The 27th meeting of the GST Council held yesterday through video conferencing approved a new return filing framework which would be implemented in step-wise process. It also approved that the GSTN, the information technology backbone of GST, will be converted into a government holding. The Council also discussed a 2 percent concession in the GST rate on items that are bought through digital modes of payment, though the Council deferred the decision to impose a cess on sugar and instead set up a Group of Ministers for further assessment.
Key takeaways from the 27th GST Council meeting is summarised hereunder for your easy digest:
GST Council approved principles for filing of new return design on IT simplification:
The GST council in its 27th meeting approved the principles for filing of new return design based on the recommendations of the Group of Ministers on IT simplification. The key elements of the new return design are as follows:
i. One Monthly Return: All the taxpayers except few like composition dealers shall file one monthly return. Return filing dates shall be staggered based on the turnover to manage load on the IT system. Composition dealers and dealers having nil transaction shall have facility to file quarterly return.
ii. Unidirectional flow of invoices: There shall be unidirectional flow of invoices uploaded by the seller on anytime basis during the month which would also be visible to the buyer and would be the valid document to avail input tax credit (“ITC”). No need to upload the purchase invoices. HSN at four-digit level or more shall be used for invoices for B2B transaction.
iii. Simple Return design and easy IT interface: The B2B dealers will fill invoice-wise details of outward supply, based on which the system will automatically calculate his tax liability and ITC based on invoices uploaded by his sellers. Taxpayer shall be also given user-friendly IT interface and offline IT tool to upload the invoices.
iv. No automatic reversal of credit: In case of default in payment of tax by the seller, recovery shall be made from the seller. However, reversal of credit from the buyer shall also be an option available with the revenue authorities to address exceptional situations like missing dealer etc.
v. Supplier side control: Unloading of invoices by the defaulting seller (above a threshold amount) to pass ITC shall be blocked to control misuse of ITC facility and similar safeguards would also be built to prevent loss of revenue.
vi. Transition – Stage 1 and Stage 2:
- The current arrangement of GSTR 3B and GSTR 1 (Stage – 1) will continue for a period not exceeding 6 months by which time new return software would be ready.
- GSTR 2 and GSTR 3 shall continue to remain suspended.
- In Stage - 2, the new return will have facility for invoice-wise data upload and facility for claiming ITC on self-declaration basis. After 6 months of this phase 2, the facility of provisional credit will get withdrawn and ITC will only be limited to the invoices uploaded by the sellers.
vii. Recovery of tax or reversal of ITC shall be through a due process of issuing online notice and order.
viii. Return shall be simplified also by reducing the content/ information required to be filled in the return.
Change in the shareholding pattern of GSTN:
Presently, the Central Government and State Government are holding 24.5% equity shares respectively and the remaining 51% are held by non-Governmental institutions and through various mechanisms, GSTN is under strategic control of government. Considering the nature of ‘state’ function performed by GSTN, GST Council felt that GSTN be converted into be a fully owned government Company.
However, the existing financial commitments given by Centre and States to GSTN to share the capital and O&M cost of the IT Systems shall continue.
Change in GST rate for digital transactions and imposition of Sugar Cess:
i. Incentive to promote Digital Transactions: The Council has discussed in detail the proposal of a concession of 2% in GST rate [where the GST rate is 3% or more, 1% each from applicable CGST and SGST rates] on B2C supplies, for which payment is made through cheque or digital mode, subject to a ceiling of Rs. 100 per transaction, so as to incentivise promotion of digital payment.
The council has recommended for setting up of a Group of Ministers from State Governments to look into the proposal and make recommendations, before the next Council meeting.
ii. Imposition of Sugar Cess over and above 5% GST and reduction in GST rate on ethanol: Considering record production of sugar in the current sugar season, and consequent depressed sugar prices and build-up of sugarcane arrears, the Council discussed the issue of imposition of sugar cess and reduction in GST rate on ethanol in detail.
The council also recommended for setting up of a Group of Ministers from State Governments to look into the proposal and make recommendations, within two weeks, keeping in mind the views expressed in GST Council in this regard.