Key Outcomes of the 27th GST Council Meeting

The 27th Goods and Services Tax (GST) Council meeting addressed several critical areas concerning GST implementation and administration. This meeting focused on simplifying return filing, adjusting tax rates, promoting digital transactions, and restructuring the Goods and Services Tax Network (GSTN).

GST Return Simplification Initiatives

Significant changes were proposed to streamline the GST return filing process:

• Interim Period: GSTR 1 and GSTR 3B forms will remain in use for an additional six months.
• New Single Return System: Following this transitional phase, a new single-return plan will be introduced, reducing the annual filing requirement from 36 to just 12 returns.
• Reduced Information Requirements: The amount of data needed for returns will be lessened, simplifying preparation and supporting the 'ease of doing business' principle.
• Provisional Credit in Transition: During the six-month transition, taxpayers can claim provisional input tax credit (ITC) based on self-calculations.
• Buyer-Seller Reconciliation: The GSTN will display invoices uploaded by sellers, enabling buyers to verify discrepancies between claimed and allowed credits.
• ITC Availability: Invoices uploaded by sellers at any point during a month will be considered valid for buyers to claim ITC.
• Tax Recovery Post-Transition: After the six-month period, if a seller uploads invoices but fails to remit tax to the government, GSTN reserves the right to recover these taxes from the buyer, without automatic reversal of credit.
• End of Provisional Credit: Provisional credit claims will cease after this transitional period.
• Quarterly Filing for Specific Taxpayers: Businesses filing nil returns and those registered under the Composition Scheme will file GST returns quarterly.

Rate Adjustments and Further Review

Discussions also covered potential adjustments to GST rates:

• Sugar Cess Postponement: The implementation of a sugar cess has been deferred, with the government exploring alternative methods to boost revenue for farmers.
• Ethanol Duty Reduction: A proposal was made to reduce duties on ethanol.
• Ministerial Group Review: A dedicated group of ministers is tasked with reviewing these two points and providing recommendations within a fortnight.

Promotion of Digital Payments

Efforts to encourage digital transactions were considered:

• Incentive Proposal: A five-member council will further deliberate on incentives for digital payments before the subsequent council meeting.
• Proposed Concession: The suggestion includes a 2% concession on GST rates exceeding 3% for Business-to-Consumer (B2C) supplies, capped at INR 100 per transaction.

De-Privatization of GSTN

A major structural change involved the ownership of the Goods and Services Tax Network (GSTN):

• Government Ownership: GSTN will transition into a fully government-owned entity, with the government acquiring the remaining 51% equity currently held by non-governmental institutions.
• Future Shareholding: Moving forward, the Central Government will hold 50% ownership, with state governments collectively holding the remaining 50% on a pro-rata basis aligned with GST ratios.
• Employment Opportunities: This change is anticipated to create more employment opportunities as GSTN plans to recruit additional personnel.

Key Expectations from the 27th GST Council Meeting

Prior to the meeting, several key outcomes were anticipated, focusing on simplifying compliance and addressing operational issues.

Streamlined Return Filing and Input Tax Credit Process

• Unified Return: The desire was for a comprehensive single return encompassing both inward and outward supply details, aiming to reduce the number of filings, facilitate invoice matching, and centralize information. This aligns with promoting technological integration and supporting the Digital India initiative.
• Easier ITC Claims: A simplified process for claiming Input Tax Credit was deemed crucial to eliminate delays, reliance on recipient confirmations, and complex tasks associated with uploading sales/purchase data.

Enhancements to E-Way Bill System

• Single Check during Transit: Proposals included a mechanism where E-Way Bills would only be verified once during goods transit.
• Alternative Upload Methods: The need for alternative channels to upload details for E-Way Bill generation, especially for unsupported formats, was highlighted.
• Standardized Format: The vision was for a 'one-nation, one format' approach for E-Way Bills, preventing states from imposing additional forms beyond the officially notified ones.

Reverse Charge Mechanism

• Early Applicability: There was an expectation for the Reverse Charge Mechanism (RCM) to be applied earlier than the initial June 30 deadline, potentially starting with specific taxpayer categories like those under the composition scheme.

Additional Points Discussed or Anticipated

The meeting also touched upon various other subjects:

• Sugar Cess: The potential imposition of a cess on sugar was discussed as a measure to support farmers.
• Real Estate Inclusion: Integrating real estate and property transfers into the GST framework was a point of consideration.
• ITC Provision Amendment: Amending ITC provisions to allow businesses to claim credit on all business-related expenses, such as employee transport, was anticipated.
• Employer-Provided Services Exemptions: Exemptions for payments made by employees for services received from employers (e.g., canteen services) were considered.
• Anti-Profiteering Clarity: Based on various adjudications regarding GST anti-profiteering norms, the council was expected to provide further clarification.
• Digital Transaction Promotion: Encouraging digital transactions through incentives like cashbacks, discounts, or credits was also on the agenda.