Recommendations of 45th GST Council Meeting

Recommendations of 45th GST Council Meeting.

The first meeting to take place in persons after the impact of COVID-19.

Some key decisions are taken in today’s meeting to augment revenue, stream line GST provisions on portal as per Law and some exemptions were provided for treatment of COVID-19 or extension of concessional rates extended till 31st Dec 2021.

• Life-saving drugs Zolgensma and Viltepso used in treatment of Spinal-Muscular Atrophy exempted from GST when imported for personal use
• Extension of existing concessional GST rates on certain COVID-19 treatment drugs upto 31 December 2021
• GST rates on 7 other medicines recommended by Department of Pharmaceuticals reduced from 12% to 5% till 31
  December 2021
• GST rate on Keytruda medicine for treatment of cancer reduced from 12% to 5%
• GST rates on Retro fitment kits for vehicles used by persons with special abilities reduced to5%
• GST rates on Fortified Rice kernels for schemes like ICDS reduced from 18% to 5%
• Council also recommends major changes in GST rates and scope of exemption on Services
• Recommends several clarifications in relation to GST rates on Goods and Services
• Council recommends several measures relating to GST law and procedure
• Council decides to set up 2 GoMs to examine issue of correction of inverted duty structure for major sectors and for using technology to further improve compliance, including monitoring

The GST Council’s 45 meeting was held today in Lucknow under the chairmanship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council has inter-alia made the following recommendations relating to changes in GST rates on supply of goods and services and changes related to GST law and procedure:

I. Recommendations relating to GST rates on goods and services

A. COVID-19 relief measure in form of GST rate concessions

1. Extension of existing concessional GST rates (currently valid till 30 September, 2021) on following Covid-19 treatment drugs, up to 31 December, 2021 , namely-
a) Nil Rate for Amphotericin B

b) 5% on Remdesivir

c) Nil rate on Tocilizumab

d) 5% on Anti-coagulants like Heparin

2. Reduction of GST rate to 5% on more Covid-19 treatment drugs, up to 31 December, 2021,namely-

a) Itolizumab
b) Posaconazole
c) Infliximab
d) Favipiravir
e) Casirivimab & Imdevimab
f) 2-Deoxy-D-Glucose
g) Bamlanivimab & Etesevimab

Major recommendations on GST rate changes in relation to Goods with effective from 1st Oct 20201 unless otherwise stated

a) GST Rate on Retro fitment kits for vehicles used by the disabled has been reduced from applicable rate to 5%

b) GST Rate on Fortified Rice Kernels for schemes like ICDS etc. has been reduced from 18% to 5%

c) GST Rate on Medicine Keytruda for treatment of cancer has been reduced from 12% to 5%

d) GST Rate on Biodiesel supplied to OMCs for blending with Diesel has been reduced from 12% to 5%

e) GST rate on Ores and concentrates of metals such as iron, copper, aluminum, zinc and few others has been increased from 5% to 12%.

f) GST rates on Specified Renewable Energy Devices and parts has been increased from 5% to 12%

g) GST rates on Cartons, boxes, bags, packing containers of paper etc. has been rationalized to 18% from existing rates of 12% and 18%.

h) GST rates on Waste and scrap of polyurethanes and other plastics has been increased from 5% to 18%.

i) Rates have been rationalized on All kinds of pens from 12% & 18% to 18%.

j) GST Rates on Railway parts, locomotives & other goods in Chapter 86 has been increased from 12% to 18%

h) GST Rates on Miscellaneous goods of paper like cards, catalogue, printed material (Chapter 49 of tariff) has been increased from 12% to 18%.

k) IGST on import of medicines for personal use, has been exempted from the current rate of 12% on Zolgensma
for Spinal Muscular Atrophy, Viltepso for Duchenne Muscular Dystrophy & Other medicines used in treatment of muscular atrophy recommended by Ministry of Health and Family Welfare and Department of Pharmaceuticals.

l) IGST exemption on goods supplied at Indo-Bangladesh Border haats has bee rationalized from existing rates to Nil rate

m) Unintended waste generated during the production of fish meal except for Fish Oil is declared as Nil rated from 1st July 2017 to 30th Sep 2019.

C. Other changes relating to GST rates on goods

1. Supply of mentha oil from unregistered person has been brought under reverse charge. Further, Council has also recommended that exports of Mentha oil should be allowed only against LUT and consequential refund of input tax credit.
2. Brick kilns would be brought under special composition scheme with threshold limit of Rs. 20lakhs, with effect from 1.4.2022. Bricks would attract GST at the rate of 6% without ITC under the scheme. GST rate of 12% with ITC would otherwise apply to bricks.

D. Correction in Inverted Duty structure in Footwear and Textiles sector

GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as was discussed in earlier GST Council Meeting and was deferred for an appropriate time, will be implemented with effect from 01.01.2022.

E. In terms of the recent directions of the Hon’ble High Court of Kerala, the issue of whether specified petroleum products should be brought within the ambit of GST was placed for consideration before the Council. After due deliberation, the Council was of the view that it is not appropriate to do so at this stage.

F. Major GST changes in relation to rates and scope of exemption on Services with effective from 1st Oct 2021 unless otherwise stated

a) Validity of GST exemption on transport of goods by vessel and air from India to outside India is extended upto 30.9.2022.

b) GST rates on Services by way of grant of National Permit to goods carriages on payment of fee has been reduced from 18% Nil Rate

c) GST rates Skill Training for which Government bears 75% or more of the expenditure [ presently exemption applies only if Govt funds 100%]. from current rate of 18% to Nil rate

d) GST rates Services related to AFC Women’s Asia Cup 2022. has been reduced from current rate of 18% to Nil Rate

e) GST rates on Licensing services/ the right to broadcast and show original films, sound recordings, Radio and Television programmes [ to bring parity between distribution and licencing services] has been increased from 12% to 18%.

f) Printing and reproduction services of recorded media where content is supplied by the publisher (to bring it on parity with Colour printing of images from film or digital media) has been increased from 12% to 18%

g) Exemption on leasing of rolling stock by IRFC to Indian Railways withdrawn.

h) E Commerce Operators are being made liable to pay tax on following services provided through them

i) transport of passengers, by any type of motor vehicles through it with effective from 1st Jan 2022.

ii) restaurant services provided through it with some exceptions with effective from 1st Jan 2022

i) Certain relaxations have been made in conditions relating to IGST exemption relating to import of goods on lease, where GST is paid on the lease amount, so as to allow this exemption even if (i) such goods are transferred to a new lessee in India upon expiry or termination of lease; and (ii) the lessor located in SEZ pays GST under forward charge.

G. Clarification in relation to GST rate on Goods

1. Pure henna powder and paste, having no additives, attract 5% GST rate under Chapter 14.
2. Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues, falling under HS code 2303 attract GST at the rate of 5%.
3. All laboratory reagents and other goods falling under heading 3822 attract GST at the rate of12%.
4. Scented sweet supari and flavored and coated illachi falling under heading 2106 attract GST atthe rate of 18%
5. Carbonated Fruit Beverages of Fruit Drink” and “Carbonated Beverages with Fruit Juice”attract GST rate of 28% and Cess of 12%. This is being prescribed specifically in the GST rate schedule.
6. Tamarind seeds fall under heading 1209, and hitherto attracted nil rate irrespective of use. However, henceforth they would attract 5% GST rate effective from 1st Oct 2021 for use other than sowing. Seeds for sowing will continue at nil rate.
7. External batteries sold along with UPS Systems/ Inverter attract GST rate applicable to batteries [ 28% for batteries other than lithium-ion battery] while UPS/inverter would attract18%.
8. GST on specified Renewable Energy Projects can be paid in terms of the 70:30 ratio for good sand services, respectively, during the period from 1st July 2017 to 31st Dec 2018 in the same manner as has been prescribed for the period on or after 1 January 2019.
9. Due to ambiguity in the applicable rate of GST on Fibre Drums, the supplies made at 12%GST in the past have been regularised. Henceforth, a uniform GST rate of 18% would apply to all paper and paper board containers, whether corrugated or non-corrugated.
10. Distinction between fresh and dried fruits and nuts is being clarified for application of GST rate of “nil” and 5%/12% respectively;
11. It is being clarified that all pharmaceutical goods falling under heading 3006 attract GST at the rate of 12% [ not 18%].
12. Essentiality certificate issued by Directorate General of Hydrocarbons on imports would suffice; no need for taking a certificate every time on inter-state stock transfer.

H. Clarification in relation to GST rate on services

1. Coaching services to students provided by coaching institutions and NGOs under the central sector scheme of ‘Scholarships for students with Disabilities” is exempt from GST
2. Services by cloud kitchens/central kitchens are covered under ‘restaurant service’, and attract5% GST [ without ITC].
3. Ice cream parlor sells already manufactured ice- cream. Such supply of ice cream by parlors would attract GST at the rate of 18%.
4. Overloading charges at toll plaza are exempt from GST being akin to toll.
5. The renting of vehicle by State Transport Undertakings and Local Authorities is covered by expression ‘giving on hire’ for the purposes of GST exemption
6. The services by way of grant of mineral exploration and mining rights attracted GST rate of18% with effective from 1st July 2017
7. Admission to amusement parks having rides etc. attracts GST rate of 18%. The GST rate of28% applies only to admission to such facilities that have casinos etc.
8. Alcoholic liquor for human consumption is not food and food products for the purpose of the entry prescribing 5% GST rate on job work services in relation to food and food products.
   

II. On the issue of compensation scenario, a presentation was made to the Council wherein it was brought out that the revenue collections from Compensation Cess in the period beyond June 2022 till April 2026 would be exhausted in repayment of borrowings and debt servicing made to bridge the gap in 2020-21 and 2021-22. In this context various options, as have been recommended by various committees/ forums were presented. The Council deliberated at length on the issue. The Council decided to set up a GoM to examine the issue of correction of inverted duty structure for major sectors; rationalize the rates and review exemptions from the point of view of revenue augmentation, from GST. It was also decided to set up a GoM to discuss ways and means of using technology to further improve compliance including monitoring through improved e-way bill systems, e-invoices, FASTag data and strengthening the institutional mechanism for sharing of intelligence and coordinated enforcement actions by the Centre and the States.

III. Recommendations relating to GST law and procedure

I. Measures for Trade facilitation

1. Relaxation in the requirement of filing FORM GST ITC-04:

Requirement of filing FORM GST ITC-04 under rule 45 (3) of the CGST Rules has been relaxed asunder:
a. Taxpayers whose annual aggregate turnover in preceding financial year is above Rs. 5 crores shall furnish ITC-04 once in six months ;
b. Taxpayers whose annual aggregate turnover in preceding financial year is upto Rs. 5 crores shall furnish ITC-04 annually.

2. In the spirit of earlier Council decision that interest is to be charged only in respect of net cash liability, section 50 (3) of the CGST Act to be amended retrospectively, with effective from 1st July 2017, to provide that interest is to be paid by a taxpayer on “ineligible ITC availed and utilized ” and not on “ineligible ITC availed”. It has also been decided that interest in such cases should be charged on ineligible ITC availed and utilized at 18% with effective from 1st July 2017.

3. Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons
(entities having same PAN but registered in different states) , without going through the refund procedure, subject to certain safeguards.

4. Issuance of the following circulars in order to remove ambiguity and legal disputes on various issues, thus benefiting taxpayers at large:

a. Clarification on scope of “intermediary services

b. Clarification relating to interpretation of the term “merely establishment of distinct person ”in condition (v) of the Section 2 (6) of the IGST Act 2017 for export of services. A person incorporated in India under the Companies Act, 2013 and a person incorporated under the laws of any other country are to be treated as separate legal entities and would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act 2017 for considering a supply of service as export of services;

c. Clarification in respect of certain GST related issues:

1. With effective from 1st jan 2021 , the date of issuance of debit note (and not the date of under lying invoice) shall determine the relevant financial year for the purpose of section 16(4) of CGST Act, 2017;
2. There is no need to carry the physical copy of tax invoice in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the CGST Rules, 2017;
3. Only those goods which are actually subjected to export duty i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction imposed under section 54(3) of CGST Act, 2017 from availment of refund of accumulated ITC.

5. Provision to be incorporated in in CGST Rules, 2017 for removing ambiguity regarding procedure and time limit for filing refund of tax wrongfully paid as specified in section77(1) of the CGST/SGST Act and section 19(1) of the IGST Act.

J. Measures for streamlining compliances in GST

1. Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration.
2. Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in
FORM GSTR-3B.
3. Refund to be disbursed in the bank account, which is linked with same PAN on which registration has been obtained under GST.
4.Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1 , if he has not furnished the return in FORM GSTR-3B for the preceding month.
5.Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in
FORM GSTR-2B

K. GST Council has also recommended amendments in certain provisions of the Act and Rules.

.Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of all stakeholders. The same would be given effect through relevant Circulars/ Notifications/ Law amendments which alone shall have the force of law.

Release ID: 1755925)

Rs 75,000 crore released to States and UTs with Legislature as GST Compensation shortfall

₹ 75,000 crores released to States and UTs with Legislature as GST Compensation shortfall. Almost 50 % of the total shortfall for the entire year released in a single installment

Ministry of Finance has released today ₹75,000 crores to the States and UTs with Legislature under the back-to-back loan facility in lieu of GST Compensation.  This release is in addition to normal GST compensation being released every 2 months out of actual cess collection.

Subsequent to the 43^rd GST Council Meeting held on 28.05.2021, it was decided that the Central Government would borrow ₹1.59 lakh crore and release it to States and UTs with Legislature on a back-to-back basis to meet the resource gap due to the short release of Compensation on account of inadequate amount in the Compensation Fund. This amount is as per the principles adopted for a similar facility in FY 2020-21, where an amount of ₹1.10 lakh crore was released to States under a similar arrangement. This amount of ₹1.59 lakh crore would be over and above the compensation in excess of ₹1 lakh crore(based on cess collection) that is estimated to be released to States/UTs with Legislature during this financial year. The sum total of ₹2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22.

All eligible States and UTs (with Legislature) have agreed to the arrangements of funding of the compensation shortfall under the back-to-back loan facility.  For effective response and management of COVID-19 pandemic and a step-up in capital expenditure all States and UTs have a very important role to play. For assisting the States/UTs in their endeavour, Ministry of Finance has frontloaded the release of assistance under the back-to-back loan facility during FY 2021-22 ₹75, 000 crore (almost 50 % of the total shortfall for the entire year) released today in a single instalment. The balance amount will be released in the second half of 2021-22 in steady instalments.

The release of ₹75,000 crore being made now is funded from borrowings of GoI in 5-year securities, totalling ₹68,500 crore and 2-year securities for ₹6,500 crore issued in the current financial year, at a Weighted Average Yield of 5.60 and 4.25 percent per annum respectively. 

It is expected that this release will help the States/UTs in planning their public expenditure among other things, for improving, health infrastructure and taking up infrastructure projects.

Proposed Levy of GST COIVD Cess in the State of Sikkim

The pandemic has impacted the finances of individuals as well the Governments across the globe. The Governments are resorting to various measures to recover the tax collections. To increase the demand for goods or services across the globe, many countries have reduced their tax rates as it will increase spending power, which means more revenue.

In India, the Government has not reduced the tax rates but has given relief measures to the taxpayers by extending due dates and reducing late fees and interest. The tax rates have been reduced only in the case of goods required for the treatment of COVID. Apart from this, the central bank also increased the Fiscal Responsibility and Budget Management (FRMB) limits so that the State Governments can access more funds and spend.

Pandemic is a natural calamity, and to raise more funds, the Governments are exploring new ways and means. As part of it, the Sikkim state has requested for levy of COVID Cess on the Power Sector and Pharma sector for two years. This Cess is in line with the Kerala Flood Cess levied for two years from 2019. In Kerala, the Cess is applicable on intrastate transactions for B2C supplies, and the taxpayers have to file separate returns. The valuation rules have also been amended to exclude the Kerala Floods cess from the levy of GST wide Notification Number 31/2019 – (Central Tax) dated 28th June 2019.

Basis of the decision taken in the 43rd GST Council Meeting, a Group of Ministers, has been constituted, and they were supposed to submit the recommendations with 15 days. The Group of Ministers constituted are

1. Sh. Basavaraj Bommai Minister for Home Affairs, Karnataka Convener
2. Sh. Manish Sisodia Deputy Chief Minister, Delhi Member
3. Sh. T S Singh Deo Minister for Commercial Taxes, Member
4. Sh. K. N. Balagopal Minister for Finance, Kerala
5. Sh. Niranjan Pujari Minister for Finance, Odisha
6. Sh. B. S. Panth Minister for Tourism & Industries, Member Sikkim
7. Sh. Suresh Kumar Khanna, Minister for Finance, Uttar Pradesh

The Group of Minsters will examine the following

1. One percent of the turnover of the pharmaceutical sector (excluding the unorganized sector) is imposed for the current year and subsequent two years, up to 2022 &23; and
2. Rs. 0.1 per unit of power generated is imposed for the current year and subsequent years, up to 2022-23

If the GoM approves the COVID Cess, we can expect similar measures to be raised by other states. Though the tax rate is very nominal but it requires changes in the following areas

a) IT Systems to capture and collect COVID Cess

b) Accounting Ledgers/Chart of Accounts

c) Return filing systems.

d) various documents being generated like Tax Invoice, Purchase Order, Sales Order etc.,

Moreover, these changes are applicable for a particular state, but there should be flexible to adapt to the localized changes in the era of One Nation One Tax and One Market. Though it is tough not not impossible to adapt to the new requirements in the New Normal.

Government grants further extension in timelines of compliances. Also announces tax exemption for expenditure on Covid treatment and ex-gratia received on death due to Covid

A.           Tax exemption

1. Many taxpayers have received financial help from their employers and well-wishers for meeting their expenses incurred for treatment of Covid-19. In order to ensure that no income tax liability arises on this account, it has been decided to provide income-tax exemption to the amount received by a taxpayer for medical treatment from employer or from any person for treatment of Covid-19 during FY 2019-20 and subsequent years.
2. Unfortunately, certain taxpayers have lost their life due to Covid-19. Employers and well-wishers of such taxpayers had extended financial assistance to their family members so that they could cope with the difficulties arisen due to the sudden loss of the earning member of their family. In order to provide relief to the family members of such taxpayer, it has been decided to provide income-tax exemption to ex-gratia payment received by family members of a person from the employer of such person or from other person on the death of the person on account of Covid-19 during FY 2019-20 and subsequent years. The exemption shall be allowed without any limit for the amount received from the employer and the exemption shall be limited to Rs. 10 lakh in aggregate for the amount received from any other persons.

              Necessary legislative amendments for the above decisions shall be proposed in due course of time.

B.           Extension of Timelines

              In view of the impact of the Covid-19 pandemic, taxpayers are facing inconvenience in meeting certain tax compliances and also in filing response to various notices. In order to ease the compliance burden of taxpayers during this difficult time, reliefs are being provided through Notifications nos. 74/2021 & 75/2021 dated 25^th June, 2021 Circular no. 12/2021 dated 25^th June, 2021. These reliefs are:

1. Objections to Dispute Resolution Panel (DRP) and Assessing Officer under section 144C of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for which the last date of filing under that section is 1^st June, 2021 or thereafter, may be filed within the time provided in that section or by 31^st August, 2021, whichever is later.
2. The Statement of Deduction of Tax for the last quarter of the Financial Year 2020-21, required to be furnished on or before 31^st May, 2021 under Rule 31A of the Income-tax Rules,1962 (hereinafter referred to as “the Rules”), as extended to 30^th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15^th July, 2021.
3. The Certificate of Tax Deducted at Source in Form No.16, required to be furnished to the employee by 15^th June, 2021 under Rule 31 of the Rules, as extended to 15^th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31^st July, 2021.
4. The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64D for the Previous Year 2020-21, required to be furnished on or before 15^th June, 2021 under Rule 12CB of the Rules, as extended to 30^th June, 2021 vide Circular No.9 of 2021, may be furnished on or before 15^th July, 2021.
5. The Statement of Income paid or credited by an investment fund to its unit holder in Form No. 64C for the Previous Year 2020-21, required to be furnished on or before 30^th June, 2021 under Rule 12CB of the Rules, as extended to 15^th July, 2021 vide Circular No.9 of 2021, may be furnished on or before 31^st July, 2021.
6. The application under Section 10(23C), 12AB, 35(1)(ii)/(iia)/(iii) and 80G of the Act in Form No. 10A/ Form No.10AB, for registration/ provisional registration/ intimation/ approval/ provisional approval of Trusts/ Institutions/ Research Associations etc., required to be made on or before 30^th June, 2021, may be made on or before 31^st August, 2021.
7. The compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Act, for which the last date of such compliance falls between 1^st April, 2021 to 29^th September, 2021 (both days inclusive), may be completed on or before 30^th September, 2021.
8. The Quarterly Statement in Form No. 15CC to be furnished by authorized dealer in respect of remittances made for the quarter ending on 30^th June, 2021, required to be furnished on or before 15^th July, 2021 under Rule 37 BB of the Rules, may be furnished on or before 31^st July, 2021.
9. The Equalization Levy Statement in Form No. 1 for the Financial Year 2020-21, which is required to be filed on or before 30^th June, 2021, may be furnished on or before 31^st July, 2021.
10. The Annual Statement required to be furnished under sub-section (5) of section 9A of the Act by the eligible investment fund in Form No. 3CEK for the Financial Year 2020-21, which is required to be filed on or before 29^th June, 2021, may be furnished on or before 31^st July, 2021.
11. Uploading of the declarations received from recipients in Form No. 15G/15H during the quarter ending 30^th June, 2021, which is required to be uploaded on or before 15^th July, 2021, may be uploaded by 31^st August,2021.
12. Exercising of option to withdraw pending application (filed before the erstwhile Income Tax Settlement Commission) under sub-section (1) of Section 245M of the Act in Form No. 34BB, which is required to be exercised on or before 27^th June, 2021, may be exercised on or before 31^st July, 2021.
13. Last date of linkage of Aadhaar with PAN under section 139AA of the Act, which was earlier extended to 30^th June, 2021 is further extended to 30^th September, 2021.
14. Last date of payment of amount under Vivad se Vishwas(without additional amount) which was earlier extended to 30^th June, 2021 is further extended to 31^st August, 2021.
15. Last date of payment of amount under Vivad se Vishwas (with additional amount) has been notified as 31^st October, 2021.
16. Time Limit for passing assessment order which was earlier extended to 30^th June, 2021 is further extended to 30^th September, 2021.
17. Time Limit for passing penalty order which was earlier extended to 30^th June, 2021 is further extended to 30^th September, 2021.
18. Time Limit for processing Equalisation Levy returns which was earlier extended to 30^th June, 2021 is further extended to 30^th September, 2021.

Recommendations of 43rd GST Council meeting

The 43 GST Council met under the Chairmanship of Union Finance & Corporate Affairs Minister
Smt. Nirmala Sitharaman through video conferencing here today. The meeting was also attended
by Union Minister of State for Finance & Corporate Affairs Shri Anurag Thakur besides Finance
Ministers of States & UTs and senior officers of the Ministry of Finance & States/ UTs.
The GST Council has made the following recommendations relating to changes in GST rates on
supply of goods and services and changes related to GST law and procedure:
COVID-19 RELIEF
As a COVID-19 relief measure, a number of specified COVID-19 related goods such as medical
oxygen, oxygen concentrators and other oxygen storage and transportation equipment, certain
diagnostic markers test kits and COVID-19 vaccines, etc., have been recommended for full
exemption from IGST, even if imported on payment basis, for donating to the government or on
recommendation of state authority to any relief agency. This exemption shall be valid upto
31.08.2021. Hitherto, IGST exemption was applicable only when these goods were imported “free of
cost” for free distribution. The same will also be extended till 31.8.2021. It may be mentioned that
these goods are already exempted from Basic Customs duty. Further in view of rising Black Fungus
cases, the above exemption from IGST has been extended to Amphotericin B.
Further relief in individual item of COVID-19 after Group of Ministers (GoM) submits report on 8 June 2021

As regards individual items, it was decided to constitute a Group of Ministers (GoM) to go into the
need for further relief to COVID-19 related individual items immediately. The GOM shall give its
report by 08.06.2021.

OTHER RELIEFS ON GOODS
To support the LympahticFilarisis (an endemic) elimination programme being conducted in
collaboration with WHO, the GST rate on Diethylcarbamazine (DEC) tablets has been
recommended for reduction to 5% (from 12%).
Certain clarifications/clarificatory amendments have been recommended in relation to GST rates.
Major ones are, –
Leviability of IGST on repair value of goods re-imported after repairs
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.

SERVICES
To clarify those services supplied to an educational institution including anganwadi(which provide
pre-school education also), by way of serving of food including mid- day meals under any midday
meals scheme, sponsored by Government is exempt from levy of GST irrespective of funding of
such supplies from government grants or corporate donations.
To clarify these 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, and input services relating thereto are exempt from GST.
To make appropriate changes in the relevant notification for an explicit provision to make it clear that
land owner promoters could utilize credit of GST charged to them by developer promoters in respect
of suchapartments that are subsequently sold by the land promotor and on which GST is paid. The
developer promotor shall be allowed to pay GST relating to such apartments any time before
or at the time of issuance of completion certificate.
To extend the same dispensation as provided to MRO units of aviation sector to MRO units of
ships/vessels so as to provide level playing field to domestic shipping MROs vis a vis foreign MROs
and accordingly, –
GST on MRO services in respect of ships/vessels shall be reduced to 5% (from 18%).
PoS of B2B supply of MRO Services in respect of ships/ vessels would be location of recipient of
service
To clarify that supply of service by way of milling of wheat/paddy into flour (fortified with
minerals etc. by millers or otherwise )/rice to Government/ local authority etc.for distribution of
such flour or rice under PDS is exempt from GST if the 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.
To clarify that GST is payable on annuity payments received as deferred payment for
construction of road. Benefit of the exemption is for such annuities which are paid for the service
by way of access to a road or a bridge.

To clarify those services supplied to a Government Entity by way of construction of a rope-way
attract GST at the rate of 18%.
To clarify that services supplied by Govt. to its undertaking/PSU by way of guaranteeing loans taken
by such entity from banks and financial institutions is exempt from GST.

MEASURES FOR TRADE FACILITATION:

1. Amnesty Scheme to provide relief to taxpayers regarding late fee for pending
   returns:
   To provide relief to the taxpayers, late fee for non-furnishing FORM GSTR-3B for the
   tax periods from July, 2017 to April, 2021 has been reduced / waived as under: –
   i. late fee capped to a maximum of Rs 500/- (Rs. 250/- each for CGST & SGST) per return for
   taxpayers, who did not have any tax liability for the said tax periods;
   ii. late fee capped to a maximum of Rs 1000/- (Rs. 500/- each for CGST & SGST) per return
   for other taxpayers;
   The reduced rate of late fee would apply if GSTR-3B returns for these tax periods are
   furnished between 01.06.2021 to 31.08.2021.

2. Rationalization of late fee imposed under section 47 of the CGST Act:

To reduce burden of late fee on smaller taxpayers, the upper cap of late fee is being
rationalized to align late fee with tax liability/ turnover of the taxpayers, as follows

A. The late fee for delay in furnishing of FORM GSTR-3B and FORM GSTR-1 to be
capped, per return, as below:
(i) For taxpayers having nil tax liability in GSTR-3B or nil outward supplies
in GSTR-1, the late fee to be capped at Rs 500 (Rs 250 CGST + Rs 250 SGST)
(ii) For other taxpayers:
a. For taxpayers having Annual Aggregate Turnover (AATO) in
preceding year upto Rs 1.5 crore, late fee to be capped to a maximum
of Rs 2000 (1000 CGST+1000 SGST);
b. For taxpayers having AATO in preceding year between Rs 1.5 crore
to Rs 5 crore, late fee to be capped to a maximum of Rs 5000 (2500
CGST+2500 SGST);
c. For taxpayers having AATO in preceding year above Rs 5 crores, late
fee to be capped to a maximum of Rs 10000 (5000 CGST+5000
SGST).

B. The late fee for delay in furnishing of FORM GSTR-4 by composition taxpayers to
be capped to Rs 500 (Rs 250 CGST + Rs 250 SGST) per return, if tax liability is nil in
the return, and Rs 2000 (Rs 1000 CGST + Rs 1000 SGST) per return for others.

C. Late fee payable for delayed furnishing of FORM GSTR-7 to be reduced to Rs.50/-
per day (Rs. 25 CGST + Rs 25 SGST) and to be capped to a maximum of Rs 2000/-
(Rs. 1,000 CGST + Rs 1,000 SGST) per return.
All the above proposals to be made applicable for prospective tax periods.

3. COVID-19 related relief measures for taxpayers:

In addition to the relief measures already provided to the taxpayers vide the
notifications issued on 01.05.2021, the following further relaxations are being
provided to the taxpayers:

A. For small taxpayers (aggregate turnover upto Rs. 5 crore)

a. March & April 2021 tax periods:
i. NIL rate of interest for first 15 days from the due date of furnishing the return in FORM
GSTR-3B or filing of PMT-06 Challan, reduced rate of 9% thereafter for further 45 days and
30 days for March,2021 and April, 2021 respectively.
ii. Waiver of late fee for delay in furnishing return in FORM GSTR-3B for the tax periods
March / QE March, 2021 and April 2021 for 60 days and 45 days respectively, from the due
date of furnishing FORM GSTR-3B.
iii. NIL rate of interest for first 15 days from the due date of furnishing the statement in CMP-08
by composition dealers for QE March 2021, and reduced rate of 9% thereafter for further 45
days.

b. For May 2021 tax period:
i. NIL rate of interest for first 15 days from the due date of furnishing the return in FORM
GSTR-3B or filing of PMT-06 Challan, and reduced rate of 9% thereafter for further 15 days.
ii. Waiver of late fee for delay in furnishing returns in FORM GSTR-3B for taxpayers filing
monthly returns for 30 days from the due date of furnishing FORM GSTR-3B

B. For large taxpayers (aggregate turnover more than Rs. 5 crore)

A lower rate of interest @ 9% for first 15 days after the due date of filing return in FORM
GSTR-3B for the tax period May, 2021.
ii. Waiver of late fee for delay in furnishing returns in FORM GSTR-3B for the tax period May,
2021 for 15 days from the due date of furnishing FORM GSTR-3B.

C. Certain other COVID-19 related relaxations to be provided, such as

1. Extension of due date of filing GSTR-1/ IFF for the month of May 2021
   by 15 days.
2. Extension of due date of filing GSTR-4 for FY 2020-21 to 31.07.2021.
3. Extension of due date of filing ITC-04 for QE March 2021 to 30.06.2021.
4. Cumulative application of rule 36(4) for availing ITC for tax periods
   April, May and June, 2021 in the return for the period June, 2021.
5. Allowing filing of returns by companies using Electronic Verification Code
   (EVC), instead of Digital Signature Certificate (DSC) till 31.08.2021.

D. Relaxations under section 168A of the CGST Act: Time limit for completion of
various actions, by any authority or by any person, under the GST Act, which falls
during the period from 15 April, 2021 to 29 June, 2021, to be extended upto 30
June, 2021, subject to some exceptions.
[Wherever the timelines for actions have been extended by the Hon’ble Supreme
Court, the same would apply]

4. Simplification of Annual Return for Financial Year 2020-21:

i. Amendments in section 35 and 44 of CGST Act made through Finance Act, 2021 to be
notified. This would ease the compliance requirement in furnishing reconciliation statement
in FORM GSTR-9C, as taxpayers would be able to self-certify the reconciliation statement,
instead of getting it certified by chartered accountants. This change will apply for Annual
Return for FY 2020-21.
ii. The filing of annual return in FORM GSTR-9 / 9A for FY 2020-21 to be optional for
taxpayers having aggregate annual turnover upto Rs 2 Crore;
iii. The reconciliation statement in FORM GSTR-9C for the FY 2020-21 will be required to be
filed by taxpayers with annual aggregate turnover above Rs 5 Crore.

5. Retrospective amendment in section 50 of the CGST Act with effect from 01.07.2017,
   providing for payment of interest on net cash basis, to be notified at the earliest.

OTHER MEASURES
i. GST Council recommended amendments in certain provisions of the Act so as to make the
present system of GSTR-1/3B return filing as the default return filing system in GST.

Note: The recommendations of the GST Council have been presented in this release in simple
language for information of all stakeholders. The same would be given effect through relevant
Circulars/Notifications which alone shall have the force of la

GIST of Notifications issued on 1st May 2021

GIST of Notifications issued on 1st May 2021

Due to the ongoing second wave of the Covid – 19 pandemic, there are a lot of restrictions imposed on the business and common person to curtail the spread of the virus. As a  part of lockdowns or restrictions, the trade and industry cannot run the business full-fledged and causing a lot of hardships in the filing of returns or meet the compliance requirements. Keeping in view of all these, the Government has provided relaxation under GST in for wavier/part wavier of interest, late fee and extension of due date for filing of returns.

Notification No 8/2021 – Central Tax Dated 1^st May 2021 – Reduction & wavier of Interest for delayed payment of taxes

Interest will not be applicable for the delay in filing of returns for the first 15 days, and from 16^th day to 30^th day, it will be charged at 9%, and after 30 days, the interest rate will be 18%, i.e., the normal rate. The above benefit will be applicable for the following class of persons for the months of April and May 2021

1. Taxpayers having aggregate turnover above ₹ 5 crores during the previous financial year
2. Taxpayers having aggregate turnover up to ₹ 5 crores during the previous financial year and filing GSTR – 1
3. Taxpayers having aggregate turnover up to ₹ 5 crores during the previous financial year and filing returns under QRMP (Quarterly Returns Monthly Payment) Scheme  
4. Taxpayers who are availing of the Composition Scheme benefit

The above notification is a retrospective notification and is effective from 18^th April 2021

Notification No 9/2021 – Central Tax Dated 1^st May 2021 – Relaxation in Late fee

Levy of the late fee has been waived for the taxpayers who are filing GSTR – 3B

1. Late fee has been waived off for the first 15 days for taxpayers having aggregate turnover above ₹ 5 crores during the previous financial year
2. Late fee has been waived off for the first 30 days for taxpayers who are filing GSTR – 3B on a monthly basis and quarterly basis having aggregate turnover up to ₹ 5 crores during the previous financial year

The above notification is a retrospective notification and is effective from 20^th April 2021

Notification No 10/2021 – Central Tax Dated 1^st May 2021

The due date for filing of GSTR – 4 by composition taxpayers has been extended to 31^st May 2021.

The above notification is a retrospective notification and is effective from 30^th April 2021

Notification No 11/2021 – Central Tax Dated 1^st May 2021

The due date for furnishing the declaration in FORM GST ITC-04, in respect of goods dispatched to a job worker or received from a job worker, during the period from 1st January 2021 to 31st March 2021 has been extended from 25th April 2021 to 31st May 2021.

Notification No 12/2021 – Central Tax Dated 1^st May 2021 – Extension in filing due date for filing of GSTR – 1

The due date for filing of GSTR – 1 for the month of April 2021 has been extended to 26^th May 2021.

Notification No 13/2021 – Central Tax Dated 1^st May 2021 – Relaxation in matching

Relaxation in matching for the availing input tax credit for April 2021 has been provided, and the taxpayers have to do matching for the months of April and May together while filing GSTR – 3B for the month of May 2021.

Taxpayers who are filing returns under QRMP Scheme can file IFF (invoice furnishing facility) by 28^th May 2021.

Notification No 14/2021 – Central Tax Dated 1^st May 2021 – Relaxation in compliance proceedings due date

The time limits for the completion of compliance or any action by the tax authorities or any person which are  falling between 15^th April 2021 to 30^th May 2021 has been extended in the following cases

 a) completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, by whatever name called; or

b) filing any appeal, reply, or application or furnishing any report, document, return, statement, or other records, by whatever name is called.

The above extension is not applicable in the following cases

1. Related to Time of Supply
2. If the turnover of the composition taxpayer has crossed the threshold during this period
3. Section 25 – registration procedure
4. Section 27 – procedure-related to casual taxable person and the non-resident taxable person
5. Section 31 – Tax Invoice
6. Section 37 – provisions related to the filing of returns for outward supplies
7. Section 47 – provisions related to levy of late fee
8. Section 50 – provisions related to ley of interest
9. Section 69 – provisions related to power to arrest errant taxpayers
10. Section 90 – provisions related to Liability of partners of firm to pay tax
11. Section 122 – provisions related to penalties for certain offenses
12. Section 129 – provisions related to detention, seizure and release of goods and conveyance under transit
13. Section 39 – except for provisions related to sub-section (3), (4) and (5) related to TDS deductors, ISD and not resident taxpayers
14. Section 68 – provisions related to e-waybill

Provided that where, any time limit for completion of any action, by any authority or by any person, specified in, or prescribed or notified under rule 9 of the Central Goods and Services Tax Rules, 2017, falls during the period from the 1st day of May 2021 to the 31st day of May 2021, and where completion of such action has not been made within such time, then, the time limit for completion of such action, shall be extended up to the 15th day of June 2021;

Five Commandments – GST for Year Closing

We are in the world of New Normal due to the ongoing pandemic globally. Pandemic has resulted in disruptions and business strategy changes based on consumer preferences and budget allocations. The organizations have started the new financial years on 1^st April 2020 in the lockdown period. None of the organizations have prepared or able to scale to the dynamic & ever-changing business environment. Time Never Stops, and History Repeats are the two common phrases we hear in our discussions in business circles. Come whatever may happen, organizations have to close their books of accounts for 31^st March year. Closure of books in time and properly helps the organization mitigate the risks and take timely actions for the coming year to improve the top line and bottom line. What is required for increasing the top line and bottom line is a strategy on how to achieve it, and compliance is one of the strategies meant to achieve the same. As we all know, GST is a Business Reform, not tax reform; changing few business processes in the organization here and there can ensure productivity while safeguarding the organization from hefty penalties and late fees. Following a structured process will ensure to minimize the same and at the same time be in good books of the tax authority and the suppliers. Professionals and taxpayers are required to complete the following before filing the GSTR – 1 and GSTR – 3B for March 2021 by 11^th of April 2021 and 20^th of April 2021 ( for few taxpayers, it will be 22^nd of April or 24^th of April if their turnover is less than ₹ 5 cores based on the state they are located).

1. Reconciliation of Outward Supplies
2. Reconciliation of Inward Supplies
3. Reconciliation of Related Party Transactions
4. Issue of Pending Debit/Credit Notes
5. Reversal of ITC arising out of pandemic

1. Reconciliation of Outward Supplies

A series of reconciliations have to be done while filing the returns for March 2021 if the reconciliations have not been done while filing monthly and quarterly returns.

Verify the following for the correctness of the data in return filing

• Taxable Supplies, Exempted Supplies are reported correctly
• Non-GST supplies are reported correctly
• Supplies to deemed exporters are reported correctly at lower tax rates
• Supplies to notified agencies at a lower rate are reported correctly
• All outward supplies transactions are reported correctly in the Sales Register
• Ensure that e-invoices are issued wherever required if applicable
• Ensure and validate that the GSTINs of the customers are entered correctly and reported
• Ensure and validate that no GST is charged for transactions within the state having the same GSTINs
• Ensure that all the debit and credit notes are issued as per the provisions of GST
• Ensure and verify that all the liability entries are passed in the books of accounts

Complete the following reconciliations before the filing of the March GST Returns

• Reconcile between the GSTR – 1 data and the Sales Register
• Reconcile between GSTR – 1 and GSTR – 3B
• Reconcile between GSTR -3B and Sales Register
• Reconcile the data for the HSN summary being reported in monthly GSTR – 1
• Reconcile e-waybill data with GSTR – 1 data, and if there are any differences, it is worth making a reconciliation statement and preserve it for future references.
• Reconcile the e-invoices reported in the GSTR – 1 with the e-invoices generated
• Reconcile between the Liability Ledgers on GST portal with the

The beginning of the year started with lockdown, and it has resulted in a lot of delays and cancellations of orders. Wherever there is a commercial element missing and open, try to close all such cases by the issue of debit and credit notes. Credit Notes have to be issued before the due date of filing of GSTR returns for the month of September or filing of Annual Return, whichever is earlier.

Section 37 (3), First Proviso

Provided that no rectification of error or omission in respect of the details furnished under sub-section (1) shall be allowed after furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.

If any excess tax is paid for the said period through GSTR – 3B, then the same should be reduced from the GST liability in March 2021, reducing the cash outflows. Also, please maintain a reconciliation statement for the same for future reference.

2.Reconciliation of Inward Supplies

One of the major features and business-friendly measures in GST is the availability of seamless input tax credit. Though it is a piece of soothing music to the business’s ears, it comes with a set of stringent measures like if input tax credit has been availed wrongly or excess amounts or claiming it if the supplier has not filed returns. Given all these, availing of the input tax credit process and claiming correctly becomes crucial for the business. 

One of GST rollout’s major benefits for the trade and industry is the availability of input tax credit seamlessly across the supply chain cycle. Though input tax credit is available, certain restrictions are available, and they are given in Section 16, Section 17(5), and in the corresponding rules.

Section 16(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Before doing the reconciliation, ensure to complete the following tasks

• Update the purchase register for the entire year and ensure all the transactions are updated in it.
• Verify that e-invoices are received from all the suppliers to whom it is applicable; else, it will not be considered a tax invoice and not eligible to claim the input tax credit.
• Verify and ensure that all the original copies of the tax invoice are available
• Verify and ensure that the goods and services are received before availing of the input tax credit
• Verify and ensure that all the credit and debit notes are updated in the system and accounted
• Verify and ensure that if any debit or credit notes are required to be issued by the supplier are issued, filed by the supplier in his returns and also accounted in the books
• Verify and ensure that RCM applicability on inward supplies is identified and accounted for, and paid.
• Verify and ensure that input tax credit is availed only on eligible inward supplies only
• Verify and ensure that input tax utilization entries passed in the books of accounts

Section 17(5)

(b) the following supply of goods or services or both—

• food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
• membership of a club, health and fitness centre; and

(c) works contract services when supplied for construction of an immovable property(other than plant and machinery) except where it is an input service for further supply of works contract service;

(d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and

Apart from ensuring the steps mentioned above are completed and the do the reconciliation

Complete the following reconciliations

• Reconcile between GSTR – 2A / 2B with Purchase Register
• Reconcile between GSTR -2A /2B with GSTR – 3B
• Reconcile between GSTR-3B with Purchase Register
• Reconcile the ITC Ledger on GST portal with the various ledger accounts

Rule 69 – Matching

The following details relating to the claim of input tax credit on inward supplies including imports, provisionally allowed under section 41, shall be matched under section 42 after the due date for furnishing the return in FORM GSTR-3-

• Goods and Services Tax Identification Number of the supplier; 
• Goods and Services Tax Identification Number of the recipient;
• invoice or debit note number;
• invoice or debit note date; and
• tax amount:

3. Reconciliation of Related Party Transactions

In multiple instances, related parties are not accounted for properly, or returns are filed incorrectly. This results in a lot of tax litigation or reversal of input tax credits through discharge of liability. Though there is no loss to the exchequer, it is not as per the law’s provisions, and the taxpayer cannot amend the returns if they have claimed wrongly.

It is recommended to verify all such transactions if there are any related party transactions and rectify the same in the March months returns. This process will ensure no loss of input tax credit, excess payment of taxes, which impacts the organization’s bottom line. This will also eliminate litigation and save time and effort.

The above process is not required if the taxpayers reconcile their data before filing their monthly returns

4. Issue of Pending Debit/Credit Notes

In a going business concern, there will always be issues and challenges in the supply chain. The supply chain challenges could be damages or breakages in transit or delay in shipments or receipt of goods, or receipt of inferior quality or different ones from the ordered—all these results in some price negotiations or others. In GST, only the supplier of goods or services can issue a debit note, and the recipient cannot unilaterally issue a debit note or credit note on the supplier.

As the above case results in price negotiation, there will always be a delay in the process, and as it is the year-end, it is recommended to clear all such pending issues. A rigorous follow-up with the vendors is required, backed by documentation.

Another case could be on account of reconciliation, there could be some suppliers who must have missed filing their returns, or their registrations have been canceled; in all such cases where the supplier has not filed the returns, a credit note should be requested to be issued to compensate the loss of input tax credit. If the supplier does not issue a credit note and the payment is already made, then the taxpayer cannot do anything but reverse the input tax credit with interest at the rate of 24%; payment of interest will be an additional loss to the taxpayers. To avoid such cases, before the payment release, it is recommended to complete the reconciliation process or withhold the tax amount until the supplier files the GST returns. This process will ensure that there is an impact on the bottom line.

Similar could be the case in the case of outward supplies. Also, it is recommended to issue debit or credit notes before the 31^st of March 2021.

Section 34(2) – Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:

Though there is no time limit for the issue of Debit Note but is advised to issue the same as the same will minimize the pending issues, the issue of debit notes brings is additional cash into the system, which has become scarce due to the business disruptions on account of the pandemic.

5.Covid Impact on GST

The pandemic has impacted every business directly or indirectly. The impact is on the sales front, profits front as well on the operations and employee front. As the lockdowns have been announced to curtail the spread of the deadly virus, many manufacturers and service providers have impacted their businesses.

Manufacturers

• If any spoilage/wastage of raw materials or work in progress, the same is being debited to the Profit and loss account simultaneously. If any input tax credit has been availed, the same has to be reversed and observed in the profit and loss account.
• If any goods have been expired due to the lockdown, the same is being written off to the profit and loss account. Similarly, the input tax credit has to be reversed if any availed.
• If the customers have returned the goods and the same could not be used, were scrapped or destroyed for not being used, the input tax credit has to be reversed on such goods.
• If the scrapped goods are sold at a nominal rate, then input tax credit need not be reversed as it is sold as scrap, and GST is paid on it as per one school of thought.
• The pandemic has also resulted in a delay in payments. Identify if the suppliers are paid within 180 days; if not, the input tax credit must be reversed on the amounts due from one hundred and eighty-first day onwards.
• If any return of the goods by the customers or dealers or distributors, issue the credit notes immediately without further delay. It will be a challenge in financial reporting if issued after 1^st April 2021.

Service Providers

If the advance is received from the customers and service is not being provided due to the lockdowns, advance received treatment becomes crucial in GST. The possible scenarios and treatment under GST

1. If the advance is returned in the same month, then no need to account for GST on receipt of the advance. Verify and validate all such advance receipts, and if GST is not paid, please pay interest on it if the invoice is issued in the subsequent months.
2. If the invoice is not issued till 31^st March and service is not provided, validate and verify if GST is paid on the advance receipt along with the interest
3. If an amount is partially returned in the subsequent months and service is not provided, validate and verify if GST is paid on advance receipt if not account it and pay along with interest

• The pandemic has also resulted in a delay in payments. Identify if the suppliers are paid within 180 days. If not, the input tax credit must be reversed on the amounts due from one hundred and eighty-first day onwards.
  • If any credit notes are required to be issued for the delay in service, complete the activity before filing GST Returns for March; else, reconciliation statements have to be prepared to explain to various stakeholders.
  • If any debit notes have to be issued for price variations, the activity must be completed before the GST Returns filing for March 2021; else, reconciliation statements must be prepared to explain to various stakeholders.

The points mentioned above are indicative and may vary from taxpayer to taxpayer. It is also recommended to address the following points before the filing of the March return  

1. Inputs sent on job work if not returned within the stipulated period; tax invoice has to be issued
2. Avail of the input tax credits if any is missed out
3. There is an exemption for reporting input tax credit by classification for the first two years only; the taxpayers must classify and claim input tax credit accordingly. If not done, prepare a reconciliation statement and validate that the same match the input tax credit claimed in GSTR – 3B.
4. Verify If any employee gifts above Rs 50,000 on which tax liability has to be paid
5. Verify if any input tax credit has to be reversed for the goods given without any consideration
6. Verify if any shortages or damage to stock on which input tax credit has been claimed? If any such items are there, reverse the input tax credit
7. Validate the input tax credit reversed on common inputs for taxable and exempted supplies being reversed
8. Verify input tax credit has been reversed on a pro-rata basis on capital goods from one state to another state
9. Verify the financial credit notes and debit notes issued according to the l provisions; else, issue GST Credit / Debit Notes.
10. File all the relevant returns as per applicability and complete the reconciliations
11. Verify if all the customers who have to file GSTR – 7 & 8 have filed their returns and accepted the same, this will save on the cash outflows.

Wherever possible, if any ITC has to be reversed or tax has to be paid, account for it and discharge it through GSTR – 3B.   

Verification of the above tasks is a time-consuming process, and it is recommended to start the process ASAP and ensure that no input tax credit benefit lapses. No removal of difficulties order has been issued for availing input tax credit for an extra period on account of a pandemic-like situation.

During the first three years after the rollout of GST, there was an option for corrections using the GSTR – 9 for liability. The same is being withdrawn based on the Finance Bill 2021, yet to be notified; if this is the case, there is no room left for the taxpayers for rectification. The wrongdoings can be seen only during the audit or scrutiny by the department officers over a period of time. By that time, the penalty amount along with interest also is going to be increased multi-fold. To avoid such challenges, it is highly recommended to follow the above steps before filing the returns for March 2021.

To avoid all the challenges, the return filing data should be captured in the accounting or ERP system accordingly. Wherever possible, automation should be introduced to minimize human efforts and automate the process of data entry and reconciliations. Let’s not forget that GST is a business reform and not tax reform.

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 within a 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 collections for the month of July 2020

₹ 87,422 crore gross GST revenue collected in July

The gross GST revenue collected in the month of July, 2020 is ₹ 87,422 crore of which CGST is ₹ 16,147crore, SGST is ₹ 21,418 crore, IGST is ₹ 42,592 crore (including ₹ 20,324 crore collected on import of goods) and Cess is ₹7,265 crore (including ₹ 807crore collected on import of goods).
The government has settled ₹ 23,320 crore to CGST and ₹ 18,838 crore to SGST from IGST as regular settlement.The total revenue earned by Central Government and the State Governments after regular settlement in the month of July,2020 is ₹ 39,467 crore for CGST and ₹ 40,256 crore for the SGST.
The revenues for the month are 86% of the GST revenues in the same month last year. During the month, the revenues from import of goods were 84%and the revenues from domestic transaction (including import of services) were 96% of the revenues from these sources during the same month last year.
The revenues for the last month were higher than the current month. However, it is important to note that during the previous month, a large number of taxpayers also paid taxes pertaining to February, March and April 2020 on account of the relief provided due to COVID-19. It may also be noted that the taxpayers with turnover less than ₹ 5 core continue to enjoy relaxation in filing of returns till September 2020.
The chart shows trends in monthly gross GST revenues during the current year. The table shows the state-wise figures of GST collected in each State during the month of July 2020 as compared to July, 2019 and for the full year.