38th GST Council’s decisions regarding Law and Procedure related changes

The 38th meeting of the GST Council met under the Chairmanship of the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman here today. The meeting was also attended by the Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur  besides Finance Ministers of States & UTs and senior officers of Ministry of Finance.  The GSTCouncil recommended the following:

  1. Grievance Redressal Committees (GRC) will be constituted at Zonal/State level with both CGST and SGST officers and including representatives of trade and industry and other GST stakeholders (GST practitioners and GSTN etc.). These committees will address grievances of specific/ general nature of taxpayers at the Zonal/ State level.
  2. Due date for annual return in FORM GSTR-9 and reconciliation statement in FORM GSTR-9C for FY 2017-18 to be extended to 31.01.2020.
  3. Following measures would be taken to improve filing of FORM GSTR-1:
    1. waiver of late fee to be given to all taxpayers in respect of all pending FORM GSTR-1from July 2017 to November 2019, if the same are filed by 10.01.2020.
    2. E-way Bill for taxpayers who have not filed their FORM GSTR-1 for two tax periods shall be blocked.
  4. Input tax credit to the recipient in respect of invoices or debit notes that are not reflected in his FORM GSTR-2A shall be restricted to 10 per cent of the eligible credit available in respect of invoices or debit notes reflected in his FORM GSTR-2A.
  5. To check the menace of fake invoices, suitable action to be taken for blocking of fraudulently availed input tax credit in certain situations.
  6. 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.
  7. Due date of filing GST returns for the month of November, 2019 to be extended in respect of a few North Eastern States.
  8. The Council also approved various law amendments which will be introduced in Budget 2020.

[This note presents the decision of the GST Council in simple language for easy understanding which would be given effect through Gazette notifications/ circulars which alone shall have force of law. The same will be made effective from the date as specified in such notifications / circulars.]

 

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RM/KMN

38th GST Council’s decisions On Rate Changes

The 38th meeting of the GST Council met under the Chairmanship of the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman here today. The meeting was also attended by the Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur  besides Finance Ministers of States & UTs and senior officers of Ministry of Finance.  The GSTCouncil recommended the following relating to changes in GST rates, exemptions.

  1. To exempt upfront amount payable for long term lease of industrial/ financial infrastructure plots by an entity having 20% or more ownership of Central or State Government. Presently, the exemption is available to an entity having 50% or more ownership of Central or State Government. This change shall become effective from 1st January, 2020.
  2. To levy a single rate of GST @ 28% on both State run and State authorized lottery. This change shall become effective from 1st March, 2020.
  3. The Council also considered the rate of 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 packing of goods ( HS code 3923/6305)in view of the requests received post the changes recommended on such goods in last meeting and recommended to raise the GST to a uniform rate of 18%(from 12%) on all such bags falling under HS 3923/6305 including Flexible Intermediate Bulk Containers (FIBC). This change shall become effective from 1st January, 2020.

[This note presents the decision of the GST Council in simple language for easy understanding which would be given effect to through Gazette notifications/ circulars which shall have force of law.]

 

RM/KMN

Over Simplified GST Annual Return & GST Audit

Apart from the monthly filing of returns by the taxpayers in GST, all taxpayers have to file GST Annual Return and taxpayer with turn over above Rs 2 Crores have to file GST Audit Report yearly.  Annual Return under GST has to be filed through GSTR – 9 by all the taxpayers who have registered in GST even for a single day during the period 1st April 2017 to 31st March 2017.  The data to be reported is very much in detail, and most of the taxpayers have failed to maintain the data in the required manner as they have not reviewed or been guided based on the draft return formats released by the Government before the rollout of GST. The formats for the GSTR – 9 and GSTR – 9C (audit) have been released during Sep 2018; by that time, the financial year has lapsed, and most of the taxpayer was not in a position to get the data. This has resulted in requests from the trade, industry, and professionals for the extension of the due dates and simplification of the formats.

The Government has extended on multiple occasions from 31st Dec 2018 to finally now to 31st Dec 2019. Filing of Annual Return has been made optional for taxpayers having up to Rs 2 Crores has been made optional wide Notification No. 47/2019 – Central Tax for the Financial Year 2017-18 and 2018-19. Now, apart from this, the Government has simplified the return filing process for other taxpayers. This is good news for the taxpayers as their pain in collating the data is no longer required as most of them have been made optional for the Financial Year 2017-18 and 2018-19.

Simplifications announced in GSTR – 9

  1. Outward supplies can be reported net of Debit / Credit Notes and Adjustments

The outward supplies being reported from Table 4A to 4G now can be reported net of Debit / Credit Noted and adjustments optionally if the taxpayer is having any difficulty in deriving the data. The outward supplies that can be reported are

  1. B2B Supplies
  2. B2C Supplies
  3. Deemed Exports
  4. Supplies to SEZ with payment of Duty
  5. Exports with payment of duty
  6. Advance received but supplies not made
  7. Inward supplies on which tax is payable on account of reverse charge

 

  1. Consolidated reporting for Exempted, Non-GST, and Nil Rated Supplies

All the supplies related to Exempted, Non-GST, and Nil Rate Supplies, which are to be reported in Table 5D to 5F, can now be reported in Table 5D, i.e., Exempted as a consolidated amount optionally if the taxpayer has any challenges in deriving these amounts individually. These can be reported net of Debit / Credit Notes & Amendments rather than reporting them separately.

  1. Outward Supplies Without Payment of Duties

The taxpayers can report the supplies made to SEZ or SEZ Developers, Exports, or Supplies on which the Recipient has to pay taxes can be reported net of Debit / Credit Notes & Amendments. These supplies are falling in table 5A to 5C.

  1. Input Tax Credit

Inward supplies from other than imports or from SEZ Units, imports and liable for reverse charge which are to be reported in Table 6B separately for Inputs, Capital Goods & Services can now be reported as a consolidated amount in Table 6B – “Inputs” if the taxpayer is not able to provide the breakup of the same.

Inward supplies received from unregistered suppliers liable for reverse charge are to be reported separately for Inputs, Capital Goods & Services can now be reported as a consolidated amount in Table 6C – “Inputs” if the taxpayer is not able to provide the breakup of the same. The amount to be reported her is only for the taxes paid and eligible amounts.

Inward supplies received from registered suppliers liable for reverse charge are to be reported separately for Inputs, Capital Goods & Services can now be reported as a consolidated amount in Table 6D – “Inputs” if the taxpayer is not able to provide the breakup of the same. The amount to be reported her is only for the taxes paid and eligible amounts.

Inward supplies from SEZ Units are to be reported separately for Inputs & Capital Goods can now be reported as a consolidated amount in Table 6E – “Inputs” if the taxpayer is not able to provide the breakup of the same. The amount to be reported her is only for the taxes paid and eligible amounts.

  1. Reversal of Input Tax Credit

Taxpayers are required to reverse the input tax credit if the supplier is not paid in 180 days as per provisions of Rule 37, Input Service Distributor as per provisions of Rule 39, reversal in cases where the goods or services or both used partially for taxable supplies and partially for non-business purpose or exempted supplies as per provisions of Rule 42 and for transfer or sale of capital goods as per provisions of Rule 43, Blocked input tax credit under Provisions of Section 17(5) of the CGST Act 2017  were supposed to be reported separately in Tables 7A to 7E can now be reported as a single amount in Table 7H.

  1. Refunds

The taxpayers are required to fill the amount for Refund Claimed, Refund Sectioned, Refund Rejected & Refund Pending are to be reported in Table 15A to 15D, now the taxpayers have the option of not reporting the same.

  1. Demands

Taxpayers are required to fill the amount of Demand raised, Amount of Demand Paid, and Pending amounts in Table 15E to 15G, now the taxpayers have the option of not reporting the same.

  1. Reporting of other Supplies

Taxpayers were required to report the supplies from Composition Tax Payers, Total amount  of material not received from job work, which is considered as deemed supplies and goods shipped on approval basis but received within specified period are not returned are required to report in Table 16A to 16C and now the taxpayers have an option of not reporting the same.

  1. HSN Summary for Inward & Outward Supplies

Taxpayers were required to provide the HSN Summary for the Inward Supplies and Outward Supplies in Table 17 & Table 18, and now the taxpayers have the option of not reporting the same.

  1. Applicability of the optional reporting

In almost all the sections where details are required to be reported, but now the same has been made optional. The flexibility applies only from 1st July 2017 to March 2018 and from 1st April 2018 to 2019. Thereby meaning that the taxpayers have to file the detailed amounts for the year 2019-20.

Simplifications announced in GSTR – 9C

GSTR – 9C is a reconciliation statement between the GST Returns and the Financial Statements. As part of the reconciliation statement, there is also a requirement to the return certified by a practicing Cost Accountant or Charted Accountant, the wording used in the same are also modified to shift the onus form the GST Auditor to the Taxpayer.

Simplifications announced in GSTR – 9C

  1. Revenue Reconciliation

Taxpayers have to reconcile the revenue between the GST Returns and the Financial Statements. The tax payment is based on the Time of Supply for the GST Returns, and for the Financial Statements, they are based on the Accounting Standards; as a result, there will be a difference between both the revenues and the same is required to be reconciled and reported in GSTR – 9C. The reconciliation is the GSTR – 9C is required to classify under the following sections

  1. Unbilled Revenue at the end of the Financial year
  2. Unbilled Revenue at the beginning of the Financial year
  3. Supplies treated as Deemed Supplies as per Schedule – 1
  4. Credit Notes issued for the supplies in the next financial year, not reflected in the GST Returns
  5. Trade Discounts accounted in the Financial Statements, but they are ineligible as per GST and not reflected in the GST Returns
  6. Turnover from 1st April to 30th June 2017
  7. Credit Notes accounted in the Financial Statements, but they are ineligible as per GST and not reflected in the GST Returns
  8. Adjustments on account of supply of goods by SEZ units to DTA Units
  9. Turnover for the period under composition scheme
  10. Adjustments in the turnover under section 15 and rules thereunder
  11. Adjustments in turnover due to foreign exchange fluctuations

All these are required to be reported in Table 5A to 5N of the GSTR – 9C, now the taxpayers have an option to report the same separately as a consolidated amount in Table 5O.

  1. Input Tax Credit Reconciliation

Input tax credit reconciliation is required to be provided in Table 12, and as a part of it in 12 B, ITC booked in earlier Financial Year claimed in current Financial Year is not mandatorily required to be reported. Taxpayers have the option of not reporting it also.

In table 12 C, ITC availed as per audited financial statements or books of accounts, taxpayers have an option of not reporting it also.

  1. Expense wise reporting of Input Tax Credit

In Table 14 of GSTR – 9C, taxpayers are required to report the input tax credit based on various accounting/expense heads mandatorily, now taxpayers have the option of reporting the same.

  1. Certification from GST Auditor

GST Audit has to be certified by GST, a practicing Cost Accountant or Charted Accountant, who is certifying the audit. The format and the content of the Certificate are the same except for the change of wordings from “true and correct” to “true and correct.” This gives a lot of breather for the practicing members as they are not coming forward to come and certify that the information provided by them is correct.

The simplification of the GSTR – 9 and GSTR – 9C is applicable only for the FY 2017-18 & 2018-19, and the extension of the due dates have been notified through the Removal of Difficulties Order No. 08/2019-Central Tax dated 14th Nov 2019.

From the above, it makes it clear that the Government wants all the eligible taxpayers to file the GST Annual and Audit returns. Once the filing is completed, the Government may be taking up the assessment of the same to ascertain the correctness of the data being furnished from time to time by the taxpayers and also detect any tax evasion which might have taken place. After the rollout of GST, to date, the taxpayers have not completed at least one audit or assessment.

 

Disclaimer

Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the author may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

360° analysis of Circular No. 123/42/2019 – GST

Restrictions on Input Tax Credit is notified on 9th Oct 2019 wide Notification No 49/Central Tax, dated 9th Oct 2019. There is a lot of confusion and the process of availing the restricted input tax credit by the trade and industry and along with the professional. Keeping in view of all these, CBIC has issued Circular No. 123/42/2019– GST dated 11th Nov 2019. Though the circular clarifies most of the points, there are still a couple of points on which clarity is required.

Points clarified in the Circular No. 123/42/2019– GST are

  1. Restrictions on 20% input tax credit is applicable for availing input tax credit after 9th Oct 2019, thereby meaning it is applicable for the filing of the return for Sep 2019 also.
  2. Restriction of 20% is applicable only for the invoices, debit notes and credit notes reflected in GSTR – 2A
  3. Restriction of 20% is not applicable on the IGST paid on imports, ISD transfer, etc., which are not part of the GSTR – 2A
  4. Restriction is not applicable supplier wise but on the total eligible credit. Ineligible credits have to be deducted from the available credit from GSTR – 2A
  5. If the total amount of restricted credit of 20% is more than the eligible credit, then it is restricted to the eligible amount only.
  6. The taxpayer can take the differential amount of input tax credit where the suppliers have filed the returns in the subsequent tax periods

Points which require clarification are

  1. The amount of restricted credit claimed during the month is for which tax? Is it to be considered separately for CGST, SGST, and IGST or the sum of all the taxes?
  2. What would be the treatment if the taxpayer has claimed for IGST only, and the suppliers have filed returns on which CGST +SGST is available?
  3. Ineligible credit in case of the same supplies used for the taxable and exempted supplies will be known at a later period, in such a case who to determine the eligible credit?

As per the author’s interpretation, it is based on each tax and not the total input tax credit available in GSTR – 2A as the said notification is issued concerning CGST Rules. The third point definitely needs some clarification based on the wording used in the circular “The credit available under sub-rule (4) of rule 36 is linked to total eligible credit from all suppliers against all supplies whose details have been uploaded by the suppliers. Further, the calculation would be based on only those invoices which are otherwise eligible for ITC. Accordingly, those invoices on which ITC is not available under any of the provision (say under sub-section (5) of section 17) would not be considered for calculating 20 per cent. of the eligible credit available.”

The taxpayers have to do a cost-benefit analysis after considering all the scenarios, the amount of additional investment involved for claiming the restricted input tax credit as it involves changes in the accounting systems and keeping track of the same. Even if the taxpayers decide not to go for the availing restricted 20% credit, still they have to change the accounting practice for availing input tax credit. Embracing technology will help the taxpayers to overcome the challenges of maintaining the reconciliations manually and also keeping track of it from time to time and update it. The changes in accounting required for availing the 20% restricted input tax credit, the details of the changes in the accounting can be referred here

Whatever the decision the taxpayers have to take, they have to take it at the earliest as the clock is ticking, and the due date for filing of GSTR – 3B for Oct 2019 is approaching fast.

Disclaimer

Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the author may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

GST Rate on Services as Recommended by The GST Council in Its 37th Meeting

The 37thGST Council met in Goa today under the Chairmanship of Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman  . The meeting was also attended by Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur besides Chief Minister of Goa Shri PramodSawant,  Finance Ministers of States & UTs and seniors officers of the Ministry of Finance .

GST Council took following decisions relating to changes in GST rates, ITC eligibility criteria, exemptions and clarifications on connected issues.

(A)         EXEMPTIONS / CHANGES IN GST RATES / ITC ELIGIBILITY CRITERIA:

Rate reduction sector wise:

Hospitality and tourism:

  1. To reduce the rate of GST on hotel accommodation service as below: –

Transaction Value per Unit (Rs) per day GST
Rs 1000 and less Nil
Rs 1001 to Rs 7500 12%
Rs 7501 and more 18%
  1. To reduce rate of GST on outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 from present 18% with ITC to 5% without ITC.  The rate shall be mandatory for all kinds of catering. Catering in premises with daily tariff of unit of accommodation is Rs 7501 and above shall remain at 18% with ITC.

Job work service:

  1. To reduce rate of GST from 5% to 1.5% on supply of job work services in relation to diamonds.
  2. To reduce rate of GST from 18%to 12% on supply of machine job work such as in engineering industry, except supply of job work in relation to bus body building which would remain at 18%.

Exemption sector wise:

Warehousing:

  1. To exempt prospectivelyservices 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.

Transportation:

  1. To increase the validity of conditional exemption of GST on export freight by air or sea by another year, i.e. till 30.09.2020.

Insurance:

  1. To exempt “BANGLA SHASYA BIMA” (BSB) crop insurance scheme of West Bengal Government.
  2. To exempt 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.

Export promotion:

  1. To exempt 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.
  2. To issue a notification under Section 13(13) of IGST Act notifying the place of supply of specified R&D services (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) 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.
  3. To clarify 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 and section 13(3)(a) of IGST Act, 2017 is not applicable for determining the place of supply in such cases.

Miscellaneous

  1. To allow the registered authors an option to pay GST on royalty charged from publishers under forward charge and observe regular GST compliance.
  2. To notify grant of liquor licence by State Governments against payment of license fee as a “no supply” to remove implementational ambiguity on the subject.
  3. To exempt services related to FIFA Under-17 Women’s World Cup 2020 similar to existing exemption given to FIFA U17 World Cup 2017.

(B) RATIONALIZATION/ TRADE FACILITATION MEASURES:

  1. To allow payment of GSTon securities lending service under reverse charge mechanism (RCM) at the merit rate of 18% and to clarify that GST on securities lending service for period prior to RCM period shall be paid on forward charge basis. IGST shall be payable on supply of these services and in cases where CGST/SGST/UTGST have been paid, such taxpayers will not be required to pay tax again.
  2. 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.

(C) CLARIFICATIONS:

  1.             To clarify the scope of the entry ‘services of exploration, mining or drilling of petroleum crude or natural gas or both”.
  2. To clarify taxability of Passenger Service Fee (PSF) and User Development Fee (UDF) levied by airport operators.

Note: It is proposed to issue notifications giving effect to these recommendations of the Council on 1st October, 2019.

[This note presents the decision of the GST Council in simple language for easy understanding which would be given effect to through Gazette notifications/ circulars which shall have force of law.]

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RM/KMN



(Release ID: 1585718)