Tax Insights
from India Tax & Regulatory Services
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GST Council extends date for implementation of e-invoice, simplified monthly return and annual returns, extends foreign trade benefits, and introduces various other trade facilitation measures
March 16, 2020
In brief
The thirty ninth meeting of the Goods and Service Tax (GST) Council meeting was held on 14 March 2020. The major decisions by the GST Council in its thirty ninth meeting1 are summarised as follows.
In detail
Introduction of e-invoice and QR code deferred
• The target date for the introduction of e-invoicing and QR code has been postponed by six months to 1 October 2020.
• Various categories of taxpayers have now been exempted from the requirement to issue e- invoices and QR codes:
− insurance companies;
− banks, financial institutions, non- banking financial companies;
− goods and passenger
1 Press Release on the thirty ninth GST Council Meeting dated 14 March 2020
transportation service providers.
Compliances
• Monthly returns:
− The existing reporting framework for monthly compliances via Forms GSTR-1 and GSTR-3B has been continued till September 2020.
− Effectively, this also pushes the introduction of the proposed
simplified compliances via Forms ANX 01/ 02 and RET 1 by six months.
− Extensions to the due dates for filing returns
have been provided to taxpayers located in Ladakh in light of the recent reorganisation.
• Annual returns:
− The due date for filing the Annual Return and Reconciliation
Statement for financial year (FY) 2018-19 has been extended by three months to 30 June 2020.
− MSMEs with a turnover below INR 50m have been exempted from furnishing the Reconciliation
Statement for FY 2018- 19.
Tax Insights
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− Late fees on delayed filing of the Annual Return and Reconciliation Statement for FYs 2017-18 and 2018- 19 have been waived for taxpayers with a turnover below INR 20m.
Customs
The exemptions from IGST and compensation cess on imports made under the advance
authorisation, Export Promotion Capital Goods, and Export Oriented Unit schemes have been extended up to 31 March 2021.
Additionally, it was announced that the e-wallet scheme would be implemented after 31 March 2021.
Refunds
• To facilitate exports, the bunching of refund claims (which are currently bracketed within a FY) would now be allowed across FYs.
• The ceiling on the value of the supply for exports for the purpose of calculation of refund on zero-rated supplies will be prescribed.
• Provisions will be introduced for allowing recovery of refund on export of goods where export proceeds are not realised within the time prescribed under the Foreign Exchange Management Act, 1999.
Input Tax Credit
• A procedure for reversal of input tax credit (ITC) on capital goods, which are partly used for taxable supplies and partly used for exempt supplies, will be introduced.
• Certain restrictions will be imposed on the utilisation of ITC for new GST registrations, until physical verification of the premises and financial know your customer is undertaken, to curb fake invoicing and fraudulent
passing of ITC.
• Clarifications will be issued to address the apportionment of ITC in cases of business reorganisation under section 18(3) of CGST Act, 2017.
Changes in GST rates
• Rate on mobile phones and specified parts to be increased from 12% to 18%.
• Rate on Maintenance, Repair and Overhaul (MRO) services for aircraft will be reduced from 18% to 5% with full ITC.
Additionally, the place of supply of MRO services to a business entity will be revised to the “location of the
recipient” to attract overseas clients.
Other changes
• Interest for delay in payment of GST to be charged on the net cash tax liability retrospectively with effect from 1 July 2017.
• A circular will be issued to clarify the procedure for filing appeals to the Tribunal until the Appellate Tribunals are formally constituted.
• Information returns that would be sought from banks will be prescribed. Currently, only a broad empowering provision exists.
• Aadhaar-based authentication for new taxpayers will be operationalised.
• A new facility called “Know Your Supplier” will be introduced to enable registered persons to have basic information about current or prospective suppliers.
• Procedures will be prescribed for taxpayers undergoing processes related to corporate insolvency resolution under IBC, to enable them to comply with the provisions of GST laws during the period of
resolution.
The takeaways
The thirty ninth meeting of the GST Council proposes a slew of taxpayer friendly measures with the objective of easing the compliance burden; these range from technology interface-based compliance (e-invoicing) to those faced by small taxpayers (annual returns). The extended date of implementation for e-invoices and introduction of certain exemptions comes as a relief in view of the industry’s limited readiness, with regard to systems, infrastructure and manpower, to meaningfully target 1 April 2020 as a start date. The industry should utilise the next six months to build Enterprise Resource Planning connected solutions to enable a streamlined e-invoicing system and other protocols.
Other steps being taken by the Government to ameliorate debated issues such as recovery of interest on the net liability, apportionment of credit during business reorganisations, refunds when export proceed are not realised within prescribed time limits and compliance during IBC proceedings would also ease the taxpayers’ compliance burden and reduce litigation. The Government is also seeking to rectify technical glitches faced by taxpayers while accessing the GST Network in a time bound manner with senior level interventions — this provides a positive tone as it is an indication of the
Government’s commitment to continually improve India’s GST infrastructure.
Please note that the above update is based on the press releases dated 14 March 2020 by the Ministry of Finance. The notifications and statutory amendments with regard to the decisions made in the thirty ninth GST Council Meeting are still awaited.
Tax Insights
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