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GST Council extends compensation cess indefinitely beyond June 2022; existing return filing system to continue till 31 March 2021; and proposes enabling of auto-population of Form GSTR-3B from Form GSTR-1
6 October 2020
In brief
The f orty-second meeting of the Goods and Service Tax Council (GST Council) was held on 5 October 2020 via video conferencing and was chaired by the Union Finance and Corporate Affairs Minister, Ms. Nirmala
Sitharaman1. The GST Council discussed various aspects pertaining to compensation cess, the future roadmap f or GST compliance and incremental introduction of the proposed new GST return system into the current system of filing returns.
The key discussions by the GST Council as per Press Release1 are summarised below.
In detail
Compensation to States
• Levy of compensation cess to be extended beyond June 2022 for s uch period as may be required. Further details in this regard are awaited.
• Compensation of INR 200bn to be released to the States as on 5 October 2020 towards loss of revenue during f inancial year (FY) 2020-21. An amount of about INR 250bn towards Integrated GST of FY 2017-18 to be released by next week.
GST compliance
Auto-filled Form GSTR-3B
• The GST Council has approved the roadmap for GST return f iling, incorporating features of the new GST return system (in furtherance to the recommendations stipulated in the thirty ninth GST Council meeting).
This is expected to reduce the compliance burden significantly.
• Under the new f ramework, filing of Form GSTR-1 by the taxpayer and his/ her suppliers within the due date would enable the following:
- View the input tax credit (ITC) available in his/ her electronic credit ledger from all sources prior to the due date f or payment of tax; and
- Enable the system to auto-populate Form GSTR-3B.
In order to achieve this, Form GSTR-1 would have to be mandatorily filed before Form GSTR-3B with effect f rom 1 April 2021.
• Auto-population of the taxpayer’s liability from his/ her Form GSTR 1 would be effective from 1 January 2021.
• Auto-population of ITC based on the suppliers’ Form GSTR-1 through the newly developed facility in Form
1 Press Release on the forty-second GST Council Meeting dated 5 October 2020
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GSTR-2B according to the following timelines for:
- Monthly filers from 1 January 2021.
- Quarterly f ilers from 1 April 2021.
GST returns
• Due date f or furnishing quarterly Form GSTR-1 for taxpayers required to file returns on a quarterly basis would be the thirteenth of the month succeeding the quarter effective from 1 January 2021.
• The present system of filing monthly return in Forms GSTR-1 and GSTR-3B to be extended till 31 March 2021.
Relaxation for small taxpayers
• The earlier recommendation by the GST Council for small taxpayers having aggregate turnover less than INR 0.05bn to file returns on a quarterly basis (however, payments are to be made on monthly basis) would be implemented from 1 January 2021.
• For the f irst two months of the quarter, small taxpayers would have the option to pay 35% of the net cash liability of the last quarter using an auto-generated challan.
Harmonised System of Nomenclature requirements
With ef f ect from 1 April 2021, the requirements for Harmonised System of Nomenclature (HSN) in Form GSTR- 1 would be revised as follows:
• Six-digit HSN code for suppliers having aggregate turnover above INR 0.05bn;
• Four-digit HSN code f or business-to-business suppliers having aggregate annual turnover upto INR 0.05bn;
and
• Government empowered to notify eight-digit HSN for notified class of supplies by all taxpayers.
Other recommendations
• Provision for furnishing of Nil Form CMP-08 through SMS.
• Ref und to be paid/ disbursed in a validated bank account linked with the Permanent Account Number (PAN) and Aadhaar of the registrant with effect from 1 January 2021.
• Satellite launch services supplied by Indian Space Research Organisation, Antrix Corporation Limited and New Space India Limited would be exempted to encourage domestic launching of satellites.
Ready reckoner for effective dates
Effective from Particulars
1 January 2021 • Auto-population of ITC for taxpayers required to file returns on monthly basis.
• Auto-population of all taxpayers’ liability from Form GSTR-1.
• Refund to be paid/ disbursed in a validated bank account linked with the PAN and Aadhaar.
• For small taxpayers, returns to be filed on a quarterly basis;
however, payments are to be made on a monthly basis.
• Due date for quarterly filing of Form GSTR-1 to be thirteenth of the month succeeding the quarter.
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Effective from Particulars
1 April 2021 • Auto-population of ITC for taxpayers required to file returns on quarterly basis.
• Form GSTR-1 to be mandatorily filed before Form GSTR- 3B.
• Revised HSN requirement to be implemented.
The takeaways
While auto-population of Form GSTR-3B is a welcome change aimed at increasing the ease of doing business and reducing the compliance burden of taxpayers, its seamless implementation would vastly increase the trust and confidence in the system. The changes in HSN requirement would add to the existing obligation (along with e-invoicing), requiring changes in the Enterprise Resources Planning systems for companies to work upon. The upcoming GST Council Meeting on 10 October 2020 is expected to bring further clarity on the compensation issue.
Let’s talk
For a deeper discussion of how this issue might affect your business, please contact your local PwC advisor.
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