India: 27th GST Council Meeting On Simplification Of GST Compliance Structure

Last Updated: 9 May 2018
Article by SKP  

The 27th GST council meeting was held via a video conference call on 4 May 2018 with an agenda to simplify compliance structure and incentivize digital payments on retail transactions.

The key updates of the meeting are:

Agenda 1 – New Return Filing Process

The new return filing process would be introduced in three phases:

Phases Particulars
Phase I – First 6 Months
  • Current process of filing GSTR-3B and GSTR-1 will continue for the first six months.
  • Software for the new system to be under development during this phase.
Phase II – Next 6 Months
  • Single-monthly system of filing returns to be introduced for all taxpayers except persons with nil liability and composition dealers who will be able to file quarterly returns.
  • A uni-directional system of uploading details of invoices by the supplier to be implemented on the basis of which the recipient to get credit.
  • For the first six months of the new system, a facility to avail provisional credit by the recipient to be made available.
  • Supplier to continuously upload details of invoices and recipient to follow up with the supplier in case there is any gap in the uploaded details.
  • The recipient to try and reduce mismatch through follow up only. No mechanism in place for the recipient to upload any invoice.
Phase III – After 1 Year
  • The new system of return filing to be fully implemented with no facility of provisional credit. Credit to be available on the basis of details of invoices uploaded by the supplier only.
  • In case tax liability on uploaded invoices is not discharged by the supplier but credit availed by the recipient, then the government would first recover the same from the supplier. However, the government would retain the power to recover the tax from the recipient also.

Agenda 2 – Stake of GSTN

The 51% stake of GSTN which is currently held by non-government institutions, would be now acquired by the government. Stake in GSTN would be then held by the center and state equally.

Agenda 3 – Incentivize Digital Payments

The GST Council discussed to incentivize digital payments by 2%, subject to a cap of INR 100 per voucher. However, a committee has been set up to look into this matter and the final decision has been deferred until the next council meeting.

Agenda 4 – Cess on Sugar

The Group of Ministers will further discuss proposed cess on sugar and the final decision on the same has been deferred until the next council meeting.

Other Key Updates: Judicial Pronouncements

  • The Authority for Advance Ruling (AAR), Delhi, has ruled that the supply of goods made to international outbound passengers, holding international boarding pass, from the retail outlet located in the security hold area of the Indira Gandhi International Airport (which is claimed to be beyond Customs Frontiers of India) cannot be considered export of goods and the same should be subjected to GST. The AAR clarified that as per Section 2(5) of IGST Act, exports of goods takes place only when they are taken out of India and therefore merely on crossing the Customs Frontiers of India would not qualify as exports.
  • The Bombay High Court in a writ petition has provided an extension for filing TRAN-1 till 10 May 2018 for taxpayers who were not able to file TRAN-1 by the earlier due date (30 April 2018) due to IT-related glitches. It has been clarified that extension is available only to those dealers who could not complete the process of TRAN-1 filing either at the stage of original or revised filing due to IT-related glitches and that the taxpayers will be required to provide the necessary proof of their inability to access the portal due to technical glitches.
  • The AAR, Maharashtra has ruled that Krishi Kalyan Cess appearing in the service tax return of input service distributor as on 30 June 2017 and which has been carried forward in the electronic credit ledger maintained by the company under CGST Act, 2017, would not be eligible as input tax credit under GST.

SKP's Comments

The decision of the GST Council on return simplification has found the golden mean during the consultation stage. The government is approaching this cautiously considering that it has allowed provisional input tax credits for six months from the implementation of the new system. Not doing so could have exposed the system to chaos witnessed last year as a result of system glitches, huge mismatches, and endless reconciliations. The initial facility of provisional credits would be welcomed by the industry and it should also give adequate time to test the system before it is implemented entirely.

One area of concern is the intention of the government to go after the recipient in case of default of the supplier in paying tax to the government. Once the liability of the supplier on the uploading of invoices is frozen and the recipient has paid the tax on his purchases to the supplier, then the onus is really on the supplier as the agent of the government to be held liable. The recipient should not be penalized for no fault on his part. It would be interesting to watch how the ultimate aim, which is achieving full automation in return filing process, would pan out after a year considering the past record of the GSTN system.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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