39th GST Council Meeting Updates & Highlights

On 14th March 2020, 39th GST Council Meeting was held, in which certain important recommendations were made, to provide relief to the taxpayers registered under the GST Act on some major aspects. 

Here are the important recommendations made in the meeting: 

1. GST system-related issues

Currently, taxpayers face a lot of technical glitches while filing GST returns or performing other GST related tasks on the portal. Recommendations have been made to tackle these technical glitches by Shri Nandan Nilekani (Infosys).

• The current capacity of the system to handle 1.5 lakh taxpayers at the time of filing returns will be increased to 3 lakh taxpayers at a time. 
• The transition of GST returns system from the current system to the new system will be done in an incremental manner.
• Forms GSTR-1, 3B and 2A will be linked with each other to prevent tax evasion. At first, details of outward supplies in GSTR-1 will be linked to liability in GSTR-3B. Next, details of Input tax credit (ITC) in GSTR-3B will be linked to the details of supplies reflected in GSTR-2A.
• Shri Nandan Nilekani will personally monitor the progress of implementation of these initiatives.

Also Read: Comparison between GSTR-1 and GSTR-3B

2. Law and Procedure related issues

In order to facilitate trade and provide relief to the taxpayers, the following recommendations have been made:

• Till now, there was confusion regarding the amount of tax liability on which interest is to be charged, in case of delayed d. It is now clarified in this GST council meeting, with retrospective effect from 1st July 2017, interest on delayed payment of GST liability will be charged on the net amount. 

Suppose tax liability was ₹50,000 and ITC was ₹30,000. Net cash liability is ₹20,000 that is required to be paid in cash. In case of delayed payment, interest will be charged on ₹20,000 and not on ₹50,000. 

• Application for revocation of cancellation of registration can now be filled up to 30th June 2020 where GST registrations have been cancelled by the department till 14th March 2020.
• For F.Y.2018-19, Micro, Small and Medium Enterprises (MSMEs) having an aggregate turnover of fewer than ₹5 crores, are not required to file Reconciliation Statement in Form GSTR-9C. This relaxation is only for GSTR-9C and not GSTR-9.
• For F.Y.2018-19, Due date for filing Annual return in GSTR-9 and Reconciliation statement in GSTR-9C shall be extended to 30th June 2020.
• For F.Y. 2017-18 and 2018-19, late fees for delayed filing of GSTR-9 and GSTR-9C shall not be levied, where the aggregate turnover is less than ₹2 crores. 
• A new facility “Know your supplier” shall be introduced for registered persons to provide them with basic information of the current or prospective suppliers.
• For taxpayers who could not opt for the special composition scheme notified (composition scheme for a supplier of services with a tax rate of 6% having an annual turnover in the preceding year up to ₹50 lakhs) by filing Form CMP-02, filing of GSTR-1 for F.Y.2019-20 shall be waived.
• For registered persons having principal place of business in the Union territory of Ladakh, due dates for filing GSTR-3B shall be extended till 24th March 2020, for the months of July 2019 to January 2020. Same is recommended for GSTR-1 and GSTR-7.
• Now exporters can make an application for refund claims by bunching the claims across financial years and not just within a financial year, which is a very good step. 
• For filing GSTR-1 and GSTR-3B, the existing system shall be followed until September 2020.
• Now, GST department shall seek information returns from banks. 
• Where a person takes new GST registration in India, physical verification of the premises and financial KYC of the registered person shall be necessary before passing of ITC. This restriction shall help curb fake invoicing and fraudulent passing of ITC.

• Other points to note in this GST council meeting

1. Special procedure for corporate debtors under the Insolvency and Bankruptcy Code, 2016 who are undergoing the corporate insolvency resolution process, to enable them to comply with the provisions of GST Laws. 
2. Special procedure for registered persons in Dadra and Nagar Haveli & Daman and Diu during the transition period, consequent to a merger of the UTs w.e.f. 26th January 2020; transition to be completed by 31st May 2020.
3. Clarifications issued with respect to matters covering apportionment of ITC in cases of business reorganization, appeals during non-constitution of the Appellate Tribunal, refunds, special procedure for registered persons who are corporate debtors under the provisions of the Insolvency and Bankruptcy Code, 2016, undergoing the corporate insolvency resolution process.

Also Read: How to Claim GST Refund & Apply for GST No. Cancellation

3. Changes in GST rates

• GST rate on Mobile phones and specified parts increased from 12% to 18%. 
• GST rate on all types of matches, whether handmade or other, rationalised to 12%. Earlier, the rate was 5% for handmade matches and 18% for others. This rationalisation will help in the classification issue.
• GST rate on Maintenance, Repair and Overhaul (MRO) services, in respect to aircraft, reduced from 18% to 5% with full ITC. Also, there shall be a change of place of supply for B2B MRO services to the location of the recipient.