1.0 Background of 43rd GST Council Meet: –

The GST Council has last met on 5th October, 2020, it had been more than half year that GST Council has met to discuss the trade facilitation measures on account of 2nd wave of COVID – 19. The 43rd GST Council meeting was highly requested from trade & industry to announce relief measures in regards to smoothening the implementation of GST & reducing rates of certain products in view of COVID – 19 & Black Fungus.

Further, the meeting also emphasised on reduction of rates on other products & extend exemptions to various services which are discussed in detail in below paras.

2.0 Analysis of GST Council Meeting Highlights – Legal Updates & Rate Cut Proposals: –

2.1 REDUCTION OF RATE ON COVID RELIEF ITEMS

The GST Council has proposed to Exempt IGST on Import of COVID relief items such as

(A) COVID – 19 relief items: –

> Medical oxygen,

> Oxygen concentrators and

> Other oxygen storage and transportation equipment,

> Certain diagnostic markers test kits and

> COVID-19 vaccines etc.

(B) Black Fungus relief item: –

> Amphotericin B (Used to protect from Black Fungus).

(Detailed List of Items would be shared soon by GOI)

Important Highlights: –

(i) Exemption extended on import on payment basis: –  The said exemption on IGST was already in force when imported free of cost for free distribution, however, with this proposal it has been decided to extend the same when imported on payment basis.

(ii) Criteria for Exemption: – The nature of import shall be for donating to the government or on recommendation of state authority to any relief agency.

(iii) Validity: – This exemption shall be valid upto 31.08.2021. Hitherto, IGST exemption was applicable only when these goods were imported “free of cost” for free distribution.

2.2 GST RATE CUT ON OTHER PRODUCTS: –

> Lympahtic Filarisis (an endemic) elimination programme being conducted in collaboration with WHO, the GST rate on Diethylcarbamazine (DEC) tablets has been recommended for reduction to 5% (from 12%)

> GST rate of 12% to apply on parts of sprinklers/ drip irrigation systems falling under tariff heading 8424 (nozzle/laterals) to apply even if these goods are sold separately.

2.3 GST EXEMPTIONS RELATED PROPOSALS: –

(i) Leviability of IGST on repair value of goods re-imported after repairs

As per section 20 of Customs Act, 1962, when goods are re-imported after repairs, duty of customs which would be leviable on fair cost of repairs carried out including cost of materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges, both ways.

The GST Council proposes to amend the said provision. However, the nature of amendment is yet to be prescribed by department.

(ii) Clarifications on Service Exemptions

(A) SERVICES PROVIDED “TO” EDUCATIONAL INSTITUTION: –

Nature of Funding Irrelevant for Claiming Exemption: – As per Entry No. 66 of Notification 12/2017 – CT (R) exempts certain services provided to Educational Institutions. The below tabulated presentation would make the proposed amendment very clear.

Nature of Service Taxability when provided to Pre – School to HSC Others Change if any
Transportation of students, faculty and staff; Exempt Taxable No Change
Catering, including any mid-day meals scheme sponsored by CG/SG/UT. Exempt Taxable No Change
Security or cleaning or house-keeping services performed in such educational institution; Exempt Taxable No Change
Catering, including any mid-day meals scheme sponsored by CG/SG/UT when CG/SG/UT is funded from government grants or corporate donations Exempt Taxable Proposed

(B) SERVICES PROVIDED “BY” EDUCATIONAL INSTITUTION: –

As per Entry No. 66 of Notification 12/2017-CTR, Services provided by Educational Institutions: –

> To its Students, faculty & staff or

> By way of conduct of examination are exempt from GST

The GST Council hereby proposes to clarify that, services provided by way of examination including entrance examination, where fee is charged for such examinations, by National Board of Examination (NBE), or similar Central or State Educational Boards, and input services relating thereto are exempt from GST.

Important Points & Analysis: –

(i) It would be worth to note that inward supplies received by NBE or other similar boards to provide services by way of conduct of examination are also clarified to be exempt from GST.

(ii) The examples of the same can be depicted as, NBE has taken services of printing shop to print question papers for conducting entrance examination. Thus, services provided by printer to NBE would be exempt from GST.

2.4 GST CLARIFICATION ON REAL ESTATE SECTOR: –

ANALYSIS OF PROPOSAL

(A) Meaning of Developer Promoter & Landowner Promoter and Detailed Analysis:-

(i) Developer promoter is a promoter who constructs or converts a building into apartments or develops a plot for sale.

(ii) Land Owner Promoter is a promoter who transfers the land or development rights or FSI to a developer promoter for construction of apartments and receives constructed apartments against such transferred rights and sells such apartments to his buyers independently.

(Explanation – NN 11/2017 – CTR dated 28th June, 2017)

Thus, when developer – promoter sells the constructed apartments to Land owner promoter before issuance of completion certificate or occupancy certificate, the sale of such apartments would be liable to GST (Schedule III read with NN 11/2017 – CTR).

(B) Analysis

GST Council in its 43rd GST Council meeting would like to make it amply clear that when developer promoter sells the apartments to land owner promoter and levies GST on it, land owner promoter would be eligible to avail Input Tax credit and can utilise the same when such land owner promoter further sells it to independent buyers (before CC/OC).

It shall be noted that, this clarification would only be applicable in case of ongoing projects i.e., projects which were started on or before 1st April, 2019 & promoter have furnished Annexure IV. After 1st April, 2019, the effective tax rates are 1% & 5% without ITC (Affordable & non-affordable respectively).

2.5 GST RATES ON MAINTENANCE, REPAIR & OVERHAUL (MRO) SERVICES: –

The GST Rates on Maintenance, Repair & Overhaul Services have been changed from time to time. Let us understand the rates transition along with proposed rate in below tabulated presentation: –

Sr. No. Period Service Rate of

Tax

Notification No. Remarks
1 July, 2017 to 31st March, 2020 Maintenance, repair and installation (except construction) services. 18% Entry No. 25(i)  of Notification No. 8/2017-Integrated Tax (Rate) From 1st July, 2017 to 31st March, 2020 there was no      bifurcation between aircraft or vessel MRO services.
2 1st April, 2020 till present Maintenance, repair or overhaul services in  respect  of aircrafts, aircraft engines and other aircraft components or parts. 5% Entry No. 25(ia) of Notification No. 8/2017-Integrated Tax (Rate) inserted vide Notification No. 02/2020-Integrated Tax (Rate) effective from 1st April, 2020 From 1st April, 2020 the rate of MRO services on aircraft parts reduced from 18% to 5%. Thus, vessel MRO services are continued to be taxed at 18%
3 Notified date till thereafter Maintenance, repair or overhaul services in respect of ships/vessels 5% Proposed in GST Council 43rd Meeting, to be notified from effective date.

PLACE OF SUPPLY: –

(i) In respect of MRO services of Aircraft: – Place of supply for B2B MRO services shall be location of the recipient of services vide Notification No. 02/2020–Integrated Tax Dated 25th March, 2020.

(ii) In respect of MRO services of Vessel & Ships: – Place of supply for B2B MRO services is proposed to be location of the recipient in GST Council Meeting.

(Note: – MRO Services are provided on goods, which declares place of supply as performance based services. Accordingly, if foreign ships or aircrafts are repaired the place of supply would have become “India” if place of supply was not changed to Location of Recipient of Service)

2.6 OTHER SERVICES: –

♦ Supply of service by way of milling of wheat/paddy into flour (fortified with minerals etc. by millers or otherwise) /rice to Government/ local authority etc. for distribution of such flour or rice under PDS is exempt from GST if the value of goods in such composite supply does not exceed 25%. Otherwise, such services would attract GST at the rate of 5% if supplied to any person registered in GST, including a person registered for payment of TDS.

♦ GST is payable on annuity payments received as deferred payment for construction of road. Benefit of the exemption is for such annuities which are paid for the service by way of access to a road or a bridge.

♦ Services supplied to a Government Entity by way of construction of a rope-way attract GST at the rate of 18%.

♦ Services supplied by Govt. to its undertaking/PSU by way of guaranteeing loans taken by such entity from banks and financial institutions is exempt from GST.

3.0 Compliance Updates: –

3.1 PENDING RETURN – Reduction in Capping Late Fees if return filed between 01.06.2021 to 31.08.2021.: –

Government would announce amnesty scheme for waiver of Late fees for period July, 2017 to April, 2021 as below: –

Sr. No. Nature of Return Proposed Caping Present Capping
1 Nil Return Rs. 500 per return (CGST – Rs. 250, SGST – Rs. 250) 10,000 per return (CGST – Rs. 5,000 SGST – Rs. 5,000)
2 Other than Nil Return Rs. 1,000 per return (CGST – Rs. 500 & SGST – Rs. 500) 10,000 per return (CGST – Rs. 5,000 SGST – Rs. 5,000)

The reduced rate of late fee would apply if GSTR-3B returns for these tax periods are furnished between 01.06.2021 to 31.08.2021.

3.2 CURRENT RETURNS – Reduction in Late Fees for period after April, 2021: –

Sr. No. Nature of Return Nature of Tax Payer Late Fees
1 GSTR 1 / GSTR 3B Taxpayers having nil tax liability in 3B or Nil Outward supplies in GSTR 1 Capped at Rs 500 (Rs 250 CGST + Rs 250 SGST)
Preceding year’s Annual A.T.O. upto Rs. 1.5 Crores Late fee to be capped to a maximum of Rs 2000 (1000 CGST+1000 SGST)
Preceding year’s Annual A.T.O. more than Rs. 1.5 Crores upto Rs. 5 crores Late fee to be capped to a maximum of Rs 5000 (2500 CGST+2500 SGST)
Preceding year’s Annual A.T.O more than 5 crores late fee to be capped to a maximum of Rs 10000 (5000 CGST+5000 SGST). (No change)
2 GSTR 4 Composition Taxable Person having nil tax liability Late fee to be capped to Rs 500 (Rs 250 CGST + Rs 250 SGST) per return, if tax liability is nil in the return
Other composition taxable person Late fee to be capped to Rs 2000 (Rs 1000 CGST + Rs 1000 SGST) per return for others.
3 GSTR 7 Tax Deductors Late fees to be reduced to Rs.50/- per day (Rs. 25 CGST  +  Rs  25  SGST)  and  to  be  capped to a maximum of Rs 2000/- (Rs. 1,000 CGST + Rs 1,000 SGST) per return.

3.3 RELIEF MEASURES W.R.T. INTEREST & LATE FEES: –

In addition to the relief measures already provided to the taxpayers vide the notifications issued on 01.05.2021, the following further relaxations are being provided to the taxpayers:

Nature of Tax Payer: – Small taxpayers (aggregate turnover upto Rs. 5 crore)

Period: – March & April 2021

Sr No. Nature of relief Tax period Interest Rates Allowed Period for relaxation of interest or late fee
1 Interest March, 2021 0% 15 days from due date of GSTR 3B or PMT-06 Challan
2 Interest March, 2021 9% After 15 days but before 60 days from due date of GSTR 3B or PMT-06 Challan
3 Interest April, 2021 0% 15 days from due date of GSTR 3B or PMT-06 Challan
4 Interest April, 2021 9% After 15 days but before 45 days from due date of GSTR 3B or PMT-06 Challan
5 Late Fees for filing of GSTR 3B March,   2021   or January,  2021  to March, 2021 0 60 days from due date of GSTR 3B
6 Late Fees for filing of GSTR 3B April, 2021 0 45 days from due date of GSTR 3B
7 Composition Scheme CMP 08 for January, 2021 to March, 2021 0% 15 days from due date of CMP 08
8 CMP 08 for January, 2021 to March, 2021 9% After 15 days but before 60 days from due date of CMP 08

Nature of Tax Payer: – Small taxpayers (aggregate turnover upto Rs. 5 crore)

Period: – May, 2021

Sr No. Nature of relief Tax period Interest

Rates

Allowed Period for relaxation of interest or late fee
1 Interest May, 2021 0% 15 days from due date of GSTR 3B or PMT-06 Challan
2 Interest May, 2021 9% After 15 days but before 30 days from due date of GSTR 3B or PMT-06 Challan
3 Late Fees May, 2021 0 30 days from due date of GSTR 3B

Nature of Tax Payer: – Large taxpayers (aggregate turnover more Rs. 5 crore)

Period: – May, 2021

Sr No. Nature of relief Tax period Interest

Rates

Allowed Period for relaxation of interest or late fee
1 Interest May, 2021 9% 15 days from due date of GSTR 3B or PMT-06 Challan
2 Late Fees May, 2021 0 15 days from due date of GSTR 3B

3.4 OTHER RELIEF MEASURES

1. Extension of due date of filing GSTR-1/ IFF for the month of May 2021 by 15 days. Extension of due date of filing GSTR-4 for FY 2020-21 to 31.07.2021

2. Extension of due date of filing ITC-04 for QE March 2021 to 30.06.2021

3. Cumulative application of rule 36(4) for availing ITC for tax periods April, May and June, 2021 in the return for the period June, 2021

4. Allowing filing of returns by companies using Electronic Verification Code (EVC), instead of Digital Signature Certificate (DSC) till 31.08.2021.

5. Time limit for completion of various actions, by any authority or by any person, under the GST Act, which falls during the period from 15th April, 2021 to 29th June, 2021, to be extended upto 30th June, 2021

3.5 Simplification of Annual Return for Financial Year 2020-21:

♦ Amendments in section 35 and 44 of CGST Act made through Finance Act, 2021 to be notified. This would ease the compliance requirement in furnishing reconciliation statement in FORM GSTR-9C, as taxpayers would be able to selfcertify the reconciliation statement, instead of getting it certified by chartered accountants. This change will apply for Annual Return for FY 2020-21.

♦ The filing of annual return in FORM GSTR-9 / 9A for FY 2020-21 to be optional for taxpayers having aggregate annual turnover upto Rs 2 Crore;

♦ The reconciliation statement in FORM GSTR-9C for the FY 2020-21 will be required to be filed by taxpayers with annual aggregate turnover above Rs 5 Crore.

Further, retrospective amendment in section 50 of the CGST Act with effect from 01.07.2017, providing for payment of interest on net cash basis, to be notified at the earliest.

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