Summary of Key Decisions from the 31st GST Council Meeting

The 31st Goods and Services Tax (GST) Council convened on December 22, 2018, in New Delhi, under the chairmanship of Finance Minister Shri Arun Jaitley. This significant meeting focused on several key areas, including adjustments to GST rates, extensions for various compliance deadlines, clarity regarding the implementation of GST 2.0, and enhancements to GST compliance processes such as return filing, registration, and refund procedures on the official portal.

Major Outcomes of the 31st GST Council Meeting

Phased Introduction of GST 2.0

The Council announced that the new GST return filing system would be introduced on a trial basis starting April 1, 2019, with full implementation anticipated by July 1, 2019.

Stricter Regulations for E-way Bills

To ensure compliance, taxpayers will no longer be able to generate e-way bills if they have failed to file their GST returns for two consecutive tax periods.

Updates on Current GST Return Filing

• A waiver for late fees was declared for all GST returns due from July 2017 to September 2018, provided they are filed by March 31, 2019.
• The deadline for claiming Input Tax Credit (ITC) for the financial year 2017-18 was extended until the due date for filing GSTR-3B for March 2019, subject to specific conditions.
• A single cash ledger will be introduced, consolidating individual cash ledgers for each tax head (IGST, SGST/UTGST, CGST, and Cess).

Simplified Annual Returns: Form GSTR-9 and GSTR-9C

• Declaration of HSN codes will be mandatory only for inward supplies whose individual value constitutes 10% or more of the total inward supply value.
• Any additional tax payments required can now be made through Form GST DRC-03 using cash.
• Input Tax Credit (ITC) cannot be claimed directly through Form GSTR-9 and Form GSTR-9C.
• The reconciliation statement uploaded via Form GSTR-9C will require verification by the taxpayer.
• All monthly or quarterly GST returns must be filed before submitting annual returns.
• Annual returns should reflect 'supplies made during the financial year' rather than 'supplies as declared in filed GST returns'.
• The value of 'No Supply' can be reported under the Exempt supplies section, specifically in Table 5D, 5E, or 5F of GSTR-9.
• In GSTR-9, Table 8A (ITC as per GSTR-2A) will automatically populate with all invoices pertaining to FY 2017-18, irrespective of when the supplier filed their GSTR-1.

Recommended Extensions for Due Dates

• The deadline for filing the GST Annual Return (GSTR-9) and the Reconciliation Statement (GSTR-9C), following a GST audit, was recommended to be extended to June 30, 2019.
• The due date for GSTR-8, to be filed by e-commerce operators for the period October 1, 2018, to December 31, 2018, was extended to January 31, 2019.
• The filing deadline for ITC-04 for the months of July 2017 to December 2018 was extended to March 31, 2019.

Potential Expansion of the Composition Scheme

The Council plans to reconvene in January 2019 to discuss the possible inclusion of residential property supplies under real estate and services provided by small service providers within the Composition Scheme. A Group of Ministers (GoM) has been established to review these matters.

Rationalization of GST Rates

Finance Minister Jaitley stated that the GST rate reductions would result in an overall revenue impact of Rs 5500 crore. These recommendations were made after considering reports from the Fitment Committee.

Key changes include:

• No change for Cement: 13 automotive parts and 8 cement industry items will remain in the 28% GST slab.
• Third-party insurance: Reduced to 12% GST slab from 18%.
• Goods and Services removed from 28% slab: Six goods and one service were moved out of the highest 28% tax bracket.
• Cinema tickets: Tickets priced under Rs 100 saw a reduction from 18% to 12% GST, while those Rs 100 or above were reduced from 28% to 18%.
• Specific items removed from 28% slab: Lithium-ion battery chargers, video game consoles, small sports equipment, and accessories for disabled carriages.
• Items remaining at 28% slab: Goods typically used by higher-income segments, such as air conditioners and dishwashers.
• Exemptions: Bank charges on savings accounts and services under the Pradhan Mantri Jan Dhan Yojana were exempted from GST.
• Pilgrim flights: GST on special flights for pilgrims, facilitated by the Government of India under bilateral agreements, was reduced to 5% for economy class and 12% for business class.

Formation of Group of Ministers (GoM) for Specific Issues

A 7-member Group of Ministers (GoM) was constituted to examine:

• Revenue trends, including an analysis of structural patterns impacting revenue collection in certain states. The National Institute of Public Finance and Planning (NIPFP) will assist the GoM.
• The appropriate tax rates for lotteries (12% for state-organized and 8% for state-authorized schemes).
• The threshold limit for exemptions applicable to MSMEs.
• The potential for expanding the scope of the composition scheme.

Recommended Legislative Amendments

• The establishment of a Centralized Appellate Authority for Advance Rulings was recommended to address conflicting decisions issued by multiple state authorities.
• An amendment to Section 50 of the CGST Act was proposed, stipulating that interest would be calculated solely on the net tax liability remaining after deducting the Input Tax Credit utilized for the month in the electronic cash ledger.

Miscellaneous Provisions

• A pilot program for a single authority to disburse refund amounts sanctioned by either Central or State tax authorities will be implemented, with details to be finalized soon.
• Changes to the filing of Form RFD-01A include:
  • Ability to upload supporting documents online.
  • Expansion of refund types applicable, such as excess tax paid, refunds from assessment orders, and tax paid on intra-State supply incorrectly treated as inter-State supply (and vice-versa). A detailed procedure will be established.
• The window for completing the GST migration process has been reopened until January 31, 2019. Taxpayers migrating during this period have until March 31, 2019, to file GSTR-1 and GSTR-3B for periods from July 2017 to February 2019.
• Clarifications for specific Input Tax Credit (ITC) queries, including refunds for accumulated ITC due to inverted duty structures, timelines for availing ITC on invoices, timely refund disbursal, and refunds of accumulated compensation cess ITC, are expected to be issued promptly.

It is important to note that these changes will become effective only once officially notified by CBIC and updated on the GSTN portals.

Prior Expectations for the 31st GST Council Meeting

Before the meeting, several key outcomes were anticipated:

• Discussions regarding the announcement of GST rates for petrol and diesel.
• A high likelihood of GST rate cuts for the housing sector, with two proposals under consideration:
  1. Reducing the GST rate from 12% to 8%, aligning it with affordable housing, while retaining the ITC claim option.
  2. Reducing the GST rate to 5% without the ITC claim option.
• Decisions based on reports from sub-committees analyzing GST on sugar and cess for exigencies.
• Speculation about reducing the highest tax slab from 28% to 18%, aiming to rationalize GST rates by limiting the 28% slab to luxury and "sin" goods, affecting items like cement, computer monitors, power banks, and third-party vehicle insurance.
• A decision on simplifying GSTR-9 Annual Returns.