After 12th October, 2020, the 43rd GST Council meeting was held under Chairmanship of Hon’ble Finance Minister on 28th May, 2021. To tackle outbreak of COVID-19, Council made various recommendations related to exemption or reduction of GST rates and Custom duty rates on various Medical Goods, provided relief on the due date of filing of returns, relief granted from late fee for earlier pending GST returns, rationalised late Fee for future period etc.
We have made an attempt to summarize key recommendations of GST Council in this Article:
GST Council made recommendation on following two areas:
- Relief related to COVID-19 for Medical Goods and Services;
- Measures for Trade Facilitation during such Pandemic
A. COVID-19/Black Fungus Relief
1. Relief for Medical Goods and equipments for COVID-19
- CBIC exempted Basic Custom Duty (“BCD”) on Import of various medical equipment and medicines such as Remdesivir Active Pharmaceutical Ingredients, Injection Remdesivir, oxygen Concentrator etc. vide Notification No. 27/2021–Customs, 28/2021-Customs and 29/2021-Customs dated 20th April, 2021. Since exemption was granted for BCD only, therefore, IGST was payable on import at applicable rate.
- Vide N/No. 30/2021-Customs dated 1st May, 2021, IGST Rate on import of Oxygen Concentrator reduced to 12%.
- Department received various representations from Charitable Organisations, Corporate Entities and other associations that they were receiving various COVID-19 relief material from outside India Free of Cost for Free distribution purpose. However, the same is chargeable to IGST. Therefore, exemption was granted for IGST on import of such goods on FOC basis for free distribution subject to specified condition.
- Accordingly, IGST was applicable on COVID-19 relief material imported on payment basis.
- GST Council recommended full exemption from IGST even if COVID-19 relief material such as medical oxygen, oxygen concentrators and other oxygen storage and transportation equipment, certain diagnostic markers test kits and COVID-19 vaccines, etc., are imported on payment basis.
- Exemption shall remain valid till 31st August, 2021.
- Also, earlier exemption of IGST on import on FOC basis is also recommended to extend till 31st August, 2021.
- Further, for granting relief to other individual COVID-19 related items, the GST Council formed a Group of Ministers. They shall analyze the need for relief for individual items and shall submit their report by 8th June, 2021. Relief on individual items shall be granted after submission of report.
2. Relief of Medicines to cure Black Fungus
- GST Council has recommended IGST exemption on import of Amphotericin B, even if it is imported on payment basis.
- Amphotericin B is an antifungal medication used to cure Black Fungus.
3. Relief on other goods
- GST rate on Diethylcarbamazine (DEC) tablets has been recommended for reduction to 5% (from 12%). This medicine is used to cure LympahticFilarisis (an endemic).
- IGST on import of repaired goods (re-imported after repair) should be levied on repair value only.
- GST rate of 12% to apply on parts of sprinklers/ drip irrigation systems falling under tariff heading 8424 (nozzle/laterals) to apply even if these goods are sold separately.
4. Relief on Services
- Council has clarified that GST is exempted on following services (It means exemption was already applicable and GST Council has only clarified the status):
- services of serving of food including mid-day meals under any midday meal scheme to an educational institution irrespective that funding of such supplies are from government grants or corporate donations.
- Services provided by way of examination including entrance examination, where fee is charged for such examinations, by National Board of Examination (NBE), or similar Central or StateEducational Boards.
- GST Council has recommended that necessary modification should be made in relevant notification to make it clear that land owner promoters could utilize credit of GST charged to them by developer promoters in respect of such apartments that are subsequently sold by the land promotor and on which GST is paid. The developer promoter shall be allowed to pay GST relating to such apartments any time before or at the time of issuance of completion certificate.
- Developer Promoter Constructs Apartments and collects consideration from the Land Owner during the process of construction. Since, consideration is collected before issuance of Completion certificate, therefore, the Developer promoter is liable to pay GST on such amount.
- In turn, the Land owner also collects consideration from the customer before issuance of completion certificate. Therefore, the Land Owner is also liable to pay GST on the same.
- GST Council has clarified that Land Owner can avail Input tax Credit of GST paid to Developer and can use the same for payment of his output GST Liability.
- Reduced GST rate on MRO service to Ship/Vessal
- Maintenance, Repair and Overhaul Services are taxable @ 18%. Government reduced the GST rate on “Maintenance, repair or overhaul services in respect of aircrafts, aircraft engines and other aircraft components or parts” to 5% vide N/No. Notification No. 02/2020–Central Tax (Rate) dated 25th March, 2020. This amendment reduced costs for the Aviation sector. However, cost was still high for ships and Vessels.
- Therefore, GST Council has recommended to extend the same dispensation to MRO units of ships/vessels so as to provide level playing field to domestic shipping MROs vis a vis foreign MROs.
- Accordingly, GST on MRO services to ships/vessels shall apply at a reduced rate of 5% (from 18%).
- Further, PoS of B2B supply of MRO Services in respect of ships/ vessels would be the location of the recipient of service. Therefore, if services are provided to any recipient outside India then the same shall not attract GST and will reduce the cost of service in the international market.
- Clarification on applicability of GST Rates on Services:
- GST Council has clarified that supply of service of milling of wheat/paddy into flour/rice to Government/ local authority etc.for distribution of such flour or rice under PDS (Public Distribution System) is exempt from GST provided that value of goods in such composite supply does not exceed 25%. Otherwise, such services would attract GST at the rate of 5% if supplied to any person registered in GST, including a person registered for payment of TDS.
- GST is payable on annuity payments received as deferred payment for construction of roads. Benefit of the exemption is for such annuities which are paid for the service by way of access to a road or a bridge.
- Service of Construction of a rope-way to a Government Entity is taxable at the rate of 18%.
- Supplier of service by the government to its undertaking/PSU by way of guaranteeing loans by such entities from banks and financial institutions is exempt from GST.
B. Measures for Trade Facilitation during such Pandemic
1. Relief to file pending GST returns under Amnesty Scheme for the period July 17 to April 21
- Usually, Most of the GST return non-filers have left GST compliance after a point of time due to accumulation of huge amount of penalty and there is no way to file return without prior payment of such penalty.
- Therefore, to promote filing of pending GSTR-3B for the period of July, 2017 to April, 2021, GST Council has recommended to reduce late Fee on filing of GSTR-3B to:
- Maximum INR 500 (INR 250 each for CGST & SGST) for taxpayers who did not have any tax liability for the said tax periods;
- Maximum INR 1,000 (INR 500 each for CGST & SGST) for other taxpayers.
- Benefit of reduced Late fee shall be available only if GSTR-3B is filed between 01.06.2021 to 31.08.2021.
2. Rationalisation of Late fee for Late filing of GST Returns
- At present, in case of delay in filing of GSTR-3B, late fee is levied of INR 20 per day, in case of NIL GST return, and INR 50 per day, in other cases. However, the amount of late fee does not exceed INR 10,000.
- Considering that imposing the same maximum cap on all taxpayers is irrational. Therefore, the GST Council has recommended to rationalise the maximum cap of Late fee based on tax liability in return and Aggregate Annual Turnover of the person.
Following are the maximum cap recommendations made by the GST Council.
|Return Type||Scenarios||Maximum Amount of Late fee|
|GSTR-3B||For taxpayers (irrespective of aggregate turnover) having:Nil tax liability in GSTR-3B;or Nil outward supplies in GSTR-1||INR 500 (INR 250 each for CGST & SGST)|
|GSTR-3B||For taxpayers having Annual Aggregate Turnover (AATO) in preceding year upto Rs 1.5 crore||INR 2000 (INT 1000 each for CGST & SGST)|
|GSTR-3B||For taxpayers having AATO in preceding year between Rs 1.5 crore to Rs 5 crore||INR 5000 (INT 2500 each for CGST & SGST)|
|GSTR-3B||For taxpayers having AATO in preceding year above Rs 5 crores||INR 10,000 (INR 5,000 each for CGST & SGST)|
|GSTR-4||For composition Dealer, if tax liability is NIL in the return||INR 500 (INR 250 each for CGST & SGST)|
|GSTR-4||For composition Dealer, in other cases.||INR 2,000 (INR 1000 each for CGST & SGST)|
|GSTR-7||Reduced to INR 50/- per day (INR 25 each for CGST & SGST)Maximum cap of INR 2,000 (INR 1000 each for CGST & SGST) per return|
- Recommendation of changes in maximum cap of late fee shall be made effective for prospective tax period and not for returns pending for earlier tax periods.
3. Relief in due dates of various GST returns
Considering the COVID-19 impact, the Government has already granted extension for GST returns due for March & April, 2021 vide notifications dated 01.05.2021.
However, since cases of COVID-19 are still not controlled and lockdown is still extending, GST Council has recommended granting further extension for the month of March & April, 2021 and also grant extension for May, 2021.
4. Other Facilitations
- Rule 36(4) of CGST Rules, 2021, i.e., restriction of ITC upto 105% of ITC appearing in GSTR-2B, shall apply cumulatively for the period of April, May and June, 2021 in GSTR-3B of June, 2021.
- Companies shall be allowed to file returns by using Electronic Verification Code (EVC) also. Otherwise, Companies can filed returns or any other document using Digital Signature only.
- Time limit for completion of various actions, by GST authority or by any person, which are falling during the period from 15th April, 2021 to 29th June, 2021, shall be extended upto 30th June, 2021, subject to some exceptions.
5. Simplification of Annual Return and Reconciliation Statement
- Provision of certification of Reconciliation statement by Chartered Accountant under Section 35 of CGST Act, 2017 was dropped by Finance Act, 2021. Therefore, Reconciliation Statement in Form GSTR-9C is required to be filed by the taxpayer on self certification basis and such provision shall be implemented with effect from FY 2020-21.
- Annual return in FORM GSTR-9 / 9A for FY 2020-21- Shall be optional for taxpayers having aggregate annual turnover upto INR 2 Crore;
- Reconciliation statement in FORM GSTR-9C for the FY 2020-21- Shall be optional for taxpayers having aggregate turnover upto INR 5 Crore.