Top 13 Takeaways of 39 th GST Council Meeting

[NikhilMohan Jhanwar]

Amid huge expectations from GST council from 39th meeting held on 14.03.2020, GST Council has recommended various changes in GST law to facilitate trade and industry at large. We present to you top 10 takeways from GST council meeting at New Delhi:

1. Interest on delayed payment to be calculated on net GST liability  

• Council has recommended retrospective change w.e.f. 1st July 2017, to calculate interest on delayed payment of GST on Net liability paid in cash
• This will come as much required breather to the trade, industry as well as courts which were flooded with various petitions across India recent being Refex Industries case by Madras High Court holding payment of Interest on net liability only.
• We now expect that recovery notices issued by the Department on gross liability to fill government coffers will undergo withdrawal or revision

2. Changes in GSTR-9 & 9C

• Due date for filing GSTR-9 & 9C for F.Y. 2018-19 has been extended upto 30th June 2020 as against earlier due date of 31st March 2020
• Relaxation to MSMEs from furnishing of GSTR-9C for F.Y. 2018-19, for taxpayers having aggregate turnover below ₹ 5 crores
• Waiver of late fees for delayed filing of GSTR-9 & 9C for F.Y 2017-18 and 2018-19 for taxpayers with aggregate turnover less than ₹ 2 crores. Interestingly, no GSTR-9C is required to be filed by taxpayers having turnover below 2 crores.

3. Special procedure for taxpayers under IBC

• The taxpayers who are facing insolvency proceedings were facing issues in filing GST returns post appointment of Resolution Professional if GST returns were not filed for the period before initiation of insolvency proceedings as the GST Portal does not allow filing of GSTR-3B until returns for all previous periods  were filed by the taxpayers. This issue has also come up before NCLT-Chennai Bench for allowing filing of GST returns during corporate insolvency resolution period (CIRP) which directed respondent to allow resolution professional to allow access of GST portal to the resolution professional to enable file GST return during CIRP. 
• The GST Council has not recommended to provide special procedure for these taxpayers to address the issue of inability access GST portal. 

4. Deferment in E-Invoicing 

• Touted as game changer in GST,  E-Invoicing and QR code proposed to be introduced from 1st April 2020 for taxpayers having aggregate turnover of more than ₹ 100 crores (for B2B transactions) and ₹ 500 crs. (for B2C transactions) has been deferred till 1st October 2020
• Further, exemption has been provided to following class of registered person:

1. insurance company, 
2. banking company, 
3. financial institution & non-banking financial institution, 
4. GTA, 
5. passenger transportation service

5. Deferment in New GST Returns

• GST New Returns proposed to be introduced from 1st April 2020 for which Trial run has also been launched by the Government has also been deferred till 30th September 2020. Existing returns system of GSTR-3B and GSTR-1 will continue till then.

6. Restriction in claiming ITC for new GST registrations 

• To curb fake invoicing and fraudulent passing of ITC, restrictions are proposed 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. 
• The Government is being very harsh on fraudsters who misuse the GST system after unearthing various fake invoicing cases across India (invoices without supply or supply without invoicing) 

7. Changes in GST rates for mobile phones to address inverted duty structure

• Earlier to boost consumption, GST rates were slashed for various items including mobile phones and specified parts from 18% to 12% without gauging the impact of the same on supply chain as the inputs used for assembling/manufacturing mobile phones are currently taxable @18% as against output tax @12%. This leads to situation of piling of input tax credit in hands of suppliers leading to working capital issue. Further, refund is allowed only  for input portion and not on input services.
• To address this, GST rates have been recalibrated from 12% to 18% on mobile phones and specified parts
• Changes were expected in textile, footwear and fertilizer industry also but it has been left for further consultation.

8. Rationalisation of GST Rates on matches and MRO services

• GST rate on all types of matches (handmade and other than handmade) has been rationalised to 12% (from 5% on handmade matches and 18% on other matches)
• It is proposed to reduce 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

9. Extension for revocation of cancellation of registration till 30.06.2020

• Where registrations have been cancelled till 14.03.2020, application for revocation of cancellation of registration can be filled up to 30.06.2020. A New way to compel taxpayers pay GST on time is cancellation of registration if GST returns are not filed for a consecutive period of 6 months. This leads to business of taxpayers virtually on a standstill.
• The extension in filing revocation application will surely encourage taxpayers to file returns, pay taxes and revoke their applications by 30th June 2020

10. Extension in IGST exemption on imposts by EOU

• The present exemptions from IGST and Cess on the imports made under the Advance authorization/ EPCG/EOU schemes have been extended up to 31.03.2021. Since implementation of GST, the IGST exemptions are being extended on a continuous basis by GST Council which was earlier available in Central Excise regime.

11. Know Your Supplier Facility

• A new facility called ‘Know Your Supplier’ is proposed 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

12. Clarifications and amendments in GST

• By way of circulars and notifications, clarification and amendments are expected in GST law in certain provisions relating to ITC, refunds, new GST registration, zero-rated supplies, reversal of ITC, appeals before Tribunals etc. However, the circulars and Notifications are yet to be issued.

13. Addressing IT related issues at GST Portal

• Since implementation of GST, GST portal has been talk of the town for perennial technical glitches while filing returns and forms due to lower capacity of GST portal to handle only 1.5 lacs taxpayers at a time.
• GST Council has summoned Mr. Nandan Nilekani, Infosys to explain the technical glitches and way forward to address IT issues on urgent basis. In order to smoothen the rollout of the new return system, and to ensure a better uptake of the new return, he suggested and informed following measures:
• the transition to the new return system may be made in an incremental manner
• problem of tax evasion and gaming of the system due to non-linking of  GSTR-1 and GSTR-3B is addressed immediately by linking details in GSTR-1 to the liability in GSTR-3B
• linking of the input tax credit in GSTR-3B to the details reflected in the GSTR-2A
• implementation of Aadhaar authentication and spike rules would also be initiated
• to augment the capacity of the IT system to concurrently handle 3 lakh taxpayers from the present level of 1.5 lakh taxpayers
• hardware procurement process has been initiated which is slightly impacted by the Covid-19 pandemic
• Mr. Nilekani has been asked to attend next 3 meetings of the GST Council and personally monitor the progress of the GSTN project and also agreed to attend the IT-GoM for the next 6 months or till such time the initiatives are implemented.
• GST Council has given a go ahead for deployment of additional manpower (60 in number) and assured speedy approvals for procurement of additional hardware and hiring of manpower
• The target to address IT issues and take new initiatives to be implemented by the 31st of July, 2020

Before parting…..

The announcements made by 39th Council meeting in terms of relaxation and deferment will act as substantial relief to taxpayers who are already facing acute economic slowdown in domestic market as well as global downturn amid COVID-19 pandemic. We should be geared up for adapting to radical changes which would come up in GST sooner or later in terms of E-Invoicing and GST New returns and start re-structuring accounting system. 

If New returns and E-Invoicing is implemented in mid of Financial Year, this will again create issue in reconciling returns and books of accounts and file annual returns like we faced in 2017-18 for 3 months. Hence, the businesses should be geared up from 1st April 2020 itself at data entry level to ensure that requisite information required in New GST returns and requisite changes in software to enable GST Invoicing are made available to the taxpayers by their accounting systems.

(CA Nikhil M. Jhanwar)