gst-council-approves-track-and-trace-mechanism-for-goods

The 55th GST Council meeting, led by Finance Minister Nirmala Sitharaman, introduced several significant decisions aimed at strengthening the Goods and Services Tax (GST) framework and reducing tax evasion.

 

One of the key measures approved was the implementation of a ‘Track and Trace Mechanism’ for commodities that are prone to evasion.

 

This mechanism will ensure better monitoring and traceability of goods through the entire supply chain by affixing a unique identification mark on such items or their packages. 

 

This initiative, which is set to be introduced through Section 148A of the CGST Act, 2017, is expected to plug existing loopholes and ensure compliance in the supply chain.

 

The Track and Trace Mechanism will help enforce greater accountability by providing a legal framework for the traceability of commodities that are typically at risk of tax evasion.

 

This measure will significantly enhance the transparency of the supply chain, making it easier for authorities to track goods from manufacturers to end-users. The move was welcomed by industry experts, who believe that this mechanism will deter fraudulent activities and contribute to a more robust tax system.

 

Another important decision was related to online services. The GST Council clarified that suppliers offering online services, such as online gaming or OIDAR (Online Information and Database Access or Retrieval) services, to unregistered recipients will be required to record the name of the recipient’s state on the tax invoice.

 

This will help in the proper determination of the state of supply for GST purposes, ensuring compliance with the IGST Act, 2017.

 

On the GST rates for goods, the Finance Minister announced a reduction in the rate of GST on fortified rice kernels (FRK) from 18% to 5%. This decision is expected to lower the cost of these kernels, which are often used in government welfare schemes aimed at alleviating malnutrition.

 

Additionally, the Council exempted GST on gene therapy, marking a significant step towards making such treatments more affordable and accessible.

 

Furthermore, the Council also recommended a reduction in the compensation cess to 0.1% for supplies to merchant exporters. This brings the cess rate in line with the GST rate on such supplies, making the export process more cost-effective.

 

Additionally, the Council exempted IGST on imports of equipment and consumable samples by inspection teams of the International Atomic Energy Agency (IAEA), subject to specified conditions.

 

The meeting also focused on GST exemptions for specific services. The GST Council decided to exempt GST on contributions made by general insurance companies to the Motor Vehicle Accident Fund, which provides compensation to victims of road accidents.

 

This fund covers various expenses, including cashless treatment for accident victims, thus promoting social welfare through insurance.

 

In another noteworthy move, the GST Council clarified that transactions involving vouchers will not attract GST. Vouchers, which are neither classified as goods nor services, will be excluded from the GST system.

 

This decision aims to simplify the taxation process and reduce ambiguity regarding voucher-related transactions.

 

The definition of ‘pre-packaged and labelled’ goods was also updated to include all commodities intended for retail sale, weighing no more than 25 kg or 25 litres.

 

The updated definition aligns with the Legal Metrology Act, ensuring that products with a label affixed to them adhere to the necessary regulatory requirements.

 

Furthermore, the Council provided clarity on the issue of ‘penal charges’ imposed by banks and non-banking financial companies (NBFCs) on borrowers. It was confirmed that no GST will be levied on penal charges related to non-compliance with loan terms.

 

This decision was aimed at easing the financial burden on borrowers, as such charges are often seen as a punitive measure rather than a service.

 

Finally, the GST Council approved the issuance of circulars to remove ambiguities in certain areas, ensuring smoother implementation of GST regulations.

 

One of the key recommendations was the reduction of the pre-deposit requirement for filing an appeal before the appellate authority in cases involving only penalty amounts. This will make it easier for businesses to challenge unfair penalty-related decisions and ensure a more transparent appeal process.