42nd GST Council Meeting: Key Expectation & Highlights

The 42nd Good and Service Tax (GST) Council Meeting held under the chairmanship of Union Finance & Corporate Affairs Minister Nirmala Sitharaman through video conferencing on October 5. The meeting was also attended by Union Minister of State for Finance & Corporate Affairs Mr Anurag Thakur apart from Finance Ministers of States and UTs and senior officers of the Ministry of Finance and States/ UTs.

The GST Council had made several recommendations in the meeting. Here are the key highlights and expectation.

Important points to be noted:-

  • Levy of ‘Compensation Cess’ to be extended beyond 5 years:

GST being a destination based consumption tax, the revenue of the same has been accruing to destination/consuming states [except section 13(8) of IGST Act]. GST (Compensation to States) Act, 2017 was enacted to levy Compensation cess for providing compensation to the States for the loss of revenue arising on account of implementation of the said tax with effect from the date from which the provisions of the Central Goods and Services Tax Act is brought into force (1/7/2017), for a period of five years or such period as may be prescribed on the recommendations of the GST Council.

Thus, levy of Compensation Cess to be extended beyond the transition period of five years, i.e. exceeding June, 2022, for such period as may be required to meet the revenue gap.

  • Centre to release Compensation Cess for States:

Compensation cess collected this year so far, amounting to approximately to Rs 20,000 crore is expected to be provided by Centre to the States, as a measure to make up for the loss incurred during 2020-21. Also, Rs. 24,000 crores will be provided by the end of this week, towards the Integrated GST of 2017-18;

  • Ease in filing Returns and simpler compliances:

Intending to enhance Ease of Doing Business and improve the compliance experience, the Council has approved the future roadmap for return filing under GST.

The approved framework aims to simplify return filing and further reduce the taxpayer’s compliance burden by making the following changes:

  1. Furnishing of GSTR-1 for the periods is sufficient, as GSTR-3B will be auto-populated based on the filing of GSTR-1.
  2. Due date for filing GSTR-1 (for those taxpayers who furnish it quarterly) will be extended to the 13th of the succeeding month to the respective quarter; i.e. w.e.f. January 1, 2021.
  3. Now, GSTR-3B will be auto-populated from GSTR-1 in the following manner:

         a) The ‘Liability’ part will be generated for all taxpayers w.e.f. January 1, 2021.
b) The ‘Input Tax Credit’ part will be generated (with the help of GSTR 2B) for the
Monthly taxpayers – w.e.f. January 1, 2021
Quarterly taxpayers – w.e.f. April 1, 2021

4. To ensure that [i] and [ii] of point (b) are carried out smoothly, the GSTR-1 is to be mandatorily filed before GSTR-3B w.e.f. April 1, 2021.

5. The due dates to furnish the existing GSTR-1 and GSTR-3B is March 31, 2021.

  • Reduce burden of Small taxpayers:

The compliance burden, especially on the small taxpayers, having aggregated annual turnover less than Rs. 5 crore, the Council’s recommends to allow filing of returns quarterly with monthly payments by such taxpayers to be implemented w.e.f. January 1, 2021. The payment will be made through challan every month, and the number of returns comes down from 24 monthly returns to 8 returns, from January 1, 2021.

Furthermore, such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35 per cent of the net cash tax liability of the last quarter using an auto-generated challan.

  • Revising requirement to mention HSN / SAC on Tax Invoices

Revised requirement of declaring HSN for goods and SAC for services in invoices and in FORM GSTR-1w.e.f. April 1, 2021, as under:

  1. HSN/SAC at 6 digits for supplies of both goods and services for taxpayers with aggregate annual turnover above Rs. 5 crores;
  2. HSN/SAC at 4 digits for B2B supplies of both goods and services for taxpayers with aggregate yearly turnover up to Rs. 5 crores;
  3. Government to have the power to notify 8 digit HSN on declared class of supplies by all taxpayers.
  • Refund to be paid/disbursed:

PAN and Aadhar cards are compulsory for claiming a refund. The refunds will be given only to those bank accounts that have been validated with PAN and Aadhar details from January 1, 2021.

  • GST compensation issue:

The payment of GST compensation to states became an issue after revenues from the imposition of cess started decreasing since August 2019. The Centre had to dive into the excess cess amount collected during 2017-18 and 2018-19. The compensation payout amount was Rs 69,275 crore in 2018-19 and Rs 41,146 crore in 2017-18.

  • GST Council exempts satellite launch services by ISRO, Antrix:

In order to encourage domestic launching of satellites particularly by young start-ups, the satellite launch services supplied by ISRO, Antrix Corporation Ltd. and NSIL would be exempted.

The next meeting is scheduled on October 12 to further deliberate on compensating states for GST cess shortfall.

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