The 39th GST Council meeting happened on Saturday, 14th March 2020 at New Delhi. The Union FM Nirmala Sitharaman chaired this meeting and took decisions on certain crucial issues under GST.
The article covers the following:
Highlights of the 39th GST Council Meeting
1. Deferment of the new GST return system and e-invoicing
The implementation of the new GST return system has been postponed to 1st October 2020. Also, the implementation of e-invoicing and the QR code has been deferred to 1st October 2020.
The present return system (GSTR-1, GSTR-2A & GSTR-3B) will be continued until September 2020.
2. Changes in the GST rates
- GST on mobile phones and specified parts was increased from 12% to 18%. This decision was taken to avoid difficulties due to the inverted duty structure.
- All types of matches have been rationalised to a single GST rate of 12%. Till now, the handmade ones were taxed at 5% and the rest was taxed at 18%.
- GST on Maintenance, Repair and Overhaul (MRO) service in respect to aircraft was reduced from 18% to 5% with full ITC.
- All these rate changes will come into effect from 01 April 2020.
3. Interest on delayed payments
Now, the interest for delayed GST payment will be calculated on the net tax liability. This amendment will apply retrospectively from 1st July 2017.
4. Extension of GSTR-9 and 9C
The GSTR-9 & 9C deadline is extended to 30 June 2020 for FY 2018-19. Also, the turnover limit will be increased from Rs 2 crore to Rs 5 crore for mandatory annual return filing. Hence, filing GSTR-9C is optional for the taxpayers having the turnover less than Rs 5 crore.
The taxpayers with an aggregate annual turnover of less than Rs 2 crore in FY 2017-18 and FY 2018-19 will not pay any late fee for delayed filing of GSTR-9.
5. Know your supplier
A new scheme called ‘Know your Supplier’ has been introduced so that the taxpayers are informed about the basic details of the suppliers with whom they transact or propose to conduct business.
6. Waiver and extension of due dates
The GSTR-1 for 2019-20 will be waived for certain taxpayers who could not opt for the special composition scheme (notification No. 2/2019-Central Tax (Rate) dated 7th March 2019) by filing Form CMP-02.
The due date of Form GSTR-3B for July 2019 to January 2020 is extended till 24th March 2020 for taxpayers with a principal place of business in the Union Territory of Ladakh. Also, a similar extension is recommended for Form GSTR-1 and Form GSTR-7.
7. Amendment to revocation of cancellation
Taxpayers who have cancelled their GST registration till 14th March 2020 can file an application for revocation of cancellation of registration. The window to fill this application is available till 30th June 2020. The extension is a one-time measurement to facilitate those who want to continue conducting the business.
8. Other decisions
- Infosys Chairman, Mr Nandan Nilekani to present progress updates about the GST IT systems at the next three GST Council meetings.
- The time limit for finalisation of the e-Wallet scheme for consumers is extended till 31st March 2021.
- A special GST procedure was prescribed during the CIRP period for the GST registered corporates who are undergoing insolvency/resolution procedure under IBC Code, 2016.
- A transition plan is laid down till 31st May 2020 for the taxpayers belonging to Dadra and Nagar Haveli & Daman and Diu, due to the merger in January 2020.
- Refund claims will now be processed in bulk for the benefit of the exporters.
- Present IGST and cess exemptions on the imports made under the AA/EPCG/EOU schemes will continue up to 31st March 2021.
LIVE Updates and News as on 14th March 2020
Important change on GSTR-1:
The GST Council decided to stagger the GSTR-1 filing for taxpayers with:
- Turnover more than Rs 1.5 cr -to file before 10th of the following month
- Turnover up to Rs 1.5 cr -to file before 13th of the following month
The GSTR-2A can be generated on 14th of following month
6.20 p.m: Interest for delayed GST payment to be calculated on net tax liability from 1st July 2017 (retrospectively)
6.15 p.m GST meeting concludes; Union FM speaks at the Press Meet
5.50 p.m The GST Council defers the proposal on the taxability of economic surplus of brand owners of alcohol for human consumption
5.40 p.m The GST Council will continue with GSTR-1, GSTR-2A and GSTR-3B till September 2020 and defer the new GST return system till such time
5.20 p.m Important announcement: GSTR-9 and 9C due date pushed to 30th June 2020 for FY 2018-19 from 31 March 2020; Increases the turnover limit from Rs 2 cr to Rs 5 cr for the mandatory annual return filing
4.45 p.m: The GST Council may remove the blocking of the Input Tax Credit (ITC) for the taxpayers who opt for lower rate of 5% as output GST
4.20 p.m: The GST rate on mobile phones will be increased from 12% to 18% allowing a full claim of input tax credit; Relief given to domestic service providers of maintenance, repair and operations. More details awaited
4.00 p.m: GST rate rationalisation postponed to the next meeting to be held in April 2020, details of which are awaited
3.45 p.m: GST Council to announce the e-way bill-FASTag integration to be applicable from April 2020
2.15 p.m: Major move on the New GST return system:
1.30 p.m: Union FM likely to defer the issue of the states’ compensation to the next meeting in April 2020; Reassures states for the payment of full compensation cess dues
12.30 p.m: Infosys asks for a year’s time to build smooth functioning GST’s IT systems by January 2021; Infosys Chairman Nandan Nilekani to be part of next three GST Council meetings
12.15 p.m: Shri Sushil Kumar Modi made a presentation on the current IT challenges faced by the taxpayers
11.20 a.m: Meeting is underway, as Union FM Nirmala Sitharaman chairs the meeting in the presence of State FMs:
11.15 a.m: The 39th GST Council Meeting begins
Expectations of 39th GST Council Meeting
1) A decision to defer the applicability of the e-invoicing system
The preparation of e-invoicing
seems sub-par, and the GST Council may consider extending the date of implementing the e-invoicing system by three months. It is said that it may be made applicable from 1st July 2020 as against the earlier date of 1st April 2020. With more time at its hands, GSTN may be able to provide improved solutions as well.
2) Rolling out the new GST return system in April 2020
As per the latest development on 7th March 2020, taxpayers are facing many technical difficulties on the GST portal. These have led the GSTN to give Infosys a fortnight to fix them. Given that the government wants to fix the present GST return system sooner, it seems to be looking to stabilise the present system ending in March 2020.
Moreover, the annual GST returns filing facility will be on focus till 31st March 2020. On the other hand, the CBIC and tax officers are increasingly concerned about the number of tax evasions and are looking into the means for its prevention. All these have led to the speculations that the new GST return
system might be pushed further by a month or two.
3) The anomaly of the interest charged on delayed GST payment to see an end
The applicability of interest charge is now on the net liability, as opposed to gross liability, but applies prospectively. Many tax professionals and small taxpayers are dissatisfied with the move, requesting the government to make this a retrospective change since July 2017.
4) Relaxing the penal consequences for the notices related to FY 2017-18 and FY 2018-19
There have been multiple instances where the GST notices
have been sent out for wrongful tax credit claims and non-payment of interest on delayed GST payment. In some cases, the extended due dates in the previous periods have not been considered while sending out the notices. Considering that the first two years of GST was mostly not stable for taxpayers, giving them relaxations will help them bear less damage. Hence, any penalty or late fees reduction will help them prepare for better compliance in future periods.
5) GST rate structure change and rate hikes speculated
It was speculated in the previous GST Council meeting that the five slab structure would be brought down to three slabs by carrying out a major rate rejig. The 5% tax rate will be hiked up to a maximum of 9-10%, and the 12% tax rate will be removed.
The GST Council has set up a revenue augmentation committee to look into the possible solutions for increasing the GST collections. In addition to these, certain items that were exempted or nil rated may make a comeback under the tax net.
The GST Council has begun correcting the cases of inverted tax structure prevalent for certain items and sectors. In the 38th GST Council meeting, GST on woven and non-woven bags was increased from 12% to 18%. More items such as mobiles, textiles, solar modules, railway locomotives, fertilisers, steel utensils (whose output tax rate ranges between 5-12%) are expected to undergo the rate corrections. However, no major rate changes can be expected in the current scenario.
6) Miscellaneous expected
States will be pushing the centre to resolve the compensation matter, who are most likely to demand full compensation for the fiscal year. Hence, long deliberations are expected in the room. The GST Council
will also be discussing the measures to strengthen and build a strong GST system against tax evasions.
The previous GST Council meeting
was concluded on 18th December 2019 where an important decision was made to defer GSTR-9 and 9C for the first two years of GST. All eyes are on this GST Council meeting as addressing the taxpayers’ woes tops the agenda.