GST Council tweaks hiring norms for tribunal, clarifies on taxability of corporate, personal guarantees

New Delhi: Goods and Services Tax (GST) Council on Saturday clarified on the taxability of personal and corporate guarantees, tweaked the norms for hiring members and President of GST appellate tribunal and allowed businesses to file appeals despite delays.

As per the decision of the federal indirect tax body, no tax has to be paid on personal guarantees given by directors of companies that raise loans from banks and financial institutions if the company does not make any payments to the director for the same.

Where corporate guarantee is provided between related parties, one percent of the value of such guarantee or the payment made to the guarantor, whichever is high, will be subject to tax, according to an official statement issued after the Council meeting. According to experts, 18% GST will apply on such corporate guarantees.

The Council recommended that businesses, which could not file appeals within the prescribed time of a maximum of four months, are now eligible for an amnesty scheme and can file appeals up to 31 March 2024, subject to certain riders on pre-deposit payment of 12.5% of the tax under dispute.

“This will facilitate a large number of taxpayers, who could not file appeals in the past within the specified time period,” the statement said.

Finance minister Nirmala Sitharaman at a press briefing said that the Council has also decided to make a few amendments to the decisions taken earlier on setting up GST appellate tribunal.

These pertain to the age of judicial members and also those from the lawyer community who may get appointed. As per Saturday’s amendments, the president of the tribunal and the members will have a tenure of 70 years and 67 years respectively, up from 67 years and 65 years prescribed earlier, Sitharaman explained.

The minimum age of appointment was not specified earlier for appointment as members and president. Now a minimum age of 50 years is recommended, the minister informed.

Sitharaman also said that there will be no GST on millet flour where millets account for 70% of the product by weight if sold lose, and a 5% tax will be levied where these are sold in a pre-packaged and labeled form. It is also decided to lower GST on molasses from 28% to 5%.

She added that the GST Council has recommended keeping extra neutral alcohol (ENA), an intermediate product used in making liquor for human consumption, outside GST ambit.

Liquor, the finished product, is also outside the GST net, and is subject to state excise duty and central sales tax on inter-state sales. On ENA, Centre has taxation powers which it will not exercise. This brings clarity and offers a big relief to producers.

The Council also offered integrated GST (IGST) exemption to foreign vessels when they make coastal runs in India, which is expected to promote tourism in India’s coastal region, especially the western coast.