GST Council Makes Significant Reforms to Help Businesses

The 53rd GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, has unveiled a series of significant reforms aimed at simplifying the GST system, easing compliance burdens, and fostering a more business-friendly environment. These decisions come as a response to various challenges faced by businesses, particularly MSMEs, since the implementation of GST in 2017.

Key Reforms and Their Impact:

1. Waiver of Interest and Penalties:

In a major relief to businesses, the council has recommended waiving interest and penalties on demand notices issued under Section 73 of the CGST Act for fiscal years 2017-18, 2018-19, and 2019-20. This applies to cases not involving fraud or willful misstatement, provided the full tax demanded is paid. This move acknowledges the difficulties faced by taxpayers during the initial years of GST implementation and offers a chance for businesses to clear their dues without additional financial burden.

2. Extension of Input Tax Credit (ITC) Claim Period:

The council has recommended that the time limit to avail input tax credit for invoices or debit notes for FY 2017-18 to 2020-21 be extended to November 30, 2021, if claimed through GSTR-3B returns filed up to that date. This retrospective change aims to resolve ITC-related issues that many businesses faced in the early years of GST.

3. Reduction in Litigation:

To reduce government litigation, the council has recommended monetary limits for filing departmental appeals: ₹20 lakhs for GST Appellate Tribunal, ₹1 crore for High Courts, and ₹2 crores for the Supreme Court. This is expected to significantly reduce the number of tax disputes clogging the judicial system.

4. Easing Appeal Process:

The council has recommended reducing the pre-deposit amount required for filing appeals under GST. This change aims to ease cash flow issues for businesses while ensuring their right to appeal is not hindered by financial constraints.

5. Changes in Tax Rates and Exemptions:

Several changes in GST rates have been recommended, including a uniform 12% GST on milk cans, cardboard boxes, solar cookers, and sprinklers. The council has also recommended exemptions for certain services provided by Indian Railways and for accommodation services, which should benefit students and working professionals.

6. Aadhaar-based Authentication:

The council has recommended rolling out biometric-based Aadhaar authentication for GST registration applicants across India in a phased manner. This measure aims to strengthen the registration process and combat fraudulent input tax credit claims.

7. E-commerce Related Changes:

The council has recommended reducing the Tax Collected at Source (TCS) rate for e-commerce operators from 1% to 0.5%, which should ease the financial burden on suppliers using these platforms.

These reforms reflect a concerted effort to address various pain points in the GST system, particularly for MSMEs. By simplifying processes, reducing compliance burdens, and offering relief measures, the GST Council aims to create a more conducive environment for business growth and economic recovery.