Chaired by the Union Finance Minister, Smt. Nirmala Sitharaman, the 39th GST Council meeting took place on March 14th, 2020. Several crucial issues were discussed in the meeting and decisions were made. Mr. Anurag Thakur, Union Minister of State for Finance and Corporate Affairs with Finance Ministers of States and Union Territories, and other senior officers of the Finance Ministry were also part of the Council.
Some serious issues were discussed in the 39th GST Council meeting- the extension of 9C and GSTR 9, modifications in GST rates of some commodities, and “Know your supplier” were a few major decisions that took place in the 39th GST Council meeting.
Expectations from the 39th GST Council Meeting
The 38th GST Council meeting was very crucial for the efficient regulation of GST laws. Considering the 38th GST Council as the base, stakeholders had the following expectations from the 39th GST Council meeting:
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The Decision to Postpone The E-Invoicing System’s Application
The GST Council may decide to postpone the e-invoicing system’s implementation by three months due to the system’s poor preparation. It is stated that rather than the original date of April 1, 2020, it might become effective on July 1, 2020. With more time on its hands, GSTN might also be able to offer better solutions.
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Implementation of New GST Return System
According to the most recent update on March 7, 2020, users of the GST portal are encountering numerous technical issues. Because of these issues, the GSTN has given Infosys two weeks to fix them. The government appears to be trying to stabilize the current system, which expires in March 2020, in order to address the current GST return system sooner rather than later. Additionally, until March 31, 2020, the annual GST return filing facility will be the main focus.
However, the CBIC and tax officers are getting increasingly concerned about the amount of tax evasion and are investigating ways to stop it. This has led to rumors that the new GST return system may be delayed by one or two months.
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Interest paid on overdue GST payments must end
Instead of the gross liability, the interest charge now applies to the net liability, but it does so prospectively. Many small taxpayers and tax professionals are unhappy with the change and have been pleading with the government to make it retroactive since July 2017.
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Lowering the fines for the notices pertaining to FY 2017–18 and FY 2018–19
GST notices have been issued on several occasions for incorrect tax credit claims and non-payment of interest on late GST payments. In certain instances, when distributing the notices, the extended deadlines from earlier periods were overlooked. Given that taxpayers’ experience with the GST was largely unstable during the first two years, granting them relief will lessen the harm.
Therefore, any reduction in penalties or late fees will assist them in getting ready for improved compliance in subsequent periods.
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Changes to the GST rate structure
At the last GST Council meeting, there was conjecture that a significant rate revision would reduce the five-slab structure to three slabs. The rate of 12% tax will be eliminated, and there will be an increase in the rate of 5% tax to a maximum of 9–10%. A revenue augmentation committee has been established by the GST Council to assess potential ways to boost GST collections. Aside from this, some things that were zero-rated or exempt might reappear under the tax net.
The GST Council has started making corrections to the instances of inverted tax structures that are common for specific goods and industries. The GST rate on woven and non-woven bags was raised from 12% to 18% during the 38th GST Council meeting. More products with output tax rates ranging from 5 to 12 percent, including steel utensils, textiles, solar modules, railway locomotives, and mobile phones, are anticipated to experience rate adjustments. However, given the current circumstances, no significant rate changes are expected.
Updates From the 39th GST Council
| 4:20 PM | The rate of GST shall rise from 12% to 18% for mobile phones, enabling complete impact tax credit limits. Domestic service providers offering maintenance, repair, and operations services would also benefit from this. |
| 4:45 PM | The GST Council has the authority to lift the restriction on the Input Tax Credit (ITC) for taxpayers who want to pay output GST at a rate as low as 5%. |
| 5:20 PM | An important announcement was made regarding the deadline for GSTR-9 and 9C for FY 2018-19, being extended from March 31, 2020, to June 30, 2020. The obligatory annual return filing limit was raised from Rs 2 cr to Rs 5 cr. |
| 5:40 P.m. | The GST Council decided to postpone the implementation of the revised GST return system until September 2020 and proceed with GSTR-1, GSTR-2A, and GSTR-3B until then. |
| 5:50 PM | The recommendation on the taxability of brand owners’ surplus revenue on alcohol intended for human use was postponed by the GST Council. |
| 6:15 PM | The GST Council Meeting was concluded and the Union Financial Minister addressed the press. |
| 6:20 PM | Interest for late GST payments would be computed retroactively on net tax liability as of July 1, 2017. |
What were the Key Agendas of the 39th GST Council Meeting
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Update Given by Infosys over GSTN
An update regarding technology involved in GSTN was given by Infosys to serve better.
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Revenue Position Review
The GST council reviewed the revenue position to understand the various related issues.
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Fitment Committee Recommendations
The Fitment Committee recommended issues for the GST Council to take into account. The issues were recommended by the Committee of Officers on Revenue Augmentation.
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Law Committee Recommendations
The Law Committee played a major role in this session of the GST Council, they suggested multiple valuable issues that should be taken care of in the GST Council meeting.
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Taxability of Economic Surplus
Taxability of “economic surplus” obtained by owners of alcoholic beverage brands for human consumption usage.
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Difficulties with CGST rule 41(1)
Difficulties encountered when allocating ITC in corporate reorganization situations under section 18(3) of the CGST Act in conjunction with CGST rule 41(1).
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Interest and Penalty Waiver
Problem with interest and penalty waiver for the prior period because of the removal of pre-import requirements under the scheme of Advance Authorization
Interest charges in accordance with section 50 of the CGST Act, 2017 for late tax payments
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Benefit to Taxpayers
Requests from taxpayers who have benefited from the special composition scheme under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019 to forego filing FORM GSTR-1.
Submission of the GSTR-9C (Reconciliation Statement) and GSTR-9 (Annual Return) forms.
Extension of the deadlines for e-invoicing implementation combined with an exemption from e-invoicing for a specific category of registered individuals.
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Amendments
Changes that have been proposed for the CGST Act of 2017 and the IGST Act of 2017.
Proposal to amend the rule or issue a notification to allow AADHAAR-based authentication in the GST.
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Notification to Association of MFI
Notifying the Association of Mutual Fund of India, Transunion CIBIL Ltd., and NPCI under Section 150(1)(p) and filing the Banking Information Return required by Section 150(1)(e).
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GST Appellate Tribunals
Clarification on appeals concerning the Appellate Tribunal’s institutional structure and framework.
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Regulatory Suggestions
Note for the GST Council’s agenda addressing the maintenance of the current system of submitting GSTR-1 and GSTR-3B forms through September 2020.
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Merging Daman and Diu
Transition Plan with an eye toward the Union Territories of Daman & Diu and Dadra & Nagar Haveli merging.
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Revisions to the CGST Regulations, 2017.
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The “Know Your Supplier” scheme.
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Postponing the e-Wallet initiative and prolonging exporters’ duty exemption.
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Uttar Pradesh GSTAT
Establishing the Uttar Pradesh State and Area Benches of the Goods and Services Tax Appellate Tribunal (GSTAT).
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CFI’s Representation
The Law Committee’s discussions regarding the Construction Federation of India’s representation for the orders of the Hon. High Court of Delhi.
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Quarterly Report by NAA
The NAA’s quarterly report for the GST Council’s information covers the period from October to December 2019.
Highlights of the 39th GST Council Meeting
Key highlights of the 39th GST Council meeting:
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Delay of e-invoicing and the Updated GST Return System
The new GST return system is now scheduled to go into effect on the 1st of October 2020. Moreover, QR codes and e-invoicing have been postponed to get into operations until October 1, 2020.
GSTR-1, GSTR-2A, and GSTR-3B, the current return system, will remain in place until September 2020.
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Modifications in the Rates of GST
- The 12% to 18% rate of GST on mobile phones and certain parts was raised. This decision was made to prevent issues brought on by the inverted structure of duty.
- A single 12% GST charge now shall be applicable to all kinds of matches. Before this, handmade matches were subject to a 5% tax, and the tax for the remaining ones was 18%.
- With full input tax credit, the GST on maintenance, repair, and overhaul (MRO) services for aircraft was brought down from 18% to 5%. The aforementioned rate modifications will take effect on April 1, 2020.
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Interest on Payments
It was decided that the net tax liability would be used to compute the interest for late GST payments. This change will take effect retroactively on July 1st, 2017.
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Extension of 9C and GSTR-9
For FY 2018–19, the GSTR-9 & 9C deadline has been extended to June 30, 2020. It is also planned to raise the necessary yearly return filing threshold from Rs 2 crore to Rs 5 crore. Therefore, taxpayers who have a revenue of less than INR 5 Crores can choose if they wish to file GSTR-9C.
For FY 2017–18 and FY 2018–19, taxpayers with a combined yearly revenue of less than Rs 2 crore will not be assessed a late fee for filing their GSTR-9 forms after the deadline.
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Know Your Supplier
The introduction of the “Know Your Supplier” program aims to provide taxpayers with basic information regarding the suppliers they already trade with or plan to do so in the future.
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Extension in Waiver and Due Dates
Some taxpayers who were unable to file Form CMP-02 and choose the special composition scheme (notice No. 2/2019-Central Tax (Rate), issued March 7, 2019, would not be required to complete the GSTR-1 for 2019–20.
Form GSTR-3B due dates for July 2019 to January 2020 will be postponed for taxpayers having a major place of business in the Union Territory of Ladakh until March 24, 2020. An equivalent amendment is advised for Forms GSTR-1 and GSTR-7 as well.
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Revocation Cancellation Amendments
Taxpayers may submit an application for the revocation of registration cancellation if they have canceled their GST registration before March 14, 2020. The application window will remain open until June 30, 2020. For the benefit of those who wish to carry on with business as usual, the grace period would be a measurement for one time only.
Major Outcomes of the 39th GST Council Meeting
- From July 1, 2017, interest will be assessed on the net cash tax liability for any GST payment delays. (Accordingly, the law will be amended retrospectively).
- In cases where registrations were canceled until March 14, 2020, applications for revocation or cancellation of registration may be submitted until the date of June 30, 2020 (this is a one-time extension of the application period to accommodate business owners).
- Every registered person would be enabled to access the updated feature called “Know Your Supplier,”. It would allow them to have some basic knowledge about the suppliers they currently trade with or plan to do so.
- For taxpayers who were unable to file FORM CMP-02 in order to take advantage of the special composition scheme option under notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, the need to furnish FORM GSTR-1 for 2019–20 will be waived.
- In order to enable registered persons who are corporate debtors under the terms of the Insolvency and Bankruptcy Code, 2016 and are going through the corporate insolvency resolution process to comply with the provisions of GST Laws during the CIRP, a special procedure is being prescribed.
- Extension of the deadline for FORM GSTR-3B for July 2019 to January 2020 through March 24, 2020, for individuals who are registered and whose primary place of business is in the Union territory of Ladakh. It is also advised to extend in a similar way for Forms GSTR-1 and GSTR-7.
- An extension until March 31, 2021, for the completion of the e-wallet scheme. The current exemptions from IGST and Cess on imports made under the AA/EPCG/EOU schemes shall also be extended until the same date.
- The GST Council has decided to postpone the introduction of a new return until September 2020. The current procedure for providing FORM GSTR-1 and FORM GSTR-3B will be followed up until that point.
- Procedure to be amended for the reversal of input tax credit for capital goods used partially for taxable and partially for exempt supplies under rule 43 (1) (c).
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More Information
To learn more about the 39th GST Council meeting you can rely on sources like cbic-gst.gov.in/pdf/press-release/press-release-goods-services.pdf and 39th GST Council Meeting | Goods and Services Tax Council
