Update on 27th GST Council Meeting at New Delhi on 4th May 2018

GST Council (‘Council’) in its 27^th meeting held on 04^th May 2018 has discussed and made recommendations on various issues. The key highlights of the meeting are as follows:

·         Simplification of GST Returns – The Council has approved principles for filing of new Return design based on the recommendations of the Group of Ministers on IT simplification. The key elements of the new Return design are as follows –   

a)      Return:-

      One single Return to be filed on monthly basis, expect for composition dealers and those dealers who file ‘Nil’ Returns where option of quarterly filing of Return is allowed.

      Returns will also be simplified by reducing the content/information to be filled in the Return.

b)      Stage wise implementation of Return filing:-

      In Phase-I of introduction of new Return system, GSTR-1 and GSTR-3B will continue for a period not exceeding 6 months;

      In Phase-II, tax payers will be allowed to upload invoices in relation to outward supplies and claim ITC on self-declaration basis. This phase will be in existence for 6 months and the tax payer will be constantly updated on the ITC available based on the invoices uploaded and claim provisional ITC on self-declaration basis;

      Once the time period of Phase-II is completed, taxpayers will be allowed to claim ITC only on the basis of invoices uploaded by the sellers, The provisional credit facility will be withdrawn.

c)       Flow of invoice in returns:-

      Invoices uploaded by the seller would be a valid document to avail Input Tax Credit (‘ITC’) and no further invoice needs to be uploaded by the buyer;

      Invoices for B2B transaction shall require HSN at four-digit level or more to achieve uniformity in the reporting system;

      Output tax liability will be automatically calculated basis the outward invoices uploaded by the seller and based on the same invoice purchaser will be allowed the credit;

d)      Reversal of credit:-

      No automatic reversal of ITC for non-payment of tax by the seller.

      If seller is on default, the recovery shall be made from Seller;

      However, revenue authorities will have an option to insist the purchaser to reverse the ITC in exceptional cases like missing dealers;

      Recovery of tax or reversal of ITC shall be through a due online process of issuing notice and order;

e)      Safeguard to control ITC:-

      Seller shall be blocked in case of non-payment of GST above a threshold limit;

      Analytical tools in this regard would be used to identify such transactions at the earliest and prevent loss of revenue.

·         The Council also discussed on providing incentive to promote digital transactions by providing concession of 2% in GST rate[1] (i.e. 1% each in CGST and SGST) maximum of INR. 100 per transaction on B2C supplies.

·         The Council has recommended to form a Group of Ministers to look into the incentive proposal and make recommendations before the next Council meeting.

·         The Council also discussed on imposition of Sugar Cess over and above 5% GST and to reduce GST on ethanol.

·         The Council has recommended to form a Group of Ministers to look into the proposed imposition of sugar cess and reduction in GST rate for ethanol and make recommendations within 2 weeks.

·         Council has decided that the Central Government and the State Governments shall acquire 51% share in GSTN-SPV and convert it into a fully owned Government Company.

The decisions of the GST Council are being communicated for general information and will be given effect to through Gazette notifications / circulars which shall have force of law.

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