Recently on 14th March 2020, the 39th GST Council meeting was held in New Delhi under the chairmanship of Union finance minister Nirmala Sitharaman and other panel ministers. The GST Council has taken some of the firm decisions based on the requirement of the market. Also, the Infosys which is the main developer of the GSTN portal has required some more time to finally clear all the issues on the IT portal.
Main Purpose of 39th GST Council Meeting
The recommendation of the Fitment Committee for mending the GST rate structure to correct the inverted duty structure on various items like Mobile phones, Footwear, Textiles, and Fertilizers was placed before the GST Council for discussion. Further, consider the issue of standardizing the rate in other items for removing inversion in future meetings with further consultation and examination of the issue. The Council had a detailed discussion on various matters.
Key Highlights of the 39th GST Council Meeting
The Council made the following major decisions or recommendations: –
Measures for Trade Facilitation
- Interest for delay in payment of GST to be charged on the net cash tax liability w.e.f. 01.07.2017 (Law to be amended retrospectively).
- Where registrations have been canceled till 14.03.2020, the application for revocation of cancellation of registration can be filled up to 30.06.2020 (extension of the period of application as a one-time measure to facilitate those who want to conduct business).
Relaxation and extension of due dates
- Relaxation to MSMEs from the furnishing of Reconciliation Statement in FORM GSTR-9C, for the financial year 2018-19, for taxpayers having aggregate turnover below Rs. 5 crores;
- The due date for filing the Annual return and the Reconciliation Statement for the financial year 2018-19 to be extended to 30.06.2020; and
- Late fees not to be levied for delayed filing of the Annual Return and the Reconciliation Statement for the financial year 2017-18 and 2018-19 for taxpayers with aggregate turnover less than Rs. 2 crores.
- The requirement of furnishing FORM GSTR-1 for 2019-20 to be waived for taxpayers who could not opt for availing the option of special composition scheme by filing FORM CMP-02.
- Extension of due dates for FORM GSTR-3B for the month of July 2019 to January 2020 till 24th March 2020 for registered persons having principal place of business in the Union territory of Ladakh. A similar extension is also recommended for FORM GSTR-1 & FORM GSTR-7.
Introduction of a new facility called “Know Your Supplier”
A new facility called ‘Know Your Supplier’ to be introduced so as to enable every registered person to have some basic information about the suppliers with whom they conduct or propose to conduct business.
Change in GST Rates
- GST rates on mobile phones to be increased from 12% to 18%
- GST rate on all types of matches (Handmade and other than Handmade) has been rationalized to 12% (from 5% on Handmade matches and 18% on other matches). This would address the classification issues. This issue was deliberated earlier in the 37th meeting and was pending for decision.
- GST rate on Maintenance, Repair, and Overhaul (MRO) services in respect of aircraft to be reduced from 18% to 5% with full ITC and to change the place of supply for B2B MRO services to the location of recipient.
This change is likely to assist in setting up of MRO services in India. Domestic MRO will also get protection due to 5% tax paid under section 3(7) of the Customs Tariff Act, 1975 on most imported goods (sent abroad for repairs) as this tax is not available as credit.
Note: It is proposed to issue notifications giving effect to these recommendations of the Council on 01st April 2020.
Reacting to the increase in GST rates of mobile phones, Xiaomi India MD Manu Jain tweeted:
He also requested an exemption for phones that cost less than Rs 15,000 ($200):
“Mobile Phones and Handmade matchsticks will become expensive from April 1, 2020”
|S. No||Recommendation||Rate of GST||Effective Date|
|1.||Mobile phone and specified parts (currently taxed at 12%)||18%||1st April 2020|
|2.||All type of Matches (handmade and other matches) – Current rate for handmade is 5% and other matches are 18%||12%||1st April 2020|
|3.||(i) The rate for Maintenance, Repair, and Overhaul (MRO) services for aircraft
(ii) to change the place of supply for B2B MRO services to the location of the recipient.
(iii) Domestic MRO will also get protection due to 5% tax paid under section 3(7) of the Customs Tariff Act, 1975 on most imported goods (sent abroad for repairs) as this tax is not available as credit.
|5% with full ITC
(Current rate 18%)
1st April 2020
Rescheduling of E-invoice and QR Code:
- A certain class of registered persons (insurance company, banking company, financial institution, non-banking financial institution, GTA, passenger transportation service, etc.) to be exempted from issuing e-invoices or capturing dynamic QR code; and
- The dates for implementation of e-invoicing and QR Code to be extended to 01.10.2020.
Deferment of e-wallet Scheme:
- Extension of the time to finalize e-Wallet scheme up to 31.03.2021; and
- Extension of the present exemptions from IGST and Cess on the imports made under the AA/EPCG/EOU schemes up to 31.03.2021.
Other new initiatives:
- Seeking information return from Banks;
- To curb fake invoicing and fraudulent passing of ITC, restrictions to be imposed on the passing of the ITC in case of new GST registrations, before physical verification of premises and Financial KYC of the registered person.
Issuance of Circulars
Issuance of circulars in respect of:
- Clarification in the distribution of ITC in cases of business reorganization
- Appeals during non-constitution of the Appellate Tribunal;
- Clarification on refund related issues; and
- Clarification on the special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, undergoing the corporate insolvency resolution process.
Amendments to the CGST Rules:
Key amendments are as below:
- Procedure for reversal of input tax credit in respect of capital goods partly used for effecting taxable supplies and partly for exempt supplies under rule 43 (1) (c);
- ceiling to be fixed for the value of the export supply for the purpose of calculation of refund on zero-rated supplies;
- to allow for a refund to be sanctioned in both cash and credit in case of excess payment of tax;
- to provide for recovery of refund on the export of goods where export proceeds are not realized within the time prescribed under FEMA; and
- to operationalize Aadhaar authentication for new taxpayers.
Also, Certain amendments to be carried out in the GST laws.
Other Major Decisions
- Continuation of the existing system of furnishing FORM GSTR-1 & FORM GSTR-3B till September 2020;
- A special procedure is being prescribed for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016 and are undergoing the corporate insolvency resolution process, so as to enable them to comply with the provisions of GST Laws during the CIRP period.
- A special procedure for registered persons in Dadra and Nagar Haveli & Daman and Diu during a transition period, consequent to the merger of the UTs w.e.f. 26.01.2020; transition to be completed by 31.05.2020.
- Bunching of refund claims allowed across financial years to facilitate exporters.
Nandan Nilekani asked the GST Council for an increase in manpower and hardware, but it was highlighted that due to the novel coronavirus outbreak, hardware requirements (most of which are fulfilled by China) cannot be done anytime soon. The GST Council agreed to the demand for an increase in manpower and further decisions will be taken in subsequent GST Council meetings. The GST Council, however, asked Infosys to fix the GST system by July 2020.
The approach of the 39th GST Council Meeting to proceed with changes in returns, e-invoicing, etc. on an incremental basis would permit businesses to hold these changes in a standardized manner. The introduction of multiple changes from 1st April, as was proposed earlier, would have put added pressure on businesses, who have been grappling with multiple business and regulatory headwinds. Addressing the media after the meeting, Finance Minister Nirmala Sitharaman also said that a better GSTN system should be ensured by Infosys by July 2020.
Also Read: Detailed Procedure of GST Registration