GST Council Meet Updates: Big Rate Cuts For Consumer Durables, Paints And Cosmetics; Sanitary Napkins Exempt

Key Tax Rate Changes

Exempt from GST:

• Sanitary pads
• Deities made of stone, marble or wood
• Raakhis, without any precious metals
• Raw material used in brooms
• Commemorative coins circulated by the RBI or government
• Saal leaves
• Fortified milk

From 12 percent to 5 percent:

• Handloom dari
• Fertiliser grade phosphoric acid

From 28 percent to 18 percent:

• Lithium-ion batteries
• Vaccum cleaners
• Food grinders, mixers
• Shavers, hair clippers
• Storage water heaters
• Electric smoothing irons
• Water cooler
• Ice cream freezer
• Refrigerators
• Hand dryes
• Cosmetics
• Perfumes
• Scents
• Paint
• Varnishes

Other changes:

• GST on ethanol sold to oil companies for blending with petrol and diesel reduced to 5 percent from 18 percent earlier
• GST on imported urea reduced to 5 percent
• GST on E-books reduced to 5 percent from 18 percent
• GST for hotels to be charged on the actual price that the customer pays and not on the declared tariffs

A nine-hour long meeting of the GST Council ended with several important decisions – rate cuts, a simplified return filing process, benefit of input credit refund for the textile sector and a benign tax regime for composition dealers, among others.

28 Percent Tax Slab Gets Leaner

The GST Council has reduced the tax rate on over 50 goods, including washing machines, refrigerators, vacuum cleaners, paints, ethanol, cosmetics, sanitary napkins.

The changes in tax rate would come into effect from July 27, 2018, said a press release issued by the Ministry of Finance.

The GST Council has also decided to levy GST on transaction value of hotel rooms instead of declared tariffs. Hotels used to levy GST on their declared tariff even when they used to offer discounts to customers.

This is a big relief for the hospitality sector as customers used to protest on GST being levied on a higher tariff rate rather than discounted rates, Manbeer Sandhu, president of Hotel and Restaurant Association of Haryana pointed out.
This will help customers as well since the benefit of GST being applied to a discounted rate will be passed on to them.

Manbeer Sandhu, President, Hotel and Restaurant Association of Haryana

While this is positive for consumers and the hotel industry, there’s another related issue that hasn’t been addressed yet, Abhishek Rastogi, partner at law firm Khaitan & Co. told BloombergQuint. Companies spend a considerable amount to avail hotel services and a majority of it is in states where they may not be necessarily registered. This leads to problems on the input tax credit front, Rastogi explained.
Credit availment is a problem in cases where the hotel is located in one state and the taxpayer is registered in another state. The input tax credit is not available in the state where you’re paying the taxes since you’re not registered there. I think that’s the second fundamental problem which arises for companies.
Abhishek Rastogi, Partner, Khaitan & Co.







Textile Sector: GST To Get Less Taxing?

The textile sector will now be eligible for input tax credit refunds. The GST regime for textile industry has been rather strange so far, L Badrinarayan, a partner at Lakshmikumaran & Sreedharan pointed out. For instance, a taxpayer is selling fabric which is taxed at 5 percent but the input for it, let’s say, polyester yarn is taxed at 18 percent. There was an accumulation of credit for such businesses.

Textile companies have been saying that this has been making them uncompetitive in the foreign market. Majority of the textiles are exported from either Pakistan, Bangladesh or India. The minute there is even a 1 percent increase in the cost of textile, the exports move from India to Pakistan and Bangladesh. 
L Badrinarayan, Partner, Lakshmikumaran & Sreedharan 

The only hitch here is that it is going to be prospective and so whatever textile credit has accumulated in the books of companies will lapse, Badrinarayan added.

For this measure to be meaningful, the refunds should come on time or else the textile sector – that largely consists of small businesses - will continue to face cash flow issues, Chandrakant Salunkhe, the president at the SME Chamber of India said.

Return Filing: Sahaj & Sugam

After months of deliberation, the Council has agreed on a simplified return filing process... one that is also narrower in its applicability.

Small taxpayers – with a turnover of up to Rs 5 crore – can now opt for filing quarterly returns. However, they will have to pay GST on a monthly basis. Simplified returns for small taxpayers have been called Sahaj and Sugam and will need less information compared to regular GST returns. 93 percent of the taxpayers have a turnover of less than Rs 5 crore and these taxpayers would benefit substantially from the simplification measures, a media note by the Finance Ministry said.

Those with a turnover above Rs 5 crore will benefit as well, it added.

The return form will have two main tables – one for reporting outward supplies and one for availing input tax credit based on invoices uploaded by the supplier. Invoices can be uploaded continuously by the seller and can be continuously viewed and locked by the buyer for availing input tax credit. This process would ensure that very large part of the return is automatically filled based on the invoices uploaded by the buyer and the seller. The process would be ‘Upload-Lock-Pay’ for most tax payers.

The new return design will also provide the option to amend the invoice, the release pointed out. An amendment can be made by filing an amendment return. Payment would be allowed to be made through the amendment return as it will help save interest liability for the taxpayers, the release added.

This will reduce compliance, but a difference in timing of filing of returns for assessees with a turnover above and below Rs 5 crore may impact timing of the availment of credit, Bipin Sapra, an indirect tax expert at EY India, said in an emailed statement.

Benign Regime For Composition Dealers

Currently, taxpayers with an annual turnover below Rs 1 crore can avail of the composition scheme. Under this scheme, taxpayers have to pay a flat GST rate but the benefit of claiming input credit is not available.

The Council has now increased the threshold for this scheme to Rs 1.5 crore. Taxpayers under composition scheme will also be allowed to supply services, whose value should not exceed 10 percent of turnover in the preceding financial year, or Rs 5 lakh, whichever is higher. These services cannot be in the restaurant space, as restaurant owners cannot avail of composition scheme.

The Council also decided to defer the implementation of the reverse charge mechanism to September next year. 

Under reverse charge, the receiver of goods has to pay GST instead of the supplier.

The next meeting of the GST Council will be on August 4, and will focus on issues and problems faced by medium and small scale industries.

Understand GSTR 1 filing and added features in return utilities with Q & A

Understand GSTR 1 filing and added features in return utilities with Q & A

Question and answers in GSTR 1 filing in GST portal – how to understand it and what are the added features in return utilities on GST Portal that would bring relief for tax payers :

The GST Council took a slew of decisions during its 23rd meeting in Guwahati to benefit consumers and businesses alike. While consumers will stand to benefit from a number of rate cuts, including the tax on restaurants, businesses stand to benefit from a significant easing of compliance norms to do with filing returns.

 

So what has changed with the forms and how is it going to ease the burden of tax payers

Originally upto 15th Nov 2017

v  GST system required businesses to submit at least three forms to file their returns. v  The GSTR-1 dealt with the invoice-wise details of supply, GSTR-2 dealt with the receipts of goods, and GSTR-3 an overall summary derived from GSTR 1 Form and GSTR 2 respectively .

Decisions taken in 23rd GST Council Meeting

v  GST Council decided to ease the compliance burden on businesses, companies would be allowed to only file the GSTR-1 form, up to March 31, 2018 and there by negating the requirement of filing other two forms GSTR2 and GSTR-3 which will be filed as scheduled in the original drafting of law from April 18. v  GST Council organized a committee to look into how to make the GSTR-2 Form easier, to bring it back into the system with full functionality. v  The Council also decided to extend the usage of the summary GSTR-3B form, meant to make life easier for those unfamiliar with the filing process, till March 31 from the earlier December 31 deadline.

Changes in deadlines for GST Return filing and how the GST Council has divided the Tax payers into two slots providing the tax payers the burden less smooth filing of GST Returns as they promised :

Seeing the difficulties faced by small and medium sized enterprises the council then decided to divide the tax payers into two groups based on turnover filed by the tax payers in the previous financial year. Let’s see how this has been worked out and whether this really going to benefit tax payers especially SME’s and let’s also look at the same time how these decisions are being reflected in the GST Return utilities on GST Portal.

I. Class A or Group A Tax Payers (for convenience of understanding) :

♦ Who are these tax payers : These are tax payers – Companies, Partnership firms, Limited liability Partnership companies, sole proprietorship firms with a turnover of up to ₹1.5 crore in the preceeding financial year.

So if your turnover in the preceeding financial year following the Action period (i.e., GST Period 01.07.2017) is within the said prescribed limit of 1.5 Crores then you fall in this group.

♦ What are the benefits given here for them : To file their GSTR-1 forms for each month in a quarterly manner. Since GSTR2 and GSTR3 utility filing has not been finalized the work for which is under process the manner of filing these Forms (GSTR-2 and GSTR 3) will be notified on later date in future. So overall it’s a relief for small traders whose turnover is well within the said limit requiring to file GSTR-1 Form on quarterly basis and there by not requiring to file returns on monthly basis. [Note : The Taxes have to be paid on monthly basis by filing Form GSTR 3B which has to be filed by all tax payers irrespective of the turnover till March 2018]

♦ New GST dates to remember if you have opted for Quarterly return : GSTR-1 Form for July to September are to now be filed by December 31, the October to December forms by February 15, 2018 and the January to March forms by April 30, 2018.

♦ How to choose this plan on GST Portal : Logging onto GST Portal from 10th of this Month has been different we saw following questions that creeped up the ladder while filing the GSTR 3B return lets understand these in details. Logging onto GST Portal the new pop up page would look something like this.

Finer Points here :

Please select the last month of the Quarter?? How to understand this :

l  July month’s GSTR-1 return has already been filed by us during September 2017 and hence for the Quarter July – September GSTR 1 for August and September alone needs to be filed by selecting the last month of the Quarter (September in this case)

l  Do we need to fill up separate GSTR-1 for each of the month of the Quarter?? No the GSTR 1 Form is one for all months of the Quarter. So you would be required to file one GSTR-1 Form for the whole Quarter.

 

♦ Is there any Changes in GSTR 1 Form then?? Yes few headings been added…

GSTR1 Form – Other Details : These are the details in excess of Original GSTR 1 Form which we used for filing July’s GSTR 1 filing and the other particulars of GSTR1 are kept intact.

Table 11A Amended Tax Liability (Advance Received) Table 11B Amendment of Adjustment of Advances Table-10 Amendment B2C (Others)

Each table requires furnishing of Consolidated Statement of Advances Received/Advances which were adjusted in the current tax period/ Amendments of information which were furnished in earlier tax period.

II. Class A or Group A Tax Payers (for convenience of understanding) :

♦ Who are these tax payers : These are tax payers – Companies, Partnership firms, Limited liability Partnership companies, sole proprietorship firms with a turnover exceeding ₹1.5 crore in the preceeding financial year.

So if your turnover in the preceeding financial year exceeds 1.5 Crores then you fall in this group.

♦ New GST dates to remember if you have opted for Monthly return : To File their July to October forms by December 31. And from thereafter, they will have to file monthly returns, but with a delay of 40 days from the end of the taxable period. That is, the returns for November will have to be filed by January 10, those for December by February 10, and so on. The extension period of 40 days for each month’s return is given in order to match the return filing period of those who would be filing the returns on Quarterly basis because GSTs matching concept cannot be compromised and hence the delay is allowed in returns for those who will be opting for monthly returns.

♦ How to choose this plan on GST Portal : The page will open similar to the diagram above. In order to select monthly return you have to click ‘No’ instead of ‘Yes’. And there is no further change in GSTR 1 Form, the GSTR1 Form is one for all tax payers irrespective of the turnover criteria. [Note : Again the Taxes have to be paid on monthly basis by filing Form GSTR 3B which has to be filed by all tax payers irrespective of the turnover till March 2018]

 

Conclusion : Still we are waiting for GSTN to work to its fullest as GSTR2 filing and GSTR-3 filing utility are yet to be put up on GST Portal. It’s clear from these changes brought up by GST Council that they are clear in presenting the true picture of GST to Tax payers and they are seriously working on clearing the issues related to GSTN and its implementation. As a tax payer everyone would expect the same from the law makers to repair and re structure the GST to suit the needs of various tax payers so that GST return filing is not considered as a burden by tax payers anymore. And Tally.ERP 9 has a like mind when it comes to embrace the changes or adapting the changed environment as it states to deliver the packed GST just as it is originated from GST Network. And the experience of filing GST returns from Tally.ERP 9 is way more easier than filing with offline utility tool on GST Portal as in offline utility tool either you would be required to fill all particulars about outward supplies manually or through a automated software which are very few in the market. But with Tally.ERP 9 you can directly export the data into JSON format then into the GST portal. Thus making the process of return filing a easier task. But the transformation part of Tally.ERP 9 comes with its innovative ideas which one would have witnessed recently with its online forums which has received wide interest from Chartered accountants community as it allows them to seek to share to depart knowledge on various topics concerning GST and this is such a good initiative considering that the new India to be build in the back drop of GST and that would be possible only when people with knowledge shares what they know about GST and Tally.ERP 9 is one such medium which is educating and bridging this knowledge gap.

GST Refunds – Manual Filing

GST Refunds – Manual Filing

As the portal GSTN is not ready so manual filing of GST Refunds has been enabled vide inserting rule 97A in CGST Rules 2017 vide NotfnNo. 55/2017 CT dt15.11.2017. The following types of GST Refunds are covered under manual filing viz., GST Refund of Excess balance in electronic cash ledger, Export of services with payment of tax, accumulated ITC in case of Export of goods/services without payment of accumulated ITC due to inverted tax structure, on supplies made to SEZ with payment of tax, accumulated ITC in case of supplies made to SEZ without payment of tax and on deemed exports.

 

The relevant provisions of GST Refunds have been complied and place below which I hope will be helpful for both trade as well as the departmental officers in filing/handling GST refund claims.

Section	54 of CGST Act, 2017
Rules	Rule 89 to 97A of CGST Rules, 2017
Procedural Circulars	Circular No. 17/17/2017 CST dt 15.11.2017 Circular No. 24/24/2017-GST dt 21.12.2017
Periodicity	For any tax period( monthly) (quarterly for those under 1.5 Cr)
Time limit	Before expiry of two years.
Relevant date	Ref. Sec 54(14) of CGST Act.
Minimum GST refund to be claimed	Rs.1000/-
Authority to whom before filed Central/State	Jurisdictional GST AC/DC
Payment of the sanctioned amount of GST Refund	The payment of sanctioned amount in respect of CGST/IGST/CESS shall be made by the Centre and SGST/UTGST shall be made by the respective States/UTs
Registers to be maintained by the jurisdictional officer	Three Registers: Table -1 : Receipt and Acknowledgement Table -2 : Deficiency memo, Provisional order, payment advice Table -3 : SCN, Sanction/Rejection Final Order
Things to keep in mind while filing for GST Refund	>Documentary evidence as listed in rule 89(2) shall accompany every claim >Return for the period must have been filed before filing the claim (GSTR 1, GSTR 3B) >Only one deficiency memo shall be issued >Resubmission of claim on receipt of deficiency memo shall be treated as new one, however the ARN and debit entry generated earlier shall be used

Types of GST Refund (Categories covered)		Procedure for filing	Document/ Statement to be attached with GST Refund Application	Procedure to be followed by the GST dept for issue of GST Refund
Supply of goods on payment of IGST to SEZ		1) RFD01A to be filed manually	1) Declaration –rule 89(2)(f)(non availment of ITC by receiver) 2)Self Declaration –rule 89(2)(l) (unjust enrichment) 3) Declaration to the effect that no prosecution initiated for last 5 years	1) On ascertaining the completeness in all respects, the acknowledgement in Form RFD -02 shall be issued within 15 days from the date of filing the claim (Otherwise deficiency memo in Form RFD -03 shall be issued) 2) If the application is not filed afresh within 30 days of receipt of deficiency memo order shall be passed in Form PMT-03 and re credit of the amount claimed shall be done through Form RFD -01B 3) Provisional refund (90%) order in RFD – 04 shall be passed within 7 days of acknowledgement. 4) Payment advice to be issued in Form RFD -05 5)Notice for rejection of refund to be issued in Form RFD – 08 6)Refund sanction / rejection order to be issued in Form RFD -06 within 60 days 7)Order for complete adjustment/withholding of sanctioned refund to be issued in Form RFD- 07
Export of services on payment of IGST		1) RFD01A to be filed manually	1) Statement containing details of Invoices and relevant BRC/FIRC 2) Declaration to the effect that no prosecution initiated for last 5 years.
Supply of services on payment of IGST to SEZ		1) RFD01A to be filed manually	1) Declaration –rule 89(2)(f)(non availment of ITC by receiver) 2)Self Declaration –rule 89(2)(l) (unjust enrichment) 3) Declaration to the effect that no prosecution initiated for last 5 years.
GST Refund of unutilized ITC used in making zero rated supplies of goods/services for export and to SEZ		1) RFD01A to be filed in portal 2) ARN to be generated as proof for debit entry in credit ledger. 3) RFD01A to be filed manually along with ARN generated	1)Declaration under second proviso to sec. 54(3) –(goods not subjected to export duty, Non availment of drawback on goods/services) 2)Declaration under sec.54(3)(ii) 3) Statement 3A(rule 89(4)) –in case of exports Statement 5A(rule 89(4) – in case of supplies to SEZ 4) Statement containing shipping bill wise details of goods exported 5) In case of services statement containing details of Invoices and relevant BRC/FIRC 6) Declaration to the effect that no refund is claimed against the invoices involved in the claim 7) Declaration to the effect that no prosecution initiated for last 5 years.
GST Refund claim arising due to inverted duty structure (accumulated ITC)	1) RFD01A to be filed in portal 2) ARN to be generated as proof for debit entry in credit ledger. 3) RFD01A to be filed manually along with ARN generated		1) Statement -1(rule 89(5)) 2) Statement 1A(rule 89(2)(h)) 3)Declaration to the effect that no refund is claimed against the invoices involved in the claim 4) Declaration to the effect that no prosecution initiated for last 5 years
GST Refunds on accounts of deemed exports	1) RFD01A to be filed manually		1) Statement -5B(rule 89(2)(g)) 2) Declaration (rule 89(2)(g)) by supplier or receiver as the case may be with “Undertaking” 3) Declaration to the effect that no prosecution initiated for last 5 years
GST Refunds on balance in electronic cash ledger	1) RFD01A to be filed in portal 2) ARN to be generated as proof for debit entry in credit ledger. 3) RFD01A to be filed manually along with ARN generated		1) Declaration to the effect that no prosecution initiated for last 5 years

 Formula for GST Refund

GST Refund amount in case of zero rated supply of goods/services or both (rule 89(4):

 Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of  services) x Net ITC ÷Adjusted Total Turnover

 Where,-

 (A) “Refund amount” means the maximum refund that is admissible;

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking;

 (D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated in the following manner, namely:-

 Zero-rated supply of services is the aggregate of the payments received during the relevant period for zero-rated supply of services and zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period reduced by advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period;

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

(F) “Relevant period” means the period for which the claim has been filed.

GST Refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula (rule 89(5)–

Maximum Refund Amount = {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods

 Explanation.- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4) of rule 89.