43rd GST Council Meeting: Highlights and Latest News Updates

The 43rd GST council meeting was held on 28th May 2021. The GST Council has met after more than six months. The meetings were chaired by Finance Minister Smt. Nirmala Sitharaman, Union Minister of State for Finance and Corporate Affairs Shri Anurag Thakur was also present at the meeting, besides the Finance Ministers of the states and union territories (UTs), and other senior officers of both, the Ministry of Finance and the States and UTs.

Also, the Council decided to conduct a special session to discuss how compensation cess will be collected beyond 2022 to be held in later months.

Highlights of the 43rd GST Council Meet

1. The Council decided to keep the GST rate of 5% as it is on COVID vaccines. Also, the Council ruled out the possibility of notifying COVID related relief materials as zero-rated goods.
2. GST exemption has been provided on import of all COVID relief materials and medicines (including free of cost) till 31st August 2021; Also, the medicine for Black fungus – Amphotericin B is included in the exemption list.
3. A Group of Ministers (GoM) to be formed by 29th May 2021 and submit a report by 8th June 2021 on the need for further reductions and decide on any new rates in exemptions.
4. A GST Amnesty scheme has been announced for small taxpayers who delayed GSTR-3B filing to reduce the late fee. Also, the maximum late fee for small taxpayers is reduced for GST Returns to be filed in future.
5. The due dates for IFF and GSTR-1 filing for May 2021 are extended by 15 days. Also, the due date for GSTR-4 for FY 2020-21 and ITC-04 for Jan-Mar 2021 is extended up to 31st July 2021 and 30th June 2021, respectively.
6. The late fee waiver and interest reduction have been announced for GSTR-3B or PMT-06 filing for March, April and May 2021 and CMP-08 submission for Jan-Mar 2021 for taxpayers.
7. Now, the taxpayers can cumulatively apply CGST Rule 36(4) for April, May and June 2021 while filing GSTR-3B of June 2021.
8. GST Annual Return (GSTR-9) filing is rationalised and continues to be optional for 2020-21 for small taxpayers with turnover up to Rs.2 crore. Also, GSTR-9C (Reconciliation statement) to be still applicable for taxpayers with an annual turnover of equal to or more than Rs.5 crore, allowing self-certification.
9. Companies can continue filing GST returns using EVC instead of digital signature till 31st August 2021.
10. The time limit for completing compliances and taking actions under the GST law which were due between 15th April 2021 to 29th June 2021, stands extended up to 30th June 2021.
11. The Quarterly Return Quarterly Payment (QRQP) scheme to be introduced based on the law committee’s suggestions and modalities worked out.
12. The Council discussed the GST Compensation cess at length, and it is decided to adopt the same formula as last year. The Centre will borrow Rs.1.58 lakh crore to meet the shortfall in GST Cess.
13. The Council did not pick up the GST rate revisions related to the Inverted tax structure for discussion.

GST Return Due date revisions, Late fee and Interest relief

#Category X states: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union Territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands and Lakshadweep.

##Category Y states: Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, the Union Territories of Jammu and Kashmir, Ladakh, Chandigarh and New Delhi.

Expectations from the 43rd GST Council meeting

More relief measures due to the COVID-19 pandemic

The GST Council is expected to consider multiple requests made by the state governments to reduce GST rates on various medical essentials to curb COVID-19, including to treat the patients.

As far as GST on vaccines is concerned, the fitment committee of the GST Council has recommended not to exempt GST on COVID-19 vaccines from the present rate of 5%. The fitment panel has argued that since vaccines were almost entirely procured by the central and state governments and provided free of cost to the public, the GST would eventually accrue to the Centre and states.

However, the fitment committee recommended reducing the GST rate on pulse oximeters, medical-grade oxygen, and oxygen concentrators to 5% from 12% until the end of July 2021. However, the GST rate reduction on COVID-19 testing kits to 5% is recommended till the end of August 2021.

Despite the demands for lowering GST rates on COVID-19 related drugs and medicines, the committee has not recommended as the COVID-19 treatment protocol was being altered based on new learnings.

Coming to the GST on oxygen concentrators, the Delhi High Court recently said that imposing a 12% Integrated GST (IGST) on oxygen concentrators received for personal use or as gifts is “unconstitutional”. The court also quashed Notification No. 30/2021-Customs dated 1st May 2021 issued by the Finance Ministry, stating that a 12% IGST will be levied on oxygen concentrators imported for personal use or gift.

The Council may consider accepting the judgment and extend the benefit considering the enormity of the pandemic situation, a life-saving measure and insignificant revenue loss.

Also, there may be a further extension in the deadlines of various GST compliances due to the extension in the lockdown period in several States till the first week of June 2021.

GST Amnesty Scheme for Small Taxpayers

The Council is likely to announce an amnesty scheme on late fee in GST return filing to provide a huge relief to small taxpayers and MSME’s in the country given the pandemic. The scheme is likely to cover all the pending GSTR-3B returns from July 2017 till April 2021. Also, the validity of this amnesty scheme could be from 1st June 2021 till 31st August 2021.

GST Rate Rationalisation for Certain Items

The Council may discuss bringing down the GST rate on two-wheelers which is currently 28%. It is projected to boost revenues that were impacted by the pandemic. With a rise in rural demand, as evidenced by increased tractor sales, any rate reduction would aid two-wheeler manufacturers in increasing sales through competitive pricing.

The GST Council may also take up the matter of levying GST on natural gas.

Furthermore, sources told IANS that natural gas could be included in a three-tier GST system, with prices varying depending on consumption. As a result, while residential piped natural gas (PNG) may be taxed at a lower rate of 5%, commercial piped natural gas may be taxed at the median rate of 18%, and car fuel CNG may be taxed at the maximum rate of 28%.

Fixing the Issues caused by the Inverted Tax Structure

Inverted tax structure correction is needed, particularly in sectors such as fertiliser, steel utensils, solar panels, tractors, tyres, electrical transformers, pharma, textile, cloth, and railway locomotives.

The term “inverted tax” applies to tax rates on inputs and capital goods that are higher than those on finished goods. This leads to a rise in products’ input credit claims getting blocked, as well as leads to a slew of administrative and regulatory issues.

While the duty on imported tyres is currently 10%, the inputs, such as rubber, are subject to a 20% duty. Solar modules, on the other hand, are duty-free, although their components are taxed at a rate of 5-10%.

Rework compensation shortfall & borrowing needs

Several states had urged Nirmala Sitharaman, the Union Finance Minister, to call a GST Council meeting as soon as possible to rework the compensation shortfall and borrowing requirement.

As economic uncertainty persists, states also want to explore extending the GST compensation question beyond July 2022 in the Council.

Several states have accused the federal government of failing to meet with the GST Council at least once a quarter, as required by the Constitution.