This article reiterates the outcomes of “GST Council Meeting 21 July 2018- New Delhi”. In this meeting, council has provided benefits to both being consumers as well as traders. Bofore the upcoming Lok sabha elections in 2019, this is an appreciated action of the government to make it comfortable against opposition during election campaigns. Primary agenda of this meeting was to provide an ease of doing business. It is proposed to issue notifications giving effect to the recommendations with effect from 24th July 2018.
Following is the set of various recommendations:-
Recommendations on opening of migration window for tax payers till 31 August ,2018
The GST Council has approved the proposal to open the migration window for taxpayers, who received provisional IDs but could not complete the migration process.
The 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 31 August, 2018.
The nodal officer would then forward the details to GSTN for enabling migration of such taxpayers.
Further, It has also been decided to waive the late fee payable for delayed filing of return in such cases. Such taxpayers are
required to first file the returns on payment of late fees, and the waiver will be effected by way of reversal of the amount paid as late fees in the cash ledger under the tax head.
Taxpayers who intend to complete the migration process are requested to approach their jurisdictional Central Tax/ State Tax nodal officers in this regard.
Simplified GST Return
The GST Council has also approved the new return formats and associated changes in law. In the 27 meeting held on 4th May, 2018 the Council had approved the basic principles of GST return design and directed the law committee to finalize the return formats and changes in law.
The formats and business process approved today were in line with the basic principles with one major change i.e the option of filing quarterly return with monthly payment of tax in a simplified return format by the small tax payers. (In our view Pre-requisite to make payment tax on monthly basis is just equal to preparation of return with an exception to click “Submit & File” buttons of GSTR-3B)
For Small Taxpayers: The Council approved quarterly filing of return for the small taxpayers having turnover below Rs. 5 Cr as an optional facility. Quarterly return shall be similar to main return with monthly payment facility but for two kinds of registered persons – small traders making only B2C supply or making B2B + B2C supply. For such taxpayers, simplified returns have been designed called Sahaj and Sugam. In these returns, details of information required to be filled is lesser than that in the regular return.
Other than Small Taxpayers:-
All taxpayers excluding small taxpayers and a few exceptions like ISD etc. shall file one monthly return.
The return is simple with two main tables. One for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer for availing input tax credit. This process would ensure that very large part of the return is automatically filled based on the invoices uploaded by the buyer and the seller. Simply put, the process would be “UPLOAD – LOCK – PAY” for most tax payers. ( In our view, This might be critical situation if it really happens to avail ITC on the basis of supplier’s uploaded invoices only. Further, process to lock the invoices by buyer might be cumbersome as GSTN ‘s earlier systems to view all the ITC invoices in GSTR-2A are not efficient. Let’s wait till the show begins.).
Taxpayers would have facility to create his profile based on nature of supplies made and received. The fields of information which a taxpayer would be shown and would be required to fill in the return would depend on his profile.
NIL return filers (no purchase and no sale) shall be given facility to file return by sending SMS. (A Welcome step)
The new return design provides facility for amendment of invoice and also other details filed in the return. Amendment shall be carried out by filing of a return called amendment return. Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayers.
As per Council, 93% of the taxpayers have a turnover of less than Rs 5 Cr and these taxpayers would benefit substantially from the simplification measures proposed improving their ease of doing business. Even the large taxpayers would find the design of new return quite user friendly.
Amendments in GST Acts
GST Council also gave its approval to amend GST Acts for the various provisions in different Acts of GST.
Please refer our separate detailed article for this: – GST Act – Amendment Proposals July 2018
GST rate on Services
The GST Council took following decisions relating to exemptions/changes in GST rates/ITC eligibility criteria, rationalization of rates / exemptions and clarification on levy of GST on services.
Sector –Farmers/ Agriculture/ Food Processing
1. Exempt services by way of artificial insemination of livestock (other than horses).
2. Exempt warehousing of minor forest produce in line with exemptions provided to the agricultural produce.
3. Exempt the works of installation and commissioning undertaken by DISCOMS/ electricity distribution companies for extending electricity distribution network upto the tube well of the farmer/ agriculturalist for agricultural use.
4. Exempt services provided by FSSAI to food business operators.
Education/ Training/ Skill Development
5. Reduce rate of GST from 18% to 5% on supply only of e-books for which print version exist.
Social Security/ Pension Security/ Senior Citizens
6. Exempt services provided by Coal Mines Provident Fund Organisation to the PF subscribers from the applicability of GST on the lines of EPFO.
7. Exempt supply of services by an old age home run by State / Central Government or by a body registered under 12AA of Income Tax Act) to its residents (aged 60 years or more) against consideration upto Rupees Twenty Five Thousand per month per member provided consideration is inclusive of charges for boarding, lodging and maintenance.
8. Exempt GST on the administrative fee collected by National Pension System Trust.
9. Exempt services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in activities relating to the welfare of industrial or agricultural labour or farmer; or for the promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports, education, social welfare, charitable activities and protection of environment, to own members against consideration in the form of membership fee up to an amount of one thousand rupees per member per year.
Banking/ Finance/ Insurance
10. Exempt Reinsurance Services provided to specified Insurance Schemes such as Pradhan Mantri Rashtriya Swasthya Suraksha Mission (PMRSSM) (Ayushman Bharat), funded by Government.
Government Services
11. Exempt services provided by Government to ERCC by way of assigning the right to collect royalty, DMFT etc. from the mining lease holders.
12. Exempt the guarantees given by Central/State Government/UT administration to their undertakings/PSUs.
Miscellaneous
13. Exempt GST on import of services by Foreign Diplomatic Missions/ UN & other International Organizations based on reciprocity.
14. Exempt services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with Explanation I in section 8 of the IGST Act provided the place of supply is outside the taxable territory of India in accordance with section 13 of IGST Act .
15. Prescribe GST rate slabs on accommodation service based on transaction value instead of declared tariff which is likely to provide major relief to the hotel industry.
16. Prescribe GST rate of 12% with full ITC under forward charge for composite supply of multimodal transportation.
17. Rationalize the notification entry prescribing reduced GST rate on composite supply of works contract received by the Government or a local authority in the course of their sovereign functions.
18. Rationalize entry relating to composite supply of food and drinks in restaurant, mess, canteen, eating joints and such supplies to institutions (educational, office, factory, hospital) on contractual basis at GST rate of 5%; and making it clear that the scope of outdoor catering under 7(v) is restricted to supplies in case of outdoor/indoor functions that are event based and occasional in nature.
Clarifications
19. Supply of services provided by State and Central educational boards to students for conduct of examination will be clarified to be exempt.
20. To clarify that the courses run by private ITIs for designated trades are exempt under GST whereas non-designated courses are taxable.
21. To clarify that GST on premium paid by the Governments for implementing Pradhan Mantri Rashtriya Swasthya Suraksha Mission (PMRSSM) (Ayushman Bharat) is exempt from GST.
22. To provide clarification on applicability of Service Tax / GST on services rendered by an Indian Architect- Consultant in relation to immovable property located outside India to Indian Diplomatic Missions/Posts abroad.
23. To clarify to Auroville foundation that‘maintenance’ paid by it to Auroviliansis not liable to GST.
24. To insert an explanation in notification No. 13/2017-Central Tax(Rate) to define the term renting of immovable property.
25. To clarify that certain services such as “deposit works(expenses for providing electric line/plant)” related to distribution of electricity provided by DISCOM, attract GST.
Export / other trade facilitation measures
26. Extend the exemption granted on outward transportation of all goods by air and sea by another one year i.e. upto 30th September, 2019 as relief to the exporter of goods.
27. Place liability to pay GST on services provided by individual DSAs to banks/NBFCs under reverse charge on the buying banks/NBFCs. However, services by non-individual NBFCs (corporate, partnership firms) to banks/NBFCs would continue under forward charge, as at present.
GST Rates reduction on goods & for specified handicraft items
The GST Council took following decisions on GST Rate on Goods:-
I. GST rates reduction on 28% items:
A. 28% to 18%
- Paints and varnishes (including enamels and lacquers)
- Glaziers’ putty, grafting putty, resin cements
- Refrigerators, freezers and other refrigerating or freezing equipment including water cooler, milk coolers, refrigerating equipment for leather industry, ice cream freezer etc.
- Washing machines.
- Lithium-ion batteries
- Vacuum cleaners
- Domestic electrical appliances such as food grinders and mixers & food or vegetable juice extractor, shaver, hair clippers etc
- Storage water heaters and immersion heaters, hair dryers, hand dryers, electric smoothing irons etc
- Televisions upto the size of 68 cm
- Special purpose motor vehicles. e.g., crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries
- Works trucks [self-propelled, not fitted with lifting or handling equipment] of the type used in factories, warehouses, dock areas or airports for short transport of goods.
- Trailers and semi-trailers.
- Miscellaneous articles such as scent sprays and similar toilet sprays, powder-puffs and pads for the application of cosmetics or toilet preparations, hair shampoo, hair dyes, shaving creams, deodrants, shoe polish, shoe cream and many more of routine use items
B. 28% to 12%
- Fuel Cell Vehicle. Further, Compensation cess shall also be exempted on fuel cell vehicle.
II. Refund of accumulated credit on account of inverted duty structure to fabric manufacturers:
Fabrics attract GST at the rate of 5% subject to the condition that refund of accumulated ITC on account of inversion will not be allowed. However, considering the difficulty faced by the Fabric sector on account of this condition, the GST Council has recommended for allowing refund to fabrics on account of inverted duty structure. The refund of accumulated ITC shall be allowed only with the prospective effect on the purchases made after the notification is issued.
III. GST rates have been recommended to be brought down from,-
A. 18%12%/5% to Nil:
- Stone/Marble/Wood Deities
- Rakhi [other than that of precious or semi-precious material of chapter 71]
- Sanitary Napkins,
- Coir pith compost
- Sal Leaves siali leaves and their products and Sabai Rope
- Phool Bhari Jhadoo [Raw material for Jhadoo]
- Khali dona.
- Circulation and commemorative coins, sold by Security Printing and Minting Corporation of India Ltd [SPMCIL] to Ministry of Finance.
B. 12% to 5%:
- Chenille fabrics and other fabrics under heading 5801
- Handloom dari
- Phosphoric acid (fertilizer grade only).
- Knitted cap/topi having retail sale value not exceeding Rs 1000/-
C. 18% to 12%:
- Bamboo flooring
- Brass Kerosene Pressure Stove.
- Hand Operated Rubber Roller
- Zip and Slide Fasteners
D. 18% to 5%:
- Ethanol for sale to Oil Marketing Companies for blending with fuel Solid bio fuel pellets
IV. Rate change made in respect of footwear
5% GST is being extended to footwear having a retail sale price up to Rs. 1000 per pair. Footwear having a retail sale price exceeding Rs. 1000 per pair will continue to attract 18%
V. GST rates have been recommended to be brought down for specified handicraft items [as per the definition of handicraft, as approved by the GST council] from,-
A. 18% to 12%:
- Handbags including pouches and purses;
- jewellery box
- Wooden frames for painting, photographs, mirrors etc
- Art ware of cork [including articles of sholapith]
- Stone art ware, stone inlay work
- Ornamental framed mirrors
- Glass statues [other than those of crystal]
- Glass art ware [ incl. pots, jars, votive, cask, cake cover, tulip bottle, vase ]
- Art ware of iron
- Art ware of brass, copper/ copper alloys, electro plated with nickel/silver
- Aluminium art ware
- Handcrafted lamps (including panchloga lamp)
- Worked vegetable or mineral carving, articles thereof, articles of wax, of stearin, of natural gums or natural resins or of modelling pastes etc, (including articles of lac, shellac)
- Ganjifa card
B. 12% to 5%:
- Handmade carpets and other handmade textile floor coverings (including namda/gabba)
- Handmade lace
- Hand-woven tapestries
- Hand-made braids and ornamental trimming in the piece
- Toran
VI. Miscellaneous Change relating to valuation of a supply:
- IGST @5% on Pool Issue Price (PIP) of Urea imported on Govt. account for direct agriculture use, instead of assessable value plus custom duty.
- Exemption from Compensation cess to Coal rejects from washery [arising out of cess paid coal on which ITC has not been taken].
VII. Clarifications/amendments as regards applicability of GST rate in respect of certain goods recommended by GST Council which inter-alia includes:
- Milk enriched with vitamins or minerals salt (fortified milk) is classifiable under HS code 0401 as milk and exempt from GST.
- 5% GST on both treated (modified) tamarind kernel powder and plain (unmodified) tamarind kernel powder.
- Beet and cane sugar, including refined beet and cane sugar, (falling under heading 1701) attracts 5% GST rate.
- Water supplied for public purposes (other than in sealed containers) does not attract GST.
- Marine engine (falling under sub-heading 8408 10 93) attracts 5% GST rate.
- Kota stone and similar stones [other than marble and granite] other than polished will attracts 5% GST, while ready to use polished Kota stone and similar stones will attracts 18%.
- Certain other miscellaneous clarification as regards classification/rate have been recommended.
Relevant Publications:-
21.07.2018 Proposals over GST rate -services
21.07.2018 Amendment in Acts-various proposals
21.07.2018 GST rate reduction -Goods
