The Article below summarizes the GST updates for the month of January 2020 with respect of two important circulars / notifications issued during the month:

A. Notification No. 01/2020-Central Tax dated 1 January 2020

The above notification makes applicable certain provisions of the Finance Act, 2019 w.e.f. 1 January 2020. The list of the provisions is given below:

1. Section 10

  • A composition dealer, apart from his regular business for which registration has been obtained as a composition dealer, is eligible provide services (other than restaurant services) to the extent of 10% of the turnover in the preceding year or 5,00,000 whichever is higher. As per the amendment, for the purpose of calculation of limit of 10%, interest or discount shall not be taken into account.
  • Further, another amendment has been made to deny the option to avail composition scheme for a casual taxable person and a non resident taxable person.
  • The option to avail composition scheme has been extended to a service provider (any services other than restaurant services), having a turnover of upto 50 lakhs to enable them to pay tax at the rate of 6% on the value of services.
  • For the purpose of computing eligibility of a person to pay tax under composition (basically for computing the limit of 1.50 crores in case of goods and 50 lakhs in case of services), the aggregate turnover shall include the turnover from 1 April to the date to becoming liable for registration under the Act but shall not include income in the nature of interest or discount on deposits, loans or advances. For example- Mr. A commences business on 5th April 2019. Till 30 September 2019, his turnover is 20 lakh. Consequently, Mr. A gets registered as a composition dealer and his turnover from 1 October 2019 to 31 March 2020 is INR 1.1 crore. Now, for determining his eligibility for next year during 2021-2022, his aggregate turnover shall be taken as 1.3 crores (INR 20 lakh + INR 1.1. crores)

2. Section 22

As per the amendment to Section 22, in case of a supplier engaged in only supply of goods, the limit for registration under GST has been raised to INR 40 lakh from the earlier 20 lakh.

3. Section 49 (Intra-head adjustment in Electronic Cash ledger

As per the amendment, any amount outstanding in the electronic cash ledger may be transferred to any other head in CGST, SGST and IGST in the electronic cash ledger and such transfer shall be deemed to be a refund under the Act. This adjustment is a welcome step as in many cases amount deposited under the wrong head had to be deposited again and the amount wrongly deposited had to be claimed as refund from the GST authorities.

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B. Circular No.131/1/2020-GST dated 23 January 2020

Under the GST regime, several cases of monetization of fraudulent input tax credit have been observed. In such cases, it was often found that the exporters were non-existent at the addresses provided. It was also observed that these exporters were claiming ITC on the basis of fake invoices and were using this ITC to pay tax on exports which was later claimed as refund at the time of filing the GST returns. To curb this menace of fraudulent GST refunds CBIC has, through the captioned Circular, introduced the following Standard Operating Procedure (SOP) to be followed by exporters:

1. At the outset, the Board through tools of Artificial Intelligence and Data Analytics, shall select a small percentage of exporters for further verification. Till the verification is complete, the refund scrolls with respect to such exporters shall be kept in abeyance and their export consignments shall be subjected to 100 % examination at the customs port. Further, the jurisdictional CGST or Customs authorities of the concerned exporter shall inform him at the earliest to avoid any inconvenience to the genuine exporter. The concerned exporter, on being informed or his own volition, shall furnish certain information in the Format as per Annexure-A to the circular.

2. On the basis of the information furnished, the Jurisdictional CGST authorities shall complete the verification procedure within 14 days, failing which it has be to be brought to the knowledge of nodal cell constituted in Pr. Chief Commissioner / Chief Commissioner Office.

3. After completion of 14 days from the date of submission of information to the jurisdictional CGST authorities, the exporter may escalate the matter to the Chief Commissioner by sending him an email concerned (email ids of the jurisdictional Chief Commissioner given in Annexure-B to the circular). The jurisdictional Pr. Chief Commissioner / Chief Commissioner shall get the verification procedure completed within the next 7 working days.

4. In any case, where the refund remains pending for more than a month, the exporter may file a grievance at by giving all the relevant details like GSTN, IEC, Shipping Bill no., Port of Export and CGST formation where the details in the prescribed format of Annexure-A were submitted by the exporter. These grievances shall be resolved by a Committee headed by Member GST, CBIC.

Thus, through this circular, due care has been taken to reduce the cases of fraudulent refunds while ensuring minimum hardship for the genuine exporter.

(The author is a practicing Chartered Accountant based in Delhi and can be reached at [email protected] or 9811933762)

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. The author does not accept any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied without express written permission of the author.

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  1. Moti Purohit says:

    in case of eligibility to provide services upto 10% of PY turnover or 5L which ever is higher, what would be gst tax rate on service component (whether it will be equal to composition tax rate or more than that).
    please help

  2. Moti Purohit says:

    i could not find the provision for eligibility to provide services upto 10% of PY turnover or 5L which ever is higher.
    and in case it is there, what would be gst tax rate on service component (whether it will be equal to composition tax rate or more than that).
    please help

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January 2021