The 38th GST Council Meeting was held on Wednesday, December 18, 2019, in New Delhi under the Chairmanship of our honorable Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman.
This meeting was also attended by the Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur, Finance Ministers of States & UTs and senior officers of the Ministry of Finance.
The key issues of the 38th meeting revolved around:
- extension of due dates to file annual returns;
- improving the filing of GSTR-1;
- reducing the ownership criteria of Central or State government for lease of industrial or financial infrastructure
- implementing a single GST rate on State run lottery
- increasing GST rates on Woven and Non-Woven Bags and sacks of polyethylene or polypropylene strips
However, the Council in its 37th Meeting discussed about:
- bringing about relaxations with regards to filing of annual returns for SMEs,
- implementing the New GST Return System,
- issuing circulars to bring about uniformity in the application of GST Law in varied aspects like claiming GST refund,
- changes in GST tax rates on certain goods and services,
- clarifications regarding specific issues, (vi) measures for promoting exports etc.
Therefore, certain issues discussed in the 38th meeting were an extension of the aspects or areas discussed in the 37th meeting.
So, following are the key recommendations given in the 38th GST Council Meeting:
1. Constitution of the Grievance Redressal Committees at the State or Zonal Level
The GST Council recommended that the Grievance Redressal Committees (GRC) shall now be constituted at the Zonal or the State level. These Committees would nominate the following persons to handle the grievances of the individuals:
- CGST and SGST officers
- Representatives of trade and industry
- GST stakeholders like GST Practitioners, GSTN etc.
2. Extension of the Due Date for Annual Returns
In its 37th Meeting, the Council had relaxed the small taxpayers having an annual turnover of upto Rs 2 Crore from filing annual return in GSTR-9. Even the Composition taxpayers were exempted from filing annual tax returns in GSTR-9A for subsequent tax periods.
Now, the Council in it’s 38th Meeting has extended the due dates to file annual return in Form GSTR-9 as well as reconciliation statement in Form GSTR-9C for FY 2017-2018. The date of filing such annual returns has been extended to January 30, 2020.
3. Improved Filing of GSTR-1
The Council has considered bringing about some measures to improve the Filing of GSTR-1 by the taxpayers.
1. Waiver of Late Fee
One of the steps contemplated include waiving off the late fee proposed to be charged on all taxpayers who did not file Form GSTR-1 from July 2017 to November 2019. Provided such taxpayers must file their Form GSTR-1 by January 10, 2020.
This waiver will come through the Amnesty Scheme for GST. During the initial days of GST implementation, lot many taxpayers registered under the GST law ended up with non-compliances. This was on account of lack of clarity of the GST law, frequent amendments, GSTN portal issues etc.
Thus, GST Council considered launching one time Amnesty Scheme for:
- Non-Filers who did not file the returns and
- Nil-Tax Filers who filed their returns with tax liability as NIL.
As per this Scheme, the genuine Non-Filers would be able to relieve themselves by cancelling their GST Registration, that is, deregistering themselves from GST Scheme.
Such a Scheme provides for total waiver of interest, penalty and fines in all cases and also offers immunity to such Non-Filers from prosecution. Thus, such a facility would allow the Non-Filers to complete their backlog of non-compliances without any pressure or fear of penal consequences.
The date of the GST Amnesty Scheme has been extended till January 15th, 2020.
2. Blocking of GST E-Way Bill
As per Rule 138E of the CGST Rules, 2017, the E-Way Bill Generation facility would be blocked for the taxpayers who did not file their returns in GSTR-3B. These are the taxpayers who did not file their GSTR-3B for the previous two or more consecutive months or quarters.
This means that the taxpayer who failed to file GSTR-3B for two or more consecutive months or quarters, they would not be able to generate e-way bills to dispatch or receive goods. This would lead to a halt in the business activity.
Thus, it is when that the taxpayer files GSTR-3B, the e-bills get unblocked the next day.
So, in the 38th GST Council Meeting, the Council came up with a similar measure to improve the filing of GSTR-1. It proposed that the E-Way Bills would be blocked for the taxpayers who have not filed their Form GSTR-1 for two consecutive tax periods.
4. Reduction in the Percentage of ITC Availed By the Recipient For Unreflected Invoices
Prior to October 9, 2019, all taxpayers claimed ITC on self declaration basis. That is, they declared the total figure of eligible tax credit under IGST, CGST and SGST in GSTR-3B. Thus, there was no compulsion to reconcile ITC amount with GSTR-2A. Although, taxpayers were advised to do so.
This means that the taxpayers could claim ITC in full even if the GSTR-2A reflected less ITC amount as compared to the books of accounts. So, the unreflected amount of ITC was treated as provisional credit.
However, the CBIC introduced sub-rule (4) to Rule 36 in CGST Rules, 2017 as per Notification No. 49/2019 released on October 9, 2019.
As per this new rule, the taxpayer would be allowed to avail only 20% of the Input tax Credit standing in respect of invoices or debit notes which have not been uploaded by the suppliers.
This meant that the recipient could avail ITC even if the supplier did not upload the invoices. But the amount of credit that the recipient could avail would not have been more than 20% of the ITC available to the recipient on the basis of the details or invoices uploaded by the supplier. This means that the maximum limit for availing ITC on provisional basis was 20%.
However, in its 38th meeting, the GST Council proposed that the taxpayer filing GSTR-3B can claim provisional ITC only to the extent of 10% of the eligible tax credit available in GSTR-2A.
Thus, the provisional credit or the input tax credit in respect of invoices or debit notes not reflected in GSTR-2A shall be restricted to 10% of the eligible credit. And the eligible credit is arrived at by considering the ITC against invoices or debit notes that are reflected in GSTR-2A.
5. Blocking Input Tax Credit Fraudulently
The Council proposed to take suitable action of blocking fraudulently availed ITC in order to check the menace of fake invoices. Such a measure was in line with the latest amendment made to the CGST Rules, 2017.
The CBIC inserted Rule 86A titled “Conditions of use of amount available in electronic credit ledger” in the CGST Rules via Notification No. 75/2019 issued on December 26, 2019.
As per this rule, the tax department may not allow fraudulently availed ITC standing in the electronic credit ledger to be used for payment of GST Liability or refunded. Such a restriction shall apply where:
ITC has been availed by the recipient in cases where:
- A registered person who issues invoices or debit notes is found to be non-existent. Or does not conduct business from the place for which registration has been obtained;
- Goods or Services are not received
- Supplier does not pay tax to the government or;
- Recipient is found to be non-existent or does not conduct business from the place for which registration has been obtained or;
- Invoice or Debit note, on which ITC is availed, is not in possession of the Registered Person
Furthermore, such a restriction shall be applicable till one year from the date of imposing such a restriction.
6. Changes in GST Rates
Following decisions were undertaken with regards to the changes in the GST Rates and exemptions in the 38th GST Council Meeting:
|Nature of Change||Present||Amendment|
|Exemption of upfront amount payable for long term lease of industrial/ financial infrastructure plots||Given to entities having 50% or more ownership of Central or State Government||Given to entities having 20% or more ownership of Central or State Government|
|GST on both State run and State authorized lottery||Single GST Rate of 28%|
|GST rate on Woven and Non-Woven Bags and sacks of polyethylene or polypropylene strips or the like , whether or not laminated, of a kind used for the packing of goods||12%||18%|
7. Other Recommendations
Following are the other set of recommendations given by the Council:
- A Standard Operating Procedure for tax officers would be issued in respect of action to be taken in cases of non-filing of FORM GSTR 3B returns.
- Due date of filing GST returns for the month of November, 2019 to be extended in respect of a few North Eastern States.
- Approval of various law amendments which will be introduced in Budget 2020.
8. Recommendations To Augment GST Revenue
Sh. Sushil Kumar Modi who was the Convenor of GoM on revenue augmentation made a presentation to the GST Council on the issue of revenue, GST rate structure and compensation needs of the States.
The presentation covered a wide range of issues including measures:
- for encouraging voluntary compliance
- for expanding tax base
- to improve return filing and tax collection
- for rate rationalisation
- Of automating various aspects like e-invoice, new return system, QR code on bills etc
After this presentation, the GST Council gave necessary guidance on:
- further analysis regarding exemption and concession impact analysis,
- tax base analysis
- sensitivity analysis
- compliance measures needed to keep pace with revenue needs
- expeditious implementation of IT and other initiatives