On December 18, 2019, the 38th GST Council Meeting was presided over by Honorable Union Finance Minister Nirmala Sitharaman. The meeting was held amid anticipations of a hike in GST rates and slabs to cover the revenue gap. A broad range of topics were discussed at the meeting, including ways to boost voluntary compliance, broaden the tax base, enhance return filing and tax collection, rationalize rates, etc.
The GST council had a look at the presentation on revenue augmentation given by the committee of State and Center officers before concluding the meeting.
Updates From the Recent GST Council Meetings
|May 28th, 2021
|On the day, the 43rd GST Council meeting took place. The re-introduction of the GST amnesty scheme was approved by the Council. The rationalization of the late fee was also confirmed for the taxpayers, particularly the small ones. An exemption was announced on IGST for relief materials and treatment equipment for COVID-19 import.
|September 1st, 2021
|On the day, the 45th GST Council meeting was held. An extension was announced for the tax exemptions available for COVID-19 essentials. Other agendas of the council were rectification in the structure of inverted tax as well as the issue of GST compensation available to states.
|December 29th, 2021
|On the day, the 46th GST Council meeting was organized in New Delhi. The conference, chaired by Union FM Nirmala Sitharaman, resolved to put off the rise in the GST rate for textiles to 12%.
|June 24th, 2022
|The 47th meeting of the GST Council took place in Chandigarh on June 28 and 29, 2022. In addition to reducing the GST exemption list, Union FM Nirmala Sitharaman, who presided over the meeting, recommended revisions to rates for revenue augmentation and inversion correction. Composition taxpayers and e-commerce suppliers received compliance relief.
Anticipations for the 38th GST Council Meeting
Improved Streamlining of the Future GST Returns System
Discussions took place between the different stakeholders and the finance ministry over the two months. The major agendas of discussion were the practicality and viability of the updated return system. The progress made in developing the updated system on the GSTN portal was also noted by the Ministry. On December 7, 2019, a countrywide survey was conducted to get input on the new GST returns. The latest survey took place on the GST feedback Diwas. A plethora of regulatory challenges, including regular invoice matching and monitoring, were likely to arise subject to the new GST returns.
Taxpayers are enabled to track and timely claim correct ITC by utilizing cutting-edge tools and encrypted filing systems like ClearTax that facilitate vendor communication. For the advantage of taxpayers, it was greatly anticipated that the updated return format and procedure of filing could be more optimized.
Evaluation of States’ GST Compensation
The revenue status is likely to be noted by the GST Council at this meeting. The revenue for the remaining months of the current fiscal year has been declining steadily. Additionally, the main subject on the agenda for this GST Council meeting was the Central Government’s unreasonable delay in paying its states the compensation cess during the previous four months.
Several producing states are proposing an alternate approach to compensation cess, despite the fact that they are suffering from revenue loss. Additionally, a few states, including Chhattisgarh, had appealed to our Honorable Prime Minister requesting an extension of the compensation period from 2021–2022, to 2026–2027.
Discussion of Problems Resulting From Inverted Tax Structure
It is anticipated in the 38th GST Council meeting that the inverted tax structure for a wide range of commodities shall be corrected by the GST Council. Fabric bags, solar panels, steel kitchenware, railroad locomotives, and fertilizers (output tax rates ranging from 5 to 12 percent) are among the items included, with input taxes typically amounting to 18 percent.
Reforming the Card’s GST Tax Rate Slabs
It was predicted that the next meeting would include yet another significant change to the GST rates. It is anticipated that higher rates, particularly ranging from the tax rate of 5% to 9–10% maximum as well as the elimination of the 12% tax rate, will reduce the five-slab structure to three slabs. Furthermore, certain commodities that were zero-rated or exempt can reappear under the tax net.
The last 37th GST Council Meeting was organized on September 20, 2019. The reductions in rates were the main topic of discussion in the preceding GST Council meetings. Given that the GST Council meeting placed a high priority on increases in rates, consumers may ultimately be forced to suffer the effects of these revisions given the extremely high rate of inflation.
Key Agendas From the 38th GST Council Meeting
The 38th GST Council Meeting was quite crucial for multiple sectors of the economy. The key agendas were concerned with improving the existing GST laws and checking for amendments if needed. Check out the below-mentioned major key agendas from the 38th GST Council meeting:
Issues regarding GST on Lotteries
The GST Council discussed multiple issues regarding GST on lotteries to come up with a strong and relevant decision.
Assessment of Revenue
The Committee of Officers’ revenue augmentation deliberations and the GoM’s revenue analysis recommendations.
The GoM’s Real Estate Report
The group of ministers was asked to present a real estate report which was discussed later in the meeting.
Fitment Committee Recommendations
Several matters that the Fitment Committee suggests to the GST Council were taken into account during the meeting.
Law Committee Recommendations
-The Standard Operating Procedure that should be used if returns are not filed.
-The CGST Act, 2017 amendments that are proposed.
Public Grievance Redressal Committee
Establishing a Public Grievance Redressal Committee in accordance with the Delhi High Court’s ruling in the Sales Tax Bar Association case.
Status of GoMs on Key Agendas
The status of the Group of Ministers (GoMs) is established for different items on Key agendas for quick implementation.
Adhering to the Central Government’s Notifications
The Central Government’s notifications, circulars, and orders are deemed ratified by the GST Council.
Decisions of GIC
The GST Implementation Committee (GIC) came up with a few decisions and released them for the Council’s information.
Information Regarding Recommendations made by IT Grievance Redressal Committee
Council information regarding the decisions and recommendations made by the IT Grievance Redressal Committee.
NAA’s Quarterly Report
The NAA’s quarterly report for the GST Council’s information, covering the quarter ending in September 2019.
Updates on the Following Implementation Initiatives:
- GST EWB System – FASTag Integration.
- New Return System.
- Integrated refund system with single-source disbursement.
- Creation of an electronic Invoice Reference Number.
- Integration of Aadhaar with GST registration and suggested modifications to the GST Law and GSTN System.
GST Rate on Textiles
Description of the GST rate on textiles and fabrics falling under Chapters 56 to 59 of the tariff in compliance with the directive of the Hon’ble High Court of Delhi in Writ Petition (Civil) No. 597 of 2019.
Anything Else on the Agenda With the Permission of the Chairperson
Formation of Goods and Service Tax Appellate Tribunals(GSTAT) for states and area benches.
Also Read: What are the GST Rates for Services?
Highlights of the 38th GST Council Meeting
Grievance Redressal Committee (GRC) formation
To handle taxpayer complaints at the Zonal/State level, Grievance Redressal Committees (GRC) have to be commissioned. Officers from the CGST and SGST, as well as trade and industry representatives and other GST stakeholders, will be on the committee.
Extended Deadline for GSTR-9 and GSTR-9C
For the fiscal year 2017–18, the deadline for filing the annual return in GSTR-9 and the reconciliation statement in GSTR-9C has been moved to January 31, 2020. The deadline was previously set for December 31, 2019. With the deadline extended, taxpayers will have more time to utilize the GSTR-9C offline tool, which is anticipated to launch on December 21, 2019.
Waiver of Late Fees on GSTR 1
If the GSTR1 for the tax period from July 2017 to November 2019 is filed by January 10, 2020, the late fee will not be applied. Taxpayers will not be able to generate E-way bills if they fail to file their GSTR-1 for two tax periods.
ITC Claim Limited to Ten Percent
The GST Council has determined that in the event that invoices or debit notes are not recorded in GSTR-2A, a taxpayer’s provisional input tax credit (ITC) will be limited to 10%. The 20% limit was set prior to the GST Council Meeting.
Extension of the Deadline for GST Returns for Some Taxpayers
For some North-Eastern states, the deadline for submitting GST returns for the month of November 2019 has been extended.
Tax officers’ Standard Operating Procedure
The Standard Operating Procedure for tax officers was decided upon by the GST Council. This will facilitate the tax officers’ ability to take appropriate action when GSTR 3B returns are not filed.
During the meeting, the GST Council approved a number of laws and amendments that will be included in Budget 2020.
Changes Made in GST Rates in the Council
|Proposed Rate of Exemption
|With Effect From
|Long-term financial and/or industrial infrastructure leasing
|The exemption was available for the upfront payment made by an entity that owns at least 50% of the federal or state governments.
|The exception will apply to the upfront payment made by a company that owns 20% or more of the federal or state governments.
|1st January 2020 was expected to be the date for commencement of the change
|State-run and State authorized lottery
|12% State-run and 28% State-authorized
|Uniform 28% lottery rate for all states
|The change in rate was to be in effect from 1st March 2020
|Flexible Intermediate Bulk Containers (FIBC), woven and non-woven bags, and sacks made of polyethylene or polypropylene strips utilized as packaging items
|12% was the present GST rate
|18% Proposed GST rate
|1st January 2020 was expected to be the date for the change to be effective
Key Outcomes of the 38th GST Council Meeting
The 38th GST Council meeting held on 18th December 2019 was one of the most important meetings. These are the key outcomes of the 38th GST Council meeting:
- To handle complaints of a specific or general nature from taxpayers at the zonal/state level, Grievance Redressal Committees (GRC) will be established.
- The deadline for filing the reconciliation statement (GSTR 9C) and annual return (GSTR 9) for the fiscal year 2017–18 has been extended to January 31, 2020.
- Form GSTR 1 filings that are delayed from July 2017 to November 2019 are exempt from late fees provided they are submitted by January 10, 2020.
- E-way bills will be blocked for taxpayers who have not filed their Form GSTR 1 for the last two tax periods.
- 10% of the available eligible credit may be used as ITC for invoices or debit notes that the recipient does not have on file in his GSTR 2A.
- The deadline for filing returns for the month of November 2019 will be extended for a few states in the Northeast.
- GST exemption for developers of industrial land provided the government owns 20% or more of the developer’s capital (previously it was 50%). The change was supposed to come into effect from January 1, 2020.
- The state-run and state-authorized lotteries will be subject to a single rate of GST at 28%.
- Weaved and non-woven bags, sacks that have polyethylene or polypropylene strips, and similar items will be subject to an 18% GST rate. The changes were expected to be applicable from January 1, 2020.
The 38th GST Council Meeting was held during a period when the council was under a lot of pressure to increase revenue in the face of a deficit. The council chose not to change the GST rates, though. Raising the GST rate could cause inflation and reduce consumer spending.
For the first time in its 38 meetings, the GST Council chose to forgo its usual consensus-based decision-making process and instead use voting to decide how much lotteries should be taxed. The government decided against raising rates or eliminating exemptions, with the exception of modifying the GST rates on state-run and state-authorized lotteries.
The following could be reliable sources for more information on the 38th GST Council Meeting:
- gstcouncil.gov.in/sites/default/files/Signed Minutes – 38th GST Council Meeting.pdf
- PRESS_RELEASE_38.pdf (gstcouncil.gov.in)