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By: Dr. Sanjiv Agarwal
October 16, 2020
All Articles by: Dr. Sanjiv Agarwal       View Profile
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According to IMF’s world latest outlook, India’s GDP is now likely to contract @ 10.3% in Financial Year 2020-21. However, it is expected to bounce back with about 8.8% growth in Financial Year 2021-22. On world economy, it may fall by 4.4 percent in 2020-21. Only Chinese economy is likely to grow by 1.9% in current fiscal.

World Bank had recently signaled that Indian economy may contract 9.6% in Financial Year 2020-21. It says that Indian economy was already slowing before the pandemic and its situation is worse than before. There had been a 33% rise in poverty. India’s growth is projected to rebound to 5.4% in Financial Year 2022. However, new economic opportunities where digital technology is will play a major role are emerging.

The RBI in its bi-monthly monetary policy review on 9th October 2020, has indicated modest recovery in January – March, 2021. It made a statement that the worst was possibly over for the economy and the focus must now shift from containment to revival. The economy is witnessing an upturn, and if the current momentum gains ground, a faster and stronger rebound is eminently feasible.

The 42nd GST Council meeting held on 5th October deliberated upon GST Compensation Cess to states, enhancement in features of return filing, reducing compliance burden on small taxpayers, revising HSN Code requirements, refunds to go in bank accounts etc.

The 43rd meeting of GST Council was held on 12th October, 2020 to take forward the discussion on payment of compensation to states. In last meeting on 5th October, the Council failed to reach any consensus on ways to compensate states for shortfall in tax revenue. The 43rd GST Council meeting remained un-conclusive as no consensus could be arrived at.

On compensation to states, Union Government has allowed 20 states who agreed to option-I, to borrow ₹ 68825 crore through open market to make up for the compensation short fall arising out of lower Compensation Cess collection. Other dissenting states are weighing out other options including the legal recourse.

The AAR, Maharashtra recently ruled that GST shall not apply or the amount charged by employer from employees for providing transport services in non-AC vehicles having a capacity of more than 13 persons in connection with transporting employees to the work place from home and back. Also, ITC would be available w.e.f. 1.2.2019. [IN RE: M/S. TATA MOTORS LIMITED - 2020 (9) TMI 352 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA].

In yet another case, the Gujarat High Court admitted a petition challenging Rule 86A of the Central Goods and Services Tax Rules, 2017 to the extent it empowers the authorities to block the Input Tax Credit (ITC). [M/S KALPSUTRA GUJARAT VERSUS THE UNION OF INDIA - 2020 (9) TMI 679 - GUJARAT HIGH COURT].

CBIC has issued clarification on reconciliation statement and annual return for 2018-19 and on rules 36(4) for the period February – August, 2020.

October 2020 is the month of festivals and compliances under GST and income tax. Let’s see if the dates get extended for one more time.

Outcome of 42nd GST Council meeting held on 05.10.2020

  • Quarterly filing of GSTR-1 & GSTR-3B for taxpayers with aggregate turnover of less than ₹ 5 crores from 1st January, 2021. However, payment of tax would be made monthly through challan.
  • For the taxpayers filing quarterly returns as above, a facility to only upload outward supply invoices would be provided.
  • For taxpayers with aggregate turnover of more than ₹ 5 crores, HSN code to be mentioned at 6-digit level and for those with aggregate turnover of less than ₹ 5 crores making B2B supplies, HSN code to be mentioned at 4-digit level.
  • Further, for notified classes of supplies, 8 digits HSN Code shall be required to be mentioned.
  • From 1st January, 2021, refund would be disbursed to only those bank accounts which are validated with PAN and Aadhar. Further, refund applications can now be signed through Aadhar authentication via OTP.
  • Satellite launch services are to be exempted to promote start-ups making satellites.

[Source: Press Release dated 05.10.2020 ]

Outcome of 43rd GST Council meeting held on 12.10.2020

  • Meeting with a sole agenda on Compensation to States
  • Cess collection is inadequate to meet the shortfall due to Covid effect, which was never envisaged
  • Shortfall to be met by borrowing
  • Majority of the states had opted for Option I. On the other, other states kept saying let us decide on the basis of consensus, as they have not opted for Option I.
  • Unanimously agreeing to extend the cess beyond 5 years, to repay the principal and interest of the entire compensation.
  • If states agree to borrow as suggested by centre, both interest and principal for the borrowing will be paid out of compensation cess collected from July 2022; it will be paid neither from Central nor from state resources. It is hence actually a third party who is taking the burden of both principal and interest
  • Borrowing by centre and paying to states for shortfall does not find favour with centre as it is likely to result in rise in bond yield and increase in borrowing cost for the government.
  • No consensus arrived on options presented to states for GST compensation shortfall.

[Source:  Press Briefing on 43rd GST Council meeting on 12.10.2020]

Permission to 20 States allowed to mobilize ₹ 68,825 crores 

  • MOF grants permission to 20 States to raise additional amount of ₹ 68825 crore through open market borrowings to make for GST revenue shortfall.
  • Additional borrowing permission granted @ 0.50 % of the Gross State Domestic Product (GSDP) to those States who have opted for Option-1 out of the two options suggested by the Ministry of Finance to meet the shortfall arising out of GST implementation.
  • These States are Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh, and Uttarakhand. 
  • Eight States are yet to exercise any option.
  • Option-I facilities to States, inter alia, include:
  • A special borrowing window, coordinated by the Ministry of Finance to borrow the amount of shortfall in revenue through issue of debt. The total shortfall in the revenue of the States on this account has been estimated at around ₹ 1.1 lakh crore.
  • Permission to borrow the final instalment of 0.5% of GSDP out of the 2% additional borrowings permitted by the Government of India in view of the COVID pandemic, waiving the reforms condition.

(Source: MOF PIB Press Release ID 1664054 dated 13.10.2020)

Clarifications on GSTR-9 and GSTR 9C for FY 2018-19

  • The Annual return in FORM GSTR-9 is mandatory only for taxpayers with aggregate annual turnover above ₹ 2crore while reconciliation statement in FORM GSTR-9C is to be furnished only by the registered persons having aggregate turnover above ₹ 5 crore.
  • Vide Notification No. 69/2020 – Central Tax, dated 30.09.2020, the due date for furnishing of the Annual Return (GSTR-9) for the FY 2018-19 has been extended till 31.10.2020.
  • CBIC has clarified that the taxpayers are required to report only the values pertaining to Financial Year 2018-19 and the values pertaining to Financial Year 2017-18 which may have already been reported or adjusted are to be ignored. No adverse view would be taken in cases where there are variations in returns for taxpayers who have already filed their GSTR-9 of Financial Year 2018-19 by including the details of supplies and ITC pertaining to Financial Year 2017-18 in the Annual return for FY 2018-19. (Tables 4, 5, 6 and 7)

[Source: MOF Press Release ID 1663175 dated 09.10.2020]

GST Rule 36(4) on ITC for February, 2020 to August, 2020

  • Vide Notification No. 30/2020-CT dated 03.04.2020, it was provided that conditions under rule 36(4) shall apply cumulatively for the tax period February, March, April, May, June, July and August, 2020 and that the return in FORM GSTR-3B for the tax period September, 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months.
  • Taxpayers to ascertain the details of invoices uploaded by their suppliers under sub-section (1) of section 37 of the CGST Act for the periods of February, March, April, May, June, July and August, 2020, till the due date of furnishing of the statement in FORM GSTR-1 for the month of September, 2020 as reflected in GSTR-2As.
  • Taxpayers shall reconcile the ITC availed in their FORM GSTR-3Bs for the period February, 2020 to August, 2020 with the details of invoices uploaded by their suppliers of the said months, till the due date of furnishing FORM GSTR-1 for the month of September, 2020. The cumulative amount of ITC availed for the said months in FORM GSTR-3B should not exceed 110% of the cumulative value of the eligible credit available in respect of invoices or debit notes the details of which have been uploaded by the suppliers under sub-section (1) of section 37 of the CGST Act, till the due date of furnishing of the statements in FORM GSTR-1 for the month of September, 2020.
  • The excess ITC availed arising out of reconciliation during this period, if any, shall be required to be reversed in Table 4(B)(2) of FORM GSTR-3B, for the month of September, 2020.
  • Failure to reverse such excess availed ITC on account of cumulative application of sub-rule (4) of rule 36 of the CGST Rules would be treated as availment of ineligible ITC during the month of September, 2020.

[Source: Circular No. 142/12/2020-GST dated 09.10.2020 read with Circular No. 123/42/2019-GST dated 11.11.2019]

E-invoicing – Relaxation and latest changes

  1. ‘E-invoicing’ for certain classes of taxpayers has come into effect from 1-10-2020.
  2. Keeping in view the hardships faced by the taxpayers due to COVID-19 lockdown and as some of these taxpayers are still not ready, as a last chance, Government had given relaxation that invoices raised by notified taxpayers during October, 2020 without following e-invoice procedure (i.e. uploading invoice details on e-invoice portal (IRP), obtaining IRN and issuing invoice with QR Code) will be deemed to be valid and no penalty will be there if the IRN for such invoices is obtained within 30 days of date of invoice.
  3. Further, vide notifications (Central Tax) 70/2020 and 72/2020 dated 30-9-2020, certain amendments and additions were made in respect of e-invoicing. Below is the summary of amendments:
    1. Regarding aggregate turnover threshold, it was specified that those who crossed ₹ 500 crore in any preceding financial year from 2017-18 onwards, will be covered.
    2. Supplies for ‘exports’ are also specifically included under e-invoicing.
    3. QR code, having the Invoice Reference Number (IRN) to be part of invoice copy issued to buyer.
    4. In case of any contingency, Commissioner can exempt a person or a class of registered persons from e-invoicing for a specified period.
    5. Where e-invoicing is applicable, physical copy of invoice need not be carried (during movement of goods) and it is sufficient if the QR code having IRN is produced electronically, for verification by proper officer.

[Source: GSTN]


By: Dr. Sanjiv Agarwal - October 16, 2020


Discussions to this article


Dear Sanjay Agarwal ji,

Your article is very much informative and easy to understand. Keep it up.

By: Muthukumar Muthunarasimhan
Dated: 17/10/2020


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