39th GST Council Meeting
39th GST Council Meeting
The 39th GST Council Meeting was conducted on 14th March 2020 under the leadership of the Finance Minister of India. The meeting discussed various issues to be resolved for making the GST structure operating in the country more efficient. In the meeting, decisions were taken relating to the issues of MSME Relief, Inverted Tax Structure, Maintenance Repair and Overhaul (MRO) Services, Trade Facilitation, Know Your Supplier, E-Invoicing and QR Code, Deferment of E-wallet Scheme, and other measures. Also, the problems faced by the IT sector in the current GST regime were highlighted by Mr.Nandan Nilekani, who was invited to present the glitches of GST portal in the meeting.
The decisions taken by the 39th GST Council will be implemented by the Government by officially promulgating the relevant notifications in the Gazette of India. The notifications are expected to be issued on 1st April 2020 (01.04.2020) and the press release of this meet can be accessed below. This article provides a summary of the important decisions taken at the 39th GST Council meeting.
39th-GST-Council-MeetingRelief for MSMEs
The Council has decided on the following relief measures to ensure better ease of doing business for MSMEs:
- As per the CGST Act, MSMEs are required to furnish a GST reconciliation statement in Form GSTR-9C. The Government has proposed to exempt MSMEs having a turnover of less than Rs.5 crores from the obligation to file GSTR-9C. The relief shall be available only for the Financial Year 2018-19.
- The due date for filing GSTR-9 and GSTR-9C will be extended upto 30th June 2020 (30.06.2020).
- For Financial Years 2017-18 and 2018-19, taxpayers having an aggregate turnover of less than Rs.2 crores need not pay any late fees. The relief is available for the filing of the returns GSTR-9 and GSTR-9C.
- For taxpayers who are not eligible to opt for the composition scheme available under Notification No. 2/2019-CT(R)/07.03.2019, the requirement to furnish Form GSTR-1 is waived. Instead, such taxpayers are allowed to file Form CMP-02.
- For taxpayers doing business in Ladakh, the due date for filing Form GSTR-3B, Form GSTR-1 and Form GSTR-7 for the period July 2019 to January 2020 has been extended till 24th March 2020 (24-03-20).
Inverted Duty Structure
An Inverted Duty Structure is a situation in which the GST rate applicable to inputs is greater than the GST rate applicable to outward supplies. Under such a situation, a manufacturer would face difficulty in fully setting off the input taxes paid against the taxes collected on outward supplies. At present, the industries which are engaged in manufacturing mobile phones, footwear, textile and fertilisers are facing the problem of inverted duty structure. To solve this issue, the GST Council has decided on the following measures:
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- The Government has proposed to raise the GST rate on mobile phones and mobile phone component parts from 12% to 18%
- The Government has proposed to introduce a uniform GST rate of 12% for matches. At present, the GST rate for matches is as follows: Handmade matches will attract a GST rate of 5%. On the other hand, machine-manufactured matches will attract a GST rate of 18%
Maintenance Repair and Overhaul (MRO) Services
MRO services form part of the aircraft industry. The GST Council has proposed the following reforms in relation to MRO Services:
- The Government has planned to reduce the GST rate on MRO services from 18% to 5%.
- The Government has proposed to allow taxpayers who are providing MRO services to claim full Input Tax Credit (ITC).
- For B2B MRO services, the Government has proposed to change the place of supply from location of the service provider to location of the service recipient.
- 5% tax should be paid on import of MRO services under Section 3(7) of the Customs Tariff Act, 1975, for service charges paid on imported goods sent abroad for repairs. To protect the domestic business, the Government has proposed that this tax should not be allowed as ITC.
Trade Facilitation
Interest for delay in GST payments will be charged on the net cash tax liability. The relief will be provided retrospectively from 1st July 2017 (01.07.2017). Also, for GST registrations cancelled until 14th March 2020 (14.03.2020), an application for revocation of cancellation can be filed till 30th June 2020 (30.06.2020). This is a one-time relief measure.
Know Your Supplier
A new facility by the name of ‘Know Your Supplier’ is proposed to be introduced in the GST portal. Through the facility, all registered taxpayers will have the option to see basic details about the suppliers with whom they are doing business. Hence, taxpayers can check the financial stability and credibility of their suppliers by using this facility.
Invoicing and QR Code
Insurance companies, banking companies, financial institutions, and non-banking financial institutions are exempt from the requirement to mandatorily issue invoices with QR Code. The specified companies are also exempted from the requirement to mandatorily issue E-invoices. For other assessees, the deadline for mandatory implementation of QR Code and E-invoicing has been extended till 1st October 2020 (01.10.2020).
Deferment of E-wallet Scheme
The time for finalising the E-wallet scheme has been extended till 31st March 2021 (31.03.2021). Further, taxpayers are exempted from payment of IGST and Cess on imports made under the notified schemes. The notified schemes include Export Promotion Capital Goods Schemes and other schemes. The relief shall be available until 31st March 2021 (31.03.2021).
Information Technology (IT) Sector
In the GST Council meeting, Mr.Nandan Nilekani delivered a presentation addressing the issues that are faced by the IT sector in the GST system. Mr.Nilekani made various suggestions, including the linking of Form GSTR-1 and Form GSTR-3B in a timely manner. In order to tackle tax evasion, Mr.Nilekani exhorted the Council to ensure implementation of the GST Aadhaar cross-linking authentication mechanism in a timely manner. The GST Council anticipates these initiatives to be implemented tentatively by 31st July 2020 (31.07.2020).
Other Measures
- A method will be developed for co-relating the information available in the GST portal with the KYC information available in the database of the nationalised banks.
- The Council contemplated measures to prevent the issue of fake invoices and other related malpractices which lead to false claiming of ITC and hence revenue loss for the Government. Hence, restrictions are proposed for transfer of ITC in the case of new GST registrations.
- A special procedure will be developed for registered persons who are deemed to be corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016. The procedure should be followed by all taxpayers who are undergoing the corporate insolvency resolution process.
- A new procedure will be instituted for allowing reversal of input tax credit for capital goods partially used for effecting taxable supplies and partly for exempt supplies.
- A ceiling shall be fixed for determining the value of export supplies so that that refund can be calculated on zero-rated supplies with a greater degree of accuracy.
- In case of excess payment of tax, the Government proposes to allow a refund to be sanctioned both through cash and credit methods. Credit method implies that refund shall be allowed in terms of additionally claimable ITC.
- The Government shall provide for the recovery of refund on the export of goods where export proceeds are not realised within the time prescribed under the Foreign Exchange Management Act
- The Government proposes to speed up the process of Aadhaar authentication for new taxpayers.
The Government has proposed to issue notifications giving effect to the above recommendations of the 39th GST Council Meeting on 1st April 2020 (01.04.2020).
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