RECENT DEVELOPMENTS IN GST

[Dr. Sanjiv Agarwal]

The Covid -19 Pandemic is still on and has moved India up in top five nations to suffer from this virus in terms of people affected. Covid-19 has also and is continuing to adversely affect our lives and economy as well making it difficult for one and all to survive and cope up with its economic after effects.

Lockdown 5.0 or Unlock 1.0 has opened up businesses but not at old normal levels. This may take some more time. However, as the number of new cases throughout the country grow, one can not say with any amount of confidence as to whether further lockdown may be clamped or tightened.

India economic growth continues to be of concern amid Covid impact. While it is expected to grow at about 0-3 percent in current fiscal, it is unlikely to recover till next year. With all sectors faring miserably coupled with joblessness, liquidity crunch and not much of liquidity support and demand push, thinking of its bouncing back appears to be a dream for next few months. India’s  tax to GDP ratio is now at a 10 years low at 9.88%. This ratio was 10.97%  in 2018-19 and 11.22 % on 2017-18. This is due to decline in tax collections.

According to OECD, even the world economy is likely to squeeze by 6% in 2020 owing to global recession triggered by Covid. If there is a second wave of Covid, there could be a contraction of 7 percent or above. However, expressing confidence in India’s ability to recoup from the current economic uncertainty, Fitch Ratings expects the economy to clock near double-digit growth next fiscal year. It has projected GDP growth of 9.5 percent in 2021 -22 after a contraction of 5 percent this fiscal year.

CBIC has taken few steps recently to provide ease of compliances under GST. It has rolled out the facility of filing Nil monthly GST 3ZB return through SMS which will help over 22 lakh registered taxpayers to file returns. It has also extended the validity of e-way bills expired on or after 20 March, 2020 to 30^th June 2020 as there was lockdown from 25^th March, 2020. It has also notified norms for issue of order for notices regarding refund applications. The time limit for issuance of notices has been extended upto 30th June, 2020. CBIC has also issued two Circulars providing clarifications on refund related issues and non levy of GST on director’s remuneration which is considered as salary.

Central Government has also released GST compensation of ₹ 36400 crore to states, making a total of ₹ 1.50 lakh crore for financial year 2019-20.

Clarificatin on Refund Issues

• CBIC has issued clarification on the issue relating to refund of accumulated ITC in respect of invoices whose details are not reflected in the FORM GSTR-2A of the applicant.
• Vide Circular No.135/05/2020 – GST dated the 31st March, 2020, the refund related to these missing invoices had been restricted. Now, the refund of accumulated ITC shall be restricted to the ITC available on those invoices, the details of which are uploaded by the supplier in FORM GSTR-1 and are reflected in the FORM GSTR-2A of the applicant.
• Circular No. 135 does not in any way impact the refund of ITC availed on the invoices / documents relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) etc.. It has been clarified that the treatment of refund of such ITC relating to imports, ISD invoices and the inward supplies liable to Reverse Charge (RCM supplies) will continue to be same as it was before the issuance of Circular No. 135/05/2020- GST dated 31st March, 2020.

[Source: Circular No. 139/09/2020-GST dated 10.06.2020]

Classifcaition on Director’s  Remuneration               

• Circular clarifies on leviability of GST on remuneration paid by companies to the independent directors defined in terms of section 149(6) of the Companies Act, 2013 or those directors who are not the employees of the said company and leviability of GST on remuneration paid by companies to the whole-time directors including managing director who are employees of the said company.
• In respect of such directors who are not the employees of the said company, the services provided by them to the Company, in lieu of remuneration as the consideration for the said services, are clearly outside the scope of Schedule III of the CGST Act and are therefore taxable. In terms of entry at Sl. No. 6 of the Table annexed to notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. The remuneration paid to independent directors, or those directors, by whatever name called, who are not employees of the said company, is taxable in hands of the company, on reverse charge basis.
• The part of Director’s remuneration which are declared as “Salaries’ in the books of a company and subjected to TDS under Section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.
• The part of employee Director’s remuneration which is declared separately other than “salaries’ in the Company’s accounts and subjected to TDS under Section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017 – Central Tax (Rate) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis.

 [Source: Circular No. 140/10/2020-GST dated 10.06.2020]

Effecting the provisions of Rule 67A for furnishing a Nil return in FORM GSTR-3B by SMS

• The Central Government vide Notification No. 44/2020- Central Tax dated 8th June, 2020 has appointed the 8th day of June, 2020, as the date from which Rule 67A ( Manner of furnishing of return by short messaging service facility ) shall come into force to allow the registered person to furnish a Nil return in FORM GSTR-3B for a tax period, through a short messaging service (SMS) using the registered mobile number and the said return shall be verified by a registered mobile number based One Time Password facility(OTP).
• A Nil return shall mean a return under section 39 for a tax period that has nil or no entry in all the Tables in FORM GSTR-3B.

[Source: Notification No. 44/2020- Central Tax dated 08.06.2020]

Extension of date for compliance for Daman Nagar Haveli and Daman & Diu

• Post merger of two Union Teritories , CBIC has extended the period for compliance with special procedure for tax payers in the two Union Territories from 31.05.2020 to 31.07.2020.
• This Notification is effecting from 31.05.2020.

[Soruce: Notification No. 45/2020- Central Tax dated 09.06.2020]

Time limit for issue of notice for refund

• In view of COVID pandemic, CBIC notifies time limit for issuance of order in cases where a notice has been issued for rejection of refund claim, in full or in part, falls during the period from the 20^th day of March, 2020 to the 29^th day of June, 2020, the time limit for issuance of the said order shall be extended to 15 days after the receipt of reply to the notice from the registered person or the 30^th day of June, 2020, whichever is later.

• The notification shall come into force w.e.f. 20.03.2020.

[Source: Notification No. 46/2020-Central Tax dated 09.06.2020]

Extension of validity of E-way Bills

• Where an e-way bill has been generated under rule 138 of the Central Goods and Services Tax Rules, 2017 on or before the 24th day of March, 2020 and whose validity has expired on or after the 20th March, 2020, the validity period of such e-way bill shall be deemed to have been extended till the 30st day of June, 2020.

• This shall come into force from 31.05.2020.

[Source: Notification No. 47/2020-Central Tax dated 09.06.2020]

Waiver of late fee on GSTR 3B only after GST council approval

• Based upon numerous requests for waiver of late fee on GSTR 3B pertaining to the period August, 2017 to January, 2020, CBIC has not taken a decision yet.
• Instead, it has advised that all decisions are taken by the Centre and the State with the approval of the GST Council and as such , CBIC cannot waive the late fees unilaterally.
• It has however , informed that the issue of late fee would be taken up for discussion in the next GST Council meeting, likely to be held in second week of June.

[Source: Press Releas  dated 01-06-2020]

Facility of filing of Nil GST return through SMS

• The Government has allowed filing of Nil GST monthly return in Form GSTR-3B through SMS.
• The functionalilty of filing Nil Form GSTR-3B through SMS has been made available on the GSTN portal with immediate effect.

[Source: CBIC Press Release dated 08.06.2020]