The 43rd Goods and Services Tax (GST) Council convened on May 28, 2021, marking its first meeting in over six months. Chaired by Finance Minister Smt. Nirmala Sitharaman, with Union Minister of State for Finance and Corporate Affairs Shri Anurag Thakur also in attendance, the session included Finance Ministers from states and union territories, alongside senior officials from both central and state finance ministries. A special session was also planned to address the collection mechanism for compensation cess beyond 2022.

Key Outcomes of the 43rd GST Council Meeting

The Council made several important decisions:

• The Council decided to maintain the 5% GST rate on COVID-19 vaccines and rejected the proposal to classify other COVID-related relief supplies as zero-rated.
• An exemption from GST was granted for the import of all COVID-19 relief items and medicines, including those provided free of cost, until August 31, 2021. This exemption specifically covered Amphotericin B, a crucial medicine for treating Black Fungus.
• A Group of Ministers (GoM) was mandated to be established by May 29, 2021, with a deadline of June 8, 2021, to report on potential rate reductions and new exemptions.
• A GST Amnesty scheme was introduced for small taxpayers with pending GSTR-3B filings to mitigate late fees. Furthermore, the maximum late fee for small taxpayers filing future GST returns was decreased.
• Due dates for IFF and GSTR-1 filings for May 2021 were extended by 15 days. The deadlines for GSTR-4 for FY 2020-21 and ITC-04 for Jan-Mar 2021 were also pushed to July 31, 2021, and June 30, 2021, respectively.
• Taxpayers received waivers on late fees and reduced interest rates for GSTR-3B or PMT-06 filings for March, April, and May 2021, along with CMP-08 submissions for Jan-Mar 2021.
• Taxpayers are now permitted to apply CGST Rule 36(4) cumulatively for April, May, and June 2021 when filing their GSTR-3B for June 2021.
• The filing of the GST Annual Return (GSTR-9) was streamlined, remaining optional for small taxpayers with turnover up to Rs. 2 crore for 2020-21. GSTR-9C (Reconciliation statement) remains mandatory for taxpayers with an annual turnover of Rs. 5 crore or more, with self-certification now allowed.
• Companies can continue to file GST returns using Electronic Verification Code (EVC) instead of a digital signature until August 31, 2021.
• The deadline for completing GST law compliances and actions due between April 15, 2021, and June 29, 2021, was extended until June 30, 2021.
• The Quarterly Return Quarterly Payment (QRMP) scheme is set to be implemented, following the law committee’s recommendations and defined procedures.
• Extensive discussions on the GST Compensation cess concluded with the adoption of the previous year's formula. The central government committed to borrowing Rs. 1.58 lakh crore to cover the compensation cess deficit.
• The Council opted not to discuss GST rate revisions concerning the inverted tax structure.

Revisions to GST Return Due Dates, Late Fees, and Interest Relief

| Return/Form | Filing Frequency | Taxpayer Type & Turnover | Type of Relaxation | Return period | Original Due Date | Due Date as per 1st May 2021 notification | Due Date as per the recommendation of GST Council | |---| | GSTR-1 | Monthly | Regular | Due date extension | Apr’21 | 11th May 2021 | 26th May 2021 | Remains same | | | | | | May’21 | 11th June 2021 | NA | 26th June 2021 | | IFF (Optional facility) | Monthly | Regular, but opted for the QRMP scheme | Due date extension | Apr’21 | 13th May 2021 | 28th May 2021 | Remains same | | | | | | May’21 | 13th June 2021 | NA | 28th June 2021 | | PMT-06 | First and Second month of quarter | Regular, but opted for the QRMP scheme | Interest rate reduction | Apr’21 | 25th May 2021 | 25th May 2021 (Nil up to 9th June, 9% between 10th and 24th June, 18% thereafter) | 25th May 2021 (Nil up to 9th June, 9% between 10th and 9th July, 18% thereafter) | | | | | | May’21 | 25th June 2021 | NA | 25th June 2021 (Nil up to 10th July, 9% between 11th and 25th July, 18% thereafter) | | GSTR-3B | Monthly | Regular, with turnover over Rs.5 crore | late filing fees have been waived if the returns are filed within 15 days post the due date and interest rate reduction | Mar’21 | 20th April 2021 | 20th April 2021 (Interest reduced to 9% until 5th May, and 18% thereafter) | Remains same | | | | | | Apr’21 | 20th May 2021 | 20th May 2021 (Interest reduced to 9% until 4th June, and 18% thereafter) | Remains same | | | | | | May’21 | 20th June 2021 | NA | 20th June 2021 (Interest reduced to 9% until 5th July, and 18% thereafter) | | GSTR-3B | Monthly | Regular, with turnover up to Rs.5 crore | Interest rate reduction and late fee waiver | Mar’21 | 20th April 2021 | 20th April 2021 (Interest reduced to Nil until 5th May, 9% between 6th May and 20th May, and 18% thereafter) (late fee waived if the returns are filed on or before 30 days post the due date) | 20th April 2021 (Interest reduced to Nil until 5th May, 9% between 6th May and 19th June, and 18% thereafter) (late fee waived if the returns are filed on or before 60 days post the due date) | | | | | | Apr’21 | 20th May 2021 | 20th May 2021 (Interest reduced to Nil until 4th June, 9% between 5th June and 19th June, and 18% thereafter) (late fee waived if the returns are filed on or before 30 days post the due date) | 20th May 2021 (Interest reduced to Nil until 4th June, 9% between 5th June and 4th July, and 18% thereafter) (late fee waived if the returns are filed on or before 45 days post the due date) | | | | | | May’21 | 20th June 2021 | NA | 20th June 2021 (Interest reduced to Nil until 5th July, 9% between 6th July and 20th July, and 18% thereafter) (late fee waived if the returns are filed on or before 30 days post the due date) | | GSTR-3B | Quarterly | Regular, with turnover up to Rs.5 crore who have opted for the QRMP scheme (Category X# states) | Interest rate reduction and late fee waiver | Jan-Mar’21 | 22nd April 2021 | 22nd April 2021 (Interest reduced to Nil until 7th May, 9% between 8th May and 22nd May, and 18% thereafter) (late fee waived if the returns are filed on or before 30 days post the due date) | 22nd April 2021 (Interest reduced to Nil until 7th May, 9% between 8th May and 21st June, and 18% thereafter) (late fee waived if the returns are filed on or before 60 days post the due date) | | GSTR-3B | Quarterly | Regular, with turnover up to Rs.5 crore who have opted for the QRMP scheme (Category Y## states) | Interest rate reduction and late fee waiver | Jan-Mar’21 | 24th April 2021 | 24th April 2021 (Interest reduced to Nil until 9th May, 9% between 10th May and 24th May, and 18% thereafter) (late fee waived if the returns are filed on or before 30 days post the due date) | 22nd April 2021 (Interest reduced to Nil until 9th May, 9% between 10th May and 23rd June, and 18% thereafter) (late fee waived if the returns are filed on or before 60 days post the due date) | | CMP-08 | Quarterly | Composition | Interest rate reduction | Jan-Mar’21 | 18th April 2021 | 18th April 2021 (With Nil interest until 3rd May, 9% interest until 18th May, 18% thereafter) | 18th April 2021 (With Nil interest until 3rd May, 9% interest until 17th June, 18% thereafter) | | GSTR-4 | Annual | Composition | Due date extension | FY 2020-21 | 30th April 2021 | 31st May 2021 | 31st July 2021 | | GSTR-5 GSTR-5A | Monthly | Non-resident taxpayers Taxpayers supplying OIDAR services | Due date extension | Mar’21 | 20th April 2021 | 31st May 2021 | 30th June 2021 | | | | | Apr’21 | 20th May 2021 | 31st May 2021 | | | | | | May’21 | 20th June 2021 | NA | | | GSTR-6 | Monthly | Input Service Distributors (ISD) | Due date extension | Apr’21 | 13th May 2021 | 31st May 2021 | | | | | | May’21 | 13th June 2021 | NA | | | GSTR-7 GSTR-8 | Monthly | Taxpayers required to deduct TDS Ecommerce operators required to collect TCS | Due date extension | Apr’21 | 10th May 2021 | 31st May 2021 | | | | | | May’21 | 10th June 2021 | NA | | | ITC-04 | Quarterly | Goods sent or received to or from Job work | Due date extension | Jan-Mar’21 | 25th April 2021 | 31st May 2021 | |

#Category X states: Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union Territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands and Lakshadweep.

##Category Y states: Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand, Odisha, the Union Territories of Jammu and Kashmir, Ladakh, Chandigarh and New Delhi.

Key Anticipations Ahead of the 43rd GST Council Meeting

Anticipated COVID-19 Pandemic Relief Measures

State governments requested the GST Council to consider reducing GST rates on essential medical supplies required for COVID-19 treatment and prevention.

Regarding GST on vaccines, the fitment committee advised against exempting COVID-19 vaccines from the existing 5% GST.

Their reasoning was that since central and state governments primarily procured vaccines and provided them free to the public, the GST revenue would ultimately benefit both levels of government.

Nevertheless, the fitment committee proposed lowering the GST rate on pulse oximeters, medical-grade oxygen, and oxygen concentrators from 12% to 5% until July 2021.

A similar 5% GST rate reduction for COVID-19 testing kits was suggested until August 2021.

Despite calls for reducing GST rates on COVID-19 drugs, the committee did not endorse this due to evolving treatment protocols.

The Delhi High Court had recently ruled that levying a 12% Integrated GST (IGST) on oxygen concentrators imported for personal use or as gifts was unconstitutional.

The court also invalidated Notification No. 30/2021-Customs from May 1, 2021, which imposed this 12% IGST.

The Council was expected to potentially endorse this ruling and extend its benefits, acknowledging the pandemic's severity, the life-saving nature of the equipment, and minimal revenue implications.

Further extensions to various GST compliance deadlines were also anticipated, given that several states had prolonged lockdown periods until early June 2021.

Proposed GST Amnesty Scheme for Small Taxpayers

An amnesty scheme for late fees on GST return filings was widely expected, aiming to provide significant relief to small taxpayers and MSMEs amid the pandemic.

This scheme would likely encompass all outstanding GSTR-3B returns from July 2017 to April 2021, with a potential validity period from June 1, 2021, to August 31, 2021.

GST Rate Rationalization for Specific Goods

Discussions were anticipated regarding a reduction in the GST rate on two-wheelers from the current 28%.

This measure was projected to stimulate demand and boost revenues, which had been affected by the pandemic.

Given the observed increase in rural demand, as indicated by higher tractor sales, a rate cut could help two-wheeler manufacturers enhance sales through more competitive pricing.

The GST Council was also expected to address the imposition of GST on natural gas.

Reports from IANS suggested a potential three-tier GST system for natural gas, with rates varying by consumption.

This might involve a lower 5% rate for residential piped natural gas (PNG), an 18% median rate for commercial PNG, and a maximum 28% rate for compressed natural gas (CNG) used in vehicles.

Addressing Challenges from the Inverted Tax Structure

Rectification of the inverted tax structure was identified as crucial for sectors including fertilizers, steel utensils, solar panels, tractors, tyres, electrical transformers, pharmaceuticals, textiles, and railway locomotives.

An 'inverted tax structure' occurs when tax rates on inputs and capital goods exceed those on finished products.

This situation results in blocked input tax credit claims for products and creates numerous administrative and regulatory challenges.

For instance, imported tyres face a 10% duty, while raw materials like rubber are taxed at 20%.

Similarly, solar modules are duty-free, but their components incur a 5-10% tax.

Revisiting Compensation Shortfall and Borrowing Requirements

Multiple states had pressed Union Finance Minister Nirmala Sitharaman to convene a GST Council meeting swiftly to reassess the compensation shortfall and borrowing needs.

Amid ongoing economic uncertainty, states also sought to discuss extending the GST compensation period beyond July 2022 within the Council.

Some states criticized the federal government for not adhering to the constitutional mandate of holding GST Council meetings at least quarterly.