39th GST Council Meeting – Recommendations of GST council related to changes in GST rates on supply of goods and services

39 GST Council met under the Chairmanship of Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman 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 seniors officers of the Ministry of Finance.
GST Council took following decisions relating to changes in GST rates on supply of goods and services.
1. The recommendation of the Fitment Committee for calibrating the GST rate structure to correct the inverted duty structure on various items like Mobile phones, Footwear, Textiles and Fertilizers was placed before the GST Council for discussion. The Council had a detailed discussion on the matter. Upon discussion the Council made the following recommendations:-
i. To raise the GST rate on Mobile Phones and specified parts presently attracting 12% to 18%.
ii. To deliberate the issue of calibrating the rate in other items for removing inversion in future meetings with further consultation and examination of issue.
2. GST rate on all types of matches (Handmade and other than Handmade) has been rationalised to 12% (from 5% on Handmade matches and 18% on other matches). This would address the classification issues. This issue was deliberated earlier in the 37 meeting and was pending for decision.
3 To reduce GST rate on Maintenance, Repair and Overhaul (MRO) services in respect of
aircraft from 18% to 5% with full ITC and to change the place of supply for B2B MRO services to the location of recipient. This change is likely to assist in setting up of MRO services in India.
Domestic MRO will also get protection due to 5% tax paid under section 3(7) of the Customs Tariff Act, 1975 on most imported goods (sent abroad for repairs) as this tax is not available as credit.
Note: It is proposed to issue notifications giving effect to these recommendations of the Council on 01 April, 2020.
01 April, 2020.

39th GST Council Meeting – Recommendations of GST Council related on IT Roadmap

Posted On: 14 MAR 2020 7:40PM by PIB Delhi
The 39 GST Council met under the Chairmanship of Union Finance & Corporate Affairs Minister Smt Nirmala Sitharaman 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 seniors officers of the Ministry of Finance.
In the GST Council meeting, Shri Nandan Nilekani, on behalf of Infosys, made a presentation addressing the system related issues that are being faced by the taxpayers in the GST system. He first gave the summary of the recently observed IT issues and the way forward to resolve them.
He suggested that in order to smoothen the rollout of the new return system, and to ensure a better uptake of the new return, the transition to the new return system may be made in an incremental manner. He suggested that the process may be initiated by addressing the compliance related issues first so that the problem of tax evasion and gaming of the system due to non-linking of FORM
GSTR-1 and FORM GSTR-3B is addressed immediately. The journey could start with linking of the details of the statement of outward supplies in FORM GSTR-1 to the liability in FORM GSTR-3B. This would be followed by the linking of the input tax credit in FORM GSTR-3B to the details of the supplies reflected in the FORM GSTR-2A. In order to tackle evasion and preventing the gaming of the system, implementation of Aadhaar authentication and spike rules would also be initiated.
He informed the Council that to augment the capacity of the IT system to concurrently handle 3 lakh taxpayers from the present level of 1.5 lakh taxpayers, hardware procurement process has been initiated which is slightly impacted by the Covid-19 pandemic.
The GST Council further made the following suggestions after due discussionsa.
Shri Nandan Nilekani would attend the next 3 meetings of the GST Council and update the council of the status of implementation of the decisions taken by the Council and assist the Council in taking appropriate decisions on technology related issues,
b. To support the timely implementation of various initiatives, the Council gave a go ahead for deployment of additional manpower (60 in number) on T&M basis and assured that both on procurement of additional hardware and hiring of manpower, expeditious approvals would be given however the return filing experience of the taxpayers and removal of technical glitches needs to be carried out urgently.
Shri Nandan Nilekani assured that he would personally monitor the progress of the GSTN project and also agreed to attend the IT-GoM for the next 6 months or till such time the initiatives are implemented. The GST Council expects these initiatives to be implemented by the 31 of July, 2020.
RM/KMN

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

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.

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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FAQ – 9

Can a taxpayer take input tax credit after the due date of September month return or filing of Annual Return?

No, you cannot take credit of the previous fiscal year after the due date of the September month return or filing of annual return whichever basis on the provisions of Sub-Section 4, Section 16 of the CGST Act.

GST ITC Impact on financial year closing

The input tax credit availed in GST is under provisional basis…the reason is matching is not done…….so what are the financial implications? Do i need to state it as contingent item or make  a provision for the same in the financials? – point to ponder before close of financial statement for the FY 2017 – 18?

DEMYSTIFYING ANTI-PROFITEERING IN GOODS AND SERVICE TAX

Anti-profiteering is introduced in the GST Act based on the experience gained at the time of implementation of VAT in India and all other countries where GST / VAT is rolled out. The Government across the nations felt that the until and unless there is a provision in the law the benefits of the new tax regime are not being passed.

The benefit of the ITC is clearly evident in the MRP based goods, the prices are fixed based on the assumption that in the erstwhile tax regime Central Excise Taxes are not eligible for Input Tax Credit but with GST all the taxes are eligible for the ITC across the supply chain cycle, this means that ITC on the taxes can be claimed at all stages of supply. Say for example, Central Excise taxes were not eligible for ITC by the wholesaler or distributor or the end retailer, therefore Central Excise duties were part of the MRP but in GST, all the taxes are eligible for ITC, so the MRP’s have to revisited and reduced accordingly. Recently we have seen a case where one of the major FMCG company has not passed on the rate reduction, the company has paid Rs 119 crores as fine.

It is really a herculean task but not an impossible task to determine the reduction of the cost on account of additional ITC in the supply chain, reduction of taxes and taxes subsumed in GST.  Many of the taxpayers are of the assumption that there is no change in the pricing as they were taking ITC in the erstwhile tax regime and now also, but they have to look beyond then only come to a conclusion. The reduction in the MRP can be used and widely publicized as in the Australian Model where it is required to show the pre-GST and post GST Prices. Though display of dual MRP is not a mandatory feature in GST, the same can be used and shown predominantly on the goods. Adhering to the provisions of the anti-profiteering is also part of the corporate governance.

Let me explain the same with a small illustration practically A Ltd and B Ltd are two manufacturers of a health dink brands H and I.  A decided to reduce the price of the product H and use the Australian Model of dual GST and whereas B Ltd has not reduced the price as it did not consider the same to be required. In the departmental stores both the brands H & I are placed in the same rack. When the customers walk in to buy the health drink, he is attracted to brand H as he says the price is being reduced and also following the compliance even though he is using the brand I for a long time. The loyalty of the customer shifts from the brand I to brand H of company A Ltd.

This is one of the products I have seen in the departmental store for the reduction of the GST, this is how this company is publicizing the price reduction.

GST Rate Cut.jpg

It is a known fact that cost of acquisition the customer is very high and retaining the customer is also high. Here the cost benefit analysis is also not required as it is a statutory obligation and also as part of the corporate governance it has to adhered.

Anti-profiteering as seen is not anti-business but it can be used as a tool to improve the market share and profitability on account of volumes and lesser spend on the marketing costs. This benefit is available only for the corporates who act proactively and the early adopters.

It is known to all that the Director General of Safeguards has issued notices to companies and the investigation is in under process. In today’s dynamic world any negative news on the brand or the company will have an immediate impact on the sales and could also impact the profitability as well as the market capitalization if listed in the exchanges.

As part of the corporate governance and statutory obligations in the GST Act, any reduction in the rates or the availability of the Input Tax Credit has to be passed to the end customer.

The author can be reached for any further clarifications on the same on the mail id mallikarjunagupta@india-gst.in

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 owner 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 Tip – 308

As per section 29 of the CGST Act at the time of cancellation of registration, the taxpayer has to reduce the input tax credit claimed at rate of 5% per quarter on the capital goods, plant, and machinery.