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Recommendations made in the 48th GST Council meeting

Following are recommendations made in the 48th GST Council meeting
New Rule 37A to be inserted, to prescribe the mechanism for reversal of input tax credit by a registered person in the event of nonpayment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently.

In terms of Section 16(2)© of the CGST Act, 2017, for the purpose of availing Input Tax Credit it is mandatory that the tax charged in respect of supply has been actually paid to the Government

Optitaxs_Recommendations made in the 48th GST Council meetingStreamlining GST Rates

  1. Reduction in GST rate on Ethyl alcohol supplied to refineries for blending with motor spirit (petrol) from present 18% to 5%. Presently the Ethyl alcohol supplier to oil marketing companies is subject to 5% GST for blending with motor spirit. As such the said amendment appears to have addressed the applicability of the concessional rate when Ethyl alcohol is supplied to refineries

Issuance of the circular for clarifying the following issues

  1. That the higher rate of compensation cess of 22% is applicable only to motor vehicles fulfilling all four conditions, namely,
      • it is popularly known as SUV,
      • has engine capacity exceeding 1500 cc,
      • has length exceeding 4000 mm and
      • has a ground clearance of 170 mm or above
  2. Renting of a residential dwelling to a registered person, who has rented it in his personal capacity for use as his own residence and on his own account and not on account of his business is not chargeable to GST.
  3. Manner of claiming refund of Tax borne by unregistered persons/buyers in the case of cancellation of certain services received by them such as the construction of flat/house and long-term insurance policy, and where the time period of issuance of credit note by the concerned supplier is over.
  4. In order to remove doubts and ambiguity regarding the taxability of transactions/activities covered under Paras 7, 8(a) and 8(b) of Schedule III of CGST Act, 2017 inserted w.e.f. 1 February 2019 (i.e. transactions of high seas sale, sale of warehoused goods in a customs bonded warehouse and merchandise trade) during the period 1.7.2017 to 31.1.2019. The said transactions were taken outside the purview of GST by way of such insertion. Now it is proposed to make the paras effective retrospectively from 1.7.2017 so as to treat them as neither supply of goods nor supply of services under schedule III from 1.7.2017 itself. However, refund of Tax will not be granted where the Taxpayers have paid any Tax on such transactions during the period 1.7.2017 to 31.1.2019.The said paras cover the following transaction namely
    • Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India
    • Supply of warehoused goods to any person before clearance for home consumption
    • Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption
  5. That No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for the valuation of insurance services
  6. Issues pertaining to the place of supply of services of transportation of goods in terms of the proviso to sub-section (8) of section 12 of the IGST Act, 2017 and availability of input tax credit to the recipient of such supply. The Council has also recommended that the said proviso may be omitted.The said proviso specifies that where the transportation of goods is to a place outside India, the place of supply shall be the place of destination of such goods
  7. Procedure for verification of input tax credit availed for 2017-18 and 2018-19 where there is a difference in the Credit availed in the GSTR 3B return and the auto-populated details availed in GSTR 2A return
  8. manner of re-determination of demand in terms of sub-section (2) of section 75 of CGST Act, 2017.
    In terms of the said sub-section where the Appellate Authority or Appellate Tribunal or court concludes that the charges of fraud or any wilful-misstatement or suppression of facts to evade tax as alleged under sub-section (1) of section 74, i.e under the extended period of limitation, is not sustainable, the proper officer can re-determine the tax payable by such person if the notice were issued under sub-section (1) of section 73 i.e within the normal period of limitation.

Recommendation for amendment in GST Act/Rules to provide for

  1. amendment in Section 132 of the CGST Act, 2017 to raise the minimum threshold for launching prosecution under GST from Rs. One Crore to Rs. Two Crores, except for the offence of issuance of invoices without supply of goods or services
  2. amendment in Section 138 of the CGST Act 2017 to reduce the compounding amount from the present range of 50% to 150% of tax amount to the range of 25% to 100% of the Tax amount.
  3. Amendment in Section 132 of the CGST Act, 2017 to decriminalize certain offences specified under clause (g), (j) and (k) of sub-section (1) of the said section namely-
    • obstruction or preventing any officer in discharge of his duties;
    • deliberate tempering of material evidence;
    • failure to supply the information.
  4. Amendment in Section 37, 39, 44 and 52 of CGST Act, 2017 to restrict filing of returns/statements to a maximum period of three years from the due date of filing of the relevant return / statement.
  5. Amendment in Rule 37(1) of the CGST Rules, 2017 to provide for proportionate reversal of input Tax credit, where payment of Value of supply along with Tax payable thereon is not made by the recipient to the supplier within 180 days from the date of issue of invoice by the said supplier. Reversal is to be made in proportion to the amount not paid to the supplier.
  6. New Rule 37A to be inserted, to prescribe the mechanism for reversal of input tax credit by a registered person in the event of nonpayment of tax by the supplier by a specified date and mechanism for re-availment of such credit, if the supplier pays tax subsequently.
    In terms of Section 16(2)© of the CGST Act, 2017, for the purpose of availing Input Tax Credit it is mandatory that the tax charged in respect of supply has been actually paid to the Government
  7. New Rule 88C and FORM GST DRC-01B to be inserted in CGST Rules, 2017 for the purpose of intimating the taxpayer, of any difference between liability reported by such taxpayer in FORM GSTR-1 and in FORM GSTR-3B for a tax period. Such intimation will be provided only in cases where the difference exceeds a specified amount and/ or percentage. In response to the intimation, the tax payer can either voluntarily pay the differential liability or explain the reasons for such difference. New clause (d) to sub rule (6) of rule 59 of CGST Rules, 2017 to be inserted to restrict furnishing of FORM GSTR-1 for a subsequent tax period if the taxpayer has neither deposited the amount specified in the intimation letter as above nor furnished reply explaining the reasons for the difference in Tax liability declared as per Form GSTR 1 and GSTR 3B returns.

The recommendations made by the GST Council will be implemented by way of issuance of Notification/Circular and amendments in CGST Act/Rules. We will keep you posted as and when the recommendations are brought into effect.

By Raveendra Pethe, Optitax’s Senior Advisor

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