23 December 2019

Decisions of the 38th GST Council meeting

Due dates of GSTR-9 and GSTR-9C extended
The due date for Annual Return in FORM GSTR-9 and Reconciliation Statement in FORM GSTR-9C for FY 2017-18 has been extended to 31 January 2020.

ITC restricted to 10% of invoices appearing in GSTR-2A

In October 2019, the government had restricted Input Tax Credit (ITC) with respect to invoices not appearing in GSTR-2A to 20% of the ITC with respect to invoices appearing in GSTR-2A. It has now been decided to reduce this limit to 10% with ITC in respect of invoices appearing in GSTR-2A.

Waiver of late fee of GSTR-1
Late fee for delayed filing of GSTR-1 for the period July 2017 to November 2019 has been waived off, provided the same are filed by 10 January 2020.

Blocking of e-way bill
Blocking e-way bill for taxpayers who have not filed GSTR-1 for two tax periods. Earlier, this restriction was applicable only on non-filing of GSTR-3B.

Rate related changes

Change to exemption on long term lease
Extending the exemption from upfront amount payable for long term lease of industrial/ financial infrastructure plots by an entity having 20% or more ownership of Central or State government, with effect from 1 January 2020. Earlier, this exemption was available to an entity having 50% or more ownership of Central or State Government.
 
Rate rationalization on lotteries
From 1 March 2020, state run lotteries would be taxed at the same rate as state authorized lotteries viz. 28%.
 
Increase in GST rate on woven and non-woven bags
The GST rate on woven and non-woven bags and sacks of polyethylene or polypropylene strips used for packing of goods has been increased to 18% from 12% with effect from 1 January 2020. This is in view of the representations received in relation to accumulation of credit on account of inverted duty structure on manufacturing of the said goods.
 
Grievance Redressal Committee
Forming a Grievance Redressal Committee (GRC) at zonal/state levels consisting of CGST and SGST officers. These committees will address grievances of specific/ general nature of taxpayers at the Zonal/ State level.
SKP's Comments

Contrary to pre-meeting news reports, the GST Council didn’t undertake any substantial changes to the GST rates despite the gap in GST collections and budgeted estimates. It appears that the Council has instead decided to undertake measures to improve compliance by businesses to meet the GST revenue targets.
 
However, further restriction on ITC in respect of invoices not appearing in GSTR-2A can result in more working capital blockage for taxpayers. Businesses should consider implementing strong internal controls to ensure vendor compliances are tracked and there is minimal blockage of working capital.

Note
This alert is based on the press release issued by the GST Council. Relevant notifications are yet to be issued by the government.
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