The 39th GST Council meeting held on Saturday, March 14, 2020, at New Delhi and chaired by the Union Finance Minister Nirmala Sitharaman took decisions on several crucial issues under GST, including deferment of e-invoice and new returns. The due date of filing an annual return and reconciliation statement for Financial Year (‘FY’) 2018-2019 has been extended to June 30, 2020.
The Council also recommended amendments in the CGST Rules 2017 and issuance of circulars to clarify specific issues.
Given below are the highlights of the recommendations made by the GST Council for changes in the law, procedure, and GST rates:
Changes related to law and procedure:
1. Interest on delayed payment of GST
The proviso to Section 50(1) of the CGST Act 2017 concerning interest for delay in payment of GST, inserted vide Finance Act, 2019, needs to be given retrospective effect from July 1, 2017.
2. GST Returns
- The due date for filing the annual return in Form GSTR-9 and the reconciliation statement in Form GSTR-9C for FY 2018-2019 is proposed to be extended to June 30, 2020.
- MSME taxpayers having a turnover less than INR 5 crores will not be required to file Form GSTR-9C for FY 2018-2019.
- Late fees for delay in filing of annual return in Form GSTR-9 and reconciliation statement in Form GSTR-9C has been waived for FYs 2017-2018 and 2018-2019, in case of taxpayers having aggregate turnover of less than INR 2 crores.
- Filing of monthly/quarterly GST returns, which was earlier proposed to be implemented from April 1, 2020, has been postponed.
- The existing system of furnishing details in Forms GSTR-1 and GSTR-3B has been proposed to continue till September 2020.
- The requirement of furnishing details in Form GSTR-1 for FY 2019-2020 needs to be waived for taxpayers who could not avail the option of special composition scheme by filing Form CMP-02 [Notification No. 2/2019 – Central Tax (Rate) dated March 7, 2019].
- The due date for filing details in Form GSTR-3B for the months from July 2019 to January 2020 has been extended till March 24, 2020, for registered persons having principal place of business in the Union territory of Ladakh. A similar extension has been provided for filing details in Forms GSTR-1 and GSTR-7 for such persons.
3. Deferment of e-invoicing and QR Code
- The date for implementation of e-invoicing and QR Code has been proposed to be extended to October 1, 2020.
- A particular class of registered businesses or persons, including insurance companies, banking companies, financial institutions, non-banking financial institutions, goods transport agency, and passenger transportation service provider, has been proposed to be exempted from issuing e-invoices or capturing dynamic QR code.
4. Deferment of e-wallet scheme (for exporters)
The time limit to finalize the e-wallet scheme has been extended till March 31, 2021. Consequently, the current exemption from IGST and Cess on import made under Export Promotion Capital Goods, Export Oriented Unit, and Advance Authorisation schemes will continue till March 31, 2021.
5. Amendments to CGST Rules, 2017
The Council has recommended amending the CGST Rules in respect of the following:
- Procedure for reversal of ITC should be in place in respect of capital goods, which are partly used for taxable supplies and partly for exempt supplies.
- The ceiling needs to be fixed for the value of the export supply for calculation of refund on zero-rated supplies.
- Refunds need to be sanctioned in both cash and credit in case of excess payment of tax.
- Recovery of refund should be provided on the export of goods where export proceeds are not realized within the time prescribed under the Foreign Exchange Management Act, 1999.
- Aadhar based authentication should be operational for new taxpayers.
6. Circulars to be issued
The Council has proposed to issue clarifications in respect of the following:
- Apportionment of ITC in cases of business reorganization (i.e., amalgamation, merger, demerger, transfer of business, etc.).
- Appeals during the non-constitution of the Appellate Tribunal.
- Refund related issues.
7. Other new initiatives
- Information return under Section 150 of the CGST Act will be sought from Banks.
- Restrictions should be imposed on the passing of ITC, in case of new registrations, before physical verification of premises and financial KYC of the registered person, to curb fake invoicing and fraudulent claims of ITC.
8. Various other updates
- A special procedure was proposed to be prescribed for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, and are undergoing the corporate insolvency resolution process to enable them to comply with the provisions of GST laws during the Corporate Insolvency Resolution Process period.
- A new facility called ‘Know Your Supplier,’ was proposed to be introduced to enable every registered person to have some necessary information about the suppliers with whom they conduct or intend to do business.
- An application is proposed to revoke the cancellation of registration, which can be filed up to June 30, 2020, in those cases where registrations have been cancelled till March 14, 2020. This application will act as a one-time measure to facilitate those who want to continue conducting business.
- Clustering of refund claims (for exporters claiming refunds) allowed across financial years.
Changes related to GST rates on goods and services:
9. The below GST rate changes will be effective from April 1, 2020:
- GST rate on Maintenance, Repair, and Overhaul (‘MRO’) services in respect of aircraft proposed to be reduced from 18% to 5% with full ITC.
Further, the place of supply for B2B MRO services is proposed to be changed to the ‘location of recipient’, which is currently taxed as per ‘place of performance’.
- The GST rate on all types of matches has been rationalized to 12%. Currently, handmade matches attract GST of 5%, and other matches attract GST of 18%.
- The tax rate on mobile phones and relevant parts has been increased from 12% to 18% to correct the inverted duty structure on mobile phones.
Further, to remove inversion for items like footwear, textiles, and others, the issue of calibrating rate will be deliberated in future meetings with further consultation and examination of the issue.
GST technology system issues
10. The following suggestions have been made to resolve technology system-related issues:
- A process may be initiated by addressing the compliance-related problems so that the issue of tax evasion due to non-linking of Forms GSTR-1 and GSTR-3B is addressed immediately.
- Details in Form GSTR-1 to be linked with the liability in Form GSTR-3B and then followed by linking of ITC in Form GSTR-3B to the details in Form GSTR-2A.
- Implementation of Aadhaar authentication and spike rules to be initiated to tackle tax evasion.
The Council’s decision to provide a retrospective effect to the proviso to Section 50(1) for interest on delayed tax payment is a welcome decision benefitting various taxpayers. The taxpayer, who has paid interest on gross tax liability, may explore the possibility of claiming a refund of excess interest paid. Also, the decision to defer the implementation of new returns and e-invoicing will provide additional time to the taxpayers/revenue authorities to prepare for the smooth transition to the new system. Relaxation in the filing of Form GSTR-9C for taxpayers having the turnover less than INR 5 crores will significantly benefit the MSME sector.
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