The 31st GST Council meeting has brought about a major overhaul in the GST regime with a wide range of policy recommendations, in-principle approval to changes in law and rationalization of rates of goods and services. (SKP's comments have been provided below each update in italics with blue font.)

Crucial decisions impacting businesses

Extension of due date of GSTR-9 and GSTR-9C

The due date for furnishing GSTR-9 (annual return) and GSTR-9C (reconciliation statement) of financial year (FY) 2017-18 has been extended to 30 June 2019.

The GST Council has provided relief by further extending the due dates which should provide businesses adequate time to gather the relevant data.

Amendment of heading of GSTR-9 in respect of supplies etc.

It has been recommended to amend the headings of GSTR-9 in respect of supplies etc. 'made during the year' and not 'as declared in the returns filed during the year.'

The Council in view of the feedback received from the industry and the tax experts has now provided an option for taxpayers to declare their supplies etc. made during the FY, irrespective of whether they were declared in the returns. This should change the nature of GSTR-9 from being a mere consolidation return, to a more comprehensive return providing opportunity for taxpayers to rectify mistakes made in their periodic GST returns. The modalities of this amendment would have to be looked into once the revised GSTR-9 has been notified.

Availment of ITC pertaining to invoices of FY 2017-18

The time limit for availing Input Tax Credit (ITC) for invoices pertaining to FY 2017-18 has been extended to the due date of filing GSTR-3B of March 2019.

This is a huge relief for businesses and should be utilized for availing any ITC missed out earlier. However, care must be taken that such ITC has not be written off in the audited books of accounts for FY 2017-18 which may result in double utilization of such ITC resulting in disputes from the revenue authorities.

Restriction in the ITC availment through GSTR-9 and GSTR-9C

The Input Tax Credit (ITC) cannot be availed through GSTR-9 and GSTR-9C.

Since the time limit for availing ITC in relation to invoices of FY 2017-18 has been extended till the due date of furnishing GSTR-3B for the month of March 2019, the scope of this amendment appears to be is restricted only to certain exceptional cases wherein invoice pertaining to FY 2017-18 has not been claimed till March 2019.

Scope of Table 8A of GSTR-9

It has been recommended that the ITC figure auto-populated in the said table would pertain to the invoices pertaining to the relevant financial year irrespective of the month in which such invoices are reported in GSTR-1.

This should remove the doubts in the industry in respect of whether ITC pertaining to invoices of financial 2017-18 reported by the supplier in his GSTR-1 of the next financial year would be auto-populated in this table.

HSN of inward supplies in GSTR-9

The requirement to declare HSN code of inward supplies in GSTR-9 has been restricted in respect of such inward supplies whose value independently accounts for 10% or more of the total value of inward supplies.

The requirement to provide HSN-wise inward supplies was seen as an onerous task by the industry, especially since the same was not to be provided for availing ITC in GSTR-3B. In view of this, the Council has provided a relief by restricting the inward supplies in respect of which HSN-wise details have to be provided.

Facility for additional payments

Additional payments, if any, should be made through GST DRC-03.

Businesses can avail this facility to make any additional payment on account of any additional liability arising out of GSTR-9 and GSTR-9C.

New return filing system

The new return filing system would be introduced on a trial basis from 1 April 2019 and would be made mandatory from 1 July 2019.

Single cash ledger for each tax head

There would be a single cash ledger for each tax head. The modalities for implementation would be finalized in consultation with Goods and Services Tax Network (GSTN).

This should remove the difficulties faced by businesses in cases wherein GST deposited in the wrong head (say, IGST) could not be transferred to the correct head (say, CGST), resulting in double payment.

Notification of the GST amendment Acts

The amendments to the GST law passed by the Parliament in August 2018 would be notified with effect from 1 February 2019.

Creation of Centralised Appellate Authority for Advance Ruling (AAAR)

It has been proposed to create a Centralized AAAR to deal with conflicting decisions by two or more state AAAR's.

It appears that the Centralized AAAR would not replace the state-wise AAAR's, but would be a separate appellate authority over and above the state AAAR's. It appears that this would result in further appeals rather than rationalization of decisions by the state-level Advance Ruling Authorities.

Rationalization of interest chargeable on delayed payment of tax

It has proposed to amend Section 50 of the CGST Act to provide that the interest chargeable on delayed payment of tax would be calculated on the net tax liability of the taxpayer after accounting for admissible ITC.

This is in line with the position under the erstwhile indirect tax regime whereby the interest on delayed payment of tax was calculated on the net cash liability.

Restriction of generation of e-way bills

Taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills.

This is an important measure by the GST Council targeting non-compliant businesses with a view to plug revenue leakages.

Other important announcements

Mandatory filing of GSTR-1 and GSTR-3B

All returns in GSTR-1 and GSTR-3B have to be filed before filing of GSTR-9 and GSTR-9C.

Electronic filing of documents with GST RFD-01A

GSTN would shortly provide a facility to electronically upload the supporting documents/invoices in relation to a claim for refund in GST RFD-01A on the common portal. It has been further clarified that the refund claim generated till this facility is implemented but have not been submitted in the jurisdictional tax office within 60 days of the generation of ARN, such applications would be summarily rejected, and the debited amount, if any, would be re-credited to the electronic credit ledger. This would be subject to an email communication by the department providing an opportunity to submit the claim within 15 days.

This should result in speeding up of the refund process and reduction in the logistical challenges involved in the form of multiple visits to the jurisdictional offices for processing of refund.

Refunds available through GST RFD-01A

It has been decided to provide the facility of availing the following type of refunds through GST RFD-1 A:

Refund on account of assessment/provisional assessment/appeal/any other order;

Tax paid on an intra-State supply which is subsequently held to be inter-state supply and vice versa;

Excess payment of tax; and

Any other refund.

This is a welcome move by the Council to facilitate various refund claims of businesses.

Waiver of late fees for delayed filing GSTR-1 and GSTR-3B

It has been decided to waive the late fee for all taxpayers in case of GSTR-1 and GSTR-3B for July 2017 to September 2018 furnished up to 31 March 2019.

Rationalization of GST rate on goods and services

Solar power generating plant

The Council has recommended that in EPC contracts of solar power generating plant and other renewable plants, deemed value of supply of the goods attracting 5% GST rate would be 70% of the gross value of the EPC contract, and the remaining 30% would be deemed as supply of taxable services attracting standard GST rate.

The decisions by various AAR's had resulted in a situation wherein such EPC contracts were taxable as a works contract service taxable at the rate of 18%. This decision should provide a much needed boost to the solar power/renewable energy industry considering its importance.

Movement of rigs, tools and spares

It has been clarified that movement of rigs, tools & spares and all goods on wheels, on own account, where such movement is not intended for further supply of such goods but for the provision of service does not involve a supply and is not be liable to GST.

This should provide a relief to certain industries such as construction and infrastructure industry wherein such rigs, and other equipments are transferred from one location to another after completion of projects.

Non-applicability of exemption in relation to cattle and poultry feed

It has been clarified that exemption available to animal, cattle, aquatic and poultry feed would not apply to their inputs such as fish meal, meat bone meal, bran, sharps etc.

Security services liable to RCM

Security services provided to a registered person, except government departments registered only for TDS and entities registered under composition scheme, should be chargeable to GST under Reverse Charge Mechanism (RCM).

This is in line with the position under erstwhile service tax law wherein such services were taxable under RCM.

Services of unregistered BF taxable under RCM

Services provided by unregistered Business Facilitator (BF) to a bank and agent of Business Correspondent (BC) to a BC should be chargeable to GST under RCM.

Leasing services

It has been clarified that leasing of land and buildings along with equipment should fall under real estate services and attract GST at 18%.

Taxability of business establishment supplying foods, drinks etc.

It has been clarified that the nature of business establishment making supply of food, drinks and other articles for human consumption will not determine whether the supply by such establishments is a supply of goods or services. It will rather depend on the constituents of each individual supply and whether same satisfies the conditions / ingredients of a 'composite supply' or 'mixed supply.'

In a recent advance ruling it was held that food items sold by a shopkeeper would be taxable at the rate of 5% if there is also a restaurant running in the same premises, as against the rate of 12% applicable on branded snacks and 18% on cakes and pastries. This clarification provides that such a high-level analysis should be avoided and emphasis would be on the individual supply for determining the applicable GST rate.

Reduction in rates of certain goods and services

Particulars Earlier rate Revised rate
Pulleys, transmission shafts and cranks, gear boxes etc., falling under HS Code 8483 28% 18%
Monitors and TV up to screen size of 32 inches 28% 18%
Power banks of lithium iron batteries 28% 18%
Digital cameras, video game consoles etc. under HS code 9504 28% 18%
Parts and accessories for carriages for disabled persons 28% 5%
Walking stick 12% 5%
Music books 12% NIL
Cinema tickets above INR 100 28% 18%
Cinema tickets up to INR 100 18% 12%
Third party insurance premiums of goods carrying vehicles 18% 12%

Reference to various committees/GoM

The following important issues have been referred to relevant committees/Group of Ministers (GoM):

Extending the composition scheme to small service providers. The rate of tax and threshold limit to be proposed - Law Committee and Fitment Committee.

Taxation of residential property in real estate sector - Law Committee and Fitment Committee.

Threshold limit of exemption under GST regime - GoM on MSMEs.

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.