Indirect Tax

GST Developments and Associated Procedures

1.    The decision taken in the 39^th GST Council Meeting

The following decisions, inter alia, were taken by GST Council in the 39^th meeting chaired by the Finance Minister of India: 

• Enhance GST rate on mobiles to 18 per cent from 12 per cent due to inverted duty structure
• Reduce GST on maintenance, repair and overhaul (MRO) services in respect of aircrafts to 5 per cent from 18 per cent with full input tax credit
• Interest on delayed payment of GST to be applicable only on the cash component and not on the credit component (this change would require change in the GST Act and is proposed to be carried out retrospectively)
• Increase in the turnover threshold for the purposes of carrying out audit under GST laws by a Chartered Accountant and furnishing of reconciliation statement in Form GSTR 9C to INR 50 Million from the existing INR 20 Million for FY 2018-2019.
• Waiver of late fee for delayed submission of GSTR 9 and GSTR 9C for FY 2017-2018 and FY 2018-2019 for taxpayers with aggregate turnover less than INR 20 Million.
• New facility 'Know your supplier' to be introduced to enable every registered person to have some basic information about the suppliers with whom they undertake business.
• The present system to file Form GSTR 1 and GSTR 3B to be continued until September 2020 and until the new system of returns is effective and operational from October 2020.
• Suitable Notification/ Circulars/Amendments have been made/ will be made by the Government to effectuate the decisions of the GST Council. 

2.   Special Procedure for Corporate Debtors under the Insolvency and Bankruptcy Code 2016 ('IBC')

• Vide Notification No. 11/2020 – Central Tax dated 21 March 2020, the Government has notified registered persons, who are Corporate Debtors under the IBC undergoing the corporate insolvency resolution process and the management of whose affairs are being undertaken by interim resolution professionals ('IRP'), as the class of persons who shall follow a special procedure for GST law purposes.
• The procedure broadly includes the manner of seeking a new registration, filing of returns during the period, availing input tax credits, etc.  
   

3.   AADHAR based verification for GST registration

• The provisions relating to registration under the GST law have been amended so as to provide authentication using AADHAR for grant of registration. The provisions will, however, be effective 1 April 2020. In case of failure of authentication of registration using AADHAR, provisions have been made for grant of registration, subject to physical verification of the business premises.

4.   IGST on Ocean Freight – ultra vires the Law

• The GST law vide Notification 8 and 10/2017 –  Integrated Tax (Rate) dated 28 June 2017 provides for levy of IGST under Reverse Charge Mechanism. The said levy was challenged as ultra vires the IGST law and on other grounds before multiple State High Courts in India.
• The Hon'ble High Court of Gujarat in the matter of Mohit Minerals v UOI declared the said notifications to be ultra vires the IGST law. The High Court proceeded to strike down the said notifications and as a corollary declared the levy of IGST on ocean freight under Reverse Charge Mechanism as ultra vires and not per law.

• A similar ruling was also given in the matter of Sal Steel v. UOI in relation to the Service tax law, by the same High Court.

• Similar matters are pending before other State High Courts and are pending judicial scrutiny.

Important Notifications issued during the quarter

1.    E-Invoicing

• E-invoicing was proposed to be made mandatory from 1 April 2020 for businesses having turnover of INR 1 billion or more. On account of the challenges in the implementation, the Government has issued Notification No. 13/2020 – Central Tax dated 21 March 2020 to defer the implementation to 1 October 2020.
• Vide Notification No. 14/2020 – Central Tax dated 21 March 2020, effective 1 October 2020, the invoices issued to an unregistered person by registered persons with aggregate turnover over INR 5 billion shall contain the Dynamic Quick Response (QR) code.

2.   Date Extension - Annual Return and Reconciliation Statement

• Vide Notification No. 15/2020 dated 23 March 2020, the Government has extended the due date for conducting GST audit and for submission of Form GSTR 9 and Form GSTR 9C (Annual Return and Reconciliation Statement) for FY 2018-2019 till 30 June 2020.

3.   Exemption from GSTR 9C to foreign airlines

• Vide Notification No. 09/2020 – Central Tax dated 16 March 2020, the Government has exempted a foreign company being an airline company [under Rule 4(2) of the Companies (Registration of Foreign Companies) Rules, 2014] from submission of a reconciliation statement in Form GSTR 9C. This is subject to the condition that the airline company furnishes for each GSTN, a statement of receipts and payments for the financial year in respect of its Indian business operations duly certified by a Chartered Accountant by 30 September  of the following Financial Year.
  

4.   Timelines to furnish Form GSTR-3B and Form GSTR 1

GSTR 3B -

• In view of the difficulties faced on the common GST portal, the Government issued Notification No. 07/2020 – Central Tax dated 3 February 2020 and Notification No. 29/2020 – Central Tax dated 23 March 2020 proposing a staggered manner for submission of Form GSTR 3B for the months of January 2020 to September 2020.
• Where the turnover of the registered supplier is over INR 50 Million, the due date continues to be the 20^th day of the following month.

• Where the turnover is up to INR 50 Million, the due date is 22^nd or the 24^th day of the following month, depending on the State in which GST registration has been obtained.
  

GSTR 1 (Notification 27 and 28/2020 – Central Tax dated 23 March 2020) 
 

 Important circular issued during the quarter

• Vide Order No. 01/2020 – GST dated 7 February 2020, the Government extended the timelines for submission of Form GST TRAN 1 for transition of erstwhile credits. The extension has been provided until 31 March 2020 only to registered persons who could not submit the declaration on account of technical glitches on the common portal and whose case have been recommended by the GST Council.
• Vide Circular No. 131/1/2020 – GST, the Government issued a Standard Operating Procedure ('SOP') to be followed by exporters. The SOP was issued to curb fraudulent claim of IGST refunds on exports. The SOP, inter alia, includes submissions of certain information to the jurisdictional authorities in order to verify and expedite the refund sanction process.  
• Vide Circular No. 132/2/2020 - GST dated 18 March 2020, the Government has issued clarification in respect of the appellate process to be followed, pending constitution of the GST Appellate Tribunal ('GSTAT'). The Circular provides that the period of limitation to file an appeal to the GSTAT will be counted from the date on which the President or State President of the concerned GSTAT enters office.

Customs & Foreign Trade Policy related developments

• Additional Export incentive of 2 per cent is notified for the export of mobiles under HS Code 85171211 and 85171219 made by exporters within the period from 1 January 2020 to 31  March 2020.  This additional incentive is additional reward available along with rewards under MEIS.
• Further, no separate application is required to be filed for such additional incentives.  The application for claim of MEIS under the said code would also be considered as application for additional incentives.

• Corresponding customs Notification No. 14/2020-Cus dated 14.02.2020 is issued to grant exemption from payment of custom duties by using these additional incentive scrip.

• The Rebate of State and Central Levies and Taxes (RoSCTL) is notified for export of products under Chapter 61, 62 and 63.  The detailed process for claiming the benefit is notified vide Public Notice No. 58/2015-2020 dated 29 January 2020 w.e.f. 7 March 2019.

• Further, the application for issuance of RoSCTL scrip for exports made from 07 March 2019 to 31 December 2019 is prescribed as 30 June 2020.

• Further, corresponding exemption from payment of Customs Duty is notified for import against the scrip issued under RoSCTL scheme vide Notification No. 13/2020-Cus dated 14.02.2020.

• The Notification No. 13/2020-Cus dated 14 February 2020 has also notified the list of exports which are ineligible for availing the incentive under RoSCTL scheme.

• Exemption from payment of IGST and Compensation Cess on imports for EOU unit is extended till 31 March 2021 vide Notification No. 16/2020-Cus dated 24 March 2020

• Circular No. 2/2020-Cus dated 10 January 2020 is issued to clarify that SWS cannot be debited in the MEIS or SEIS scrip presented at the time of import in view of the decision of Larger Bench of Hon'ble Supreme Court in case of Unicorn Industries.  It is further clarified that for the past cases where SWS is debited in the scrip, it is clarified that such debit shall be accepted as revenue duly collected.