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40th GST Council meeting was held on Friday, 12th June 2020 via video conferencing.

40th GST Council meeting chaired by the Union FM Nirmala Sitharaman and made important announcements on GST return late fee waiver, reduced interest rate further being extended on account of COVID-19 crisis.

The meeting was the first one after COVID-19 brokeout in India and cases are rising at an alarming rate. Further, discussions on GST compensation, inverted tax structure, possibility of rate rationalisation were postponed to the next council meeting. A special meeting will be held in July 2020 only to discuss about GST compensation to states and ways to fund the same.

Latest Updates

41st GST Council meeting will be held on 27th August 2020 via VC with the key item on agenda being the ways to compensate for the GST revenue shortfall to the states.


Highlights of 40th GST Council Meet

Reduction In/Waiver from the Prior Period Late Fee

GST late fee reduction for prior periods 1st July 2017 to 31st January 2020 is as follows:

  1. No late fee for taxpayers with nil tax liability
  2. Maximum late fee is Rs 500 per return for the taxpayers who file their returns between 1st July 2020 and 30th September 2020.

MSME filers: Interest Relief and Late fee waiver for periods February-July 2020

For small taxpayers whose aggregate turnover is up to Rs 5 crore, the rate of interest for late furnishing of GST returns for Feb, Mar and April 2020, beyond 6th July 2020 (as per staggered dates), is being reduced from 18% to 9% p.a, for filing of returns done before 30th September 2020. Note that there is no interest charge if tax for these months is paid before 6th July 2020 or date as applicable based on turnover. Also, for the months May, June and July 2020, the late fee and interest will be waived off, if the returns are filed before 30th September 2020 (staggered dates are yet to be announced).

Time limit extended for revoking cancellations of GST registration

Period for seeking revocation of cancelled GST registrations allowed till 30th September 2020 for all those registrations which were cancelled till 12th June 2020. The timelimit, as per GST Act, was thirty days from the date of issue of the cancellation order.

Discussion on GST Compensation to states and UTs

GST Council is looking at a borrowing option for funding the compensation to states and UTs. The GST collections have been 45% of the usual levels in the past two months. The matter will be taken up in a special one-agenda council meeting, which is going to be scheduled in July 2020.

Correction of the Inverted Tax Structure

FM claimed that there is an issue of excess refund being granted for accumulated ITC due to inverted tax structure. An elaborate discussion happened about the issue pertaining to only the textile industry. However, sectors such as footwear and fertilisers could not be picked up for discussion. Although a unanimity was achieved over the matter, the same has yet been postponed to the future meeting as a decision could not be taken at this point in time.

Rate Rationalisation of some goods Postponed

FM along with the members discussed the rate reduction of certain items as these were brought to the Council’s notice. These include: brick kilns, and pan masala related items. FM has assured of taking up the matter in the next regular GST Council meeting.

News and Updates on 40th GST Council Meet

3.20 pm: GST Council meeting concludes. FM is addressing the press.

2.30 pm: Sources: GST Council approves the following:

  1. A phased reduction in late fees for not furnishing GSTR-3B for tax periods during July 2017 – Jan 2020, provided that the tax payment and return filing should be done between 1st July 2020 and 30th September 2020
  2. Two phases for charging late fee:
    • Phase 1: Taxpayers with Nil tax liability are not required to pay late fees.
    • Phase 2: Taxpayers with tax liability are to be charged a maximum late fee of Rs 500 per return, per month, instead of Rs 10,000 per month, per return.
  3. A compliance relief for small taxpayers with an annual turnover below Rs 5 crore has been deliberated. More details are awaited.

1.05 pm: Council meeting still underway. FinMin officials have confirmed that there is a delay in holding press briefing. Watch out this space for more updates.

12.35 pm: GST Council begins discussion on Revenue Position. Sources say: Measures being mulled to increase revenue collections; revenue shortfall has risen from 12.3% in FY 2018-19 to 22.9% in FY 2019-20. So far in FY 2020-21, only five states have reported a surplus.

12.31 pm: Sources say: A phased reduction in late fees is expected, for MSMEs who have not filed their Form GSTR-3B returns for the period 1st July 2017 to 31st January 2020, provided all dues are paid, and returns are filed between 1st July 2020 and 30th September 2020.

12.27 pm: Sources say: GST return filing due dates will be extended phase-wise for May, June and July for taxpayers with turnover below Rs.5 crore, Council may also consider the reduction of interest from 18% to 9 %.

40th GST Council meet
Credit: Finance Ministry

11.45 am: Union FM Nirmala Sitharaman to hold the press briefing at 12.45 pm. Watch out for this space for more updates.

10.09 am: FM Nirmala Sitharaman will chair today’s GST Council meeting at New Delhi set to begin from 11 am.

Expectations from 40th GST Council Meet

Waiver of Late fee for past GSTR-3B filings

The GST Council has made a press release on 1st June 2020 to re-consider a long-pending request. Several trade communities have in the past appealed to the government to waive off the late fee for a delayed filing of the GSTR-3B returns from August 2017 to January 2020.

But the government is of the opinion that any waiver of late fee for past returns may discourage and be an injustice to those return filers who had filed on time. However, the matter will be tabled for an elaborate discussion this week at the 40th GST Council meeting.

A further Extension to complete pending compliances

Businesses are slowly getting back to normalcy. However, the liquidity and working capital cycle issue need several more months before becoming stable. Businesses will be focussing now on reviving sales and may need to spend funds on discounts, marketing, and shifting to online platforms. Hence, providing further time for making GST payments or an option to pay GST in instalments, especially for small businesses, will be welcomed.

Deliberation on GST Revenue Collection and Distribution

GST collections data for March and April has not been officially released. Yet, sources indicate that during the two-month lockdown, the collections fell to an estimated Rs 35,000 to Rs 40,000 crore per month. There is a drop of about 60-70% in the revenue in comparison to Rs 1 lakh crore per month registered in the earlier months. The government should release this data regularly as GST collections if one of the key economic indicators.

The meeting will be discussing the impact of the pandemic on Centre as well as states’ revenue augmentation and ways to bridge the gap. FM had said at the previous council meeting that the Center should look into the legality of GST Council borrowing from the market to meet the criteria for compensation. With states raising the issue of shortfall in compensation kitty, discussions were held on resorting to market borrowing to meet the government’s revenue guarantee.

There are no possibilities of either increasing the GST rates of non-essential items or charging a COVID-19 calamity cess under GST.

The last GST Council meeting was 39th GST Council meeting held on 14th March 2020.

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