Decisions earlier approved by the GST Council now made effective

06 Jan 2020Tax

The GST council in its earlier meetings and the 38th meeting held on 18 December 2019 had approved several changes of GST provisions. Further, amendments in the CGST Act 2017 already passed by the Parliament were yet to be notified. The CBIC on 1 January 2020 issued notifications making several of these changes effective. Such changes along with other key updates are summarized below:

ITC restricted to 110% of invoices appearing in GSTR-2A (Effective 1 January 2020)

In October 2019, the government had provided that the Input Tax Credit (ITC) with respect to invoices not reflecting in GSTR-2A would be capped at a maximum of 20% of the invoices reflecting in GSTR-2A.
Vide Notification No. 75/2019 dated 26 December 2019, this cap has been reduced to 10% of ITC with respect to invoices appearing in GSTR-2A.

Conditions for use of amount available in electronic credit ledger

The Commissioner or GST officer (not below the rank of Assistant Commissioner) has been given the power to not allow utilization or refund of any amount in electronic credit ledger, if he has reasons to believe that the credit has been fraudulently availed or is ineligible due to the following reasons –
- The issuer/recipient of invoice is non-existent or not conducting business;
- The recipient has not received the goods/services or is not in possession of invoice;
- The tax charged on the invoice is not paid to the government.
Such restriction can be imposed for a period of not more than a year
The officer may withdraw the restriction and allow utilization of amount in credit ledger upon being satisfied that the conditions for disallowing utilization no longer exist.

Clarification with respect to Reverse Charge Mechanism (RCM) recently made applicable on renting of motor vehicle (Effective 1 October 2019)

A clarificatory amendment vide Notification No. 29/2019 dated 31 December 2019 has been issued to make it certain that RCM on renting of motor vehicle will apply only when the service provider (other than a body corporate), making supply to a body corporate does not issue an invoice charging GST @12% (with ITC)

Amendments in CGST Act has been notified

Various amendments approved by GST council meeting and brought in through the Finance Act, 2019 have been made effective –

Composition scheme (Section 10 of CGST Act,2017)

Composition scheme has been introduced for service providers having turnover up to INR 5 million. The GST rate prescribed is 6% (CGST +SGST) (vide Notification No. 01/2020-Central tax).

Threshold increased for GST registration

Enabling provision to grant power to the government to enhance the GST registration threshold limit for particular state from two million to maximum of four million (for supplier of goods only) has been notified.
The increased threshold will be effective on issue of corresponding amendment/ notification by state GST authority.

Aadhar based authentication for GST registration

Aadhar based authentication has been introduced for every registered person or any taxpayer while obtaining GST registration. In the absence of Aadhar, alternate and viable means of identification would be prescribed.

Transfer amount under electronic cash ledger (CGST, SGST, IGST, UTGST, Cess)

Facility to transfer the available cash balance between different tax heads has been notified

Power to extend due date

Enabling provision to grant power to extend the due date of annual return and due date of furnishing periodic statement and annual statement for tax collected at source under section 52 has been notified.

Penalty for anti profiteering (effective 1 January 2020)

Penalty of 10% of amount profiteered would be applicable. The penalty would not be payable if the profiteered amount is deposited within 30 days of passing of final order.

Extended Due dates for filing returns

Order No.	Return	Old Due Date	Revised Due date
Order No. 10/2019-Central Tax dated 26 December 2019	GSTR 9 and 9C for FY 2017-18	31 December 2019	31 January 2020
Notification No. 02/2020 dated 1 January 2020	Form GST TRAN-1	31 December 2019	31 March 2020
Notification No. 02/2020 dated 1 January 2020	Form GST TRAN-2	31 January 2020	30 April 2020

Waiver of late fee of GSTR-1

The Government vide Notification No. 74/2019 dated 26 December 2019 has waived late fee for delayed filing of GSTR-1 for the period July 2017 to November 2019 provided the same are filed by 10 January 2020.

Blocking of e-way bill (effective 11 January 2020)

The e-way bill facility will be blocked for taxpayers who have not filed GSTR-1 for two tax periods.
Earlier, this restriction was applicable only for non-filers of GSTR-3B
(Vide Notification No. 75/2019 – Central Tax dated 26 December 2019)

Exemption for long term lease payment (effective 1 January 2020)

The government has extended the exemption on upfront amount payable for long term lease of industrial/ financial infrastructure plots by an entity having 20% or more ownership of Central or State government (subject to conditions prescribed)
Earlier, this exemption was available to an entity having 50% or more ownership of Central or State Government.
(vide Notification No. 28/2019 dated 31 December 2019)

Change in rate of GST (effective 1 January 2020)

The government has changed the rate of GST for the following goods –

HSN	Description	Old Rate of GST	New Rate of GST
3923 or 6305	Woven and non-woven bags and sacks of polyethylene or polypropylene strips or the like, whether or not laminated, of a kind used for packing of goods	12%	18%
6305 32 00	Flexible intermediate bulk containers	12%	18%

Vide Notification No. 27/2019-Central tax (Rate) dated 30 December 2019.

Detailed explanation for INV-01

The government has released detailed explanation in relation to e-invoicing – Form GST INV-01 vide Notification No. 02/2020 dated 1 January 2020.

Our Comments

The measures introduced for reducing the ITC cap from 20% to 10% and restriction on utilization of possible ineligible credit have been brought in with the objective of shoring up stagnant GST collections. These measures will lead to working capital blockage arising due to restrictions imposed on doubtful credit. Businesses should strengthen their systems and ensure to partner with compliant vendors for reducing unmatched credits.

In the year 2020, taxpayers should prepare for GST 2.0 slated to be introduced in the form of e-invoicing, new returns and possible increases in GST Rates.

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