Tax Experts react to 35th GST Council's announcements on June 21

“As a tax evasion measure, the council’s decision to impose penalty @10% in case of delay beyond 30 days in returning the profiteered amount, would have been apt if council had also prescribed guidelines for determining the profiteered amount.”

"GST Council at its 35 th meeting held on 21 June 2019 has adopted pragmatic and positive approach in dealing with several matters and, as is said: “Yeh Dil Maange More”…. There is lot that needs to be done to reduce cost of compliance while achieving greater compliance. Here is my take on three matters out of those considered by the Council.

Council has decided to refer tax rate change matters to Fitment Committee and will take up the matter in next Council Meeting. One wishes that, continuing with that spirit, the Fitment Committee lists all the matters pending before them for consideration and holds public meetings to take views of the stakeholders on board in a time bound manner.

The decision to defer filing of annual return date by two months is a welcome decision too. Here again, one wishes that some key challenges faced by tax payers specifically, relating to bifurcation of input tax credit between that relating to goods, services and capital goods and HSN wise breakup be relaxed for FY 2017-18 and FY 2018-19 as data is not captured by businesses in that format.

Phased implementation of new return and providing detailed time lines for roll out is much needed relief. Here again, one wishes that after the trial period of 3 months, there could have been a stand still period of 3 months during which businesses provide feedback and challenges, if any, encountered during trial period are addressed before full-fledged roll out. The roll out could be made effective from 1 April 2020 which would facilitate annual return filing and so on too."

"Businesses await the modalities of E-invoicing system; especially on aspects like proposed system and its integration with current invoicing system of businesses, alternate remedies for system in cases of breakdown, etc. Extension of due date for annual return and audit report comes as a big relief for businesses; who were grappling with understanding the disclosures in light of the recent clarifications. Referral to expert committees on rate rationalization for EV’s and deemed valuation of solar projects brings hope for businesses in these industries. The extension of the term of NAA for 2 years is while quite a welcome one from a consumer point of view, a penalty of 10% however may be harsh for businesses; especially in light of there being no clear guidelines on precise calculation of these benefits".

"The GST Council, granted much awaited relief to the industry by extending due dates for GST annual returns and audit reports by 2 months to 31 August 2019. In addition, the Council made significant recommendations such as extending the tenure of National Anti-Profiteering Authority (NAA) by 2 years; road-map for implementation of new GST return formats; phase-wise implementation of E-invoicing system for B2B transactions with voluntary rolling out from January 2020.

The extension of term of National Anti-profiteering Authority (NAA) by two years clarifies the intention of Government to sustain anti-evasion measures under GST. The said extension may further increase issues for the FMCG sector, given that there are no clear guidelines for computing and determining the profiteering. One would hope that the Council would address this industry-wide pressing need for clarity on methodology for anti-profiteering, to reduce interpretational disputes in future.

The focus of this meeting, in the second term of this government, indicates that the Centre is keen to iron out gaps in present GST compliance framework by introducing a new GST return process, consisting of RET-01 in place of GSTR-3B, ANX-01 in place of GSTR-1 and ANX-02 in place of GSTR-02 which is presently in abeyance. The new return process shall be open for a trial implementation in July to September 2019, with an objective to completely phase out of existing return system from January 2020. It is a welcome move that the Government has granted a three month trial period for the industry to adapt to the new framework. The new compliance framework would also be coupled with implementation of Electronic invoicing system, which is likely to be inter-linked with the new return filing process. One would expect that this implementation would not result into a compliance conundrum, on account of technical issues and lack of awareness amongst tax payers."

"35th GST Council meeting concluded on June 21, 2019, was first meeting after formation of the new Government and delved upon various important issues.

The Council has not tinkered with the rates of GST except for referring rates of GST on specific goods like e-vehicles, solar power systems and wind turbines to the fitment committee. This has put the speculations of reducing peak rate of GST on various goods to rest. This is a clear indicator that the Council will monitor the revenue collections in next few months before further pruning the rates.

The date of filing annual returns (GSTR-9 and 9C) has been extended by two months to August 31, 2019. Along with the extension of date of filing, the industry was widely expecting simplification in such forms on which there was no announcement.

The stringent provision for blocking of e-way bills due to non-filing of returns for two consecutive periods, has also been deferred by two months to August 21, 2019.

The tenure of National Anti-Profiteering Authority has been extended by 2 years contrary to news reports of extension by 1 year. The quantum of penalty in such cases has also been significantly increased. Despite the absence of any guidelines to determine profiteering, the Council is taking a hard stance on the issue of ‘profiteering’. The taxpayers (specifically in B2C sectors) can expect heightened litigations on this front, in the coming times.

The Council has approved introduction of e-invoices for B2B transactions on a voluntary basis effective January 2020. This will significantly reduce the compliance burden of taxpayers. As a logical corollary, the Council should consider integrating way bills as well with e-invoices. The Council also approved the new return filing system in a phased manner whose trial phase will begin July 2019 and will become mandatory October 2019 onwards. These steps clearly highlight the growing role of technology in tax compliances."

"The two interesting announcements are extension of the anti-profiteering provisions and reference to the Attorney General for Article 304 of the Indian constitution. On the Anti-Profiteering front, the moot point remains that the endeavour of the government is to clearly curb inflation but in the absence of the mechanism to compute Profiteering it will be difficult for the businesses to fight the legal battle in the years ahead. The validity of the extension also remains a question and a debate. On Article 304 of the Indian Constitution - it prescribes for reasonable restrictions on the freedom of trade which can be imposed by the State. Further, the state may impose tax on goods imported from other states so that there is no discrimination. The applicability of Article 304 with respect to GST will have to be seen in the broader objectives. Rate buying should certainly not come into play again."

"The GST council met for the first time under the leadership of the new FM. Taking into account industry representation, the council has decided to extend the last date of filing of the annual return and audit report for the period July 2017 till March 2018 to August 2019. There are more than 60 cases pending before the Anti Profiteering authority. Hence, the council has recommended to extend the tenure of the NAA by two years. Bringing cheer to the EV manufacturers, the council has asked the fitment committee to fine tune the reduction of GST rate on EV to 5%.

The process of obtaining GST registration is also set to be simplified by introduction of Aadhar based GST registration. The new system for raising the tax invoices on GST portal has received in principle approval for implementation from 01 January 2020. This shall apply to only B2B invoicing. Under this system, no separate e-way bill will be required to be generated.

This was perhaps one of the most anticipated council meetings as many recommendations were expected from this meeting. Going by the sheer number of recommendations made during this meeting, it is clear that the new FM means business with enhanced focus on increasing revenue collection, curbing tax evasion and simplifying compliances."

"The extension of due dates for GSTR-9/9C comes as a big relief for the industry. Businesses should ensure that the additional time is utilized for resolving any issues, obtaining clarity on various ambiguities to ensure the GSTR-9 filed is as required under the law.

This would also minimize the possibilities of qualification in GST audit report by the auditor.

Further, implementation of e-invoicing would ensure prevention of tax leakages resulting from fake invoicing by fraudsters, while also reducing the compliance burden on genuine businesses. However, the government should be ensure that the information technology backbone of the GST portal is sufficiently scaled up to meet the requirements of e-invoicing.”

"The first post-election GST Council meeting’s clear emphasis was on anti-evasion measures and reforming compliances under GST. Keeping the first phase of E-Invoicing roll-out from January 2020 voluntary is an welcome move, keeping in mind the experiences of disruption when similar reforms were carried out in Brazil and the repeated extensions that the Government has had to extend for various other basic GST compliances (including various extensions granted in this meeting).

However, extending the tenure of the National Anti-Profiteering Authority (“NAPA”), expected as it was, ought to have been accompanied with some effective, sector-specific guidelines on determination and quantification of profiteering – as more adverse orders get issued by the NAPA, the scrutiny on its Constitutional validity, already sub judice before two High Courts, will only intensify.

Further, it would be interesting to see what the Fitment Committee has to say apropos rates for various sectors like solar and wind power, electric vehicles etc – clarity of GST treatment in these areas will boost investments in these sectors.

While the press release suggests that decisions have been taken about locations of the State and the Area Benches for the Goods and Services Tax Appellate Tribunal (GSTAT) for various States and the Union Territories with legislature, there is no mention of the much talked about ‘Centralized Advance Ruling Authority”. One hopes that a suitable announcement in that regard will be made soon to enable assessees achieving certainty of tax treatment on issues where contradictory advance rulings exist."

"Ahead of the proposals to be made at the union budget on 5^th July, variety of decisions were taken at the 35^th meeting of the GST Council yesterday:

- Grant of time for completing audit procedure for first year of GST, i.e. July 2017 to March 2018

- Electronification: Approving of e-invoicing for B2B segment from January 2020 onwards, an anti-evasion tool. E-ticketing for film theatres, which should ease doing business and plug revenue leakages. lastly, Aadhar shall henceforth enable GST registration without the requirement of various other documents.

- Anti-profiteering: a two years leash to the NAPA, will perhaps conclude legacy matters. It is still hoped that rules of the game are framed.

- Penal consequences: Blocking of ability to generate EWB by non-filers (of returns for two consecutive tax periods) has been deferred till 21^st August 2019 - small window for regularization of affairs, which must henceforth be maintained. Proposal of 10% penalty for those not depositing the determined profiteering amount reveals the grim view the Revenue Department takes of persons held to have profiteered.

- Rates: as expected, no rate cuts were announced – GST collections for the first time in the previous three months averaged in excess of Rupees one lakh crore. For e-vehicles, rate rationalization will be discussed by the fitment committee, which body shall also examine the rate structure for solar power generating system and wind turbines; a consequence of the High Court’s directions. Rate for lotteries has proven tricky; one rate system of GST has evaded lotteries, with States unable to arrive at a consensus and now the future will emerge after the topmost law officer’s opinion on the two rate structure and the destination principle, with reference to Article 304 of the Constitution of India.

- Decision regarding locations of the GST Appellate Tribunal is welcome but, much work is needed including identification of members for the various benches whilst dealing with the challenge mounted in High Courts. 

The GST law is maturing; this is perceptible not only from the words of the chairperson of the Council, that discussions were focused, and with deep understanding of issues, but also the nature of decisions taken."

"It appears to be a good start for the new members and for the new Chairperson. There are no great announcements and at the same time, not much to be disappointed for the trade. The rates proposed for electric vehicles, solar and wind power generating systems, lottery were referred to fitment committee and law ministry. This gives ample time for the industry to analyse and to fine tune their recommendations further. The decision on electric vehicles needs to be taken in conjunction with the sale and lease rates on other automobiles also, as the sector is not really in good shape considering the high tax rates under GST in addition to the life tax and registration charges payable by them under the state regulations.

The extensions given for the annual returns, electronic invoicing and deferring the implementation of Rule 138E of CGST Rules are certain pointers that the new dispensation does not want show any tearing hurry in pushing the reforms against the interests of trade and are cautious in their approach. The extension given to anti-profiteering authority needs to be supplemented with clarity in the procedures for conducting their investigations, else this may turnout to be achieles heal. Phased introduction of electronic invoicing with abolition of electronic way bill is a laudable step. We hope that shortly post budget presentation, this council will deliver on the long pending changes in the law and rules so that the conflicting judgements crisscrossing the country are brought on a level playing field, so that the industry can sigh relief and can concentrate on their business rather than worrying about the tax positions to adopt."

"The tenure of National Anti-profiteering Authority has been extended by 2 years.  No inquiry should be initiated after July 1, 2019 for aspects relating to transitioning into GST regime, including change in rate of tax on July 1, 2017; this should be instituted in the law itself.

Phase 1 of the roll-out of electronic invoicing system is proposed to be voluntary and it is proposed to roll-out same from January 2020.  Taxpayers would need minimum six months to implement the new system, after knowing fully what is to be done.  Government should announce the new system take inputs from taxpayers and thereafter finalise the system to be rolled-out.  Thereafter, taxpayers should be given six months for the Phase 1 roll-out.

The issue related to valuation of goods and services in a solar power generating system and wind turbine will be placed before next Fitment Committee.  The initial decision to segregate the value and goods and value of services in a composite supply itself needs a re-look.  The solution is not in segregating the values, but in identifying the nature of supply correctly – whether it is composite supply or mixed supply.

Taxpayers and professional got solace in extension of due date of GST Audit to August 31, 2019.  This is likely to now impact the due date for next year too.  The ‘solemn affirmation’ by the chartered accountant / cost accountant for true and correctness of the reconciliation statement should have been changed.  This can be still done, as the due date has been extended.

Declaration to be filed relating to job work has been further extended to August 31, 2019.  With each extension, the period being covered is also extended.  The earlier due date was for the period July 2017 to March 2019; now the new due date is for the period July 2017 to June 2019.  Ideally, separate due dates could be specified for FY 17-18 and for FY 18-19, to ensure compliance of this.

Amendments would be carried out in the GST laws to implement the decisions taken by GST Council in earlier meetings.  Hope, these amendments are carried out through the Finance Bill to be presented on July 5, 2019.

Effective date for blocking e-way bills on non-filing of returns for two consecutive tax periods extended from June 21, 2019 to August 21, 2019.  Considering the focus on tax evasion, this date should not have been extended.

Each date being extended, it is now becoming the tendency of taxpayers to wait till the last moment and the experience is that every time the date gets extended.  With GST completing two years on July 1, 2019, now, going forward the implementation journey should see another sea-change in the due dates / implementation dates being not changed."