: Those applicants who have opted for Biometric based Aadhaar authentication conducted at the GST Suvidha Kendra will be rolled out for GST registration on all-India basis in a phased manner.
  • DRC-03 Circular expected to be notified: A circular will be issued to prescribe a mechanism for adjusting any demand amount paid through DRC-03 against the amount payable as pre-deposit for filing GST appeal.
  • Section 122(1B) to be amended: Amendment will apply retrospectively w.e.f. 1st October 2023, so as to clarify that the said penal provision is applicable only for those e-commerce operators, who are required to collect TCS u/s 52 and not for other e-commerce operators.
 
Rate rationalisation for Goods and Services

The GST Council announced several GST rate revisions and exemptions for goods and services, as listed below-

Particulars

New GST Rates / Exemptions

Extra Neutral Alcohol used for the manufacture of alcoholic liquor for human consumption

Exempt

Imports of parts, components, testing equipment, tools, and tool-kits of aircraft, irrespective of their HS classification, are used to boost the MRO activities subject to specified conditions.

5% IGST

Parts of Poultry keeping Machinery

12%

All milk cans (different materials), irrespective of use

12%

All carton boxes and cases of both corrugated and non-corrugated paper board

12%

All types of sprinklers, including fire water sprinklers

12%

All solar cookers, whether or not single or dual energy source

12%

Services provided by Indian Railways to common man for sale of platform tickets, cloak rooms, and battery operated car services are exempted, including intra railway supplies

Exempt

Service by way of hostel accommodation is currently not exempted if outside educational institution upon satisfying the conditions that the rent limit is up to Rs. 20,000 per person per month, and the service is rendered for a continuous period of 90 days

Exempt

Corporate guarantee if in case it is for services or goods where whole ITC is available

Exempt

Services provided by Special Purpose Vehicles (SPV) to Indian Railway by way of allowing Indian Railway to use infrastructure built & owned by SPV during the concession period and maintenance services supplied by Indian Railways to SPV

Exempt

Imports of specified items for defence forces

IGST is exempt for five years till 30th June 2029

Imports of research equipment/buoys imported under the Research Moored Array for African-Asian-Australian Monsoon Analysis and Prediction (RAMA) programme subject to specified conditions

IGST is exempt

Imports in SEZ by SEZ Unit/developers for authorised operations with effect from 1st July 2017

Compensation Cess is exempt

Supply of aerated beverages and energy drinks to authorised customers by Unit Run Canteens under the Ministry of Defence

Compensation Cess is exempt

Import of technical documentation for AK-203 rifle kits imported for the Indian Defence forces.

Ad hoc IGST exemption provided

These measures aim to streamline the GST compliance process, provide clarity on various issues, and ensure consistency across the GST framework. The recommendations will be implemented through relevant circulars, notifications, and law amendments.

Source:

53rd GST Council Recommendations

MCA grants extension of time for Limited Liability Partnerships

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The Ministry of Corporate Affairs (MCA) has recently extended the deadline for filing Form LLP BEN-2 and LLP Form No. 4D for Limited Liability Partnerships (LLPs). Here are the details:

  1. Background:

    • The MCA introduced LLP BEN-2 and LLP Form No. 4D as crucial forms for declarations under the Companies Act, 2013.
    • These forms relate to significant beneficial owners and beneficial interest in contributions received by the LLP.

  2. Extension and Waiver of Additional Fees:

    • To facilitate compliance during the transition from MCA-21 version-2 to version-3, the MCA has extended the deadline.
    • LLPs now have until 1st July 2024 to submit these forms without incurring any additional fees.
    • This extension aims to ease the financial burden on LLPs and promote adherence to legal obligations.

Conclusion:

    • General Circular No.-03/2024 demonstrates the government’s commitment to supporting businesses, especially LLPs, during transitional phases.
    • By prioritizing ease of doing business and encouraging compliance, the MCA promotes transparency and efficiency within the corporate sector.

CBDT Extends Due Date for Filing Form 10 A/10 AB

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CBDT extends due date for filing Form 10A/10AB upto 30th June, 2024.
The CBDT), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 (the ‘Act’) upto 30 th June, 2024.

Considering the representations received by CBDT requesting for further extension of the due date for filing such Forms, the CBDT has extended the due date of filing Form 10A/ Form 10AB until 30th June, 2024

Form 10 A – Form 10 AB –

The Central Board of Direct Taxes ( CBDT ), has issued Circular No. 07/2024 dated 25.04.2024 further extending the due date for filing Form 10A/ Form 10AB under the Income-tax Act, 1961 ( the ‘Act’ ) upto 30th June, 2024.

CBDT had earlier extended the due date for filing Form 10A/ Form 10AB by trusts, institutions and funds multiple times to mitigate genuine hardships of the taxpayers.

The last such extension was made by Circular No. 06/2023 extending the date to 30.09.2023.

Considering the representations received by CBDT requesting for further extension of due date for filing of such Forms beyond the last extended date of 30.09.2023, and to avoid genuine hardships to taxpayers,

CBDT has extended the due date of filing Form 10A/ Form 10AB up to 30th June, 2024, in respect of certain provisions of section 10(23C)/ section 12A/ section 80G/ and section 35 of the Act.

Form 10B enables a taxpayer to file an audit report if the taxpayer has applied for or is already registered as charitable or religious trust/institution by filing Form 10A. Form 10B is accessed by the CA added by the taxpayer under the My CA service and is assigned the relevant form.

It was further clarified by CBDT that, if any such existing trust, institution or fund had failed to file Form 10A for AY 2022-23 within the extended due date, and subsequently, applied for provisional registration as a new entity and received Form 10AC, can also now avail this opportunity to surrender the said Form 10AC and apply for registration for AY 2022-23 as an existing trust, institution or fund, in Form 10A till 30th June 2024.

It was also clarified that those trusts, institutions or funds whose applications for re-registration were rejected solely on the grounds of late filing or filing under the wrong section code, may also submit fresh applications in Form 10AB within the aforesaid extended deadline of 30th June 2024.

The applications as per Form 10A/ Form 10AB shall be filed electronically through the e-filing portal of the Income Tax Department.

Source: CBDT Circular No. 7/2024 dated 25th April 2024

CBDT rulings relating to donations made by a trust / institution to another trust / institution.

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Only 85% of the eligible donations made by a trust or institution registered under Section 12AB to another trust or institution registered under Section 12AB or approved under Section 10(23C) shall be treated as the application.

The amendment introduced in the Finance Act, 2023 has significant implications for eligible Trusts and institutions. Let’s delve into the key points:

  1. Eligible Donations Treatment:
    • When an eligible Trust or institution donates to another eligible Trust or institution, the donation is considered an application for charitable or religious purposes.
    • However, this treatment applies only to 85% of the donated amount. The remaining 15% is not considered an application.
    • For example, if a Trust donates INR 100, it is treated as having applied INR 85 for charitable or religious activities.
  2. Investment Exemption:
    • The 15% portion of the donation that is not considered an application does not need to be invested in specified modes under section 11(5) of the Income-tax Act (ITA).
    • This exemption applies because the entire INR 100 donation has been made to another Trust or institution.
  3. Corpus Donations:
    • The amendment emphasizes that donations should not be towards corpus.
    • Corpus donations are not eligible for the 85% application treatment.
  4. Clarity from CBDT:
    • The Central Board of Direct Taxes (CBDT) has clarified the computation of exemption for such donations.
    • The clarification reiterates the 85% application rule and provides guidance on how to handle eligible donations.

In summary, this amendment encourages donations between eligible Trusts and institutions while ensuring that the funds are primarily used for charitable or religious purposes. It streamlines the treatment of donations and exempts the 15% portion from investment requirements.

ITR filing for AY 2024-25 – New Regime & Old Regime-How to file

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ITR-1, ITR-2 and ITR-4 have been enabled by the Income Tax department for taxpayers to file their Tax Returns for Asst Year 2024-25.

Income Tax Return Form of ITR-1, 2 and 4 are enabled to file through Online mode with prefilled data at the Income Tax e-filing portal, for Assessment Year 2024-25.

In the above, the new income tax regime has become the default option for taxpayers, in the Assessment Year 2024-25 (relating to the financial year ended March 31, 2024). Taxpayers who fail to specify their preference between the old and new regime will have their taxes processed under the New Regime.

However, taxpayers wishing to adhere to old taxation norms have been granted flexibility to change their preference, allowing them to switch between old and new regimes.

The frequency of such switches, however, is conditional on specific types of income.

Income from Salaries

Salaried individuals have the flexibility to switch between the new and old tax regimes multiple times within each financial year.

The new tax regime offers fewer tax deductions and exemptions compared to the old tax regime, which provides various deductions under Chapter VI A from taxable income.

Income from business or profession

Individuals with income from business or profession can only make a one-time choice.

For instance, if an individual with business income switches from the old to the new regime in FY2023, they will not be eligible to switch again.

Once an individual with business income opts out of the new tax regime, they cannot opt back in for the new tax regime in the future.

How to switch while filing ITR

The Central Board of Direct Taxes (CBDT) has introduced two new income tax return forms, ITR-1 (SAHAJ) and ITR-4 (SUGAM), for the Assessment Year 2024-25.

ITR Form 1 now includes the option to select the tax regime. For ITR 4 (individuals with business or professional income), taxpayers will need to file form 10-IEA to opt out of the new tax regime.

Previously, individuals had to fill out Form 10-IE to choose the new tax regime. However, Form 10-IE, which allowed individuals to opt into the new tax regime, has been discontinued.

This change aims to make the new tax regime the default setting, starting from the financial year 2023-24. Therefore, the new tax regime will automatically apply unless individuals take specific action to opt for the old regime.

Old tax regime

The old tax regime offers numerous tax exemptions and deductions for individuals. Commonly claimed exemptions and deductions include allowances such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA), as well as deductions under Sections 80C, 80D, 80CCD(1b), 80CCD(2), and various others.

New tax regime

In the new tax regime, the exemptions and deductions available in the Old Regime are not applicable. If the taxable income (after all deductions) under the old regime is below Rs 5 lakh, no tax is levied. Conversely, under the New Regime, the entire income will be tax-free if the taxable income is under Rs 7 lakh.

Which form to choose:

ITR-1 is filed by individuals, including salaried class and senior citizens.

ITR-2 is filed by businesses and professionals who have opted for presumptive taxation and those individuals whose annual income doesn’t exceed Rs 50 lakh.

ITR-4 is for resident individuals, HUFs and firms (other than LLP) having total income up to Rs 50 lakh and having income from business and profession which is computed under Sections 44AD, 44ADA or 44AE and agricultural income up to Rs 5,000.

Source: https://www.incometax.gov.in/iec/foportal//latest-news#

Income Tax Advisory for Trusts / Institutions

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                                                                  ATTENTION TRUSTS/ INSTITUTIONS                         08-Mar-2024

Income of any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 (hereinafter referred to as trust or institution under the first regime) of the Income-tax Act, 1961 (hereinafter referred to as the Act) or any trust or institution registered under section 12AA or section 12AB of the Act (hereinafter referred to as trust or institution under the second regime) is exempt subject to fulfilment of certain conditions specified under various sections of the Act.

One of the conditions required to be fulfilled by the trust or institution in order to be eligible to claim exemption under the first regime, is laid down in clause (b) of the tenth proviso to clause (23C) of section 10 of the Act. This states that in case the total income of the trust or institution, as computed under the Act without giving effect to the provisions of exemption under the first regime, exceeds the maximum amount which is not chargeable to income-tax in any previous year, the trust or institution is required to get its accounts audited and furnish the audit report in the prescribed Form before the specified date.

A similar condition is in place for trust or institution under the second regime in subclause (ii) of clause (b) of sub-section (1 ) of section 12A of the Act.

Rule 16CC and 17B of the Income-tax Rules, 1962 (hereinafter referred to as the Rules) prescribe the form of audit report for trust or institution under the first and second regime respectively. They provide that the report of audit of the accounts of a trust or institution, shall be furnished in –

(a) Form No. l0B where,

(i) the total income of trust or institution, exceeds rupees five crores during the previous year; or

(ii) such trust or institution has received any foreign contribution during the previous year; or

(iii)such trust or institution has applied any part of its income outside India during the previous year;

(b) Form No. 10BB in other cases.

The new forms, Form No. l0B/ Form No. l0BB, were notified vide Notification No. 7 of 2023 dated 21st February, 2023. The above prescription was put in place w.e.f. 01.04.2023, vide the Income-tax (Third Amendment) Rules, 2023, and is therefore, effective for assessment year 2023-24 and subsequent assessment years. The due date for furnishing such audit reports for the A.Y. 2023-24 was 31st October, 2023.

It has come to the attention of the Board that in a number of cases trusts/ institutions have furnished audit report in Form No. l0B, where Form No. 10BB was required to be furnished for the A.Y. 2023-24. Similarly, in a number of cases trusts/ institutions have furnished audit report in Form No. 10BB, where Form No. l0B was required to be furnished for the A.Y. 2023-24. As noted above, non-furnishing of audit report in the prescribed form would result in denial of exemption in such cases as it is one of the conditions which is required to be satisfied for claim of exemption.

In view of the above, the Central Board of Direct Taxes, in exercise of its powers under section 119 of the Act has allowed those trusts/ institutions which have furnished audit report on or before 31st October, 2023 in Form No. l0B where Form No. 10BB was applicable and vice-versa, to furnish the audit report under clause (b) of the tenth proviso to clause (23C) of section 10 and sub-clause (ii) of clause (b) of sub-section (1) of section l2A of the Income-tax Act, 1961, in the applicable Form No. l0B/ 10BB for the assessment year 2023-24, on or before 31st March, 2024. Please refer to CBDT Circular 2/2024 dated: 05th March 2024. Please furnish audit report in correct prescribed form for AY 2023-24 on or before 31st March 2024 to claim exemption.

Source: Central Board of Direct Taxes Circular

Mandatory requirement of Unlisted Companies to have shares in Demat Form

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Company Law
The Ministry of Corporate Affairs, has made it mandatory for private limited companies also to issue their securities in dematerialized form starting from 30 September 2024 and to facilitate conversion of all their existing securities in dematerialized form

Background:

Till now, only public limited companies were required to issue these securities in dematerialized form and private limited companies were exempted and hence could issue their securities in the form of a physical document.

Previously, the Ministry of Corporate Affairs (MCA) mandated that public companies must maintain and transact their shares in Demat form starting from October 2nd, 2018

Effective from October 27, 2023, the MCA has introduced significant changes in the regulations governing the dematerialization of securities for private limited companies.

The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 now apply to private limited companies, excluding small companies.

These rules come into effect on September 30th, 2024.

As per the new amendment every private company which has not been classified as small company shall mandatorily convert their existing physical securities into demat form within 18 months of end of F.Y. 2023. (i.e. 30/09/2024)

Small company, as per Section 2(85) of the Companies Act,2013, means a company, other than a public company,
  • having a paid-up share capital of which does not exceed 4 crore rupees or such higher amount as may be prescribed; and
  • Turnover of which as per profit and loss account for the immediately preceding financial year does not exceed 40 crore rupees or such higher amount as may be prescribed:
    Exceptions:
  • A holding company or a subsidiary company;
  • A company registered under section 8; or
  • A company or body corporate governed by any special Act.
Consequences of non-dematerialization of physical security into demat on or before 30/09/2024:
  1. After the due date, the company shall not be able to undertake a) Issue any securities b) buyback of securities c) issue bonus shares d) Offer for right issue of securities
  2.  After the due date, Security holders shall not be able to transfer the securities of the company or subscribe further issue of securities.
  3. Penalty would be levied on the Company under the provisions of section 450 of the Companies act, 2013 as no specific penalty has been provided for the said non­compliance under the act.

* The penalty to be levied under Section-450 of the Companies Act, 2013 is as mentioned hereunder: “Fine which may extend to Rs. 10,000 and in case of continuous contravention, a further fine of which may extend to Rs. 1,000 per day after the first during which the contravention continues.”

Summary: Failure to convert physical securities into demat form by the specified deadline carries significant repercussions for private companies. They risk being unable to issue securities, undertake buybacks, issue bonus shares, or offer right issues. Moreover, security holders may face restrictions on transferring securities or subscribing to further issues. Non-compliance also attracts penalties under Section 450 of the Companies Act, 2013, emphasizing the importance of adhering to the new mandate.