GST Council Meet- Highlights

GST council meeting key highlights, important updates, deadlines and extensions, and major announcements.

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42nd Meet
41st Meet
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39th Meet

42nd GST Council Meeting Highlights:

Date held: October 6, 2020

Chaired by: Union Finance Minister Nirmala Sitharaman

The 42nd Meet was supposed to be focused around the compensation to states and if the Centre and State will reach a consensus. Although there was no consensus, there are a few very important decisions and amendments that have taken place. These include relief to small taxpayers and enhancement of features of return filing.

Key Highlights

  • On the issue of releasing compensation to states:
    • No consensus: Instead, the centre will disburse a sum of INR 20k to states. It is this year’s total collection. By next week, a sum of about INR 25k crore will be disbursed towards IGST of 2017-18.
    • States may borrow more: COVID effected gap will now be calculated at INR 1.10 lakh crore instead of the previously determined INR 97k crore.
    • Extension of compensation cess levy: The GST was introduced in July 2017. States were promised a 14% incremental revenue over the last tax receipts in the first 5 years of GST rollout. This was to be done through a levy of cess or surcharge on luxury and sin goods. The collections have fallen short owing to the slowdown in the economy since the last Financial Year. To make up for this, the Centre will now borrow against future compensation receipts. The Council will extend the compensation cess levy beyond 5 years i.e. beyond 2022.
    • Surcharge on luxury goods like cars and tobacco products varies from 12% to 200% on top of the highest GST rate of 28%. It is now due to expire in 2022.
    • The cess collected beyond 5 years will pay the amount beyond INR 1.10 lakh crore.
    • The cess that will be collected beyond 5 years will have a first charge on interest. The next charge will be 50% towards the principal amount and the remaining 50% will be given to states (COVID affected compensation).
  • HSN Code mandatory from 1st April: Taxpayers with annual turnover more than 5 cr will have to provide HSN code up to 6 digits and small taxpayers will have to provide HSN code up to 4 digits from April 1.
  • Relief to small taxpayers: Taxpayers with an annual turnover of less than 5cr will not be required to file returns (GSTR-3B and GSTR-1). They will only file quarterly returns. Also, this will come into effect from 1st January 2021.
    • It was emphasized that the number of returns of small taxpayers will be reduced from 24 to 8.
    • Small taxpayers can pay about 35 percent taxes of the previous quarter and make the final payment in the last month of the quarter.
    • PAN/Aadhar mandatory: Refunds will be transferred only in those bank accounts which are pan, Aadhar verified.
  • To encourage the domestic launching of satellites particularly by young start-ups, satellite launch services by ISRO and Antrix at 18% GST will be exempt.
  • Enhancement of features of return filing: In its 39th Meeting held in March 2020, the Council had recommended an incremental approach to incorporate features of the new return system in the present familiar GSTR-1/3B scheme. Various enhancements have since been made available on the GST Common Portal. To further enhance Ease of Doing Business and improve the compliance experience, the Council has approved the future roadmap for return filing under GST. The approved framework aims to simplify return filing and further reduce the taxpayer’s compliance burden in this regard significantly, such that the timely furnishing of details of outward supplies (GSTR-1) by a taxpayer and his suppliers would –(i) allow him to view the ITC available in his electronic credit ledger from all sources i.e. domestic supplies, imports, and payments on reverse charge, etc. before the due date for payment of tax, and (ii) enable the system to auto-populate return (GSTR-3B)through the data filed by the taxpayer and all his suppliers. In other words, the timely filing of the GSTR-1 statement alone would be sufficient as the return in FORM GSTR-3B would get auto prepared on the common portal. To this end the Council recommended/decided the following:
    • Due date of furnishing quarterly GSTR-1 by quarterly taxpayers to be revised to 13th of the month succeeding the quarterw.e.f. 01.1.2021.
    • Roadmap for auto-generation of GSTR-3B from GSTR-1s
      • Auto-population of liability from own GSTR-1 w.e.f. 01.01.2021; and
      • Auto-population of the input tax credit from suppliers’ GSTR-1s through the newly developed facility in FORM GSTR-2B for monthly filers w.e.f. 01.01.2021 and for quarterly filers w.e.f. 01.04.2021
      • To ensure the auto-population of ITC and liability in GSTR 3B as detailed above, FORM GSTR 1would be mandatorily required to be filed before FORM GSTR3B w.e.f. 01.04.2021.
      • The present GSTR-1/3B return filing system to be extended till 31.03.2021 and the GST laws to be amended to make the GSTR-1/3B return filing system as the default return filing system.
  • Amendment to CGST rule: Various amendments in the CGST Rules and FORMS have been recommended (including the furnishing of Nil FORM CMP-08 through SMS)

41st GST Council Meeting Highlights:

Date held: August 27, 2020

Chaired by: Union Finance Minister Nirmala Sitharaman

The Key Highlight:

The 41st Council Meet was all about providing compensation to states to bridge the revenue-expenditure gap due to the GST shortfall. The states were guaranteed payment for any loss of revenue in the first five years of GST implementation from 1st July 2017. The shortfall is calculated assuming a 14% annual growth in GST collections by states. The base year taken is 2015-16.

The Revenue Secretary mentioned that the GST shortfall in FY 21 stands at INR 2.35 lakh crore – out of which only INR 97k crore is due to GST implementation and the rest is due to the pandemic. The center is now bound to compensate. Attorney-General said that GST Compensation has to be paid for a transition period – from July 2017 to June 2022. And states with an annual growth rate of less than 14% will be compensated for the shortfall until 2022. The states have been given 2 options:

Option 1:  The center will facilitate states through RBI in getting loans – which is INR 97K crore. This amount can be repaid after 5 years on the collection of cess. The states will have to pay a reasonable rate of interest. This boils down to borrow less and get cess later. 

Option 2: The states can borrow The entire INR 2.35 lakh crore directly from the RBI. This, in turn, boils down to borrow more and pay for it using the cess collected in the transition period.

Along with this, the center will provide relaxation of 0.5% in states’ borrowings under the FRBM Act. This will be eligible for a sum of INR 2.03 lakh crore. The above arrangements remain valid only for the current Financial Year 2020-21. A new Council meet will reevaluate the situation in April 2021. 

The states have asked for a 7-day window to think about the options.

40th GST Council Meeting Highlights:

Date held: June 12, 2020

Chaired by: Union Finance Minister Nirmala Sitharaman

The 40th GST Council meet was the first to be held after the COVID-19 breakout in India. A lot of discussions like GST compensation, inverted tax structure and rate rationalization were postponed to the next council meeting.

Key highlights:

1. Reduction in late fee for past returns:

  • The late fees on pending GST returns from July 2017 to January 2020 has been waived off for taxpayers with nil tax liability.
  • A maximum late fee of INR 500 for taxpayers who will file their pending GSTR-3B  returns between July 1, 2020 and September 30, 2020.

2. Small taxpayers / MSME filers:

  • For Feb to April 2020 tax periods – In case of business with an aggregate turnover of up to INR 5 crore. If the tax is paid on or before 6th July 2020 (as per staggered dates), no interest would be charged. If the tax is paid after 6th July 2020 (as per staggered dates), the rate of interest for late furnishing of returns has been reduced from 18% to 9% p.a. The only condition is that the returns for such tax periods should be filed on or before 30th September 2020.
  • For May to July 2020 tax periods- The late fee and interest will be waived off if the returns are filed before September 30, 2020. (staggered dates are yet to be announced)

3. One-time extension for revoking cancellations of GST registration-

The period for seeking revocation has been extended till September 30, 2020. This is applicable for all registrations which were cancelled till June 12, 2020. This will come as a relief for taxpayers who could not get their GST registrations restored on time. The original time limit is only 30 days from the date of issue of cancellation order

4. A special one-agenda meeting

The council members have set a special one-agenda meeting in July 2020. The purpose is to discuss the GST compensation to states and Union Territories and its subsequent funding. The GST collections have been 45% of the usual levels in the past 2 months.

39th GST Council Meeting Highlights:

Date held: March 14, 2020

Chaired by: Union Finance Minister Nirmala Sitharaman

Infosys Chairman, Mr. Nandan Nilekani to present progress updates about GST It systems at the next three GST Council Meetings. The 39th GST Council meet took an array of decisions. Let’s take a look at it.

Key highlights:

1. Deferment of the new GST return system and e-invoicing

  • March 31, 2021- the time limit to finalize the e-wallet system (for exporters) 
  • October 1, 2020- the time limit for implementing e-invoicing and the QR code

The present return system of filing GSTR-3B and GSTR-1 will be continued until September 2020.

2. Important changes to GST rates:

The following changes will take effect from April 1, 2020.

  • Mobile phones and specified parts- GST rate was increased from 12% to 18% to correct inverted duty structure on mobile phones.
  • Matches- GST rate has been rationalized at 12%. Prior to this, the handmade ones were taxed at 5% and the rest at 18%.
  • Maintenance, Repair and Overhaul (MRO) services in respect of aircraft- GST rate has been slashed from 18% to 5% with full ITC (Input Tax Credit). 

3. Interest on delayed payment:

The interest for delayed GST payment shall be calculated on the net tax liability. This will be given retrospective effect from July 1, 2017.

4. GSTR-9 and GSTR-9C:

  • The deadline has been pushed to June 30, 2020 for F.Y. 2018-19. Also, the turnover. 
  • MSME taxpayers having turnover less than INR 5 crore- It is optional for them to file Form GSTR-9C for F.Y. 2018-19.
  • Taxpayers with an aggregate annual turnover of less than INR 2 crore in F.Y. 2017-18 and F.Y. 2018-19 will not pay any late fee for delayed filing of GSTR-9.

5. Waiver and extension of due dates:

  • GSTR-1 for 2019-20- will be waived for taxpayers who could not opt for the special composition scheme by filing Form CMP-02. (notification No. 2/2019-Central Tax (Rate) dated 7th March 2019)
  • GSTR-3B for July 2019 to January 2020- The due date to file the return has been extended till March 24, 2020 for taxpayers with principal place of business in the Union Territory of Ladakh. Also, a similar extension is recommended for Form GSTR-1 and Form GSTR-7.

6. Know Your Supplier:

A new facility called “Know Your Supplier” was introduced. This will enable the registered taxpayer to have necessary information about the suppliers with whom they conduct or intend to do business.

7. Revocation of cancellation:

The period for seeking revocation has been extended till June 30, 2020. This is applicable for all registrations which were cancelled till March 14, 2020. The extension is a one-time measurement that will come as a relief for taxpayers who could not get their GST registrations restored on time.

8. Other highlights:

  • A transition plan has been laid down till May 31, 2020 for the taxpayers belonging to Dadra and Nagar Haveli & Daman and Diu. This is due to the merger in January 2020. 
  • Refund claims to be processed in bulk for exporters.
  • Present IGST and cess exemptions on the imports made under the AA/EPCG/EOU schemes will continue up to 31st March 2021.

Got Questions? Ask Away!

  1. Hey @HarshitShah

    Goods/sectors that are out of the GST ambit include alcohol and specified petroleum products like petroleum crude, high-speed diesel, motor spirit, aviation turbine fuel and natural gas. Alcohol for human consumption continues to attract state excise duty and VAT. Tobacco and tobacco-based products attract both excise duty and GST. Taxes such as stamp duty, toll tax, road tax, electricity duty etc. are not part of GST.

    Hope this helps!

  2. Hey @HarishMehta

    Customs duty and cess as applicable along with IGST+ GST compensation cess. IGST and GST compensation cess shall be paid after adding all customs duty and customs cess to the value of imports.

    Hope this helps!

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