Highlights of 48th GST Meeting

Highlights of 48th GST Meeting

The 48th GST Council Meeting, held virtually on 17 December 2022, raised the prosecution threshold under Section 132 of the CGST Act from ₹1 crore to ₹2 crore, slashed compounding charges, clarified that no-claim bonus (NCB) is not part of the taxable value on insurance premiums, and opened a formal refund route for unregistered persons who cancel agreements. These decisions were given legislative effect through Finance Act 2023 and remain active compliance obligations and reliefs in FY 2026-27.

Why the 48th Council Still Matters in FY 2026-27

It is tempting to file a 2022 Council meeting under "historical reference" and move on. Resist that temptation. Three reasons:

First, the prosecution and compounding changes were only enacted through Finance Act 2023 — meaning they took effect mid-year and many internal tax manuals were never updated.

Second, the no-claim bonus clarification ended years of industry-wide litigation. If your accounts team is still calculating GST on gross premium, you have a live valuation error.

Third, the refund pathway for unregistered persons under Rule 89(2)(ka) is actively used in 2025-26 for real-estate cancellations and policy surrenders — yet finance teams at developers and insurers frequently get the documentation wrong.

What follows is a section-by-section breakdown of every decision that carries forward — with numbers, procedures, and mistakes to avoid.

Decriminalisation Under Section 132: Higher Thresholds, Lower Compounding

The Before-and-After on Prosecution

Section 132 of the CGST Act, 2017 lists twelve categories of offences that can attract criminal prosecution — everything from wilful evasion of tax to obstruction of officers. Before the 48th Council's recommendation took legislative effect, a taxpayer could be prosecuted if the tax evaded exceeded ₹1 crore. That threshold has now been raised to ₹2 crore for all offences except those involving fake invoices.

The fake-invoice carve-out is critical: if the charge is issuance of an invoice without actual supply of goods or services, prosecution remains permissible at the ₹1 crore level. That distinction matters enormously in department scrutiny — an officer who suspects bogus ITC claims can still invoke Section 132 on a ₹1.5 crore case if it is framed as a fake-invoice offence.

Compounding: From Punitive to Workable

Compounding allows a taxpayer to pay a sum and extinguish the criminal liability without a trial. The old compounding range was 50% to 150% of the tax involved — on a ₹3 crore tax dispute, that meant paying between ₹1.5 crore and ₹4.5 crore just to compound the offence. The 48th Council brought this down to 25% to 100%, subject to a minimum of ₹10,000 and a maximum equal to the tax involved.

The right to compound is also extended to first-time offenders more readily, and the application is filed before the Commissioner who constitutes a Compounding Committee. Finance Act 2023, which gave effect to this change, also clarified that compounding is available only once per offence — so it is not a revolving-door mechanism for repeat evaders.

Worked Example: The ₹2 Crore Threshold in Practice

Scenario: A manufacturer in Pune is served with a show-cause notice alleging suppression of turnover, with the department computing evaded tax at ₹1.8 crore for FY 2022-23. There is no fake-invoice allegation — the dispute is about whether certain job-work receipts were correctly declared.

• Under the pre-48th-Council position: Tax evaded (₹1.8 crore) exceeds the old ₹1 crore prosecution threshold → criminal prosecution permissible under Section 132.
• Under the post-Finance Act 2023 position: Tax evaded (₹1.8 crore) is below the new ₹2 crore threshold → prosecution cannot be launched on these facts (assuming no fake-invoice angle).

If the taxpayer chooses to compound even at ₹1.8 crore, the new maximum compounding amount is ₹1.8 crore (100% of tax) versus the old maximum of ₹2.7 crore (150%). Minimum under new rules: ₹45,000 (25% × ₹1.8 crore). The saving on minimum compounding alone is ₹45,000 versus the old minimum of ₹90,000.

No-Claim Bonus on Insurance: The Valuation Clarification That Ended Years of Dispute

Why NCB Was Contested

Insurance companies offer a no-claim bonus — effectively a discount — on the renewal premium if the insured has not made any claim in the preceding year. A typical NCB ranges from 20% to 50% of the own-damage component of the premium. The dispute: should GST be charged on the gross premium before deducting NCB, or on the net premium after NCB?

Insurers were arguing that NCB is a discount and therefore excluded from taxable value under Section 15(3)(a) of the CGST Act. The department occasionally took the position that NCB was a post-supply adjustment not qualifying for deduction. Litigation piled up at the Commissioner (Appeals) level.

The 48th Council clarified: NCB deducted from the gross premium does not form part of the taxable value. GST is chargeable only on the net premium after NCB deduction. This aligns with the position that NCB is agreed at the time of supply — it is not a retrospective discount — and therefore qualifies as a trade discount under Section 15(3)(a).

Worked Example: NCB's Impact on Your Insurance GST Bill

Policy renewal facts:

• Gross own-damage premium: ₹50,000
• NCB @ 20% for one claim-free year: ₹10,000
• Net premium payable: ₹40,000
• GST rate on motor insurance: 18%

For a large fleet operator renewing cover on 200 vehicles, the aggregate overcharge under the old approach could be ₹3,60,000 in a single renewal cycle. If your insurer has been charging GST on gross premium, you are entitled to seek a corrected invoice or credit note. The CBIC circular confirming this treatment remains in force in 2026.

GST Refunds for Unregistered Persons: The Flat-Cancellation Route

Who Qualifies

An unregistered buyer — an individual who purchased an under-construction flat or entered a long-term insurance policy — may have paid GST to the supplier (developer or insurer). If the agreement is cancelled, the supplier can issue a credit note. But because the buyer is unregistered, they have no GST return to credit it against. The money was effectively stranded.

The 48th Council recommended a specific refund route. CBIC operationalised this through Rule 89(2)(ka) of the CGST Rules, 2017 and corresponding amendments to Form GST RFD-01. The unregistered person applies directly on the GST portal, providing the original tax invoice, the cancellation agreement, and proof of having borne the GST.

The application must be filed within two years from the date of the order of cancellation of the underlying contract. This limitation period matters: a flat buyer who cancelled in January 2024 must file by January 2026. In FY 2026-27, many such applications are already at the adjudication stage.

Step-by-Step: Filing GST RFD-01 as an Unregistered Person

1. Obtain a Temporary Reference Number (TRN) on the GST portal (www.gst.gov.in) using your PAN and mobile/email OTP — you do not register as a taxpayer; the TRN is used only for the refund application.
2. Navigate to Services → Refunds → Application for Refund and select the category "Refund by Unregistered Person".
3. Attach supporting documents:
4. Original tax invoice from supplier showing GST charged
5. Cancellation/termination agreement or order
6. Bank account details (cancelled cheque / account statement)
7. Affidavit that you have not claimed credit of this tax elsewhere
8. Fill in the refund details: amount of tax, period to which it relates, jurisdiction of the supplier.
9. Submit. You will receive an ARN (Acknowledgement Reference Number). Track the status under Services → Refunds → Track Application Status.
10. Respond to any deficiency memo issued by the refund-sanctioning authority within 15 working days — delay at this stage causes the application to be returned.
11. Refund is credited directly to your bank account once sanctioned — there is no GST registration required at any point.

Common documentation mistake: Buyers submit the booking cancellation letter from the developer without the original GST invoice. The portal will not accept the application without the tax invoice that shows the GSTIN of the supplier, the tax amount, and the HSN/SAC code.

Rate Changes That Still Apply in 2026

SUV Compensation Cess: The Four-Condition Test

The 48th Council resolved a long-running ambiguity about which vehicles attract the 22% compensation cess (over and above 28% GST). The clarification: a vehicle is subject to 22% cess only if it satisfies all four of the following conditions simultaneously:

1. Popularly known as an SUV — the "popular" test excludes sedans or hatchbacks that happen to have high ground clearance
2. Engine capacity ≥ 1,500 cc — petrol, diesel, or CNG equivalent
3. Length ≥ 4,000 mm — overall vehicle length
4. Ground clearance ≥ 170 mm in unladen condition — unladen means without passengers or cargo

If any one condition fails, the vehicle falls into a lower cess bracket (typically 20% for large cars with engine ≥ 1,500cc and length ≥ 4,000mm, or 15% for the mid-segment).

Worked Example: When Your SUV Falls In — or Out — of the 22% Cess

Vehicle A — Large Diesel SUV:

• Popular name: SUV ✔
• Engine: 2,400cc ✔
• Length: 4,650mm ✔
• Unladen ground clearance: 210mm ✔
• All four conditions met → 22% compensation cess
• Ex-factory price: ₹20 lakh | GST: ₹5.6 lakh (28%) | Cess: ₹4.4 lakh (22%) | Total: ₹30 lakh

Vehicle B — Compact Petrol SUV:

• Popular name: SUV ✔
• Engine: 1,497cc ✗ (below 1,500cc threshold)
• Length: 4,300mm ✔
• Unladen ground clearance: 190mm ✔
• One condition fails → 20% compensation cess applies instead
• Same ex-factory price ₹20 lakh | GST: ₹5.6 lakh | Cess: ₹4.0 lakh (20%) | Total: ₹29.6 lakh

The 3cc engine difference saves ₹40,000 in cess. This is why manufacturers price certain models specifically below the 1,500cc line.

Other Rate Changes from the 48th Council

The ethyl alcohol rate cut is particularly significant for sugarcane co-operatives and distilleries supplying the fuel blending programme. At 5% (vs 18%), the ITC impact on the oil refinery side also shifts — refineries must recalibrate their working capital for ITC on this input.

Procedural Refinements: GSTR-9 Late Fee and Place of Supply

GSTR-9 Late Fee Rationalisation

The 48th Council recommended aligning late fee for GSTR-9 (Annual Return) for registered persons with aggregate turnover up to ₹20 crore at a reduced rate. A tiered structure was notified subsequently (Notification No. 07/2023-CT): the maximum late fee is capped by turnover slab — lower slabs attract lower per-day fees. If you are filing a pending GSTR-9 for FY 2022-23 or beyond and your turnover is below ₹20 crore, check the applicable capped amount before paying the system-computed default.

Note: GSTR-9 is not mandatory for taxpayers with turnover up to ₹2 crore for FY 2022-23 onwards — they are exempt, so no late fee accrues at all. This exemption has been renewed year after year and holds for FY 2025-26 as well.

Place of Supply: Goods Transported Outside India Between Two Indian Parties

When a supplier and recipient are both located in India, but the goods are transported outside India (e.g., a ship cargo management service where the vessel moves internationally), the place of supply is now the location of the recipient — not the location of the supplier. This shifts the IGST/CGST-SGST determination in cross-border logistics service contracts. Update your E&O checklist for freight forwarders, shipping companies, and customs house agents.

RCM on Residential Dwelling Rental: Still Active and Routinely Missed

The 47th GST Council (June 2022) introduced reverse charge on rental of residential dwelling to a registered person effective 18 July 2022. The 48th Council reaffirmed this without changes.

The mechanics: if you are a GST-registered entity and you rent a house/flat — whether for housing an employee, guest house, or any purpose other than your own residence — you must self-charge GST @ 18% under RCM, remit it in GSTR-3B (Table 3.1(d)), and claim ITC in Table 4A(3) to the extent eligible. The landlord does not charge GST in the invoice.

The mistake seen routinely in 2025-26: A company registers an employee's rented flat as a guest house and pays the landlord rent. The accounts team treats it as a "residential exempted supply" and neither pays RCM nor claims ITC. The department raises a demand for the unpaid RCM along with interest at 18% per annum and penalty.

If your registered office or branch has any residential premises on rent — re-examine every lease agreement immediately.

Common Mistakes and Pitfalls to Avoid

1. Applying the old ₹1 crore prosecution threshold: Advisors relying on pre-2023 manuals may still cite the old threshold. Confirm: the ₹2 crore threshold (for non-fake-invoice cases) is in force from Finance Act 2023.

2. Charging GST on gross premium including NCB: Insurance accounting teams sometimes compute GST before applying NCB to avoid system reconfiguration. This creates a valuation error that CBIC can treat as excess collection — attractable by the department.

3. Missing the two-year window for unregistered-person refunds: The limitation runs from the cancellation date, not from the date you learned about the refund route. A flat buyer who cancelled in early 2023 may already be out of time in 2025.

4. Applying the 22% SUV cess without checking all four conditions: Dealers sometimes default to 22% on any large vehicle marketed as an SUV. Check the engine cc and unladen ground clearance in the type-approval certificate, not the marketing brochure — these are the figures that matter in a department audit.

5. Treating rate notifications as self-implementing: The rate reductions on husk of pulses and ethyl alcohol took effect from the date of the subsequent CBIC notification, not from the Council meeting date. Reversals or demands for supplies made in the gap between the Council meeting (17 December 2022) and the actual notification date are legally defensible only if the notification date is correctly identified.

6. Confusing GSTR-9 filing exemption with non-filing: Being exempt from GSTR-9 (turnover ≤ ₹2 crore) does not mean the data disappears. Reconciliation between GSTR-1, GSTR-3B, and books remains mandatory. The GSTR-9 exemption only removes the late-fee exposure, not the audit risk.

What the 48th Council Left Unfinished — and Where Those Issues Stand in 2026

Two major items were explicitly deferred at the 48th Council and have since been resolved:

Online gaming, casinos, and horse racing: The 48th Council discussed but did not decide the rate and valuation framework. The 50th GST Council (July 2023) imposed 28% GST on the face value of bets for online gaming. The Constitution (101st Amendment Act) was invoked, and CGST Act Schedule III was amended. In FY 2026-27, all online gaming platforms operating from India or servicing Indian users charge GST on full bet value — a massive structural change from the pre-50th-Council regime.

GST Appellate Tribunals (GSTAT): The 48th Council discussed operationalisation but benches were not functional for several years. By 2025-26, GSTAT benches in most major jurisdictions are operational. If you have a pre-GSTAT order at the High Court only because the Tribunal was unavailable, the department may push to transfer such matters to GSTAT — watch this space, particularly if you have long-pending High Court GST writs.

Key Takeaways

• Prosecution threshold is now ₹2 crore for all Section 132 offences except fake-invoice cases, which remain at ₹1 crore — a distinction that changes how you respond to department notices.
• GST on insurance must be computed on net premium after NCB deduction — verify your insurer's invoice format before accepting renewal documents.
• Unregistered flat buyers and policy surrenders can claim GST refund via Form GST RFD-01 within two years of cancellation — use the TRN route, not a regular registration.
• All four SUV conditions must be satisfied for the 22% compensation cess — one failing condition (commonly engine below 1,500cc or GC below 170mm) drops the vehicle to the 20% slab.
• RCM on residential dwelling rental by registered persons remains live in 2026 — audit every lease agreement your entity has signed since 18 July 2022.
• Rate changes take effect from the CBIC notification date, not from the Council meeting date — always check Notification No. and effective date before revising invoices.
• Track every subsequent Council and CBIC circular — the 48th Council's decisions have been modified, expanded, or clarified by later Councils; no GST position is static.