GST Update - 23 September 2019 | SKP
23 September 2019

Decisions in the 37th GST Council meeting

The 37th GST Council meeting was held on 20 September 2019 in Goa. The Council deliberated on a host of issues and devised various steps to provide relief to businesses. The key decisions of the Council have been captured in this alert.
 
Law and procedural changes
  • Annual return in GSTR-9 has been made optional for businesses with an aggregate turnover of up to INR 20 million.
  • A committee has been appointed to examine the possibility of simplification of annual return and audit/reconciliation statement forms i.e. GSTR-9 and GSTR-9C respectively.
  • The Council has decided to impose restrictions on availing input tax credit (ITC) by recipients in cases where the supplier has not filed his GSTR-1. However, further clarification is awaited on the modalities of this restriction.
  • The new return filing system earlier proposed to be implemented in a phased manner from October 2019 has been postponed to April 2020.
  • In a big relief, the GST Council has rescinded two contentious circulars issued in the recent past:
    • Supply of Information Technology enabled Services (ITeS)
    • The Circular had sought to clarify what qualifies as intermediary services in the ITeS sector. A new Circular in supersession of the said Circular will be issued shortly.
    • Taxability of post-sales discounts
    • The Circular, inter alia, had clarified that discounts provided by the original supplier of goods to his dealers, so that the dealers can offer a special reduced price to the customers, should be chargeable to GST in the hands of the dealer. The said Circular has been rescinded ab initio.
  • A single authority integrated refund system for quick disbursal of refund claims will be introduced from 24 September 2019.
Rationalization of GST rates
 
Goods
Commodity Old rate Revised rate
Marine fuel 0.5% (FO) 18% 5%
Cut and polished semi-precious stones 3% 0.25%
Specified goods for petroleum operations under Hydrocarbon Exploration Licensing Policy Various rates 5%
Caffeinated beverages 18% 28% + 12% Compensation cess
Import of specified defense goods not being manufactured indigenously Various rates Exempt
Exclusive parts and accessories for use with a medical device (specific Chapter headings) Various rates 12%

Services
Service Old rate Revised rate
Hotel accommodation - Daily tariff above INR 7500 28% 18%
 
Hotel accommodation - Daily tariff of more than INR 1000 but up to INR 7500 18%/12% (based on tariff)  12%
Outdoor catering other than in premises having a daily tariff of a unit of accommodation of more than INR 7500 18% 5% without ITC
Machine job work in the engineering industry (other than bus bodybuilding) 18% 12%
Intermediary services when both supplier and recipient of goods are located outside the taxable territory 18% Exempt
 
Other GST rate related changes
  • It has been clarified that fishmeal is exempt from GST for the period 1 July 2017 to 30 September 2019. However, any tax collected for this period should be deposited with the government.
  • Compensation cess on passenger vehicles having certain specifications and designed to carry more than 10 but up to 13 persons to be reduced from 15% to 1% for petrol and 3% for diesel vehicles respectively.
  • The option provided to pay GST at the rate of 18% on transactional value at the time of disposal of specified goods for petroleum operations (on which concession GST rate of 5% is paid on purchase) provided that the goods are certified by Director General Hydrocarbon as 'non-serviceable'.
  • Warehousing services for cereals, pulses, fruits, nuts, vegetables, etc. exempted from GST.
  • The validity of conditional exemption on export freight extended till 30 September 2020.
  • In order to extend export benefits to certain research & development (R&D) services provided to foreign clients, the place of supply in case of the following services has to be treated as location of the foreign service recipient:
    • Specified R&D services provided by Indian pharma companies;
    • R&D services in relation to chip design software by using sample test kits.
SKP's Comments

The dipping GDP growth rate had given enough indications that the government would attempt to provide a stimulus to the economy through GST rate reductions in key sectors in order to boost consumption. However, the announcements have been more in the form of ease of compliance requirements rather than big-ticket rate changes. Despite several demands, there has been no significant rate reduction in the automobile sector which is undergoing a huge downturn.

This shall certainly give confidence to the trade and industry that the government would be ready to step in whenever any arbitrary provisions are detrimental to businesses. Many such announcements, however, shall come to light on 1 October when the notifications making these effective shall be issued.

Note:
The changes in relation to GST rates should be effective from 1 October 2019.
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