Changes in GST Rates, Exemptions, Reverse Charge & ITC Rules from 20 October 2023

Government issued various GST rate notifications to implement the recommendations made by the GST Council during its 52nd meeting:

Amendments to GST rate Notification for Coastal Vessel Conversion with 6-Month Reconversion Clause (Notification No. 60/2023-Customs):

• The Central Government, under the Customs Act and Customs Tariff Act, has made amendments to Notification No. 50/2017-Customs.
• It introduces a provision for foreign-going vessels converted for coastal runs, with a condition for reconversion within six months.
• The notification also updates a list of authorized banks and takes effect on October 20, 2023.

Foreign going vessels are liable to pay 5% IGST on the value of the vessel if it converts to coastal run. GST Council recommends conditional IGST exemption to foreign flag foreign going vessel when it converts to coastal run subject to its reconversion to foreign going vessel in six months.


A "foreign going vessel" is a big ship that sails in international waters, going from one country to another. These ships usually don't have to pay a specific tax when they are sailing internationally.

Now, when such a foreign going vessel changes its route and starts sailing along the coast of a country (for example, within Indian coastal waters), it's referred to as a "coastal run." In this situation, the government wants to apply a tax called IGST (Integrated Goods and Services Tax), which is 5% of the value of the ship.

However, there's a recommendation from the GST Council that says if this ship, which has now become a coastal run vessel, changes back to its original status as a foreign going vessel within six months, it can be exempt from paying this IGST. In other words, the tax is not applied if the ship goes back to its international routes within six months. This recommendation aims to encourage foreign vessels to continue their international operations and not stay in coastal waters for too long.

Amendments to Input Tax Credit Rules under the CGST Act, 2017 (Notification No. 12/2023- Central Tax (Rate)):

• The Central Government, exercising powers under the Central Goods and Services Tax Act, 2017, has made amendments to Notification No. 11/2017- Central Tax (Rate) (GST Rates of Supply of Service).
• It introduces conditions for taking input tax credit on input services in the same line of business, restricting it to 2.5% when the supplier charges a higher tax rate.
• The notification also omits certain entries and takes effect on October 20, 2023.

Amendments to GST Rate Notification for Governmental Services, Including Indian Railways (Notification No. 13/2023- Central Tax (Rate)):

• The Central Government, under the Central Goods and Services Tax Act, 2017, has made amendments to Notification No. 12/2017- Central Tax (Rate) (Exemption on Supply of Service).
• The changes include the addition of services provided to Governmental Authorities related to water supply, public health, sanitation, solid waste management, and slum improvement. It also extends the tax provisions to include the Ministry of Railways (Indian Railways). These amendments take effect on October 20, 2023.

The GST Council has also recommended to exempt services of water supply, public health, sanitation conservancy, solid waste management and slum improvement and upgradation supplied to Governmental Authorities.

Amendments to GST Notification for Railways and Central Government Services (Notification No. 14/2023- Central Tax (Rate)):

• The Central Government, in accordance with the Central Goods and Services Tax Act, 2017, has made amendments to Notification No. 13/2017- Central Tax (Rate) (Services under RCM)
• These changes involve specifying that the Ministry of Railways (Indian Railways) is included in services under serial number 5 and excluded from services supplied by the Central Government under serial number 5A. The amendments are effective from October 20, 2023.

Amendment to GST Rate Notification for Taxable Construction Services (Notification No. 15/2023- Central Tax (Rate)):

• The Central Government, based on the Central Goods and Services Tax Act, 2017, has amended Notification No. 15/2017- Central Tax (Rate) (supplies not eligible for refund of unutilized ITC under CGST Act)
• The amendment changes the definition of taxable construction services for buildings or complexes intended for sale, excluding cases where the full payment is received post-completion certificate issuance or initial occupation. These changes become effective on October 20, 2023.

Amendments to GST Rate Notification for Passenger Transportation Services (Notification No. 16/2023- Central Tax (Rate)):

• The Central Government, in line with the Central Goods and Services Tax Act, 2017, has made amendments to Notification No. 17/2017- Central Tax (Rate). It revises the definition of services related to the transportation of passengers by motor vehicles, excluding omnibuses unless provided by a company through an electronic commerce operator. These amendments are effective from October 20, 2023.

With effect from 1st January 2022, liability to pay GST on bus transportation services supplied through Electronic Commerce Operators (ECOs) has been placed on the ECO under section 9(5) of CGST Act, 2017. This trade facilitation measure was taken on the representation of industry association that most of the bus operators supplying service through ECO owned one or two buses and were not in a position to take registration and meet GST compliances.  To arrive at a balance between the need of small operators for ease of doing business and the need of large organized players to take ITC, GST Council has recommended that bus operators organised as companies may be excluded from the purview of section 9(5) of CGST Act, 2017. This would enable them to pay GST on their supplies using their ITC.

Amendments to GST Rate Notification for Molasses, Millet Food Preparations, and Spirits (Notification No. 17/2023- Central Tax (Rate)):

• The Central Government, based on the Central Goods and Services Tax Act, 2017, has made amendments to Notification No. 01/2017- Central Tax (Rate). The changes involve adjustments to tax rates for items including molasses, millet flour-based food preparations, and spirits for industrial use, with the omission of specific entries. These amendments take effect on October 20, 2023.

GST Council recommended to keep Extra Neutral Alcohol (ENA) used for manufacture of alcoholic liquor for human consumption outside GST. Law Committee will examine suitable amendment in law to exclude ENA for use in manufacture of alcoholic liquors for human consumption from ambit of GST.

To reduce GST on molasses from 28% to 5%. This step will increase liquidity with mills and enable faster clearance of  cane dues to sugarcane farmers. This will also lead to reduction in cost for manufacture of cattle feed as molasses is also an ingredient in its manufacture.

A separate tariff HS code has been created at 8 digit level in the Customs Tariff Act to cover rectified spirit for industrial use. The GST rate notification will be amended to create an entry for ENA for industrial use attracting 18% GST.

GST rates on “Food preparation of millet flour in powder form, containing at least 70% millets by weight”, falling under HS 1901, with effect from date of notification, have been prescribed as: 
0% if sold in other than pre-packaged and labelled form
5% if sold in pre-packaged and labelled form

Amendment to GST Notification for Unpackaged Millet Food Preparations (Notification No. 18/2023- Central Tax (Rate)):

• The Central Government, under the Central Goods and Services Tax Act, 2017, has made an amendment to Notification No. 02/2017- Central Tax (Rate) (Exempted goods)
• This amendment introduces a new entry (S. No. 94A) regarding food preparations made from millet flour, containing at least 70% millets by weight, when not pre-packaged and labeled. The amendment takes effect on October 20, 2023.

GST rates on “Food preparation of millet flour in powder form, containing at least 70% millets by weight”, falling under HS 1901, with effect from date of notification, have been prescribed as:  0% if sold in other than pre-packaged and labelled form 5% if sold in pre-packaged and labelled form 

Amendment to GST Rate Notification for Taxation of Government Entities (Notification No. 19/2023- Central Tax (Rate)):

• The Central Government, in accordance with the Central Goods and Services Tax Act, 2017, has amended Notification No. 04/2017- Central Tax (Rate) (Reverse charge on certain specified supplies of goods under section 9 (3))
• The amendment changes the entry related to taxation of government entities, specifying that it excludes the Ministry of Railways (Indian Railways). These changes become effective on October 20, 2023.

Supply of all goods and services by Indian Railways shall be taxed under Forward Charge Mechanism to enable them to avail ITC. This will reduce the cost for Indian Railways.

Amendment to GST Rate Notification for Zari thread (Notification No. 20/2023- Central Tax (Rate)):

To clarify that imitation zari thread or yarn made out of metallised polyester film /plastic film, falling under HS 5605, are covered by the entry for imitation zari thread or yarn attracting 5% GST rate. However, no refund will be allowed on polyester film (metallised) /plastic film on account of inversion.

Similar notifications have been passed under the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”) and the Union Territory Goods and Services Tax Act, 2017 (“the UTGST Act”).

Download Notifications from below:

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