GST Council Introduces Groundbreaking ‘Track and Trace’ Technology to Curb Tax Evasion

In a significant move to tackle revenue loss, the GST Council has approved the introduction of a ‘Track and Trace Mechanism’ for specific commodities at high risk of evasion. This system will involve affixing a unique identifier to particular goods or their packaging, allowing for enhanced tracking across the supply chain. The government will be empowered to implement this mechanism through an amendment to the CGST Act, 2017, under Section 148A.

Key Features of the Track and Trace Mechanism:
– Implementation of a Unique Identification Mark on the designated goods or their packaging.
– Creation of a legal structure to establish a tracking system for selected commodities, promoting transparency in the supply chain.

During the 55th Council meeting, the finance ministry made another important announcement: all invoices for online services are now required to state clearly the state where the service is provided. Currently, many inter-state transactions lack adequate documentation about the service location, resulting in inconsistencies in tax distribution. This amendment intends to correct this by ensuring accurate tax allocation.

Specific Changes Regarding Online Services:
– Providers of ‘Online Services’, which include online gaming and other OIDAR services, must include the state name of unregistered recipients on the tax invoice.
– This address will serve as the official address of the recipient under Section 12(2)(b) of the IGST Act, 2017, and the applicable regulations.

On a related note, developments in spiritual technology startups are expanding worldwide due to the rising demand for virtual services.

Regarding GST rates for goods, Finance Minister Nirmala Sitharaman announced several modifications:
– The GST rate on fortified rice kernel (FRK) is to be reduced from 18% to 5%.
– GST on gene therapy will be exempted.
– The compensation cess rate for supplies to merchant exporters will be decreased to 0.1%, aligning it with the GST rate for those supplies.
– Exemption from IGST for the import of equipment and consumable samples by the International Atomic Energy Agency (IAEA) inspection team, subject to certain conditions.

Turning to services, the Council decided that:
– Contributions from general insurance companies to the Motor Vehicle Accident Fund, paid from third-party motor vehicle premiums, will be exempt from GST. This fund is meant to offer compensation or cashless treatment to victims of road accidents, including those affected by hit-and-run cases.
– No GST will apply to transactions involving vouchers, as they are classified as neither goods nor services.

The Council also recommended streamlining provisions related to vouchers and proposed changes to the definition of ‘pre-packaged and labelled’ items. This adjustment covers all products intended for retail sale, weighing no more than 25 kg or 25 litres, classified as ‘pre-packed’ under the Legal Metrology Act.

Furthermore, it was confirmed that no GST is applicable on ‘penal charges’ levied by banks and Non-Banking Financial Companies (NBFCs) for contraventions of loan agreements. The Council sanctioned the issuance of clarifications via circulars to resolve uncertainties and legal disputes in particular areas. Additionally, a recommendation was put forward to lower the required pre-deposit sum for appealing an order regarding penalties exclusively.