The 37th GST Council Meeting met in Goa. The Council met under the Chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman on September 20, 2019.
Further, this meeting was also attended by Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur, Chief Minister of Goa Shri Pramod Sawant, Finance Ministers of States & UTs and senior officers of the Ministry of Finance.
The Council in its 36th GST Council Meeting had cut GST rates to support electric vehicles industry as well as extended time limits for taxpayers under the Composition Scheme.
In its current meeting, the GST Council recommended changes in the GST rates for various goods and services. Further, it also gave recommendations pertaining to the GST law and procedure.
Hence, this article is divided into three sections. The first section talks about the recommendations given by the GST Council pertaining to the changes in the GST Law and Procedure.
Second section mentions suggestions pertaining to the changes in the GST rates on services. Finally, the third section deals with the recommendations given with respect to the changes in GST rates on goods.
1. Recommendations of the GST Council Related to Law and Procedure
1. Annual Returns
Relaxations with regards to filing of annual returns for MSMEs for 2017 – 2018 and 2018 – 2019
Composition taxpayers are now exempted for filing Form GSTR 9A for the subsequent tax periods
Normal taxpayers with Aggregate Turnover up to Rs. 2 Crores
Normal taxpayers with total annual turnover of Rs. 2 crores are required to file annual return in form GSTR 9. Now, they can choose to file or not to file such returns. In other words, filing form GSTR 9 has now been made optional for taxpayers with such annual turnovers.
Set Up a Committee for Simplifying Annual Return Forms
A committee of officers would be formulated to look into the manner in which forms for annual returns and reconciliation statement can be simplified.
Implementation of New Return System
The new system for filing returns would now be implemented from April 2020. This was earlier suggested to be introduced from October 2019. The council has deferred the implementation of the new return system further.
This is done so as to give sufficient opportunity both to the system as well as the taxpayers to get used to the new system.
No ITC Until Filing of Statement for Outward Supplies
The recipient would not be able to claim input tax credit until the details of outward supplies are furnished by the suppliers in statement under section 37 of the CGST Act, 2017. This is done in order to make the taxpayers to furnish their statement of outward supplies in time.
2. Extension of Last Date of Filing Appeals Before GST Appellate Tribunal
The council has extended the last date for filing appeals against the orders of Appellate Authority before the GST Appellate Tribunal. This is done because the Appellate Tribunals are still not functional.
3. Issuing Circulars to Encourage Uniformity in Application of Law
Circulars with regards to the following affairs would be issued. This would be done in order to bring uniformity in the application of law over all jurisdictions:
- process of claiming refund in form GST RFD – 01A following a favorable order in appeal or any other forum
- eligibility criteria for furnishing refund application in GST RFD – 01A. This is for the time period and category for which NIL refund application has already been filed by the taxpayer.
- explanation with regards to whether Information Technology Enabled Services (ITes) being supplied are on own account or as intermediary. This is in super-session of the circular dated 18 – 7 – 2019.
4. Cancellation of Circular Regarding Post Sales Discount
Circular dated 28 – 06 – 2019 issued with regards to the Post Sales discount has been repealed by the Council.
5. Changes in GST Acts with the Formation of UTs of J&K and Ladakh
Requisite changes in the CGST, UTGST and SGST acts is suggested. This is in line with the proposal made by the government of dividing the state of Jammu and Kashmir into two Union Territories – Ladakh and J&K at the time of article 370.
6. Introduction of Integrated Refund System
The council has proposed to introduce an integrated refund system with effect from September 24, 2019. This is done to ensure that refund is paid out to the taxpayers by a single authority.
7. Linking Aadhaar to GST Registration
The council has put forth the general proposition of linking Aadhaar to the registration of taxpayers under GST. Furthermore, it is also considering the likelihood of making Aadhaar necessary for claiming refunds.
8. Restrictions on Passing of Credit by Risky Taxpayers
It was suggested to impose rational restrictions on passing of credit by the risky taxpayers. Now this is proposed in order to deal with the challenges like fake invoices and fraudulent refunds.
II. Recommendations Pertaining to the Changes in GST Rates on Services
A) Changes in GST Rates, Exemptions and ITC Eligibility Criteria
1) Sector wise Reduction in GST Rates
a. Hospitality and Tourism
Rate Cuts on Hotel Accommodation Service
Transaction Value per Unit (in Rs) per Day
|Rs. 1000 and less||Nil|
|Rs. 1001 to Rs. 7500||12%|
|Rs. 7501 and above||18%|
|Type of Catering Service||Daily Tariff of Unit of Accommodation||Changes in GST|
|Outdoor Catering Services other than in premises||Rs. 7501||From current 18% GST with ITC to 5% without ITC (this rate is mandatory for all kinds of catering)|
|Catering in premises||Rs. 7501 and above||Remains same at 18% GST with ITC|
Job Work Service
|Type of Job Work Service||GST Rate Changes|
|Supply of job work services in relation to diamonds||Recommendation made to reduce GST rate from 5% to 1.5% on such services|
|Supply of machine job work such as in engineering industry||Recommendation made to reduce GST rate from 5% to 1.5% on such services|
|The above job work does not include supply of job work in relation to bus body building||Recommendation made to keep GST rate at 18%|
2) Sector Wise Exemption
The GST Council suggested to exempt services with regards to storage or warehousing of:
- Nuts and vegetables
- Raw vegetable fibers such as cotton, flax, jute etc
- Unmanufactured Tobacco
- Betel leaves
- Tendu leaves
It was recommended to increase the validity of conditional exemption of GST on export freight by air or sea by another year. Accordingly, the validity of conditional exemption of GST on export freight by air or sea is proposed to be increased till September 30, 2020.
The Council proposed to exempt:
- Bangla Shasya Bima (BSB) crop insurance scheme of West Bengal Government
- Services with regards to life insurance business provided by the Central Armed Paramilitary Forces (under Ministry of Home Affairs) Group Insurance Funds to their members. This relates to services provided under the respective Group Insurance Schemes of these Central Armed Paramilitary Forces.
d) Export Promotion
Recommendations were made to exempt the services provided by an intermediary to the supplier of goods or recipient of goods. This is when both the supplier and recipient of goods are located outside the taxable territory.
Further, the council plans to issue a notification under section 13(3) of the IGST Act. This notification would clarify the place of supply of specified Research and Development services rendered by Indian Pharma companies to foreign service recipients. Accordingly, the place of supply of such services would be the place where such services are effectively used or enjoyed,that is, the place of recipient of such services.
Finally, the council proposed to give clarity on the place of supply of chip design software R&D services. These include the services provided by Indian companies to foreign clients by using sample test kits in India. Accordingly, the place of supply of such services is the location of the recipient of services. Therefore, section 13 (3)(a) of the IGST act, 2017 shall not be applicable in determining the place of supply of such services.
- Registered authors to be allowed an option to pay GST on royalty received from publishers under forward charge. This way registered authors would witness regular compliance under GST
- Council to notify that the grant of liquor licence by state governments in lieu of licence fee would be taken as a ‘no supply’. This is undertaken in order to eliminate the confusion regarding the implementation of this subject
- Services with regards to FIFA under 17 Women’s World Cup 2020 to be exempted. This is much like the existing exemption provided to FIFA U17 World Cup 2017.
B) Rationalization/Trade Facilitation Measures
1. GST Payment on Securities Lending Service
- The Council suggested to allow GST payment on securities lending under Reverse Charge Mechanism. Such GST would paid at the merit rate of 18%
- Further, the GST on securities lending service for a period before reverse charge mechanism period would be paid on forward charge basis
- Also, IGST would be paid on the supply of such services. However, in circumstances where taxpayers have paid CGST/SGST/UTGST, they would not be required to pay tax again.
2. RCM To Suppliers Renting Vehicles For Service to Body Corporates
The Council proposed that reverse charge mechanism be allowed to suppliers paying GST @ 5% on renting of vehicles from registered persons. These registered persons do not include body corporate such as LLP or proprietorship. Also, such a reverse charge mechanism for renting of vehicles would be allowed in cases when services are provided to body corporate entities
Suggestions were given on giving clarity with regards to:
- the scope of the entry ‘services of exploration, mining or drilling of petroleum crude/natural gas or both
- taxability of Passenger Service fee (PSF) and User Development Fee (UDF) charged by airport operators
III. Recommendations Pertaining to the Changes in GST Rates on Goods
1. Recommendations for Reduction in GST Rates
|Type of Good||GST Rate Changes|
|Parts of Slide Fasteners||To be reduced from 18% to 12%|
|Marine Fuel 0.5% (FO)||To be reduced from 18% to 5%|
|Wet Grinders (consisting of stone as a grinder)||To be reduced from 12% to 5%|
Plates and cups made of leaves or flowers or bark
|To be reduced from 5% to Nil|
|Cut and polished semi – precious stones||To be reduced from 3% to 0.25%|
|Specified goods for petroleum operations undertaken under Hydrocarbon Exploration Licencing Policy (HELP)||Applicable rate to 5%|
|Import of specified defence goods not manufactured indigenously (up to 2024)|
Sup[ply of goods and services to FIFA and other specified persons for organizing the U 17 Women’s Football World Cup in India
Supply of goods and services to Food and Agriculture Organization (FAO) for specific projects in India
|Exemptions from GST/IGST|
2. Recommendations for Increase in GST Rates
|Type of Goods||Changes in GST Rates|
|Goods falling under chapter 86 of Tariff.These include goods like railway wagons, coaches, rolling stock (without refund of accumulated ITC). This is undertaken to tackle the issue of accumulated ITC with suppliers of such goods.||GST proposed to be increased from 5% to 12%|
|Caffeinated beverages||GST proposed to be increased from 18% to 28% + 12% compensation cess|
3. Measures Taken for Export Promotion
Several measures were undertaken to encourage exports . These include:
a) Exemption from GST/IGST
- GST/IGST to be exempted at the time of import on silver/platinum if such an import is made by specified nominated agencies
- GST/IGST to be exempted on supply of silver/platinum. Provided such a supply is made by specified nominated agency to exporters for export of jewelry
b) DIL to be included in Nominated Agencies Entitled for IGST Exemption
Diamond India Limited (DIL) to be included in the list of nominated agencies that are eligible for exemption of IGST on import of Gold or Silver or Platinum. This is undertaken so that DIL is able to supply Gold/Silver/Platinum at NIL GST to jewelry exporters.
4. Revised GST Rates on Polypropylene/polyethylene Bags
The Council proposed to keep a uniform GST rate of 12% on Polypropylene/Polyethylene bags. Further, this rate is applicable for woven, non -woven bags, whether laminated or not laminated and the ones that are used for packing of goods. This uniform GST rate of 12% is proposed to be changed from the current rates of 5%/12%/18%
5. GST Concession Provided in Certain Cases for a Specified Period
- GST to be exempted on fish meal from July 1, 2017 to September 30, 2019. However, this exemption does not apply to cases where GST has already been collected
- GST at 12% to be applicable on pulleys, wheels and items falling under HSN 8483 that are used as agricultural machinery
6. Revised Compensation Cess on Specific Passenger Vehicles
|Passenger Vehicle||Changes in Compensation Cess|
|Diesel passenger vehicle with Engine Capacity 1500 CC, Length not exceeding 4000 mm designed for carrying 10 – 13 persons||Compensation Cess to be reduced from 15% to 3%|
|Petrol passenger vehicle with Engine Capacity 1500 CC, Length not exceeding 4000 mm designed for carrying 10 – 13 persons/td>||Compensation Cess to be reduced from 15% to 1%|
7. Other Changes
- Manufacturers of aerated drinks to be excluded from the Composition Scheme
- An option to pay GST at the rate of 18% at the time of disposal of specific goods for petroleum operations (these are the goods on which concessional GST of 5% was paid at the time of original supply). Provided such goods are certified by Director General Hydrocarbon (DGH) as non – serviceable
- Restrictions imposed on the refund of Compensation Cess with regards to tobacco products. This is applicable in case of inverted duty structure
- Council to direct modalities with regards to allowing concession on spare parts imported temporarily by foreign airlines for repair of their aircraft. This is for the time such airlines are in transit in India in terms of the Chicago Convention on Civil Aviation.
8. Clarity on GST Rates for Other Goods Recommended by GST Council
|Type of Goods||Changes in GST Rates|
|Mechanical sprayers falling under HS Code 8424||GST@ 12%|
|Parts such as solar evacuation tubes for solar power based devices like solar water heater, solar steam, generation systems etc||GST @ 5%|
|Exclusive parts and accessories suitable for use solely with a medical device (These include the ones falling under heading 9018, 9019, 9021 or 9022)||Concessional GST rate of 12%|
|Almond milk classified under HS code 22029990||GST @ 18%|
|Imported Stores for Navy||Exempted from IGST|
Please Note: All the rate changes recommended would be effective from October 1, 2019.