GST Council introduces 'Track and Trace' system to curb tax evasion
Bills for online services must clearly specify the state where the service is provided, the GST council recommended.
In a significant move to plug leakage, the GST Council on Saturday approved a proposal to implement 'Track and Trace Mechanism' for specified evasion-prone commodities, under which a unique mark will be affixed on such goods or packages to trace them throughout the supply chain.
This is to insert an enabling provision in CGST Act, 2017 through Section 148A to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities.
"The system shall be based on a Unique Identification Marking which shall be affixed on the said goods or the packages thereof. This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain," the finance ministry said while listing out decisions taken in the 55th Council meeting.
Another key decision was to mandate that bills for online services clearly specify the state where the service is provided, it added.
Currently, many inter-state transactions lack proper documentation of the service's location, resulting in the state of consumption not receiving the applicable tax. This change is expected to address the issue and ensure more accurate tax distribution, the release said.
"To clarify that in respect of supply of 'Online Services' such as supply of online money gaming, OIDAR services, etc. to unregistered recipients, the supplier is required to mandatorily record the name of the state of the unregistered recipient on the tax invoice and such name of state of recipient shall be deemed to be the address on record of the recipient for the purpose of section 12(2)(b) of IGST Act, 2017 read with proviso to rule 46(f) of CGST Rules, 2017," it said.
With regard to the decision taken about the GST rate on goods, Finance Minister Nirmala Sitharaman said, the Council has decided to cut the rate on fortified rice kernel (FRK) to 5% from 18% and also exempted GST on gene therapy.
Besides, she said, it was decided to reduce the rate of compensation cess to 0.1% on supplies to merchant exporters at par with the GST rate on such supplies and to exempt from IGST imports of all equipment and consumable samples by the Inspection Team of the International Atomic Energy Agency (IAEA) subject to specified conditions.
As regards services, she said, the Council decided to exempt GST on the contributions made by general insurance companies from the third-party motor vehicle premiums collected by them to the Motor Vehicle Accident Fund, constituted under section 164B of the Motor Vehicles Act, 1988.
This fund is constituted for providing compensation/cashless treatment to the victims of road accidents including hit-and-run cases.
In addition, she said, the GST Council recommended no GST on the transaction of vouchers as they are neither a supply of goods nor a supply of services.
The provisions related to vouchers is also being simplified, she said, adding, the Council recommended amending the definition of 'pre-packaged and labelled' to cover all commodities that are intended for retail sale and containing not more than 25 kg or 25 litre, which are 'pre-packed' as defined under the Legal Metrology Act, or a label affixed thereto is required to bear the declarations under the provisions of the Act and rules.
It was also clarified that no GST is payable on the 'penal charges' levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.
The Council too approved issuance of clarifications through circulars to remove ambiguity and legal disputes in certain issues.
The panel recommended a reduction of payment of pre-deposit for filing an appeal before the appellate authority in respect of an order passed, which involves only a penalty amount.