Govt Announces A Series Of GST Relief Measures For Trade & Industry

Mumbai, 15 March 2020: Sensing further slow-down in the economy post Coronavirusoutbreak, the GST Council at its 39th meeting held on Saturday took series of decisions that will act as facilitator for the trade and industry. Among the major ones includes raising GST on mobile phones, specified parts to 18 per cent from the existing 12 per cent. The Goods and Services Tax (GST) on handmade, machine-made matchsticks has been rationalised to 12 per centwhile GST on MRO (maintenance repair overhaul) services of aircraft slashed to 5 per cent from 18 per cent. All rate related changes will come into effect on April 1.

Now the delayed GST payment will attract interest only on net tax liability from July1. Small businesses got some relief from the latest GST Council meeting with the deadline for GSTR-9C being relaxed. 

Ranjeet Mahtani, Partner, Dhruva Advisors, said, “A very controversial topic, involving recovery of interest from tax-payers on net of credit basis (by a retroactive amendment effective July 1, 2017) and not on gross liability  basis will substantially reduce disputes and ease recovery pressure that was being mounted on tax-payers.

Ritesh Kanodia, Partner, Dhruva Advisors said, “Demand notices were issued to companies for payment of GST on the gross cash liability despite proposed introduction of the proviso to Section 50. The government has earlier taken a view that the Proviso will be applicable prospectively. The demand notices were called before various high courts basis that credit available is equivalent to tax paid and interest is compensatory unpaid tax. In a welcome move the council has made the proviso retrospective from 01.07.2017 setting at rest any future litigation on the issue”.

Due date for submission of GSTR 9 & 9C ie GST Audit Report for FY19 has been extended from March 31, 2020 to June 30, 2020. This will bring about a significant relief to the trade and consultants as it was humanly impossible to comply with the deadline of March 31, 2020. 

Parag Mehta, Partner, NA Shah Associates LLP said, “Though it is a very welcome move, the ideal scenario would have been extending the same till September 30, 2020. The trade needs a minimum span of 6 months between 2 GST Audits and further with year-end coming to a close they will also be tied up with statutory audits and other compliances.”

For those with annual turnover below Rs 5 crore, the due date for filing annual return and reconciliation statement for FY19 was extended to June30, 2020. The Council also waived late fee for delayed filing of annual returns for FY18, FY19 by entities with turnover of less than Rs 2 crore. The FM said that Rs 78,000 crore has been collected as compensation cess. The total compensation related to states is over Rs 1.2 lakh crore, she said.

The monetary limit for filing the annual return and GST audit was Rs 2 crores. The said limit has been enhanced to Rs 5 crores. “This will ensure that the compliance burden is not levied on small businesses.  The trade has been demanding the said limit since inception of GST”, said Mehta.

A better GSTN system will be ensured by Infosys by July 2020, said Sitharaman. Infosys chairman Nandan Nilekani would attend next three meetings of the GST Council and update the Council on status of implementation of the decisions taken by the Council and assist in taking appropriate decisions on technology related issues, said Sitharaman. It may be recalled that Nilekani asked for time until January 2021 to ensure smooth functioning of GST’s IT systems.

GST Council will ask Infosys to deploy more skilled manpower, increase capacity of hardware, said the Finance Minister. Recently, the finance ministry has flagged 17 'areas of dissatisfaction' with Infosys-designed GST Network, including transition issues for taxpayers in Jammu and Kashmir, Aadhaarverification and lack of scalability of server.

On the issue of introduction of new GST Returns from 1st October ,2020, Mehta said, “There was a detailed presentation by Nandan Nilekani and he has assured the council that all glitches will be sorted out by January 2021. It was suggested to defer the introduction of new GST returns by 6 months. However in all fairness the same should be extended by one year. The due dates should be announced only after the new systems, returns and formats are tested by the GSTN”.

Making amendments and changes in the accounting system is a costly and time consuming affair. The trade has amended the system for GST in 2017, to incorporate various changes in a continuous manner, for e-invoicing and now for the new returns. Even after making the changes the API keeps on changing,leading the trade and the ASP/GSP to again make the changes leading to increase in cost, he said.

In the matter of e-invoicing extension, Kanodia opined that the extension on the Go-live date for e-invoicing is critical considering that companies were not yet completely prepared to implement the same. The change is not merely a small process change, however, of the entire eco-system comprising of ERP changes, alignment with vendors and suppliers. “The biggest concern that the industry is facing is integration with the ERP system, specifically, when the scheme for the e-invoice is not yet finalized and frequent changes are being introduced. There is also lack of clarity on issuance of e-invoice for certain transactions such as imports, exports, reverse charge invoices etc”, He said.

In addition, companies are concerned with the loss of credit if the vendor does not issue a proper e-invoice. While welcoming the move Kanodia said, “The extension ensures that industry will get more time to prepare and also in the meanwhile, the government can ensure that the technology framework is robust to handle the load.”

The meet on Saturday sought to correct the anomalies in the inverted duty structure, ease of doing business and lower compliance burden. Inverted duty refers to tax rates on inputs being higher than those levied on finished products. This results in higher input credit claims by goods besides several administrative and compliance issues. However, decision on GST rates for footwear, fertilisers and man-made fibres has been deferred for the next meeting.

GST collections in the month of February this year were at Rs 1,05 lakh crore. According to the Union Finance Ministry, the GST revenues during the month of February 2020 from domestic transactions have shown a growth of 12 per cent over the revenue during February last year.