GST COUNCIL’S RECOMMENDATION – MARCH, 2020

[Dr. Sanjiv Agarwal]

The all empowered GST Council (GSTC) had its 39^th meeting on 14^th March, 2020. The meeting deliberated with a three pronged focus, viz, changes in law and procedure for trade facilitation, GST rates rationalization and I.T. facilities. The GSTC also took certain decisions to defer the new facilities / utilities and / or extend the due dates and date of implementation of various utilities. Some of the major recommendations and decisions are enumerated hereunder:  

1. Implementation & procedural

1. Interest for delay in payment of GST to be charged on net cash tax liability w.e.f. 01.07.2017 instead of gross tax liability (Law to be amended retrospectively).

This is one of the major relief to assessees who were subjected to recovery notices all over the country.

2. Where registrations have been cancelled till 14.03.2020 by the department, application for revocation of cancellation of registration can be filled up to 30.06.2020 (extension of period of application as one-time measure to facilitate those who want to conduct business).

3. In respect of annual return:

1. Due date for filing the Annual return and Reconciliation Statement  (9 and 9C) for Financial Year 2018-19 to be extended to 30.06.2020
2. Relaxation to MSMEs from furnishing of annual return Reconciliation Statement in FORM GSTR-9C, for the financial year 2018-19, for taxpayers having aggregate turnover below ₹ 5 crores.
3. Late fees not to be levied for delayed filing of the annual return and the Reconciliation Statement for financial years 2017-18 and 2018-19 for taxpayers with aggregate turnover less than ₹ 2 crores.

4. Deferment of new Returns and E-invoicing (not from 1.4.2020 now):

1. The proposed implementation of new return filing and E-invoicing has been extended from 1.4.2020 till 1st of October, 2020. The existing mechanism of filing return i.e. GSTR-3B and GSTR-1 shall, therefore continue till September, 2020.
2. Further, certain class of registered persons (insurance company, banking company, financial institution, non-banking financial institution, GTA, passenger transportation service etc.) to be exempted from issuing e-invoices or capturing dynamic QR code.
3. The date for implementation of e-invoicing and QR Code to be extended upto 1.10.2020.

5. Extension of dates:

1. Extension of the time to finalize e-Wallet scheme up to 31.03.2021.       
2. Extension of the present exemptions from IGST and Cess on the imports made under the AA/EPCG/EOU schemes up to 31.03.2021.
3. The requirement of furnishing Form GSTR-1 for 2019-20 to be waived for taxpayers who could not opt for availing the option of special composition scheme under Notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 by filing Form CMP-02.
4. Extension of due dates for Form GSTR-3B for the month of July, 2019 to January, 2020 till 24th March, 2020 for registered persons having principal place of business in the Union territory of Ladakh. Similar extension has also been recommended for Form GSTR-1 & FORM GSTR-7.

6. Other changes :

1. A special procedure is being 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, so as to enable them to comply with the provisions of GST Laws during the CIRP period.
2. Bunching of refund claims allowed across financial years to facilitate exporters.
3. Seeking information return from banks.
4. A new facility called 'Know Your Supplier' to be introduced so as to enable every registered person to have some basic information about the suppliers with whom they conduct or propose to conduct business.
5. To curb practice of fake invoicing and fraudulent passing of ITC, restrictions to be imposed on passing of the ITC in case of new GST registrations, before physical verification of premises and financial KYC of the registered person.

2. Recommendations on GST Rates

Recommendations on GST Rates as follows are proposed to be come into effect from 01.04.2020:

1. GST rate on mobile phones and specified parts shall be 18% from 12% (6% higher)
2. GST rate on all type of matches including hand-made to be 12% instead of two tier rates at present, i.e., 5% for hand-made matches and 18% for other matches
3. Reduction in GST rate on Maintenance, Repair and Overhaul (MRO) services in respect of aircraft from 18% to 5% with full ITC and to change the place of supply for B2B MRO services to the location of recipient. This change is likely to assist in setting up of MRO services in India. Domestic MRO will also get protection due to 5% tax paid under section 3(7) of the Customs Tariff Act, 1975 on most imported goods (sent abroad for repairs) as this tax is not available as credit.

The above recommendations seek to rationalize the GST rates and address classification issues which will be effective w.e.f. 1.4.2020 after being notified.

3. GSTN related

1. Infosys view points

1. In order to smoothen the rollout of the new return system and to ensure a better uptake of the new return, the transition to the new return system may be made in an incremental manner.
2. The process may be initiated by addressing the compliance related issues first so that the problem of tax evasion and gaming of the system due to non-linking of Form GSTR-1 and Form GSTR-3B is addressed immediately.
3. In order to tackle evasion and preventing the gaming of the system, implementation of Aadhaar authentication and spike rules would also be initiated.
4. Procurement of additional hard ware initiated

2. GST Council’s stand

1. Mr. Nandan Nilekani, on behalf of Infosys, to attend next three Council meetings to appraise it on the status of implementation and assist the Council in taking decisions on IT related issues.
2. Approval for deployment of additional manpower (60) with assurance of other related approvals.
3. The improvement in return filing experience of the taxpayers and removal of technical glitches needs to be carried out urgently.
4. The I.T. proposals to be implemented by 31.07.2020.

It appears that with the above proposals, GST Council is more keen on improving the technical and procedural glitches to have smooth in GST implementation, for the time being.