The Goods and Services Tax (‘GST’) Council in its 37th GST Council Meeting held on 20 September 2019 has taken several taxpayer friendly decisions.
Amidst various economic measures announced by the Hon’ble Finance Minister from time to time during August and September 2019, the decisions taken during the meeting of the GST.
Council were keenly awaited by various stakeholders. The decisions of the GST Council are aimed at tax rationalisation, providing additional exemptions, lowering the applicable GST rates, plugging loopholes and addressing administrative issues being faced by taxpayers.
The decisions of the GST Council are summarised below:
1. Law and procedure related changes
1.1 Relaxation in filing of annual returns for MSMEs
The GST Council has proposed to relax the compliance requirements for filing of Annual Returns by Micro, Small and Medium Enterprises (‘MSMEs’) for FY 2017-18 and FY 2018-19. The following categories of taxpayers would not be required to file Annual Returns:
- Composition Taxpayers (FORM GSTR-9A)
- Taxpayers having aggregate turnover upto INR 2 crores (FORM GSTR-9) – optional filing
1.2 Simplification of Annual Return forms
As already announced by the Hon’ble Finance Minister during the press conference for announcement on the measures to boost Indian economy, the GST Council has constituted a Committee of Officers to examine the simplification of Forms for Annual Return and reconciliation statement.
The GST Council has extended of last date for filing of appeals before the GST Appellate. Tribunal, against the orders of Appellate Tribunals yet to become functional.
1.4 Restrictions on availment of Input Tax Credit (‘ITC’)
The GST Council has proposed to impose of restrictions on the availment of ITC by the recipients in the cases where details of outward supplies are not furnished by the suppliers in the statement under section 37 of the CGST Act, 2017 i.e., GSTR-1.
1.5 New GST Return filing system from April 2020
In order to give ample opportunity to taxpayers as well as the system to adapt to the proposed new GST Return filing system, the GST Council has recommended to implement the same form April 2020 (as against October 2019 proposed earlier).
Accordingly, the due dates for furnishing of return in FORM GSTR-3B and details of outward supplies in FORM GSTR-1 for the period October 2019 to March 2020 would be notified separately.
1.6 Circulars for uniformity of law across jurisdictions
The GST Council has recommended the appropriate Circulars would be issued to ensure uniformity in application of law across all jurisdictions in respect of the following:
- Procedure to claim refund in FORM GST RFD-01A subsequent to favourable order in appeal or any other forum;
- Eligibility to file a refund application in FORM GST RFD-01A for a period and category under which a NIL refund application has already been filed; and
- Clarification regarding supply of Information Technology enabled Services (ITeS services) (in supersession of Circular No. 107/26/2019-GST dated 18.07.2019) being made on own account or as intermediary.
1.7 Rescinding the Circular issued on post-sales discounts
On account of significant representations received on the difficulties being faced in the implementation phase, the GST Council has recommended to retrospectively rescind the Circular No.105/24/2019-GST dated 28 June 2019 issued in the context of treatment of GST on post-sales discounts.
1.8 Integrated Refund System
As already announced by the Hon’ble Finance Minister during the press conference on the measures to boost Indian economy, the GST Council has proposed the Integrated Refund filing system with disbursal by a single centralised GST authority with effect from 24 September 2019.
1.9 Others
- Amendments in law pursuant to creation of new Union Territories: Suitable amendments in CGST Act, UTGST Act, and the corresponding SGST Acts in view of creation of UTs of Jammu & Kashmir and Ladakh.
- Linking of Aadhar and GSTN: In principle decision to link Aadhar with registration of taxpayers under GST and examine the possibility of making Aadhar mandatory forclaiming refunds.
- Restrictions on utilisation of GST credit: In order to tackle the menace of fake invoices and fraudulent refunds, in principle decision to prescribe reasonable restrictions on passing of credit by risky taxpayers including risky new taxpayers.
2. Classification and Tax rate related changes in goods with effect from 1 October 2019
2.1 Changes in GST rates of goods
The
GST Council has proposed changes in the rates of various goods as under:
| Item | Existing
Rate | New
Rate |
| Reduction in rates |
|
Slide fasteners
|
18%
|
12%
|
|
Marine fuel
|
18%
|
5%
|
|
Wet grinders
(consisting of stone as a grinder)
|
12%
|
5%
|
|
Dried Tamarind
|
5%
|
Nil
|
|
Plates and cups made
of flowers, leaves and bark
|
5%
|
Nil
|
|
Semi-precious
stones-cut & polished
|
3%
|
0.25%
|
|
Woven/Non-woven
Polyethylene Packaging bags
|
18%
|
12%
|
|
Specified goods for
petroleum operation under Hydrocarbon Exploration Licensing Policy
|
Applicable
rate
|
5%
|
| Increase in rates |
|
Caffeinated Beverages
|
18%
|
28%
+
12% cess
|
Supplies of Railways
wagons & coaches
(without refund of accumulated ITC)
|
5%
|
12%
|
2.2 Exemptions from GST
The GST Council has proposed to exempt the following categories of supplies from levy of GST:
- Supplies to Fédération Internationale de Football Association (FIFA) for the Under 17 Women’s Football World Cup proposed to be held in India.
- Supply to the Food and Agriculture Organisation (FAO) for specified projects in India
- Imports of certain defence goods not manufactured indigenously (up to 2024)
- Supply of silver/ platinum by specified agencies for exports (Diamond India Ltd)
- Import of silver/ platinum by specified agencies (Diamond India Ltd).
2.3 Concession in GST for a specified period
The GST Council has proposed to grant concessions in the following categories of supplies for a specified period:
- Fishmeal: Exemption granted for the period 1 July 2017 to 20 September 2019 as there were doubts as regards taxability in view of the interpretational issues. Any tax collected for this period shall be required to be deposited.
Pulley, wheels and other parts (falling under Heading 8483): 12% GST attracted for the period 1 July 2017 to 31 December 2018 on pulley, wheels and other parts (falling under Heading 8483) and used as parts of agricultural machinery.
2.4 Changes in rates of compensation cess
The GST Council has proposed to reduce the compensation cess applicable on the following categories goods:
| Item | Existing
Rate | New
Rate |
| Reduction in rates |
Cess on Petrol Motor
Vehicles
(Capacity of 10-13 passengers)
|
15%
|
1%
|
Cess on Diesel Motor
Vehicles
(Capacity of 10-13 passengers)
|
15%
|
3%
|
2.5 Clarifications on applicability of GST rates for certain goods
The GST Council has proposed the following clarifications as regards applicability of GST rate in respect of certain goods:
- Dried Leguminous Vegetables, Shelled, Whether Or Not Skinned Or Split (HSN 0713): Mere heating of leguminous vegetables (gram/ lentil) for removing moisture, or to soften and puff it or removing the skin, and not subjecting to any other processing or addition of any other ingredients (salt, oil etc.) would be classified under HS code 0713.
- Mechanical appliances (HSN 8424): All “mechanical sprayers” falling under HS Code 8424 would attract 12% GST.
- Parts of solar powered equipment: Parts like Solar Evacuation tubes for solar power based devices like solar water heater, solar steam, generation systems etc. would be eligible for GST rate of 5%.
- Medical devices: Exclusive parts and accessories suitable for use solely or principally with a medical device (falling under headings 9018, 9019, 9021 or 9022) would fall in respective headings and attract GST at the concessional rate of 12%.
- Almond milk: Almond milk is classifiable under HS code 22029990 and attracts GST rate of 18%.
- Navy supplies: Imported stores for Navy would be entitled to exemption from IGST.
2.6 Other miscellaneous changes on classifications and rates
The GST Council has proposed the following:
- Exclusion from composition scheme: Aerated drink manufacturers shall be excludedfrom composition scheme.
- Point of Taxation for specified goods used for petroleum operations: Option to pay GST at the rate of 18% on transaction value at the time of disposal of specified goods for petroleum operations (on which concessional GST rate of 5% was paid at the time of original supply) provided that the goods are certified by Director General Hydrocarbon(DGH) as non-serviceable.
- Restrictions on refund of compensation cess: Restrictions are proposed on the grant of refund of compensation cess on tobacco products (in case of inverted duty structure)
- Concessions on aircraft spare parts: The GST Council would prescribe modalities for allowing concessions on spare parts imported temporarily by foreign airlines for repair of their aircraft, while in India in transit in terms of the Chicago Convention on Civil Aviation.
3. Classification and Tax rate related changes in services with effect from 1 October 2019
3.1 Changes in GST rates of services
The GST Council has proposed changes in the rates of various services as under:
| Item | Existing
Rate | New
Rate |
| Hospitality and
Tourism |
|
Hotels (Room Tariff of
INR 7501 and above)
|
28%
|
18%
|
|
Hotels (Room Tariff
from INR 1,001 to INR 7,500)
|
18%
|
12%
|
|
Hotels (Room Tariff
from INR 1,000 and below)
|
Nil
|
Nil
|
| Food and catering | | |
|
Outdoor Catering other
than in premises having daily tariff of unit of accommodation of INR 7501 and
above (without ITC)
|
18%
|
5%
|
| Job works | | |
|
Job work services in
relation to Diamonds
|
5%
|
1.5%
|
|
Other Job work
services on supply of machine as in engineering industry
|
18%
|
12%
|
|
Job work in relation
to bus body building
|
18%
|
18%
|
3.2 Exemptions from levy of GST on certain services
The
GST Council has proposed to exempt the following services from the levy of GST:
- Warehousing: Services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea to be exempted from GST propspectively from 1 October 2019.
- Transportation: Conditional exemption forservices by way of export freight by air or sea extended till 30 September 2020.
- Insurance: Services of “Bangla Shasya Bima” (BSB) crop insurance scheme of West Bengal Government exempted from GST
- Life insurance for Armed Forces: Services of life insurance business provided or agreed to be provided by the Central Armed Paramilitary Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under the respective Group Insurance Schemes of these Central Armed Paramilitary forces exempted from GST.
- Intermediary services: Services provided by an intermediary to a supplier of goods or recipient of goods when both the supplier and recipient are located outside the taxable territory to be exempted from GST.
3.3 Clarifications on Place of Supply for certain services
The
GST Council has proposed the following clarifications as regards the
determination of Place of Supply in respect of certain services:
- Specified Research and Development Services (R&D): The GST Councilhas recommended to issue a notification under Section 13(13) of IGST Act notifying the place of supply of specified R&D services provided by Indian pharma companies to foreign service recipients, as the place of effective use and enjoyment of a service i.e. location of the service recipient.
The Specified services include such as Integrated discovery and development, Evaluation of the efficacy of new chemical/ biological entities in animal models of disease, Evaluation of biological activity of novel chemical/ biological entities in in-vitro assays, Drug metabolism and pharmacokinetics of new chemical entities, Safety Assessment/ Toxicology Stability Studies, Bio Equivalence and Bio Availability Studies, Clinical trials, Bio analytical studies.
- Chip Design software R&D services: The GST Councilhas clarified that the place of supply of chip design software R&D services provided by Indian companies to foreign clients by using sample test kits in India is the location of the service recipient. Section 13(3)(a) of IGST Act, 2017 would not be applicable for determining the place of supply in such cases.
3.4 Other Miscellaneous changes on classifications and rates and services
The
GST Council has proposed the following:
- Royalty
under GST forward charge: TheGST
Council has recommended to allow the registered authors an option to pay GST on
royalty charged from publishers under forward charge and observe regular GST
compliance.
- Liquor
license not a supply under GST: TheGST
Council has recommended to notify the grant of liquor licence by State
Governments against payment of license fee as a “no supply” to remove
implementational ambiguity on the subject.
- GST on Securities lending scheme under
RCM: TheGST
Council has recommended to allow payment of GST on securities lending service
under Reverse Charge Mechanism (RCM) at the merit rate of 18% under IGST.
Erstwhile transactions prior to RCM period shall be paid on forward charge
basis.
- RCM on renting of vehicles: TheGST Council has recommended to allow RCM to suppliers
paying GST @ 5% on renting of vehicles, from registered person other than body
corporate (LLP, proprietorship) when services provided to body corporate
entities.
- Clarifications:
TheGST
Council has recommended to issue detailed clarifications on the following:
- Scope
of the entry ‘services of exploration, mining or drilling of petroleum crude or
natural gas or both”.
- Taxability
of Passenger Service Fee (PSF) and User Development Fee (UDF) levied by airport
operators.
It may be noted that the above summary has been prepared based on the press release by the GST Council and the announcements made by the GST Council during the press meet. In order to implement the above decisions, relevant amendment to the GST law or notifications/ circulars would be issued by the Central Board of Indirect Taxes and Customs (‘CBIC’). It may be possible that the aforementioned summary may undergo change/ need to be relooked at, once the relevant amendments or notifications/ circulars are issued. Taxpayer may take note of the same while considering the impact on their respective businesses.
Keynote on 35th GST Council meeting held on 21 June 2019
