Tax Insights
from India Tax & Regulatory Services
www.pwc.in
GST Council reduces tax rates,
relaxes filing of annual returns for small taxpayers and defers new
return system
September 22, 2019
In brief
The GST Council, in its thirty seventh meeting, approved various proposals which includes relaxing of the filing of annual returns for MSMEs, deferment of the new return systems and withdrawal of a recently issued circular on post-sales discount on an ab initio basis. Further, the GST Council reduced rates on various goods and services, which will be effective from 1 October 2019, while also increasing rates on certain items on an exceptional basis, in addition to introducing various procedural improvements.
In detail
The major decisions by the GST Council are summarised as follows:
1. Change in rates
Particulars Old rate New rate
Hotels charging room tariff between
• INR 1,001 – INR 7,500
• Above INR 7,500
18% 12%
28% 18%
Outdoor catering 18% 5% (without ITC)
Cut and polished semi-precious stones 3% 0.25%
Job work services for diamond industry 5% 1.5%
Job work services for engineering industry 18% 12%
Specified goods for petroleum operations under HELP1
12 – 18% 5%
1 Hydrocarbon Exploration Licensing Policy
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Particulars Old rate New rate
Vehicles below 4m in length carrying up to 13 people having engine capacity of
• 1500 cc diesel
• 1200 cc petrol
15% (Cess) 3% (Cess)
15% (Cess) 1% (Cess)
Caffeinated beverages 18% 28% +12%(Cess)
Railway wagon, coaches 5% 12%
2. Exemptions
The following goods and services are proposed to be exempted:
• Storage and warehousing of food items.
• The current conditional exemption of export freight charges by air or sea has been extended until 30 September
2020.
• Intermediary services
provided to supplier of goods, when both the supplier and recipient are outside taxable territory.
• Supply to specified persons organising FIFA Women’s World Cup 2020 in India.
• Imports of silver/ platinum by specified nominated agencies, and its onward supply by such agencies to exporters of jewellery.
3. Annual return
The Government has introduced relaxation in filing of annual returns for small taxpayers for financial years 2017-18 and 2018-19:
Taxpayer type Relaxation
Composition taxpayers Waiver of requirement to file Form GSTR 9A
Taxpayers other than composition taxpayers who are required to file Form GSTR 9
Filing of Form GSTR 9 to be optional for financial years 2017-18 and 2018-19 for taxpayers with an aggregate turnover up to INR 20m for each of the said tax period.
4. Availment of input tax credit and new monthly return
• Statement of intent to impose restrictions on availing input tax credit in cases where the supplier has not furnished the details of outward supplies in time in Form GSTR 1.
• Implementation of new return formats has been postponed from October 2019 to April 2020. The due dates for furnishing Form GSTR 3B and Form GSTR 1 for the period October 2019 to March 2020 to be specified.
5. Refund
Circulars would be issued shortly introduced for uniformity in the application of law across all jurisdictions for the following processes:
• Procedure to claim refund in Form GST RFD-01A,
subsequent to favourable order in appeal or any other forum.
• Eligibility to file a refund application in Form GST RFD-01A for a period and category under which a nil refund application has already been filed.
• Integrated refund system, with disbursal by single authority to be introduced from 24 September 2019.
6. Post sale discount Circular no. 105/ 24/ 2019-GST dated 28 June 2019, which provided an analysis of the tax treatment of various post sale discounts prevalent in the industry will be withdrawn on an ab initio basis. A revised circular is expected to be issued in the near future.
7. Information Technology Enabled Services (ITES) A clarification will be issued on when the supply of ITES may qualify as an intermediary, in
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supersession of circular no. 107/
26/ 2019-GST dated 18 July 2019, to bring uniformity in the
application of positions across all jurisdictions.
8. Miscellaneous changes
• Place of supply for R&D services provided by Indian pharma companies to foreign companies would be based on place of use and enjoyment of the service, i.e. location of service recipient.
• Registered authors will now have the option to pay GST on royalty received from publishers under forward charge.
• GST on securities lending services brought under the reverse charge mechanism at 18%; GST on such services prior to this change would be payable on a forward charge basis.
• Aerated drink manufacturers will not be eligible to avail the composition scheme.
• Last date for filing of appeals before the GST Appellate Tribunal to be extended, as the appellate bodies are yet to be made functional.
• Amendments to be made in the Central GST Act, Union Territory GST Act, and the corresponding State GST Acts in view of creation of Union
Territories of Jammu &
Kashmir and Ladakh.
• Committee of Officers to be constituted to examine the simplification of Forms for Annual Return and
Reconciliation Statement.
• Aadhar to be linked with registration of taxpayers under GST and the possibility of making Aadhar mandatory for claiming refunds to be examined.
• To tackle the menace of fake invoices and fraudulent refunds, reasonable
restrictions to be prescribed on passing of credit by risky taxpayers, including risky new taxpayers.
The takeaways
The key decisions adopted by the GST Council have three key characteristics.
• Firstly, they seek to ease the tax burden to bolster certain sectors in the economy, such as tourism, gems and jewellery and passenger transportation.
• Secondly, they are aimed at easing the burden of complex compliances on small
taxpayers, allowing large taxpayers more time to prepare for new compliance formats and examine ways to further simplify annual
compliances.
• Thirdly, tax woes faced by specific categories of
exporters, such as ITES, R&D units (largely concerning the entitlement to refunds) have been sought to be addressed, which should improve the current experience.
From a systemic perspective, the withdrawal of certain
clarifications (though welcome) may result in a degree of scepticism in the minds of the industry on future clarifications that are issued. The proposals to restrict input credits where vendors have not reported transactions in the GSTR1 and introduction of a system to flag
“risky” taxpayers may cause concern in the industry. However, the displayed intent of the
Government to ensure the adoption of common practices across the country by issuing administrative circulars on various issues needs recognition.
Please note that this tax insight is based on press releases by the GST Council, which is a statement of intent. It will be necessary to analyse specific implications based on the actual notifications/
circulars issued in due course.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor
Tax Insights
For private circulation only
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwCPL, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Without prior permission of PwCPL, this publication may not be quoted in whole or in part or otherwise referred to in any documents.
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