The month of July witnessed frantic activity on the GST front with the GST Council (the Council) approving a host of changes to the GST law in its 28th meeting held on 21 July 2018. The Council has approved a three-pronged change to the GST law consisting of amendments to returns, GST rates and the GST law with a view to improve compliance rates which as an upshot should give impetus to governments GST collections.

Top Trends

  • The 28th meeting of the Council was held on 21 July 2018 in New Delhi. The Council took certain important decisions such as:

    • Simplification of the return filing procedure;
    • Reduction of tax rates and rationalization of Input Tax Credit (ITC);
    • Recommendation of proposed amendments to the GST law.
  • The draft simplified GST returns formats have been published for stakeholder comments. In view of requests raised by the majority of businesses, draft formats include a return to amend the original return.
  • The Institute of Chartered Accountants of India recently hosted a webinar on GST audit. The general consensus among indirect tax professionals on certain key aspects relating to GST audit is as follows:
  • The turnover limit of INR 20 million for the purpose of determining the applicability of GST audit for a given GST registration is to be considered PAN-wise, i.e., aggregate turnover of all GST Identification Number (GSTIN) across India having the same Permanent Account Number (PAN) should be considered.

    Example: Company 'A' has GST registration in the state of Maharashtra and Gujarat. Its GST turnover is INR 15 million and INR 9 million in the state of Maharashtra and Gujarat respectively. In this scenario, even though individually the turnover for each state does not exceed the statutory threshold of INR 20 million, Company 'A' is liable to GST audit both in the state of Maharashtra and Gujarat as its aggregate turnover across India is INR 24 million (15+9).
  • The turnover should be determined on the basis of the entire financial year from April 2017 to March 2018, and not just for the post- GST implementation period, i.e., from July 2017 to March 2018.
  • The purpose of a GST audit report is to explain the reason for deviation and not just to 'report deviation.'

Judicial Pronouncements

Compliance Chart for Upcoming GST Due Dates

OTHER KEY ASPECTS

GST from a Macro Perspective

Key features of simplified returns

The Council has released the salient features and the format of the simplified return filing procedure which is proposed to be implemented once the Goods and Services Tax Network (GSTN) carries out the required changes in the IT system. The key features of the same are as follows:

  • Outward Supplies

    • Facility for continuous uploading of invoices by the supplier and viewing of such invoices by the recipient on the GST common portal.
    • These would be auto-populated as "Annexure of Outward Supplies" in the main return.
  • Inward Supplies and ITC

    • Annexure of inward supplies

      • To be auto-drafted based on invoices uploaded by suppliers.
    • Credit mechanism

      • Recipient to avail ITC only on the basis of invoices uploaded by the supplier.
      • ITC pertaining to invoices uploaded by supplier by the tenth of the subsequent month to be available in the same month. Invoices uploaded by the supplier after the tenth of the subsequent month shall be available to the recipient only in the return of the next month. For e.g., if an invoice of April 2018 is uploaded by the supplier on 11 May 2018, the recipient can claim ITC available in uch invoice in its return for the month of May 2018 and not of April 2018 resulting in working capital blockage.
    • Provisional ITC in transition phase

      • The ITC availment mechanism would be relaxed in the transition phase of six months after the new system of return filing is implemented.
      • In the transition phase, the recipient would be able to avail provisional ITC on a self-declaration basis even in respect of invoices not uploaded by the supplier by the tenth of the next month.
      • A 'missing invoice' facility would be available for this purpose. Reporting of 'missing invoices' can be delayed by the recipient for up to two tax periods to allow him time to follow up and get the missing invoice uploaded from the supplier.
  • Main return - One monthly return for all registered persons to be called as "monthly return" in form GSTR to be filed by 20th of the subsequent month. Most of the details of outward and inward supplies to be auto-populated. Certain fields would be required to be entered manually by the taxpayer such as:
  • Advances
  • Exempt and non-GST supply
  • ITC reversal
  • Amount of tax, interest or late fee.

Proposed amendments to GST law

The Council has engaged in continuous discussions with industry representatives and the revenue officials with the view to ease avoidable burden on businesses, plug loopholes and provide clarity in the GST law. Certain key recommended amendments are as follows:

  • Interest not applicable on the reversal of ITC on account of non-payment to the supplier within 180 days - Second Proviso to Section 16(2)
    The Council has re-visited the provision of levying interest on outward liability incurred due to the reversal of ITC and has deemed it as too onerous. It has therefore been proposed to be removed.
  • RCM on inward supplies from unregistered dealers only if specifically notified - Section 9(4) Addressing the concerns raised by the industry, it has been proposed to permanently suspend the provision of Reverse Charge Mechanism (RCM) on inward supplies from unregistered dealers to the extent that they apply to all registered persons. Now, the government may notify certain select category of registered persons who will be required to adhere to this provision.
  • Linkage of credit notes to specific invoices proposed to be discontinued - Sections 34(1) and 34(3)
    At present, credit note and debit note are to be linked with specific invoices. It has been proposed to allow issuance of consolidated credit and debit notes in respect of multiple invoices issued in a financial year, without linking them invoice-wise.
  • ITC on motor vehicles and certain employee benefits proposed to be liberalized - Section 17(5) The proposed amendment seeks to clarify that ITC would now be available in respect of dumpers, work-trucks, fork-lift trucks and other special purpose motor vehicles. After the amendment is carried out, ITC would be denied only in respect of motor vehicles for transport of persons having approved seating capacity of not more than 13 persons (including the driver), vessels and aircraft when these are used for personal purposes.

    Furthermore, allowing ITC when the goods or services provided to employees are obligatory under any law will come as a major relief to businesses.

    Revenue collections

    The GST collections have continued its upward trend, albeit marginally, with the gross GST collections for the month of July 2018 standing at INR 0.96 trillion. The GST collections, however, remain slightly below the government's target of an average monthly collection of INR 1 trillion.

    GST in the news

    • GSTN is testing Information Technology (IT) tools to be implemented for tax officials to ease the process of matching GSTR-1 and GSTR-3B filed by taxpayers.
    • The Council is considering the integration of e-Way Bill with regional transport databases to develop a mechanism to remove all check-posts by doing away with various road permits.
    • The solar industry has sought urgent clarity from the Council on the GST rate applicable to solar power projects in view of the contradicting rulings pronounced by the Authority for Advance Rulings of various states.

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.