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2020-03-17 09:37:23GST CenterEnglishThe GST Council in its 39th GST Council Meeting gave recommendations on the current IT issues faced by taxpayers, GST rate changes &...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2020/03/39th-GST-Council-Meeting-IT-Roadmap-GST-Rates-and-Law.jpghttps://quickbooks.intuit.com/in/resources/gst-center/39th-gst-council-meeting/39th GST Council Meeting: IT Roadmap, GST Rates and Law

39th GST Council Meeting: IT Roadmap, GST Rates and Law

9 min read

The 39th GST Council Meeting was held on Saturday, March 14, 2020 under the chairmanship of union finance and corporate affairs minister Smt Nirmala Sitharaman.

This meeting was also attended by union minister of state for finance and corporate affairs Shri Anurag Thakur, senior officers of Ministry of Finance and finance ministers of various states and UTs.

The GST Council in its 39th GST Council Meeting gave recommendations mainly in respect of:

  • the current IT issues faced by the taxpayers in the GST system and road ahead with regards to resolving such issues.
  • GST rate changes on supply of goods and services
  • changes in GST law and procedures

Earlier, in its 38th GST Meeting, the GST Council suggested to:

  • extend due dates to file annual returns
  • improve filing of GSTR – 1
  • implement a single GST rate on state run lottery
  • reduce ownership criteria of central and state government for lease of industrial or financial infrastructure
  • increase GST rates on items such as woven and non – woven bags and sacks of polyethylene or polypropylene strips

Given this backdrop, let’s have a look at the key suggestions given by the GST Council in its 39th GST Meeting.

Recommendations on the IT Roadmap

To resolve the recurring technical glitches in the GST network, the GST Council called for Nandan Nilekani in the 39th GST meeting. Shri Nandan Nilekani is the non – executive chairman of Infosys limited, the company behind building and maintaining the GST technology network.

Nandan Nilekani gave a presentation in the 39th GST meeting explaining the current issues faced by the taxpayers in the GST system and how such issues would be resolved from here on.

The recommendations made by him are as follows:

  • Shift to New GST System in an Incremental Manner

He suggested that shift to the New GST Return System must be carried out in a phased manner. This is to ensure smooth transition and a better uptake of the new return system.

Accordingly,

  • the government can begin by first tackling the compliance related issues. This is because it will help in dealing with the problem of tax evasion and gaming of the system due to non – linking of GSTR 1 and GSTR 3B. Therefore, the first step could be linking of the details of outward supplies in GSTR – 1 to the liability in form GSTR – 3B.
  • This would be followed by linking of the ITC details in form GSTR – 3B to details of supplies that get auto – populated in form GSTR – 2A.

In addition to this, Aadhaar authentication and spike rules could be initiated to deal with tax evasion and check the gaming of the system.

  • Additional Hardware Procurement Needed for Increased Load Capacity

The GST Council has put forth the expectation of increasing the load capacity of the IT system from current 1.5 lakh taxpayers to simultaneously handle 3 lakh taxpayers.

To fulfill this expectation, Nandan Nilekani informed the Council that increased hardware procurement has already been started which got affected due to the COVID – 19 pandemic.

In addition to this, he also assured that he would personally examine the progress of the GSTN project and attend IT – GoM for the coming six months or until such time the Council initiatives are fully implemented.

Thus, after the above discussion, the GST Council made following recommendations in respect of fixing the regular IT glitches faced by the taxpayers:

  • Nandan Nilekani to attend the coming three GST council meetings and provide status in respect of implementation of the decisions given by the GST Council. In addition to this, he is also required to help the GST Council in taking suitable decisions for issues related to technology.
  • The GST Council also approved the demand for hiring additional manpower of 60 people on Time and Material (T&M) basis so as to implement various initiatives in a timely manner. It assured that the procurement of additional hardware and manpower would result in speedy approvals.

The GST Council expects these initiatives to be implemented by 31st July, 2020.

GST Rate Changes on Supply of Goods and Services

The GST Council made several recommendations in respect of GST rate changes with regards to goods and services:

S.No.Goods and Services Attracting GST Rate ChangesRecommended GST Rate Changes
1.Fitment committee suggested calibrating/fine-tuning the GST rate structure so as to rectify inverted duty structure on various items. These items include mobile phones, footwear, fertilizers and textiles
  • Increase GST rate on mobile phones and specified parts from current 12% to 18%
  • Discuss the issue of adjusting/calibrating GST rate in other items for doing away with inversion in future meetings
2.Rationalization of GST rate on all types of matches, including handmade and other than handmade matchesFrom 5% on handmade and 18% on other matches to 12% on all types of matches
3.Reduce GST rate on aircraft Maintenance, Repair and Overhaul (MRO) services
  • Reduce GST rate from current 18% to 5% with full ITC
  • Change the place of supply for B2B MRO services to location of the recipient. This will help set up the MRO services in India. Also, domestic MRO, which was demanding a level – playing field against their foreign counterparts, would now get protection on account of 5% tax paid under section 3(7) of Customs Tariff Act, 1975 on majority of the goods sent overseas for repairs . This is because such a tax is not available as credit.

These suggested GST rate changes would come into effect from April 1, 2020.

Changes in Law and Procedures

The GST Council made the following suggestions in respect of changes in the GST law and procedures:

1. Measures Taken to Facilitate Trade

  • Interest for Late Payment of GST

The Council suggested that interest for late payment of GST would be levied on the net cash tax liability with effect from July 1, 2017. Therefore, the GST law would be amended retrospectively to implement such a change.

  • Extension of Period of GST Registration Application

Taxpayers whose registrations have been cancelled till March 14, 2020 can make an application for revoking such a cancellation up to June 30, 2020. This extension of period has been granted as a one time measure to support those persons who want to undertake business.

  • Recommendations in Respect of Annual Return

(i) Relaxation to MSMEs from Filing Reconciliation Statement

The Council extended relief to MSMEs by relaxing the filing of reconciliation statement in Form GSTR – 9C. Accordingly, taxpayers having an aggregate annual turnover of up to Rs. 5 crores are not required to furnish reconciliation statement in form GSTR – 9C for the financial year 2018 – 2019.

(ii) Extension of Due Date for Filing Annual Return and Reconciliation Statement

The due date for filing annual return and reconciliation statement for the financial year 2018 – 2019 has been proposed to be extended to June 30, 2020.

(iii) No Late Fees for Taxpayers for Delay in Filing Annual Return and Reconciliation Statement

Taxpayers having an aggregate annual turnover of less than Rs. 2 crores would not be charged any late fee for delay in furnishing annual return and reconciliation statement for financial year 2017 – 18 and 2018 – 19

(iv) ‘Know Your Supplier’ Support to be Introduced

The Council suggested to introduce a new facility called ‘Know Your Supplier’. This will help the registered taxpayers to have some basic information about the suppliers that they are doing business with or planning to do so.

(v) No GSTR – 1 for Taxpayers Who Could Not Opt for Special Composition Scheme

The Council has waived the requirement of filing form GSTR – 1 for 2019 – 20 for the taxpayers who could not avail the option of special composition scheme by furnishing form CMP – 02.

(vi) Special Process for Debtors Under CIRP for GST Compliance

The council suggested a special procedure for the registered persons who are corporate debtors under Insolvency and Bankruptcy Code 2016 and are going through a Corporate Insolvency Resolution Process (CIRP). This is undertaken to help them comply with GST law during the CIRP period.

(v) Due Date Extension for Filing Form GSTR – 1, GSTR – 3B and GSTR – 7 for Specific Taxpayers

The Council extended the due date for furnishing form GSTR – 3B for the month of July 2019 to January, 2020 by registered taxpayers whose principal place of business is in the UT of Ladakh.

Accordingly, the due date has been extended till 24th March 2020. The Council also suggested similar extension of due date for filing form GSTR – 1 and Form GSTR – 7.

(vi) Bunching of Refund Claims Allowed to Support Exporters

The Council allowed the bunching of refund claims across the financial years so as to support the exporters.

2. Postponing E Invoice and QR Code

  • It has been suggested to exempt certain category of registered persons from capturing dynamic QR code or issuing e-invoices. These persons include banking company, insurance company, financial institution, non – banking financial institution, GTA, passenger transportation service etc.
  • Dates for implementing e-invoicing and QR code to be extended to October 1, 2020

3. Postponing the e-wallet Scheme

The council extended the time to finalize e-wallet scheme till March 31, 2021. In addition to this, it extended the current exemptions from IGST and cess on imports made under AA/EPCG/EOU schemes till March 31, 2021.

4. The Existing GST Return Filing System to Continue

The Council suggested to continue with the existing GST return filing system of furnishing form GSTR – 1 and form GSTR – 3B till September 2020.

5. Other New Initiatives

Following new initiatives have been proposed:

  • obtaining information return from banks
  • restrictions to be exercised on passing of ITC in case of new GST registrations before proper physical verification of premises and financial KYC of the registered persons. This is suggested to prevent fake invoicing and fraudulent passing of ITC.

6. Suggestions In Respect of Circulars to be Issued

The Council proposed to issue circulars with regards to :

  • clarity in respect of apportioning ITC in cases of business reorganization under section 18(3) of CGST Act along with rule 41(1) of CGST rules
  • the clarity in respect of refund related issues
  • clarity in respect of special procedure for registered persons who are corporate debtors as per provisions of the insolvency and bankruptcy code, 2016 and are going through the corporate insolvency resolution process
  • appeals during non – constitution of the Appellate Tribunal

7. Major Amendments to CGST Rules

The key amendments to CGST rules suggested by the Council are as follows:

  • Process for ITC reversal with regards to capital goods used for making taxable supplies and partly used exempt supplies as per rule 43(1)(c)
  • Ceiling to be fixed for the value of export supply for calculating refund on zero rated supplies
  • To permit refund to be given in both cash and credit where tax has been paid in excess
  • Allow recovery of refund on export of goods in cases where proceeds from exports are not realized within the time period as specified under FEMA
  • Initiate Aadhaar authentication for new taxpayers

8. Certain Amendments to be Undertaken in the GST Law

The Council also suggested that certain amendments would be made in the GST law.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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