Recommendations by GST council in its 22nd meeting

Highlights of The GST Council in its 22nd meeting held at Delhi on 6th October 2017 

 Registration and operationalization of TDS/TCS provisions to be postponed till 31st March 2018. 

 The e-way bill system to be introduced in a staggered manner with effect from 01st January 2018 and will be rolled out nationwide with effect from 01st April 2018. 

 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 15th November 2017. 

 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 15th November 2017. 

 Invoice Rules to be modified to provide relief to certain classes of registered person. 

 Suspension of the reverse charge mechanism u/s 9(4) of the CGST Act, 2017 and u/s 5(4) of the IGST Act, 2017 till 31st March 2018. 

 Changes in Composition Schemes to simplify compliance structures for the tax payers. 

 Measures to give relief to Small and Medium Enterprises from burden of compliances under GST. 

 Major Relief Package for Exporters under GST. 

 Reduction in GST rates of 27 goods items. 

 IGST Exemption on Imports of certain goods subject to conditions. 

 Rationalisation of GST rates on job work services 

 Changes in rates of other services. 

Changes recommended in Composition Scheme 

The GST Council in its 22nd meeting has recommended certain changes to ease compliances pertaining to GST laws. Post-GST the Small and Medium businesses are facing the brunt of mammoth compliances envisaged in the law. 

The following changes in composition scheme were recommended– 

1. The turnover threshold to opt for Composition has been recommended to be revised to up to Rs. 1 crore. This threshold is the highest amount permitted by the legislation u/s 10 of the CGST Act, 2017. Currently , the threshold was fixed at Rs. 50 lacs which was later revised to Rs. 75 lacs vide Notification 08/2017-Central Tax on 27-06-2017. 

2. For special category states (except Jammu & Kashmir and Uttarakhand) the threshold is recommended to increase to Rs. 75 lacs from Rs. 50 lacs (Rs. 50 lac was revised in Not. 08/2017-CT dtd. 27-06-2017). Thus, turnover threshold for Jammu & Kashmir and Uttarakhand shall be Rs. 1 crore. 

3. The facility of availing composition under the increased threshold is intended to be made available to both migrated and new taxpayers up to 31.03.2018. 

4. The option once exercised will be operational from the first day of the month immediately succeeding the month in which the option to avail the composition scheme is exercised. 

Sl. No.       Description             Present                     Proposed 

1.             Turnover Threshold      75 lacs                  1 crore 
2. Turnover Threshold for special category states (except J&K and Uttarakhand)

                                                50 lacs                       75 lacs 

3. Turnover for States of J&K and Uttarakhand 

                                                 75 lacs                     1 crore 

4. Monthly Returns GSTR – 1, GSTR – 2 & GSTR – 3 per month for July, August and September GSTR – 4 per quarter for period onwards Oct’2017 

5. Summary return – GSTR-3B No Change No Change 

6. Persons providing Restaurant Service but also providing exempt services (Total >Rs. 20 Lacs) Not Eligible for Composition Scheme Eligible for Composition Scheme 5. New entrants to this scheme will be required to file the return in FORM GSTR-4 only for that portion of the quarter from when the scheme becomes operational. It is mandatory for them to file returns as a normal taxpayer for the preceding tax periods. 

6. This revision in threshold for Compositions is expected to greatly benefit the MSME sector. 

7. Currently, the persons who are otherwise eligible for composition scheme but are providing any exempt service (such as extending deposits to banks for which interest is being received) were being considered ineligible for the said scheme. It has been recommended to make such persons eligible for this composition scheme. 

8. A Group of Ministers (GoM) will be constituted with the responsibility to examine measures to make the composition scheme more attractive. Relief for Small and Medium Enterprises under GST 

With an effort to reduce compliance costs of small businesses the following changes are recommended – 

1. With an objective to ease the registration mandates for small and medium enterprises it was decided that those service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) will not be required to obtain registration even if they are making inter-State taxable supplies of services. 

Sl. No.   Description           Present                Proposed 

1. Annual Turnover less than Rs. 20 lacs but providing inter-state supply of services Mandatory Registration (only inter-state job worker is exempt). Registration not mandatory. 

2. Annual aggregate turnover up to Rs. 1.5 Crore Monthly returns with monthly payment of taxes. Quarterly returns with quarterly payment of taxes. Form GSTR-3B will continue up to tax period of December 2017. Liable to pay GST on Advances receipt on account of supply of goods. Pay GST on supply only, need not pay GST on receipt of advance. 

3. Unregistered Purchases/ Expenses Attracts GST under RCM provisions Suspension of such RCM provisions u/s 9(4), CGST Act, 2017 up to 31st March, 2018. RCM provisions of section 9(3), CGST Act, 2017 would continue. 

5. GTA services to unregistered persons Taxable Exempt Presently, anyone making inter-state taxable supplies is compulsorily required to register, irrespective of turnover. Only inter-State job worker was made exempt vide Notification 07/2017-Integrated Tax on 14-09-2017. 

2. With an objective to simplify payment and return filing for small and medium businesses it was decided that enterprises with an annual aggregate turnover up to Rs. 1.5 crores, will just have to file quarterly returns in FORM GSTR-1,2 & 3 and pay taxes only on a quarterly basis, Presently, the legislation requires monthly filing of returns for these categories of taxpayers.

This change will be implemented from coming Third Quarter of this Financial Year i.e. October-December, 2017. 

a. The registered buyers from such small taxpayers would be eligible to avail ITC on a monthly basis. 

b. The due dates for filing the quarterly returns for such taxpayers is not yet decided but will be notified with time. 

c. These changes will not abstain taxpayers to file monthly FORM GSTR-3B till December, 2017. 

d. Also, they are also required to file FORM GSTR-1, 2 & 3 for the months of July, August and September, 2017 as a normal taxpayer provided other conditions are satisfied. Due dates for filing the returns for the month of July, 2017 have already been announced. The due dates for the months of August and September, 2017 will be announced in due course. 

3. The council has recommended suspending the reverse charge mechanism u/s 9(4) of the CGST Act, 2017 and u/s 5(4) of the IGST Act, 2017 till 31st March 2018. A committee of experts will be appointed to review this mechanism due to the challenges faced by the taxpayers increasing their compliance costs. Section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 required a registered taxable person to pay GST on procurement of goods and services while procuring from unregistered persons. Please note that reverse charge under section 9(3) is proposed to be continued which includes payment of GST on reverse charge basis for Transport of Goods, Legal Services, Director Services etc. IT SHOULD BE NOTED THAT NOTHING RELATED TO SUSPENSION OF REVERSE CHARGE PROVISIONS HAS BEEN NOTIFIED YET THEREFORE, THE CURRENT PROVISIONS WILL PREVAIL UNTILL THE RELEVANT NOTIFICATIONS ARE OUT. 

4. It was recommended to exempt Taxpayers having annual aggregate turnover up to Rs. 1.5 crores to pay GST at the time of receipt of advances on account of supply of goods i.e., the GST on such supplies shall be payable only when the supply of goods is made. Presently, the time of supply provisions envisaged in the law mandates GST to be paid on receipt of advance against supply of goods and services. Pre-GST, such tax on advances was attracted only in case of supply of services and not in case of supply of goods. 

5. The services provided by a GTA to an unregistered person will be exempted from GST. Major Relief Package for Exporters under GST The Council in its 22nd meeting has approved major relief packages for the exporters considering the decline in in export performance and export competitiveness post-GST. This measure is taken with an objective to provide immediate relief to the export sector and enhance export competitiveness of India. The Council has also decided to continue to monitor the situation closely so that going forward all required support continues to be extended to this important sector of the economy. 

This relief package will include – 

1. Processing of refund cheques for the exports in month of July 2017 by 10th October 2017. 

2. The August backlog w.r.t. above will start getting cleared from 18th October 2017. 

3. Immediate relief is to be given by extending the Advance Authorization (AA) / Export Promotion Capital Goods (EPCG) / 100% EOU schemes to sourcing inputs etc. from abroad as well as domestic suppliers. 

4. Merchant exporters will be required to pay just a nominal GST of 0.1% for procuring goods from domestic suppliers for export. 

5. Introduction of “e-Wallet” systems to solve cash blockage of exporters. 

6. Exporters to be exempted from furnishing Bond and Bank Guarantee when they clear goods for export. 

7. Specified banks and Public Sector Units (PSUs) will be allowed to import Gold without payment of IGST. This can then be supplied to exporters as per a scheme similar to Advance Authorization.

 8. The GST on sale-purchase of duty credit scrips to be reduced from 5% to 0%. 

9. GST on bunker fuel is being reduced to 5% for both coastal vessels and foreign going vessels. Reduction in GST rates of 27 goods items 

Sl. No. Chapter/ Heading/ Subheading/ Tariff item Description Present GST Rate GST Rate Recommended by the GST Council 

1. 0804 Mangoes sliced dried 12%  to  5% 

2. 1905 or 2106 Khakra and plain chapati / roti 12% to 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% to 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% to 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% to 5% 

7. 3213 Poster Colour 28% to 18%

8. 3407 Modelling paste for children amusement 28% to  18%

9. 3915 Plastic waste, parings or scrap 18% to 5% 

10. 4004 00 00 Rubber waste, parings or scrap 18%  o 5% 

11. 4017 00 20 Hard Rubber waste or scrap 28% to 5% 

12. 4707 Paper waste or scrap 12% to 5% 

13. 4907 Duty credit scrips 5% to Nil 

14. 5401 Sewing thread of manmade filaments, whether or not put up for retail sale 18% to 12% 

15. 5402, 5404, 5406 All synthetic filament yarn, such as nylon, polyester, acrylic, etc. 18% to 12% 

16. 5403, 5405, 5406 All artificial filament yarn, such as viscose rayon, Cuprammonium, 18% to 12% 

17. 5508 Sewing thread of manmade staple fibres 18% to 12% 

18. 5509, 5510, 5511 Yarn of manmade staple fibres 18% to 12% 

19. 5605 Real Zari 12% to 5% 

20. 6802 All goods falling under heading 6802 [other than those of marble and granite or those which attract 12% GST] 28% to 18% 

21. 7001 Cullet or other waste or scrap of Glass 18% to 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% to 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% to 18% 

26. 84 or 85 E-Waste 28%/18% to 5% 

27. Any Chapter Biomass briquettes 18% to 5%

 Foot note: 1. Reduction in GST rate against S. No 4 above is subject to following condition: 

a) If the supplier of such food preparations produces a certificate from an officer notbelow the rank of the Deputy Secretary to the Government of India or not below the rank of the Deputy Secretary to the State Government concerned to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned, within five months from the date of supply of such goods or within such further period as the jurisdictional Commissioner of Central tax or jurisdictional Commissioner of State tax, as the case maybe, may allow in this regard. 2. For S. No.5 above, the phrase registered brand name means: 

a) A brand registered as on 15.05.2017 shall be deemed to be a registered brand for the purposes of levy of 5% GST, irrespective of whether or not such brand is subsequently deregistered. 

b) A brand registered as on 15.05.2017 under the Copyright Act, 1957 shall also be treated as a registered brand for the purposes of levy of 5% GST. 

c) A brand registered as on 15.05.2017 under any law for the time being in force in any other country shall also be deemed to be a registered brand for the purposes of levy of 5% GST. 

3. For S. No. 7 above, the phrase “brand name” is defined as: "brand name" or "trade name" means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, label, signature or invented word or writing which is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of that person. IGST Exemption on Imports of Goods Sl. No. 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 Rationalisation of GST rates on job work services 

Sl. No. 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% 

12. To issue a clarification with regard to classification of printing products/services Changes pertaining to certain services Sl. No. Particulars Present Proposed 

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. [scope of definition of Governmental Authority is also expanded to cover authorities set up to carry out functions entrusted to a ‘Panchayat’] 18% 5% 

2. Transport of passengers by motor cab/ renting of motor cab GST of 5% without ITC and 12% with full ITC available to transport of passengers by motor cab/ renting of motor cab;
 (i) GST of 5% without ITC and 12% with full ITC available to transport of passengers by motor cab/ renting of motor cab shall be extended to any motor vehicle; 

(ii) ITC of input services shall be allowed in the same line of business at GST rate of 5% 

3.1 Leasing of vehicles purchased and leased prior to 1.7.2017 Same rate of tax as applicable on supply of like goods involving transfer of title in goods Shall 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. 

3.2 The vehicles covered by the above leases (i.e. leases of vehicles purchased and leased prior to 1.7.2017), when disposed off/ sold. 12%/18%/28% 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. 

3.3 Sale/supply of vehicles by 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. 12%/18%/28% 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. 

3.4 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. N.A. To be subjected to GST under reverse charge under section 9 (3) of the CGST Act. Changes pertaining to certain services Sl. No. Particulars Present Proposed 

4. If a dealer who makes supplies of goods and services referred to in clause (b) of paragraph 6 of Schedule II of CGST Act i.e. Restaurant Services and /or also receives interest income or makes supply of any exempt service, (s)he will not be ineligible for the Composition Scheme under Section 10 provided all other conditions are met. Ineligible for Registration under Composition Scheme Eligible for registration under Composition Scheme. Further, in computing his aggregate turnover in order to determine his eligibility for composition scheme, interest income and value of supply of any exempt services shall not be taken into account. 

5. The services provided by a GTA to an unregistered person (under GST law) including unregistered casual taxable person (supplies of handicraft goods, conditions apply) other than the recipients liable to pay tax on GTA services under reverse charge. Liable to GST Exempt from GST 

6. To expand the existing definition of Governmental Authority Central Government, State Government, Union Territory and Local Authority To include any authority set up to carry out any functions entrusted to a Panchayat under Article 243G of the Constitution. 

7. 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. 18% GST GST shall be levied @ 12% 

8. 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. 

9. Supply of service or goods by a Government Entity to Central Government, State Government, Union Territory, Local Authority or any person specified by them against consideration received from them in the form of grants, Shall be exempted. “Government Entity” shall be defined as an authority or a board or any other body including a society, trust, corporation which is, - (i)set up by an Act of Parliament or State Legislature, or (ii)established by any government, with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority. 

10. Transportation of natural gas through pipeline. 18% GST shall be levied @ 12% with ITC or 5% without ITC 

11. Annuity paid by NHAI (and State authorities or State owned development corporations for construction of roads) to concessionaires for construction of public roads. Exemption 12. 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 13. The services provided by Overseeing Committee members to RBI Was not taxed under reverse charge mechanism under section 9(3) of the CGST ACT,2017 Shall be taxed under the reverse charge mechanism under section 9(3) of the CGST Act, 2017. 

By CA Sumit Binani