India: Decisions Taken In The 28th GST Council Meeting

Last Updated: 26 July 2018
Article by SKP  

Union Finance Minister Piyush Goyal chaired the 28th GST Council meeting held on 21 July 2018 in New Delhi. The meeting discussed a plethora of issues such as simplification of return filing procedure, recommending amendments, rationalization of GST rates, etc. Some of the critical decisions taken have been summarized below:

Simplification of return filing procedure

The GST Council (the Council) in its previous meeting held on 4 May 2018 had given in-principle approval to introduce a simplified return filing procedure. Now, the Council has approved the format and business process of the simplified return filing procedure. The format of the returns has not been released in the public domain. However, the Council vide a press release has revealed the salient features of the same:

  • Return based on 'Upload - Lock - Pay.' The return system would be as follows:

    • New return to contain two main tables - One for reporting outward supplies and one for availing Input Tax Credit (ITC).
    • ITC would be based on invoice uploaded by the supplier.
    • Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer.
  • Optional facility of filing quarterly returns in forms 'Sahaj' (only B2C supply) and 'Sugam' (B2C + B2B supply) for small taxpayers having turnover below INR 50 million.
  • The Council is yet to notify a date for implementation of this simplified return filing procedure.

Recommendation of proposed amendments

The Council on 9 July 2018 had released a list of 46 proposed amendments to the GST Law for stakeholder comments. Now, the Council has recommended 17 out of these 46 proposed amendments to the GST law. Key recommended amendments are:

  • ITC in respect of motor vehicles and certain obligatory employee benefits to be liberalized.
  • On the filing of an application for cancellation of registration, the taxpayer to be immediately relieved from undertaking compliances.  
  • Pre-deposit payable for the filing of appeal before the Appellate Authority and the Appellate Tribunal to be capped at INR 250 million and INR 500 million respectively.  
  • Liability to pay interest on the reversal of ITC due to non-payment of consideration to the supplier within 180 days to be removed.  
  • The requirement of linking debit/credit notes to invoices to be removed.  
  • Job work sector - place of supply in case of job work of any treatment or process done on goods (e.g., gold, diamonds) temporarily imported into India and then exported without putting them into any other use in India, to be outside India.  
  • Supply of services to qualify as exports even if payment is received in INR, where permitted by the Reserve Bank of India (viz. exports to Nepal and Bhutan).

The amendments would come into effect once they have been enacted by the Parliament and the State Legislatures.

Rationalization of GST rates

The Council with effect from 27 July 2018 has rationalized GST rates and related matters in respect of certain sectors. The key decisions in this regard have been encapsulated below:

Sector The decision by the Council
Agriculture and food Exemption to following services:
  • Artificial insemination of livestock (other than horses)
  • Works of installation and commissioning undertaken by DISCOMs/electricity distribution companies for extending electricity distribution network to the tube well of the farmer/agriculturalist for agricultural use
  • Services provided by the Food Safety and Standards Authority of India (FSSAI) to food business operators.
Clarifications issued in respect of certain items:
  • Milk enriched with vitamins or minerals salt (fortified milk) is exempt from GST
  • Treated (modified) tamarind kernel powder and plain (unmodified) tamarind kernel powder both attracts 5% GST rate
  • Beet and cane sugar, including refined beet and cane sugar, attracts 5% GST rate
  • Water supplied for public purposes (other than in sealed containers) does not attract GST.
Banking and IT
  • Exempt services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with Explanation I in Section 8 of the IGST Act provided the place of supply is outside the taxable territory of India in accordance with Section 13 of IGST Act. This amendment, though applicable to all, will be beneficial mainly for companies in banking and IT sector.
  • Services provided by individual Direct Selling Agents (DSAs) to banks/non-Banking Financial Sectors (NBFCs) to be taxed under reverse charge.
Hospitality
  • GST on accommodation service to be chargeable on 'transaction value,' rather than the 'declared tariff.'
  • Clarification to be issued to restrict the scope of outdoor catering to supplies in case of outdoor/indoor functions that are event-based and occasional in nature. All other supplies such as the supply of food and drinks in the restaurant, mess, canteen, eating joints and such supplies to institutions (educational, office, factory, hospital) on contractual basis would be chargeable to GST at 5%.
Transportation
  • Multimodal transportation to be charged to GST under forward charge at 12% with full ITC
  • Extension of exemption granted on outward transportation of all goods by air and sea by another one year, i.e. till 30 September 2019.
GST rates reduced from 28% to 18%
  • Special purpose motor vehicles, e.g., crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries
  • Works trucks (self-propelled, not fitted with lifting or handling equipment) of the type used in factories, warehouses, dock areas or airports for short transport of goods.
Consumer durables GST rates reduced from 28% to 18%
  • Washing machine
  • Vacuum cleaners
  • Domestic electrical appliances such as food grinders and mixers and food or vegetable juice extractor, shaver, hair clippers, etc.
  • Storage water heaters and immersion heaters, hair dryers, hand dryers, electric smoothing irons, etc.
  • Refrigerators, freezers and other refrigerating or freezing equipment including a water cooler, milk coolers, refrigerating equipment for leather industry, ice cream freezer, etc.
  • Televisions up to the size of 68 centimeters.
Textile Fabric sector to be allowed a refund of accumulated ITC on account of inverted duty structure.
Miscellaneous GST rates reduced from 28% to 18%
  • Paints and varnishes
  • Glaziers' putty, grafting putty, resin cement
  • Lithium-ion batteries.


SKP's Comments

The Council has taken major decisions in view of the representations received from various sectors of the industry. The simplified return filing procedure along with the rationalization of rates is expected to boost GST revenue and increase compliance among businesses.

The next GST Council is scheduled to be held on 4 August 2018. The meeting will primarily focus on the issues facing the Micro, Small & Medium Enterprise (MSME) sector. The meeting will also deliberate on promoting digital payments.

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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