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Important changes from 22nd GST Council Meeting

In backdrop of GSTN common portal issues, a meeting of all powered GST council was held in national capital under the chairmanship of Hon. Finance Minister of Shri Arun Jaitley. It was expected that relief to exporter and SMEs shall be given and after daylong sitting, GST council has announced some immediate measure to facilitate easy compliance for exporter, small and medium business. Attempt is made to summarized all such changes into this article. However, the exact conclusion can be drawn only after issuance of notification.

Changes in Composition Scheme

A. The turnover limit of composition scheme has been increased to Rs. 1 Crore from existing limit of Rs. 75 lakhs for all states other than special category status states. In case of Special category states except state of Jammu & Kashmir and Uttarakhand, in place of Rs 50 lakhs a revised limit of Rs. 75 lakhs shall be applicable. The turnover threshold for Jammu & Kashmir and Uttarakhand shall be Rs. 1 crore.

Supplier of services other than supplier of food are ineligible for composition scheme in terms of clause (b) of Sub-section (2) of 10 of CGST/SGST Act 2017. E.g. A registered person who is trader of consumer goods and who is also providing service to bank by way of extending deposits and receiving interest. It has been decided to allow all such who are otherwise eligible for availing the composition scheme and are providing any exempt service, shall be eligible for the composition scheme. In addition to above, A Group of Minister shall be formed to examine measures to make the composition scheme more attractive. It is expected that facility of composition scheme shall be extended to all service provider below Rs. 1 Crore or 75 Lakhs.

Changes in Job Work provisions

B. Presently, Inter-state supply except job work is taxable irrespective of turnover. It has been decided that basic threshold i.e. 20 lakhs or 10 lakhs shall be available to all service providers even if they are making inter-state supply of services.

In addition to above, on many job work services rates of tax has been rationalized as follows:-

S.N. Description of Service Rate
1 Job work services in relation to all products falling in Chapter 71 (including imitation jewellery) 5%
2 Job work services in relation to food and food products falling under Chapters 1 to 22 of the HS Code (except packing of processed milk into packets) 5%
3 Job work services in relation to products falling under Chapters 23 of the HS Code except dog and cat food put up for retail sale (CTH 23091000) 5%
4 Job work in relation to manufacture of umbrella 12%
5 Job work in relation to manufacture of clay bricks falling under CTH 69010010 5%
6 Services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapter 48 or 49, which attract GST @ 5% or Nil [Heading 9988] 5%
7 Services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapter 48 or 49, which attract GST @ 12% [Heading 9988] 12%
8 Services by way of printing on job work basis or on goods belonging to others in relation to printing of goods falling under Chapter 48 or 49, other than those covered by (6) and (7) above, [Heading 9988] 18%
9 Services by way of printing in relation to printing of all goods falling under Chapter 48 or 49, which attract GST @ 5% or Nil, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer [(Heading 9989)] 12%
10 Services by way of printing of all goods falling under Chapter 48 or 49 which attract GST @12%, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer 12%
11 Services by way of printing of all goods falling under Chapter 48 or 49 which attract GST @18% or above, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer 18%

Changes in the provisions of GST Returns

C. Registered person having aggregate turnover up to Rs. 1.5 crores are now allowed to file quarterly return as well as payment in form GSTR-1,2 & 3. This will facilitate great relief to the small and medium businesses to manage their cash flows and working capital issues. Registered buyers purchasing from such small taxpayers will be allowed to take credit on monthly basis and matching of such credit will done quarterly. The facility for quarterly return will start from 01st October, 2017 and all taxpayer will have to file GSTR-1,2 & 3 for the period of July to September 2017 on their respective due dates.

A registered person will also have to file return in FORM GSTR-3B till December 2017.The last date for filing the return in FORM GSTR-4 by a taxpayer under composition scheme for the quarter July-September, 2017 shall be extended to 15.11.2017. Also, the last date for filing the return in FORM GSTR-6 by an input service distributor for the months of July, August and September, 2017 shall be extended to 15.11.2017.

Changes in Reverse charge Mechanism

D. Based upon the tax reports of officers deputed in industrial states, The provision of RCM under Sub-Section (4) of Section 9 of the CGST/SGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till the end of fiscal year i.e. 31St March, 2017.

Specific reverse charge provision like GTA, Services by an advocate as stated under Sub-Section (3) of Section 9 of the CGST/SGST Act, 2017 and under sub-section (3) of section 5 of the IGST Act, 2017 will remain there. In addition to above following two supplies have been incorporated into the category of RCM under Sub-Section (3) of Section 9 of CGST/SGST Act, 2017.

(1) Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc by Central Government, State Government, Union Territory or a local authority, to any person, to be subjected to GST under reverse charge under section 9 (3) of the CGST Act.
(2) The services provided by Overseeing Committee members to RBI shall be taxed under the reverse charge mechanism under section 9(3) of the CGST Act, 2017.

Exemption from payment of tax on advance received

E. According to the provision of Section 12 & 13 of CGST/SGST Act, 2017, The liability to pay tax on goods or services shall arise at the time of issue of invoice or receipt of payment, whichever is earlier. In case of advance received from customer, a registered person requires to pay tax even before supply of goods or services to comply with the provision of Section 12 & 13. This becomes burdensome for small taxpayers. To minimize such inconvenience, taxpayers having annual turnover below 1.5 crores shall not be required to pay GST at the time of receipt of advances on account of supply of goods. The GST on such supplies shall be payable only when the supply of goods is made.

Changes in Goods transportation services

F. Services provided by a goods transportation agency to registered business entity is taxable in the hands of such registered business entity. However, where business entity is unregister under GST law, GTA’s are not willing to transport the goods for unregistered person. This creates big problem for unregistered business entities. In order to mitigate such difficulty an exemption is given in which the services provided by a GTA to an unregistered person shall be exempted from GST.

Provisions of TDS/TCS and E-way Bill

G. The provisions of TDS & TCS as stated under Section 51 & 52 of CGST/SGST Act and provisions of E-way bill have been deferred till 31st March, 2017.

Sale/lease/auction of vehicle

H. Following decision have been taken with respect to sale/lease/auction of vehicle.

(1) Leasing of vehicle: Tax shall be at 65% of applicable GST rate plus cess on lease rent. This facility will be available for first 3 years starting from 1st July, 2017.The vehicles covered by the above leases (i.e. leases of vehicles purchased and leased prior to 1.7.2017), when disposed off/ sold shall also be taxed at 65% of the applicable GST + Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1st July 2017
(2) Sale of old Vehicle: A registered person, who had procured the vehicle prior to 1st July 2017 and has not availed input tax credit of central excise duty, VAT or any other taxes paid on such vehicles, would be taxed at 65% of the applicable GST + Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1st July 2017.
(3) Sale by way of auction: Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc by Central Government, State Government, Union Territory or a local authority, to any person, to be subjected to GST under reverse charge under section 9 (3) of the CGST/SGST Act.

Transport of Passenger

I. Currently, transport of passenger by a motor cab is subject to 5% GST without input tax credit and at 12% with input tax credit. Transportation of passenger by way other than motor cab or renting of motor cab is subject to 18% rate of tax. It is now decided that facility of 5% without ITC and 12% with ITC shall be extended to any motor vehicle.

Changes in Works contract provisions:

J. Following changes have been made in Works Contract Services

(1) Works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to Central Government, State Governments, Local Authority, Governmental Authority or Government Entity shall be taxed at 5%.
(2) The reduced rate of 12% on specified works contract services supplied to the Central Government, State Government, Union Territory, Local Authority and Governmental Authority shall be extended to a Government Entity, where such specified works contract services have been procured by the government entity in relation to the work entrusted to it by the Central Government, State Government, Union Territory or Local Authority.
(3) GST shall be levied @ 12% on works contract services in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles.
(4) GST shall be levied @ 12% with ITC or 5% without ITC for transportation of natural gas through pipeline.

Changes in rates of Goods

K. Following changes have been suggested with respect to the rates of goods;

S. N. Chapter/ Heading/ Sub-heading/ Tariff item Description Present GST Rate GST Rate Recommended by the GST Council
1. 0804 Mangoes sliced dried 12% 5%
2. 1905 or 2106 Khakra and plain chapati / roti 12% 5%
3. 19 or 21 Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government, subject to specified conditions [Foot note 1] 18% 5 %
4. 21 Namkeens other than those put up in unit container and, – (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available [other than those where any actionable claim or enforceable right in respect of such brand name has been foregone voluntarily [Foot note 2] 12% 5%
5. 2710 Imposing GST only on the net quantity of superior kerosene oil [SKO] retained for the manufacture of Linear Alkyl Benzene [LAB] 18% 18% [Clarification to be issued]
6. 30 Ayurvedic, Unani, Siddha, Homeopathy medicines, other than those bearing a brand name [Foot note 3] 12% 5%
7. 3213 Poster Colour 28% 18%
8. 3407 Modelling paste for children amusement 28% 18%
9. 3915 Plastic waste, parings or scrap 18% 5%
10. 4004 00 00 Rubber waste, parings or scrap 18% 5%
11. 4017 00 20 Hard Rubber waste or scrap 28% 5%
12. 4707 Paper waste or scrap 12% 5%
13. 4907 Duty credit scrips 5% Nil
14. 5401 Sewing thread of manmade filaments, whether or not put up for retail sale 18% 12%
15. 5402, 5404, 5406 All synthetic filament yarn, such as nylon, polyester, acrylic, etc. 18% 12%
16. 5403, 5405, 5406 All artificial filament yarn, such as viscose rayon, Cuprammonium, 18% 12%
17. 5508 Sewing thread of manmade staple fibres 18% 12%
18. 5509, 5510, 5511 Yarn of manmade staple fibres 18% 12%
19. 5605 Real Zari 12% 5%
20. 6802 All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST] 28% 18%
21. 7001 Cullet or other waste or scrap of Glass 18% 5%
22. 8305 Fittings for loose-leaf binders or files, letter clips, letter corners, paper clips, indexing tags and similar office articles, of base metal; staples in strips (for example, for offices, upholstery, packaging), of base metal 28% 18%
23. 8483 Plain Shaft Bearing 8483 28% 18%
24. 84 Parts suitable for use solely or principally with fixed Speed Diesel Engines of power not exceeding 15HP 28% 18%
25. 84 or 85 Parts suitable for use solely or principally with power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps 28% 18%
26. 84 or 85 E-Waste 28%/18% 5%
27. Any Chapter Biomass briquettes 18% 5%

Exemption from payment on IGST

L. Following goods are exempted from payment of IGST

S. N. Description Present applicable IGST rate Recommended IGST rate
1 IGST exemption on imports of rigs imported for oil / gas exploration and production projects under lease, subject to the following conditions that:

(i) Integrated tax leviable under section 5(1) of the IGST Act, 2017 on supply of service covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017;
(ii) The rig is not sold without the prior permission of the Commissioner of Customs of the port of importation;
(iii) to re-export the goods within 3 months from the expiry of the period for which they were supplied under a transaction covered by item 1(b) or 5(f) of Schedule II of the Central Goods and Services Tax Act, 2017 out of India;
(iv) to pay on demand an amount equal to the integrated tax payable on the said goods but for the exemption under this notification in the event of violation of any of the above conditions and applicable interest.
5% Nil
2 Exemption from IGST on imports of medicines supplied free by international agencies like UNICEF, WHO, Red Cross etc. 12%/5% Nil
3 Exemption from IGST on imports of bona fide gifts upto CIF value limit of Rs. 5000 imported through post or air. 28% Nil

Changes in Export provisions

M. Following modalities have been decided with respect to export;

(1) Refund of IGST paid on goods exported outside India in July would begin to be paid from 10th October 2017 and for the month of august from 18th October, 2017. Refunds of IGST paid on supplies to SEZs and of inputs taxes on exports under Bond/LUT, shall be processed from 18th October, 2017 onwards.
(2) Exporter are allowed to procure the material against Advance Authorization (AA) / Export Promotion Capital Goods (EPCG) / 100% EOU schemes. Holders of AA / EPCG and EOUs would not have to pay IGST, Cess etc. on imports. Also, domestic supplies to holders of AA / EPCG and EOUs would be treated as deemed exports under Section 147 of CGST/SGST Act and refund of tax paid on such supplies given to the supplier.
(3) Merchant exporters will now have to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export.
(4) In view cash blockages ë-wallet” system shall be operationalized w.e.f. 01st April, 2018 and refund on export shall be credit to such e-walled on provisional basis.
(5) Exporters have been exempted from furnishing Bond and Bank Guarantee when they clear goods for export.
(6) Specified banks and Public Sector Units (PSUs) are being allowed to import Gold without payment of IGST. This can then be supplied to exporters as per a scheme similar to Advance Authorization.
(7) To restore the lost incentive on sale of duty credit scrips, the GST on sale-purchase of these scrips is being reduced from 5% to 0%.
(8) GST on bunker fuel is being reduced to 5% for both coastal vessels and foreign going vessels. This will boost coastal shipping. It will also improve India’s competitiveness.

Other Changes

N. Apart from above following miscellaneous changes are also been suggested by GST Council

(1) Invoice Rules are being modified to provide relief to certain classes of registered persons.
(2) Exemption to annuity paid by NHAI (and State authorities or State owned development corporations for construction of roads) to concessionaires for construction of public roads.
(3) Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service, by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations/ Undertakings or any other entity having 50% or more ownership of Central Government, State Government, Union Territory to (a) industrial units or (b) developers in any industrial or financial business area, may be exempted from GST .

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