CHANGES UNDER GST (Applicability, Exemptions, Rates, RCM) W.E.F 18.07.2022

Firstly, I will start from the title of this article i.e., CHANGES IN GST, it is a very common thing in GST. We can say on every month there are something changes in GST. In my view, it is something like that every morning, we looked up our app store, and it will be showing as there is an update, you need to update the apps, in the same manner, if you see the website of CBIC, something new will definitely found related to GST law & rules. Sometimes it would be in form of notifications, sometimes circulars, press releases, or clarifications, and after all in the end advisory is the simplest way to update the GST system. I’m telling the simplest way to advisory because, there is no legal existence of these advisories, this type of advisory will never help to reduce the litigation from the departments.

This time also the government has come out with the monsoon offer in GST, so many changes, especially on coverage of GST applicability, starting from non-branded food items to services of Post -Office, RBI & renting the residential premises, and health sector also could not escape this time, the GST entered in backside door in the healthcare sector also.

These changes will definitely help the government to increase their monthly GST Collection, but it will very badly affect everyone’s household budget. I’m not predicting anything about what will be impact the Indian economy, I’m too young for this, but I can surely predict it will increase the inflation rate and the cost of daily consumables.

Several recommendations have been made in the 47^th GST Council meeting held on 28^th and 29^th June 2022. Some of the major proposed changes are related to eatable items like grains, pulses etc. It was decided that in the GST council meeting, these proposed changes will come into effect from 18th July 2022 onwards, based on which several notifications were published by the Ministry of Finance on 13^th July 2022.

NOTIFICATION NO. 03/2022- CENTRAL TAX (RATE)

(This notification has been announced to amend the notification 11/2017-Central Tax (Rate), dated the 28th June, 2017 and it mainly provide the rate GST of service -Chapter 99. This notification brings the changes in the rate of construction services to the Central Government, State Government, local authority from 5 % to 12 % and 12% to 18%.)

NOTIFICATION NO. 04/2022- CENTRAL TAX (RATE)

(This notification has been announced to amend the notification 12/2017-Central Tax (Rate), dated the 28th June, 2017 and it mainly provide the list of exempted services under chapter 99. This notification brings the changes in exempted services list by removing them from exemption list to taxable list such as service of department of post , RBI, IRDA etc.)

NOTIFICATION NO. 05/2022- CENTRAL TAX (RATE)

(This notification has been announced to amend the notification 13/2017-Central Tax (Rate), dated the 28th June, 2017 and it mainly provide the list services under Reverse Charge Mechanism (RCM). This notification brings the changes in provisions of Reverse charges mechanism such as withdrawal of threshold limit of Rs. 750 & Rs. 1500/- and addition of new RCM rules on letting out residential property to registered person.)

NOTIFICATION NO. 06/2022- CENTRAL TAX (RATE)

(This notification has been announced to amend the notification 1/2017-Central Tax (Rate), dated the 28th June, 2017 and it mainly provide the list services under goods which are taxable under different rate as 5%,12%,18%,28% & 0.25%. This notification brings the changes in coverage of goods under GST. There are several changes, especially on branded & non-branded points. Earlier major eatables/ food item like grain and rice was taxable when it was bearing or holding any brand name, but from 18.07.2022, it was going to be changed from brand to ‘pre-packaged and labelled’. Some items are omitted from this list, that not means it is removed from GST, it is moved from this schedule I (2.5%) to Schedule II (6%), such as solar heater etc. it means now solar heater GST rate increased from 5% to 12%.)

Please click the below link for detailed changes (namely GST gyan 16.07.22 by Pankaj Kannaujiya)

GST gyan 16.07.22 by Pankaj Kannaujiya

CONCLUSION

If we talk about reality, there no conclusion in GST. Since July 2017, it is full off confusions, doubts & uncertainty. However, we need to sum-up everything at a point, so at the end I tried to conclude my compilation are as;

Firstly, government need to give the earliest clarification on ‘pre-packaged and labelled’ and ‘Renting the residential premises to registered taxpayer’ because it is very doubtful.

Now the questions arise, what is the ‘pre-packaged and labelled’, whether it is defined in Goods & Service Tax Act? For this question, there is an explanation issued in the notification 6/2022 Central Tax (Rate) dated 13.07.2022 are as under;

“The expression ‘pre-packaged and labelled’ means a ‘pre-packaged commodity’ as defined in clause (l) of section 2 of the Legal Metrology Act, 2009 (1 of 2010) where, the package in which the commodity is pre-packed or a label securely affixed thereto is required to bear the declarations under the provisions of the Legal Metrology Act, 2009 (1 of 2010) and the rules made thereunder”

Section 2 (l) of the Legal Metrology Act, 2009 defines the pre-packaged commodity as

“pre-packaged commodity” means a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity;”

My Interpretation/view on these changes. (Pre-packaged and labelled)

On a plain reading of the notification, it is like two conditions are laying with this phrase first is Pre-Packaging & second is labelling and as ‘AND’ mentioned in both the word (pre-packaged and labelled), therefore if both conditions will satisfy the tax would be levied.

But after reading the explanation it says that “The expression ‘pre-packaged and labelled’ means a ‘pre-packaged commodity’”

It means pre-packaged and labelled means Pre-package commodity and labelling is an essential part of pre-packaging as per the Legal Metrology Act.

From 18^th July 2022, all the food products like grains, pulses, rice etc. whether branded or non-branded will be also levied GST if it is sold pre-packaged & labelled. Presently who are consuming the branded goods, are paying the GST on these items but from 18^th July 2022, all consumers have to pay GST on these items even after non-branded also (Excluding those who procure in loose form). Some new items were also added such as Curd, Lassi, and Buttermilk Jaggery of all types including Cane Jaggery (gur) under GST. Due to these changes, GST Revenue will be definably increased but it will very badly impact the budget of the common man.

The above change will create a huge impact on the consumer necessity market as the direct burden will be borne by the consumers. This will impact not only supermarkets & marts but to local shopkeepers & local dealers also, who are selling their goods food grains, pulses and other eatables in pre-packaged conditions.

If we talk about the inflation rate, as we can say almost very huge coverage of goods has been covered by this notification along with tax on ICU room, residential house rent, Postal services & RBI services, hotel accommodation (below 1000 also), increasing tax rate of solar heater etc. This will be going to definitely increase the inflation rate in coming days.

Hope the government will soon updates all the bug of GST system and give us the hurdle free GSTIN & law.

Jay Hind, Jay Bharat.

THANK YOU

Pankaj Kannaujiya

16.07.2022

(The author has tried to cover all the aspects, which may be useful to all. But Views are strictly personal and this document is only for ease of reference, kindly take the   decision in your wisdom, please refer to official notifications / circular for more details)