Amendment under Goods and Service Tax (“GST”) law has been a constant process and considering issues and representation of industry, new changes are proposed in every GST Council meeting.
Suggestions made by the 39th GST Council Meeting
39th GST Council meeting held on 14th March 2020, under the chairmanship of hon’ble Finance Minister wherein following key changes were suggested:
1. Interest on net cash Liability
In case of delayed payment of GST, whether interest is payable on net Cash liability or gross tax liability (i.e., including ITC) has been matter of dispute since long time and various legal precedents and departmental communications has clarified that taxpayer is liable to pay interest on gross tax liability. In certain cases, taxpayer has received notices from department directing him to pay additional amount of interest on this ground.
However, In 39th GST council meeting, it has been clarified that in such cases, interest is payable on net cash liability and on this matter, necessary amendment are to be made in GST law with retrospective effect.
2. Extended time limit for Revocation of cancellation
In case of suo-moto cancellation of GST Registration by departmental authority, the taxpayer has a remedial option to file a revocation of cancellation of registration up to 30 days from the date of cancellation order. At the 39th GST Council Meeting, GST Council has decided to extend date of revocation of cancellation till 30th June, 2020 for all registrations cancelled till 14th March, 2020.
Please note that facility of revocation of cancellation is not available where taxpayer applies for cancellation of registration.
3. Relaxation for Annual Return (GSTR-9) and Reconciliation statement (GSTR-9C) for FY 2018-19
- Requirement of filing of reconciliation statement in form GSTR-9C has been relaxed for MSMEs having aggregate turnover upto INR 5 Crores during FY 2018-19. Please note that no such relaxation is given for Annual return in form GSTR-9. Therefore, MSME having aggregate turnover more than INR 2 crores are mandatorily required to file GSTR-9.
- Due date of filing GSTR-9 and GSTR-9C has been extended for FY 2018-19 till 30th June, 2020 from 31st March, 2020.
- Taxpayers with aggregate turnover upto INR 2 crores are not mandatorily required to file GSTR-9 and GSTR-9C. Therefore, no late fee will be levied for delay filing of GSTR-9 and GSTR-9C of FY 2017-18 and 2018-19 for such taxpayers.
4. Deferment of e-invoicing and QR Code
- Following class of companies are exempted from issuing e-invoicing or capturing dynamic QR Code:
- Insurance Company
- Banking Company
- Financial Institutions
- Non-banking financial institutions
- Passanger Transportation service etc.
- Date of implementation of e-invoicing and QR code has been extended till 1st October, 2020.
5. Know your supplier
Input tax credit is a mainstay of GST and taxpayer sometimes fails to avail ITC due to non-compliance on part of supplier. To avoid such scenarios, a new facility called “Know Your supplier” is to be introduced which will enable taxpayer to collect basic information about supplier with whom they conduct business or propose to conduct business.
6. Changes with respect to GST Return filing
- N/No. 2/2019-Central tax (Rate) dated 7th March, 2019 provided for composition scheme for service providers and such scheme could be opted through filing of GST CMP-02. GST Council has decided to waive off requirement of filing of GSTR-1 for FY 2019-20 for those taxpayer who could not opt for benefit of such composition scheme.
- Extension of Due date of filing of GSTR-3B for the month of July, 2019 to January, 2020 till 24th March, 2020 for persons having registered place of business in Union territory of Ladakh. Similar extensions are also recommended for GSTR-1 and GSTR-7.
7. Bunching of refund claims allowed across financial years
Under the existing process of filing refund applications, exports are allowed to file refund applications across tax periods but they are not allowed to file refund applications across financial years. Considering the undue hardship to exports, the GST council at 39th GST Council Meeting has decided to allow bunching of refund claims across financial years.
8. New Initiative
- Similar to income tax authorities, at 39th GST Council Meeting has also decided to curb information from banks.
- Considering quantum of fake invoice being issues under GST to pass on ITC without movement of Goods or provision of services, GST authority has decided to impose restriction on passing of ITC in case of new GST registration before physical verification of premises and Financial KYC of the registered persons.
9. Issuance of Circulars
GST Council has clarified that circulars will be issued to clarify following issues:
- 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.
10. Amendment to CGST Rules
Following the 39th GST Council Meeting the given amendments are to be made to CGST Rules:
- 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.
11. Changes in GST Rates
- On the basis of recommendation of the Fitment Committee for regulating the GST rate structure to correct the inverted duty structure (i.e., GST rate on inputs being higher than GST rate on output) on various items like Mobile phones, Footwear, Textiles and Fertilizers, following changes are suggested:
- Increase in GST rate on Mobile Phones and specified parts from 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 rationalised to 12% (from 5% on Handmade matches and 18% on other matches).
- GST rate on Maintenance, Repair and Overhaul (MRO) services in respect of aircraft proposed to reduce to 5% from 18% with full ITC and to change the place of supply for B2B MRO services to the location of recipient.
This change is likely to assist in setting up of MRO services in India. Domestic MRO will also get protection due to 5% tax paid under section 3(7) of the Customs Tariff Act, 1975 on most imported goods (sent abroad for repairs) as this tax is not available as credit.
12. Other issues
- 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 resolutions process, so as to enable them to comply with provisions of GST laws during CIRP period.
- Post-merger of Union territories of Dadar and Nagar Haveli and Daman & Diu with effect from 26th January, 2020, a special procedure is to be specified for registered person during transition period. Transition procedure is to be completed by 31st May, 2020.
- Time limit of finalization of scheme of e-wallet has been extended till 31st March, 2021.
- Present exemption from payment of IGST and cess imported under AA/EPCG/EOU has been extended till 31st March, 2021.