The 42nd GST Council meeting wasn’t though successful to reach an amicable point of agreement for the compensation decisions between the Union & Member States and has consequently deferred the matter which will be hopefully get resolved in the 43rd GST Council meeting on October 12, 2020.

Nevertheless, the Council made some key decisions with far-reaching impacts on businesses in future, which have been listed below- 

1. It has been decided that the GST Compensation Cess shall be extended further than the earlier prescribed transition period of five years, for such period as may be required to meet the revenue gap.

2. It also permitted the taxpayers with a turnover of less than Rs 5 crore to file GST returns on a quarterly basis with monthly payment with effect from January 1, 2021, rather than monthly returns. Such persons will also get an alternative to pay 35% of their net cash tax liability of the previous quarter using an auto-generated challan for the first two months of the quarter.

3. The due date of furnishing quarterly GST returns (GSTR-1) will be modified to 13th of the succeeding month with effect from January 1, 2021.

4. Liability in GSTR-3B to be on the automated basis of GSTR-1 effective from January 1. Likewise, an input tax credit to be automated through GSTR-2B from January 1 for the taxpayers filing monthly returns, and from April 1 for quarterly return filers.

However, it shall be mandatory to file GSTR-1 before GSTR-3B from April 1, 2021.

5. The forms GSTR-1 & GSTR-3B return filing systems shall continue to be applicable till March 31, 2021, for which amendments in the GST laws shall be made accordingly to make it effective as the same as default return filing system.

6. It was decided that the taxpayers possessing a turnover of more than Rs.5 Crore shall be compulsorily required to mention six digits Harmonised System of Nomenclature (HSN)/ Servicing Accounting Code (SAC) on invoices from April 1, 2021. Whereas, the Taxpayers holding a turnover up to Rs 5 crore need to indicate their four digits HSN/SAC on business-to-business (B2B) invoices.

Further, the government holds the power to notify taxpayers required to mention eight digits HSN Code for a certain specified class of supplies under the Act.

7. A number of amendments in the Central Goods and Services Tax (CGST) Rules, 2017 have been suggested including the provisions for the submission of the NIL Form CMP-08 through SMS services.

8. Finally, GST Refunds shall be only disbursed through an authenticated bank account associated with Permanent Account Number (PAN) and Aadhaar of the registrant with effect from January 1, 2021.

Conclusion-

After a day-long GST Council meeting held on 5th of October 2020, the Centre and the states could not draw consensus on the issue of borrowing to make up for compensation shortfall. Therefore, the GST Council will meet on October 12 to further deliberate on compensating states for GST cess shortfall.

When GST was introduced in July 2017, it assured its Member- states a 14% increase in their annual tax revenue for five years with the Centre’s commitment to meet any shortfall in revenue by way of the compensation cess levied on luxury goods and sin products like Liquor, Tobacco, Cigarette, such as liquor, aerated water, automobiles, coal and other tobacco commodities. However, the global pandemic worsened the economic situation and dried –up sources for the Central Government to keep its promise to compensate the States as provided by it earlier. The Council also observed the decision to encompass the surcharge on taxes over luxury goods such as cars, and tobacco products beyond the timeline decided till June 22, 2022.

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