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 Goods 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 Pramod Sawant,  Finance Ministers of States & UTs and seniors officers of the Ministry of Finance .

The council   took the following decisions in respect to rates relating to goods.

  1. GST rates reduction, –
  2. 18% to 12% on parts of Slide Fasteners
  3. 18% to 5% on Marine Fuel 0.5% (FO)
  4. 12% to 5% on Wet Grinders(consisting stone as a grinder)
  5. 5% to Nil on:-
  6. Dried tamarind
  7. Plates and cups made up of leaves/ flowers/bark
  8. 3% to 0.25% on cut and polished semi- precious stones
  9. Applicable rate to 5% on specified goods for petroleum operations undertaken under Hydrocarbon Exploration Licensing Policy (HELP)

 

  1. Exemptions from GST/IGST on:-

 

  1. imports of specified defence goods not being manufactured indigenously (upto 2024)
  2. supply of goods and services to FIFA and other specified persons for organizing the Under-17 Women’s Football World Cup in India.
  3.  supply of goods and services to Food and Agriculture Organisation (FAO) for specified projects in India.

 

 

  1. GST rates have been recommended to be increased from, –
  1. 5% to 12% on goods, falling under chapter 86 of tariff like railway wagons, coaches, rolling stock (without refund of accumulated ITC). This is to address the concern of ITC accumulation with suppliers of these goods.
  2. 18% to 28% +12% compensation cess on caffeinated Beverages

 

  1. Measures for Export Promotion
  1. Exemption from GST/IGST:-
  1. at the time of import on Silver/Platinum by specified nominated agencies
  2. supply of Silver/Platinum by specified nominated agency to exporters for exports of Jewellery,
  1. Inclusion of Diamond India Limited (DIL) in the list of nominated agencies eligible for IGST exemption on imports of Gold/ Silver/Platinum so as to supply at Nil GST to Jewellery exporters.
  1. A uniform GST rate of 12% on Polypropylene/Polyethylene Woven and Non- Woven Bags and sacks, whether or not laminated, of a kind used for packing of goods (from present rates of 5%/12%/18%)

 

  1. GST concession in certain cases for specific period: –
  1. Exemption to Fishmeal for the period 01.07.17 to 30.09.19. There were doubts as regards taxability offishmeal in view of the interpretational issues. However, any tax collected for this period shall be required to be deposited.

 

  1. 12% GST duringthe period 1.07.2017 to 31.12.2018, on pulley, wheels and other parts (falling under Heading 8483) and used as parts of agricultural machinery.

 

  1. Passenger vehicles of engine capacity 1500 cc in case of diesel, 1200 cc in case of petroland length not exceeding 4000mm designed for carrying upto 9 persons attract compensation cess of 1% for petrol and 3% for diesel vehicle. Council recommended same compensation cess rate for vehicles having these specifications (length and engine capacity) but designed for carrying more than 10 persons but upto 13 persons. (Presently these vehicles attract compensation cess at the rate of 15%)

 

  1. Other miscellaneous Changes:
  • Aerated drink manufacturers shall be excluded from compositionscheme.
  • Option to pay GST at the rate of 18% on transaction value at the time of disposal of specified goods for petroleum operations (on which concessional GST rate of 5% was paid at the time of original supply) provided that the goods are certified by Director General Hydrocarbon(DGH) as non-serviceable.
  • Restriction on refund of compensation cess on tobacco products (in case of inverted duty structure)
  • Prescribing modalities for allowing concessions on spare parts imported temporarily by foreign airlines for repair of their aircraft, while in India in transit in terms of the Chicago Convention on Civil Aviation.
  • Certain other changes of technical nature for the sake of clarity in application of notification.

 

  1. Clarifications as regards applicability of GST rate in respect of certain goods recommended by GST Council which inter-alia includes: 
      1. Mere heating ofleguminous vegetables (gram/lentil) for removing moisture, or to soften and puff it or removing the skin, and not subjecting to any other processing or addition of any other ingredients (salt, oil etc.) would be classified under HS code 0713.
  1. All “mechanical sprayers” falling under HS Code 8424 would attract 12% GST.
  2. Parts like Solar Evacuation tubes for solar power based devices like solar water heater, solar steam, generation systems, would be eligible to 5% GST rate.
  1. Exclusive parts and accessories suitable for use solely or principally with a medical device (falling under headings 9018, 9019, 9021 or 9022) would fall in respective headings and attract GST at the concessional rate of 12%.
  2. Almond milk is classifiable under HS code 22029990 and attracts GST rate of 18%.
  3. Imported stores for Navy would be entitled to exemption from IGST

The rate changes shall be made effective with effect from 1st October, 2019.

 

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

 

RM/KMN

(Release ID: 1585717)

Input Tax Credit Utilization

Changes have been announced in the input tax credit utilization in the GST and now the taxpayers have to first utilize the input tax credit of IGST and then only utilize the other taxes input for offsetting the various tax liabilities in GST.

These changes are announced in the CGST Amendment Act 2018.

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GST TIP – 448

As per Circular No. 05/2018-Customs, the exporters have to fill the Table 6A of the GSTR – 1
with correct details like the Invoice number, Taxable value, IGST paid, Shipping Bill number,
Shipping Date and Port Code. If the above values are missing or not matching the refund
application will not be processed.

26th Meeting of the GST Council meets & decides Extension of tax exemptions for exporters for six months

Sending a strong positive signal to the exporting community, the GST Council in its 26thmeeting held here today decided to extend the available tax exemptions on imported goods for a further 6 months beyond 31.03.2018. Thus, exporters presently availing various export promotion schemes can now continue to avail such exemptions on their imports upto 01.10.2018, by which time an e-Wallet scheme is expected to be in place to continue the benefits in future.

In a related development which would benefit the exporters, the Council reviewed the progress in grant of refunds to exports of both IGST and Input Tax Credit.  The Council appreciated that the pace of grant of IGST refund has picked up. Thereafter, the Council directed GSTN to expeditiously forward the balance refund claims to the Customs/Central GST/State GST authorities, as the case may be, for their immediate sanction and disbursal.

It may be recalled that in its meeting held on 06.10.2017 the Council had noted that exporters are experiencing difficulties of cash blockage on account of having to upfront pay GST / IGST on the inputs, raw materials etc. / finished goods imported / procured for purposes of exports. An interim solution was found by re-introducing the pre-GST tax exemptions on such imports. Additionally, for merchant exporters a special scheme of payment of GST @ 0.1% on their procured goods was introduced. Also, domestic procurement made under Advance Authorization, EPCG and EOU schemes were recognized as ‘deemed exports’ with flexibility foreither the suppliers or the exporters being able to claim a refund of GST / IGST paid thereon. All these avenues were made available upto 31.03.2018.

The permanent solution agreed to by the Council was to introduce an e-Wallet scheme w.e.f. 01.04.2018. The e-Wallet scheme is basically the creation of electronic e-Wallets, which would be credited with notional or virtual currency by the DGFT. This notional / virtual currency would be used by the exporters to make the payment of GST / IGST on the goods imported / procured by them so their funds are not blocked.

On 16.12.2017, Finance Secretary constituted a Working Group with representatives of Central and State Governments to operationalize the e-Wallet scheme. After reviewing the progress, the Council noted that whereas some preparatory work had been done, more needs to be done to address a large number of technical, legal and administrative issues that have been identified. The Council appreciated that this would require more time. The Council was also unanimous that there should be no disruption that may affect the exports. Accordingly, the Councilagreed to:

(a)        Defer the implementation of the e-Wallet scheme by 6 months i.e., upto 01.10.2018; and

(b)        Extend the present dispensation in terms of exemptions etc. which is available up to 31.03.2018, for a further 6 months i.e., upto 01.10.2018.

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DM/RM/SS

 

(Release ID: 1523716) Visitor Counter : 1621

GST Tip – 382

The final acceptance for the claim of input tax credit in respect of any tax period, for the matched tax invoice, debit note or for IGST paid on imports shall be made available electronically to the registered person making such claim in FORM GST MIS-1 through the common portal.

GST Tip – 368

As per Rule 96A, if any registered person wants to supply goods or services without payment of integrated goods and service tax for export of goods or services, have to furnish Letter of Undertaking or Bond to the FORM GST RFD-11 to the jurisdictional Commissioner.