RECOMMENDATIONS OF GST 39th COUNCIL

[Mr. M. GOVINDARAJAN]

39^th GST Council

The 39^th GST Council meeting held on 14.03.2020 at New Delhi under the Chairmanship of Smt. Nirmala Seetharaman, the Finance Minister. 

Changes in rates of tax

In view of the recommendations of the Fitment Committee, the GST council, in their 39^th meeting recommended the following-

• To raise the GST rate on Mobile Phones and specified parts presently attracting 12% to 18%.
• To deliberate the issue of calibrating the rate in other items for removing inversion in future meetings with further consultation and examination of issue.
• GST rate on all types of matches (Handmade and other than Handmade) has been rationalized to 12% (from 5% on Handmade matches and 18% on other matches). 
• 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.

These recommendations will be notified and the revised tax structure will come into effect with effect from 01.04.2020.

Recommendations related to IT roadmap

Infosys Head took part in the 39^th GST Council meeting to address the glitches in GSTN portal.  He made a made a presentation addressing the system related issues that is being faced by the taxpayers in the GST system.  He gave the summary of the recently observed IT issues and the way forward to resolve them.

The Infosys Head assured the following to the GST Council-

•  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.
• This will start with linking of the details of the statement of outward supplies in FORM GSTR-1 to the liability in FORM GSTR-3B. 
• This would be followed by the linking of the input tax credit in FORM GSTR-3B to the details of the supplies reflected in the FORM GSTR-2A. 
• The implementation of Aadhaar authentication and spike rules would also be initiated o tackle evasion and preventing the gaming of the system
• 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.

However his informed that the above said program is slightly impacted by the Covid-19 pandemic.

The GST Council made the following suggestions to the Head of Infosys-

• The Head of Infosys would attend the next 3 meetings of the GST Council and update the council of the status of implementation of the decisions taken by the Council and assist the Council in taking appropriate decisions on technology related issues.

• To support the timely implementation of various initiatives, the Council gave a go ahead for deployment of additional manpower on T&M basis and assured that both on procurement of additional hardware and hiring of manpower, expeditious approvals would be given however the return filing experience of the taxpayers and removal of technical glitches needs to be carried out urgently.

The GST Council expects these initiatives to be implemented by the 31^st of July, 2020.

Recommendations on law and procedure changes

The GST Council sought to make changes in the following-

• Measures for Trade facilitation
• Deferment of E-invoice and QR Code
• Deferment of e-wallet Scheme
• Continuation of existing system
• Other new initiatives:
• Issuance of circulars 
• Amendments to the CGST Rules

Measures for Trade facilitation

The following measures will be taken by the GST Council for the smooth running of trade-

• Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017;
• Where registrations have been cancelled till 14.03.2020, application for revocation of cancellation of registration can be filled up to 30.06.2020.  This will be the one-time measure to facilitate those who want to conduct business;
• Relaxation to MSMEs from furnishing of Reconciliation Statement in FORM GSTR-9C, for the financial year 2018-19, for taxpayers having aggregate turnover below ₹ 5 crores;
• Due date for filing the Annual return and the Reconciliation Statement for financial year 2018-19 to be extended to 30.06.2020
• Late fees not to be levied for delayed filing of the Annual return and the Reconciliation Statement for financial year 2017-18 and 2018-19 for taxpayers with aggregate turnover less than ₹ 2 crores.
• 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.
• Filing of 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.
• 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.
• Extension of due dates for FORM GSTR-3B for the month of July, 2019 to January, 2020 till 24^th March, 2020 for registered persons having principal place of business in the Union territory of Ladakh. Similar extension is also recommended for FORM GSTR-1 & FORM GSTR-7.
• Refund claims will be allowed in bulk across financial years to facilitate exporters.

Deferment of E-invoice and QR Code

• 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; and
• The dates for implementation of e-invoicing and QR Code to be extended to 01.10.2020.

Deferment of e-wallet Scheme

• Extension of the time to finalize e-Wallet scheme up to 31.03.2021;
• Extension of the present exemptions from IGST and Cess on the imports made under the AA/EPCG/EOU schemes up to 31.03.2021.

Continuation of existing system 

• Continuation of existing system of furnishing FORM GSTR-1 & FORM GSTR-3B till September, 2020;

Other new initiatives

• Banks will be directed to submit information return;
• To curb 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.

Circulars

Circulars will be issued in respect of-

• Clarification in apportionment of ITC in cases of business reorganization under section 18 (3) of CGST Act read with rule 41(1) of CGST Rules;
• Appeals during non-constitution of the Appellate Tribunal;
• Clarification on refund related issues; and
• Clarification on special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, undergoing the corporate insolvency resolution process

Amendment to Rules

Amendments will be made in rules in respect of-

• Procedure for reversal of input tax credit in respect of capital goods partly used for affecting taxable supplies and partly for exempt supplies under rule 43 (1) (c);
• ceiling to be fixed for the value of the export supply for the purpose of calculation of refund on zero rated supplies;
• to allow for refund to be sanctioned in both cash and credit in case of excess payment of tax;
• to provide for recovery of refund on export of goods where export proceeds are not realized within the time prescribed under FEMA; and
• to operationalize Aadhaar authentication for new taxpayers.

The main problem of the stakeholders is the glitches in GST portal which is not functioning properly which leads to the extension of filing returns from time to time which retards the ease of doing business.  Many expectations were there that the 39^th GST Council meeting will find a solution and the flow will be smoother within a short period.  But the head of Infosys showed his finger to Covid 19.  Three years lapsed on the introduction of GST but still the problems are there.  We have to wait for another three to six months for easy access of the portal and filing returns.  The stakeholders also expect an easy process of availing input tax credit in the coming period.