Key Measures Taken In 53rd GST Council Meeting: A Quick Recap

There was a significant buzz amongst the taxpayers before the GST Council Meeting since it was held for the first time after the formation of the new Coalition Government. Owing to the high expectations, the taxpayers did not seem to be elated initially post the press conference. However, the Authors are of the view that the press release must have given a sense of relief to them, taking into account the immense reliefs the measures have brought to the taxpayers.

Revision of GSTR-1

The persistent demand and request of the industry to provide for a mechanism to amend GSTR-1, in light of the clerical and other unintended mistakes has finally been fulfilled by the Government. It has been recommended to introduce a new optional facility by way of FORM GSTR-1A to facilitate the amendment before filing of GSTR-3B for the said tax period so that the correct liability is auto-populated in FORM GSTR-3B. What will happen to the errors noticed after filing GSTR-3B still remains to be the point of concern!

Introduction of Long due provision- Section 11A

Insertion of Section 11A under CGST Act to confer the powers to the Government to allow regularization of non-levy/short levy of GST, owing to the common trade practices is one of the pivotal moves of the Council. The said provision is in line with the earlier provisions under Excise (Section 11C) and Customs Law (Section 28A). This move was long due since the requests of taxpayers to provide relief were being denied by Government due to absence of specific provision.

Though the press conference suggested that the online gaming may not be facilitated by this provision, it will be interesting to see if this provision once introduced, can come for the rescue of gaming industry whose fate depends on past demands. One has to wait and watch as to how far and how often these powers will be used by Government to provide relief to bonafide taxpayers.

Relief from interest extended to cash balance

The relief from interest which was earlier granted in case of accumulated input tax credit has also been extended towards the balance available in Electronic Cash Ledger on the due date of filing GSTR-3B. This is a positive move, amidst the contrary decisions of various High Courts on this issue.

Insights into major developments under Valuation Issues

The issues of valuation of supply in case of import of services from related person have beset the industry over the past years. The Council has proposed to clarify the value of supply as declared in the invoice or Nil (in case no invoice has been issued) to be the open market value in case full ITC is available to recipient.

It has been recommended to clarify that the time limit for availing ITC in case of supplies received from unregistered suppliers, where tax has to be paid by the recipient under reverse charge mechanism and invoice is to be issued by the recipient will be seen from the financial year in which issuance has been raised. This measure will surely provide a sheer relief to the taxpayers and settle the ongoing disputes. 
It is expected that the clarifications proposed with respect to valuation of corporate guarantee provided between related persons will iron out the hardships caused by the amendment.

The investigations surrounding the applicability of the new valuation provision in case of export of such services and even in cases, where the recipient is eligible for full input tax credit are currently in full swing. The industry is hopeful that the clarification regarding non applicability of provision in such cases will provide a tremendous relief to them, putting the ongoing investigations to rest. However, it will be interesting to see if the clarification will also be applicable in case of guarantees given to foreign entities wherein no consideration is received as the inclusion of the said transaction with the ambit of ‘export of services’ is itself a doubt due to absence of any consideration. 

Steps taken to curb fake Input tax credit and Refunds

Amidst the Special Drive initiated against the fake registrations, refunds and invoicing, the rolling out of bio-metric Aadhar authentication on All India basis will make the registration process more stringent. Since the cases of tax frauds due to fake invoicing and refunds are at peak, it is indeed a welcome move for the economy. Even if this step is able to contribute a little towards dealing with the menace of fake input tax credit in GST and refunds, it will go a long way in enhancing the tax revenues. Boost in the tax revenues will also provide an elbow space to Government for the rate rationalisation, thereby ensuring a fair distribution of the tax burden.

Key Takeaways

With the types of measures taken in the GST Council Meeting, the dedication of the Government to create a taxpayer-friendly GST regime is clearly evident. The commitment of the Council to meet again in August also shows the intent of the Government towards advancing the business facilitation and reducing tax litigations. One can hope that the issues, which could not be addressed in this meeting due to paucity of time are addressed in the upcoming council meeting in a timely manner.