RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

Economy

OECD, Organization for Economic Cooperation and Development, which had earlier predicted growth @ 12.6 % for India has now revised it to 9.9%. This only indicates that recovery is not that easy and it should be taken seriously amid Covid pandemic. The process of relaxations in lock-down or curfew has just begun from 1.6.2021 which will be in gradual manner only. This will determine the pace of reversal as well as capacity and willingness of customers to consume and push the demand. Rise in spends and faster vaccination, both will aid the economic recovery. Moody’s Investors Services suggests that Indian economy may rebound in current fiscal with a growth of 9.3% with Covid second wave increasing risks to Indian credit profile and ratings . Presently moody’s rating is ‘Baa3’. Accordingly to NSO data, the growth in GDP in financial year 2020-21 is estimated at (-) 7.3% as compared to 4% in preceding year 2019-20.

If the second wave of Covid is confined to Q1 of current year, it may be the most optimistic situation but we will have to wait and see. Than what about so called third wave ? Will it be ? Will it not be ? We will have to watch. The first two waves pushed India back on defense in social and fiscal terms with lot of destruction. Economic recovery can not be taken for granted and future Covid waves can not be ruled out. Some stimulus is required in the economy to boost demand. Also vaccination drive will have to be simultaneously pushed.

 The largest and biggest impact on economy is expected to be in June, 2021 as most parts of India are looking forward for unlock process being backed by fast recoveries. Further, though slow, the vaccination process is also widening with all adults now under its ambit and more options of vaccines being made available. This time crisis has been more on human wealth than the economy. Eventually, there is going to be light at the end of long tunnel. In today’s context and backdrop of Covid, India also needs to redefine its priority sector so as to include education and health care along with medical insurance.

GST / GST Council / GST Collection

The next meeting (44^th) of the GST Council in being held on June 12, 2021 to discuss on GST rates on Covid related goods and medicines including that of black fungus, vaccine etc.  The Group of Ministers set up in previous Council meeting on 28.05.2021 has since submitted its report on 07.06.2021. The outcome of this meeting was awaited till the signing off of this article. The Notifications for decisions taken in 43^rd GST Council meeting have since been notified.

The much propagated and recently announced amnesty scheme for delayed return filers may not have much impact on GST revenues except that penalty amounts will come down, though penalty can not be considered as a core GST revenue item. On quarterly  filing of returns for small taxpayers with business turnover upto ₹ 5 crore, revenue will not be impacted but it will offer relief to about 70% of 12.8 million registered tax payers. Interest relief will also help taxpayers struggling with shut downs and liquidity problem.

The average e-way bill generation in May, 2021 dropped to about 35% over April and about 44% over March, 2021.

GST collection for the month of May, 2021 is ₹ 102709 lakh crore which, once again is more than ₹ 100000 lakh crore for eighth month in a row. This is despite the fact that April, 2021 witnessed business disruptions in many states and May, 2021 collection reflects the business activities in the month of April. This figure is higher by 65% compared to May, 2021 collections which also suffered similar situation. Compared to April, 2021 collection of ₹ 141384 lakh crore, May GST collection is down by 27% at ₹ 102709 lakh crore. The difference between 2020 and 2021 lock down is that in 2020 it was a total lockdown of 68 days at national level but in 2021. There has been so far selective lock down for 15-45 days in worst affected states. Out of ₹ 102709 crore collected in May 2021, CGST in ₹ 17592 lakh crore, SGST is ₹ 22653 lakh crore and IGST ₹ 53199 lakh crore out of which ₹ 26002 lakh relates to imports. Compensation cess of ₹ 9265 lakh crore is also included.

This collection also indicates that this time, second wave is not so damaging for business as in 2020. The same view has been echoed by Ministry of Finance as well as Reserve Bank of India. However, it had a severe negative impact on human life and health care.

Summary of Notifications issued on 01/06/2021

1. Extension of various due dates:

(Notification No. 17, 25, 26, 27 – CT)

Return Type	Return Period	Original Due date	Revised Due date
GSTR – 1	May’ 21	11/06/2021	26/06/2021
GSTR – 4	April’ 20 – March’ 21	30/04/2021	31/07/2021
ITC – 04	Jan’ 21- March’ 21	25/04/2021	30/06/2021
IFF (QRMP)	May’ 21	13/06/2021	28/06/2021

2. Waiver of Interest and Late fees for GSTR – 3B:

(Notification No. 18, 19 – CT)

Taxpayer Aggregate turnover	Month	Revised Interest Rate			No late fees if return is filed within
		Nil rate	9%	18%
More than 5 Cr	March’2021	-	First 15 days from due date	After 15 days from due date	15 days from due date
	April’2021	-
	May’2021	-
Less than 5 Cr (Monthly)	March’2021	First 15 days from due date	Next 45 days	After 60 days from due date	60 days from due date
	April’2021		Next 30 days	After 45 days from due date	45 days from due date
	May’2021		Next 15 days	After 30 days from due date	30 days from due date
Less than 5 Cr (Quarterly)	March’2021	First 15 days from due date	Next 45 days	After 60 days from due date	60 days from due date
	April’2021		Next 30 days	After 45 days from due date	N/A
	May’2021		Next 15 days	After 30 days from due date	N/A

 

3. Waiver of Interest for CMP-08 (Composition Dealers)

(Notification No. 18 – CT)

Period	Revised Interest Rate
	Nil rate	9%	18%
Jan’21-March’21	First 15 days from due date	Next 45 days	After 60 days from due date

 

4. Rationalisation of late fees for various returns from the tax period June’21 onwards or quarter ending June’21 onwards

(Notification No. 19, 20, 21 and 22 – CT)

Return type	Category		Maximum late fees per return
GSTR – 4	Composition dealer having NIL liability		₹ 500 (₹ 250 - CGST and ₹ 250 - SGST)
	Composition dealer having tax liability		₹ 2000 (₹ 1000 – CGST and ₹ 1000 – SGST)
GSTR – 7	Person required to deduct tax at source		₹ 50 per day (₹ 25 – CGST and ₹ 25 – SGST) Max: ₹ 2000 (₹ 1000 – CGST and ₹ 1000 – SGST)
GSTR 1 and GSTR 3B	Nil liability in GSTR 3B or nil supply in GSTR 1		₹ 500 (₹ 250 – CGST and ₹ 250 – SGST)
	Having tax liability in GSTR 3B or having supply in GSTR 1.	Turnover up to ₹ 1.5 crore	₹ 2000 (₹ 1000 – CGST and ₹ 1000 – SGST)
		Turnover between 1.5 Cr to 5 Cr.	₹ 5000 (₹ 2500 – CGST and ₹ 2500– SGST)
		Turnover above ₹ 5 Cr.	₹ 10000 (₹ 5000 – CGST and ₹ 5000 – SGST)

5. Amnesty Scheme for late fees for the period July’17 to April’21 for the return GSTR - 3B, if filed between 01/06/2021 and 31/08/2021.

(Notification No. 19 – CT)

Category	Late Fees
Nil Tax liability	₹ 500 (₹ 250 – CGST and ₹ 250 – SGST) per return.
Other than nil tax liability	₹ 1000 (₹ 500 – CGST and ₹ 500 – SGST) per return.

6. Others

(Notification No. 23, 24 and 27 – CT)

1. 1. Government via Notification No. 23 – CT has excluded government departments and local authorities from compliance of issuance of e-invoice.
   2. Government via Notification No. 27 – CT has allowed companies to file Form GSTR 1/IFF and return GSTR 3B through electronic verification code (EVC) instead of DSC for the period April 27^th, 2021 to August 31^st, 2021.
   3. Where the notice has been issued for rejection of refund claim and the time limit for issuance of order under Section 54(5) and (7) of the CGST Act falls during the period from April 15, 2021 to June 29, 2021 then the time limit for issuance of order has been extended to the later of:

a) 15 days after the receipt of reply to the notice from the registered person or;

b) June 30, 2021

1. 4. Where, any time limit for completion or compliance of any action, by any authority or by any person, has been specified in, or prescribed or notified under the CGST Act, 2017, which falls during the period April 15, 2021 to June 29, 2021 is extended till June 30^th, 2021.
   5. The condition of Rule 36(4) of CGST Rules, 2017, claiming 105% of eligible ITC appearing in GSTR 2B shall be seen cumulatively for the period April, May and June 2021 while taking the credit in GSTR 3B for the period June, 2021.

Summary of Notifications issued on 02/06/2021

1. Place of supply of MRO (maintenance, repair and overhaul) services

(Notification No. 03/2021 – CT(R)

Place of supply of MRO services in respect of ships and other vessels, their engines and other components or parts when supplied to a person for use in course or furtherance of business shall be the location of the recipient of service.

2. GST rate on Diethylcarbamazine (DEC) tablets reduced to 5%

(Notification No. 01/2021 – CT(R)

To support Lymphatic Filarises Elimination programme being conducted in collaboration with WHO, government has reduced the rate of GST on Diethylcarbamazine (DEC) tablets from 12% to 5%.

3. GST rate on supply of MRO services to ships reduced to 5%

(Notification No. 02/2021 – CT (R)

Rate of GST on supply of MRO services to ships and other vessels, their engines and other components or parts has been reduced from 18% to 5%.

4. Input tax credit (ITC) to landowner – promoter

(Notification No. 01/2021 – CT(R)

Landowner-Promoter can utilize credit of GST charged to them by developer-promoter in respect of apartments that are subsequently sold by the land-promoter and on which GST is paid.

5. Time of payment of GST on construction services

(Notification No. 03/2021 – CT(R)

Government has clarified that time for payment of GST relating to supply of apartments by developer-promoter shall be any time before or at the time of issuance of completion certificate or the date of first occupants, whichever is earlier.

      Input tax credit to landowner – promoter before completion certificate

        (Notification No. 02/2021-CT (R) and 03/2021–CT (R)

• The 43^rd Goods and Services Tax (GST) Council has decided to amend the provision, which allows landowner promoters in Joint Development Agreement (JDA) to claim GST paid to developers as Input Tax credit (ITC) in an early manner through Notification No. 02/2021 – CT (R) & 03/2021 – CTI dated 02-06-2021.
• In Joint Development Agreements (JDA), the landowner gives the development rights of his land to the developer to construct the project. In exchange, the landowner gets a certain number of flats in the project.
• The existing provisions states that the exchange transaction of flats from developer to owner attracts GST on the date of exchange itself. However, the developer should pay GST only after issuing the Completion Certificate (CC) or first occupation in the project, whichever is earlier.
• The landowner promoter is free to sell his share of flats received in exchange for the land without waiting any further. However, he cannot take ITC to offset his tax payment from flats to homebuyers until developer pays deposit the GST. If he wants to claim the GST paid by the developer as ITC, he has to wait until the developer pays GST to claim the same as ITC.
• Government through Notification No. 02/2021–CTI and 03/2021–CTI dated 02/03/2021 has rectified this anomaly by allowing the developer to pay GST on the apartments sold to the landowner either before or during the issuance of the completion certificate. This recommendation will enable the landowner to take ITC when selling the flats to further buyers.