1. Highlights of this GST Council meeting
a. GST Return Filing process further simplified
- Regular taxpayers with a turnover of up to Rs 5 crores can opt to file GST return on a quarterly basis against earlier limit of Rs. 1.5 crores. These taxpayers have to, however, pay taxes monthly through a challan. Return can be either ‘Sahaj’ or ‘Sugam’, wherein the first one, report only B2C supplies and the other report both B2B & B2C supplies, respectively.
- Regular taxpayers with turnover over Rs. 5 crores, have to file monthly returns- the new return filing system proposed by Shri Nandan Nilekani is approved. The process would be based on Invoice “UPLOAD – LOCK – PAY TAX”.
- Amendments shall be carried out by the filing of a return called amendment return and payment if any, will be through this return itself, to help save interest liability for the taxpayers.
- It is proposed, NIL return filers (no purchase and no sale) shall be given facility to file the return by sending SMS.
Implications: The new return filing for Quarterly filing taxpayers is a welcome move. Compliances made easy – The filing burden has been reduced for more than 93% taxpayers in the country, as the turnover limit for the quarterly returns filing has been hiked from 1.5 crores to 5 crores. This will also ensure lesser possibilities of crashes as the IT systems will work efficiently with a balanced load. It’s to be seen how the proposal for a monthly tax payment plugs the reconciliation gaps and affect ITC claims. Challenge can be where the supply takes place between the Quarterly return filer and Monthly return Filer.
b. Sops for Composite Dealers get a nod
- Composition dealers can now get covered for the supply of services: Limit equal to or below 10% of the turnover of services rendered or Rs 5 lakhs, whichever is higher is fixed for opting into the scheme*. Restaurant services are not be included to reckon this criterion.
- All council members have unanimously voted for bringing into effect the increased threshold limit of Rs. 1.5 crore from existing Rs 1.0 crore as soon as possible*.
*Subject to an amendment in law Implications: Indeed, the move to include those dealers providing subsidiary services is welcomed and must boost the service industry to a great extent. But certain ambiguities need to be clarified like:
a) What is the idea behind fixing Rs 5 lakhs as a lower base when the minimum threshold for GST Registration is Rs. 20 lakhs (Rs 10 lakhs in the N.E States)
b) Whether this applies to service providers only or a person supplying goods as well as services like the earlier provision.
c. On GST Registration
- Taxpayers may opt for multiple registrations within a State/Union territory in respect of multiple places of business located within the same State/Union territory. Earlier it was restricted to multiple businesses in the separate States.
- E-commerce operators needed to have compulsory GST registration only on those non-exempt goods.
- The threshold for GST exemption increased to 20 lakhs from 10 lakhs for 6 States -Taxpayers operating in Sikkim, Arunachal Pradesh, Himachal Pradesh, Uttarakhand, Assam & Meghalaya.
*Subject to an amendment in law
d. Reverse charge mechanism deferred for a year till 30th Sept 2019
- A committee will study the pros and cons of the system and also find the likely impact on revenue.
- Meanwhile, an amendment is proposed to Levy GST on reverse charge mechanism only on specified goods in case of certain notified classes of registered persons who receive supplies from unregistered suppliers.
e. Creation of GST Appellate Tribunal
- National Bench to be set up at New Delhi.
- 3 State/Regional Bench to come up in Mumbai, Chennai and Kolkata with several Area benches.
- Amount of pre-deposit payable for filing of appeal before the Appellate Authority and the Appellate Tribunal to be capped at Rs. 25 Crores and Rs. 50 Crores, respectively*.
*Subject to an amendment in law
f. Transporters to take note of heightened e-way bills compliance
- As the RFID readers or tags to be implemented in the next 6 months, this is supposed to relieve the transporters from wait at checkposts.
- Standard operating procedure to be adopted to help the transporters from unnecessary hardship at checkpoints and to give effect to a uniform penalty for default by transporters.
g. Relief to taxpayers up to 31st August 2018 to complete the registration
- Those with Prov ID, who couldn’t complete the process of Registration, to complete the process and to encourage the same, the late fees are waived for Return filing.
- Taxpayers who filed Part A of FORM GST REG-26, but not Part B of the said FORM are requested to approach the jurisdictional Central Tax/State Tax nodal officers with the necessary details on or before 31st August 2018. The Nodal officer would then forward the details to GSTN.
- The late fee payable for delayed filing of return in such cases is decided to be waived. First, taxpayers pay late fees, the same will then be reversed in the cash ledger under the tax head.
h. Rates Rationalised: Consumer segment to enjoy the most
- Sanitary Napkins exempt from GST: In one clean swoop the government has made the lives of countless Indian women easy. Sanitary napkins now will be exempt from GST. This also means that the GST paid on the input raw material used cannot be available for credit due to exemption of the end product, that indirectly impacts the pricing of this product.
- Ethanol: The implications of reducing the Ethanol rates are far-reaching. It is clear that the government has a bigger plan in place, not only will it impact the sugarcane farmers directly but also lower the cost of producing a range of items to which ethanol is essential, like blending of petrol.
- Lithium-Ion Batteries: This reduction hopes to serve as a push to the Indian electronic manufacturers, especially directed towards to the mobile phones and electric vehicle sector. It will create a favourable space these manufactures to thrive. Likewise, these products will now be more accessible to the consumer in this growing sector. Reduction of rate for Phosphoric acid has further reduced the stress on the production of ethanol.
i. What’s in for Exporters?
- Extension of the exemption by another year up to 30th September, 2019 granted on outward transportation of all goods by air and sea, as relief to the exporter of goods.
- Services provided in sectors like banking, IT have been provided relief by exempting services supplied by an establishment of a person in India to any establishment of that person outside India [related party].
- E-books will attract 5% GST instead of earlier 18%.
j. Textile Industry at vantage with allowability of refund of accumulated ITC on Inputs to make Fabric Material
Currently, the raw material is charged at a higher GST rate as when compared to the final apparel. Due to this, especially ITC on Fibre material was not being able to be utilised that attracted 12% since the Fabric that was made out of it attracted GST of only 5%. On account of the inverted duty structure that currently prevails in this industry, Council has proposed for the provision of allowing refund of the accumulated ITC by giving prospective effect to its applicability from 27th July 2018*. *Subject to CBIC Notification
k. Important announcement regards Invoicing
Registered persons may issue consolidated credit/debit notes in respect of multiple invoices issued in a Financial Year.
l. The scope of ITC widened
- To include further in its scope:
- Most of the activities or transactions specified in Schedule III;
- Motor vehicles for transportation of persons, with seating capacity of more than thirteen (including driver), vessels and aircraft;
- Motor vehicles for transportation of money for or by a banking company or financial institution;
- Services of general insurance, repair and maintenance in respect of motor vehicles, vessels and aircraft on which credit is available; and
- Goods or services which are obligatory for an employer to provide to its employees, under any law for the time being in force.
- In case the recipient fails to pay the due amount to the supplier within 180 days from the date of issue of invoice, the input tax credit availed by the recipient will be reversed. Liability to pay interest is being done away with in that case.
- Commissioner to be empowered to extend the time limit for return of inputs and capital sent on job work, upto a period of one year and two years, respectively.
- The order of cross-utilisation of input tax credit is being rationalised.One must await for further announcements giving clarity to this.
m. Following have been kept out of scope of ‘Supply’
- Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India;
- Supply of warehoused goods to any person before clearance for home consumption; and
- Supply of goods in case of high sea sales.
2. Recent Rate Changes on Goods
|S.NO||Items||New Rate||Old rate|
|1||Rakhi (other than that of precious or semi-precious material )||
|3||Circulation and commemorative coins||5%|
|4||Raw material for broom||12%|
|6||Sal leaves and its products||18%|
|8||Coir pith Compost||5%|
|9||Chenille fabrics and other fabrcis under 5801||
|11||Phosphoric Acid (fertilizer grade only)|
|12||Handmade Carpets, Textile Floor, Coverings|
|13||Knitted cap/topi having retails sale value exceeding Rs. 1000|
|14||Kota Stones and Simliar Stones (other than polished)||
|15||Ethanol for sale to oil marketing companies for blending with fuel|
|16||Solid Bio fuel pellets|
|19||Hand Operated Rubber Roller|
|20||Brass Kerosene Pressure Stove|
|21||Zip and Slide Fastener|
|22||Handicrafts (Excluding handmade)|
|23||Handbags including pouches and purses; jewellery box|
|24||Fuel Cell vehicle||28%|
|25||Televisions upto 68 cm||
|26||Glaziers’ putty, grafting putty, resin cements|
|27||Refrigerators, freezers, water cooler, milk coolers, ice cream freezer|
|29||Food Grinders & mixer|
|31||Paints and Varnishes (including enamels and lacquers)|
|32||Shavers, Hair Clippers|
|34||Storage water heaters|
|36||Hair Dryers, Hand Dryers|
|37||Electric Smoothing irons|
|40||Pads for application of cosmetics or toilet preparations|
|43||Special purpose motor vehicles|
|44||Work Trucks (Self propelled , not fitted with lifting or handling equipment)|
|45||Trailers & Semi trailers|
|List of Goods Exempt|
3. Recent Rate Changes on Services
|Services||New Rates||Old Rates|
|Supply of e-books||5%||18%|
|Supply of Multimodal Transportation||12%||Nil|
|List of Services Exempt|
|1. Sevices provided by Coal Mines provident fund organisation to the PF subscribers|
|2. Services provided by Old age home run by state government / central government to the citizens aged more than 60 years upto Rs. 25000|
|3. GST exempted on the administrative fee collected by National Pension System Trust|
|4. Services provided by an unincorporated body or non profiit entiy registered under any law to own members upto Rs. 1000 per year of membership fees.|
|1. Services by way of artificial insemination of livestock (other than horses)|
|2. Services provided by FSSAI to food businesses.|
|3. Services provided by way of warehousing minor forest produce|
|4. Services provided by the installation and commissioning by DISCOMS for extending electricity distribution network for agricultural use.|
|1. Reinsurance services provided to insurance scheme such as Pradhan Mantri Rashtriya Swasthya Suraksha Mission|
|1. Guarantees are given by central/state government to their undertakings/PSUs.|
|2. Services provided by government to ERCC by assigning the right to collect royalty to mining lease holders.|
|1. Import of services by Foreign diplomatic missions/UN other international organizations|
|2. GST rate slabs will apply on the actual rate for hotel services instead of declared tariff.|