India: Implementation Of The Decisions Made In The 35th GST Council Meeting, Clarifications Issued, And Other Key Updates

Last Updated: 14 August 2019
Article by SKP  

The government has issued various notifications and circulars to implement the decisions taken in the 35th GST Council meeting held on 21 June 2019. The key decisions that were implemented along with the corresponding notification/circular that were released have been captured in this alert.

Extension of due dates

The due dates to fill certain returns have been extended for ease of taxpayers.

Notification/Order ref. Particulars  Period Revised Due Date 
Order No. 6/2019 -Central Tax dated 28 June 2019 GSTR-9 - All registered persons July 2017 to March 2018 (annual) 31 August 2019
Notification No. 26/2019 - Central Tax dated 28 June 2019 GSTR-7 - Person required to deduct tax at source October 2018 to July 2019 (monthly) 31 August 2019
Notification No. 28/2019 - Central Tax dated 28 June 2019 GSTR-1 - Registered persons having an annual aggregate turnover of more than INR 15 million July 2019 to September 2019

(monthly)
11th of the succeeding month
Notification No. 32/2019 - Central Tax dated 28 June 2019  GST ITC-04 - Person sending goods to a job worker July 2017 to June 2019

(quarterly)
31 August 2019

Notification of due dates

The government has notified the due dates for certain periodic compliances, which were yet to be notified for the upcoming months.

Notification/Order ref. Particulars Period Due date
Notification No. 27/2019 - Central Tax dated 28 June 2019 GSTR-1 - Registered persons having an annual aggregate turnover of up to INR 15 million July 2019 to September 2019

(quarterly)
31 October 2019
Notification No. 29/2019 - Central Tax dated 28 June 2019 GSTR-3B – All registered persons July 2019 to September 2019

(monthly)
20th of the succeeding month

Relief from furnishing GSTR-9/9C for foreign OIDAR service providers

A person supplying Online Information and Database Access and Retrieval (OIDAR) services from outside India to an unregistered person in India is required to compulsorily obtain registration under Section 24 of the CGST Act, 2017. Now, the government, vide Notification No.  30/2019-Central Tax dated 28 June 2019, has exempted such OIDAR service providers from furnishing annual return (GSTR-9) and reconciliation statement (GSTR-9C).

Clarification on GST on additional/penal interest

In view of representations received from the industry, the government, vide Circular No. 102/21/2019-GST dated 28 June 2019, has issued illustrative clarifications in respect of applicability of GST on additional/penal interest on overdue loans and advances.

  • If the loan or advance is provided by the supplier of goods to the recipient of goods to facilitate the sale of such goods, any additional/penal interest charged by the supplier would be taxable under GST.
  • If a third party provides the loan or advance (e.g., a finance company), the additional/penal interest charged by such finance company would be exempt from GST under Notification No. 12/2017-Central Tax-Rate dated 28 June 2017.

Clarifications on the place of supply for certain services

The government, vide Circular No. 103/22/2019-GST dated 28 June 2019, has issued certain clarifications in relation to the determination of place of supply (POS) in certain specific cases.

Issue Clarification Issued
Services provided by the port authorities in respect of arrival of wagons at the port, unloading of wagons, movement of unloaded cargo to berth, shipment/loading on the vessel, etc.
  • Such services are ancillary or related to the cargo handling services and are not related to immovable property.
  • Therefore, the POS should be determined in accordance with the general provisions applicable to supply of services, i.e., location of the recipient of services, and not in accordance with the special provisions in relation to immovable property.
Various services on unpolished diamonds (such as cutting and polishing activity) temporarily imported into India and are not put to any use in India
  • The POS would be determined as per the provisions of Section 13(2) of the IGST Act, i.e., the location of the recipient of services, and not on the basis of where the services are performed.

Both the above clarifications intend to provide the benefit of zero-rating to the specified services by treating them as exports when the recipient of services is located outside India.

Clarifications in respect to post-sales discounts

The government, vide Circular No. 105/24/2019-GST dated 28 June 2019, has issued certain clarifications in respect of secondary/post-sales discounts given by the supplier of the goods to the dealer of such goods.

Scenario Clarification Issued
Discount given by a supplier to the dealer for offering a reduced price to the customer
  • Such discount would represent the consideration flowing from the supplier of goods to the dealer for the supply made by the dealer to the customer.
  • It would be liable to be added to the consideration payable by the customer, for determining the value of supply, in the hands of the dealer.
  • The customer, if registered, would be eligible to claim ITC only to the extent of tax paid by him to the dealer. [Second proviso to Section 16(2) of the CGST Act]

    This can have significant implications for the customer as tax would be charged by the dealer on the gross amount and the customer cannot claim ITC of additional GST paid by him, as he will pay only the discounted consideration to the dealer.

Eligibility of ITC on the issuance of commercial credit/debit note
  • Supplier of goods issue financial/commercial credit notes in cases where GST cannot be reduced by the issuance of GST credit note on account of non-fulfillment of conditions under Section 15(3) of the CGST Act.
  • It has now been clarified that the dealer will not be required to reverse ITC that is attributable to the tax already paid on such post-sale discount and received by him through the issuance of financial/commercial credit notes by the supplier of goods.

Amendments to CGST Rules

The government, vide Notification No. 31/2019-Central Tax dated 28 June 2019, has made certain amendments to the CGST Rules, 2017. The key amendments are as follows:

Value of supply in cases where KFC is applicable

Rule 32A has been inserted to provide that the value of supply to determine GST in respect of goods or services on which Kerala Flood Cess (KFC) is applicable should be the value excluding the amount of such cess, i.e., GST should be levied on the amount excluding the amount of KFC.

Transfer of amount between heads of electronic cash ledger

Sub-rule (13) has been inserted in Rule 87 to provide that a registered person may transfer any amount available under any head of the electronic cash ledger to other heads viz. integrated tax, central tax, State tax or Union territory tax or cess through form GST PMT-09. The date of applicability of this sub-rule will be notified later.

The time limit for extending the validity of the e-way bill

The second proviso to sub-rule (10) of Rule 138 provides that the validity of e-way bill can be extended by the transporter under exceptional circumstances, including transshipment. Now, a third proviso has been inserted to provide that such validity may be extended within eight hours from the time of the expiry.

SKP's Comments

Businesses should re-evaluate their positions in view of the detailed clarifications issued by the government in relation to penal interest and post-sales discounts. The much-awaited clarification on implications to ITC on account of the commercial/financial credit note is also a welcome step as it has been clarified that there would be no reversal of ITC in such a case. 

Furthermore, the amendment in CGST Rules to ensure that GST is chargeable on the value of supply excluding KFC (preventing cascading of taxes) has paved the way for the implementation of KFC from 1 August 2019.

Depositing of tax under the wrong tax head is a common mistake made by businesses. The introduction of the facility to transfer an amount between different heads of the electronic cash ledger (once it is notified) is a welcome move to rectify such mistakes and prevent blockage of working capital.

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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