43rd GST Council Meeting; Compensation Cess, Amnesty Scheme, GST Return Relief Measures Discussed

The 43rd GST Council Meeting took place today via video conferencing, chaired by Finance Minister Smt. Nirmala Sitharaman. The meeting was attended by the Finance Ministers of states and Union Territories (UTs) and senior officers of the Ministry of Finance of the states and UTs. It was the first time the Council met up after a gap of nearly eight months. The matters discussed spanned introducing an amnesty scheme, compensation cess, annual return simplification, and introducing a new Quarterly Return Quarterly Payment (QRQP) scheme, among others.

Tax rates on COVID-19 relief materials discussed

The GST rates on COVID-19 vaccines and supplies were not changed. However, GST exemptions for the import of COVID-19 relief materials and medicines, including those imported free of cost, will be valid until 31st August 2021. It is to be noted that these goods are also exempted from Basic Customs Duty. A Group of Ministers (GoM) will be constituted over the next day to reduce GST rates further. They are required to submit a report about the same by 8th June 2021. 

The FM further announced that import duties on the drug Amphotericin B to treat black fungus had been exempted. Also, to support the World Health Organisation in the LympahticFilarisis elimination programme being conducted, the GST rate on Diethylcarbamazine tablets has been recommended for reduction from 12% to 5%. 

Compensation cess session to be conducted soon

On the GST compensation cess, the FM announced that the Centre would borrow funds to the tune of Rs.1.58 lakh crores and pass it on to the states. The formula used for distribution will be the same as what was followed last year. A special session will be conducted soon with a single-point agenda to discuss the compensation issue about how much compensation cess will be collected and how long beyond July 2022. 

Amnesty scheme introduced

An amnesty scheme is introduced for small taxpayers under GST. 89% of the GST taxpayers in India constitute small taxpayers. They can now file their pending returns and avail the benefits of the amnesty scheme with reduced late fees for non-filing of GSTR-3B returns for the tax periods from July 2017 until April 2021. The late fees have been capped at a maximum of Rs.500 per return for taxpayers who did not have any tax liability for the said tax periods. For other taxpayers, the late fees are capped at Rs.1,000. This move will provide a huge relief to small taxpayers, given the pandemic situation, and apply to returns furnished between 1st June 2021 and 31st August 2021.

Late fee rationalisation done

There has been a late fee rationalisation done to reduce the burden on taxpayers for future tax periods. The rationalisation is being done to align late fees with the tax or turnover of the taxpayers. Taxpayers having nil outward supplies in their GSTR-1 return or nil tax liability in their GSTR-3B return will have their late fees capped at Rs.500.

For other taxpayers, the late fees charged will depend on their Annual Aggregate Turnover (AATO) in the preceding year. If their AATO was up to Rs 1.5 crore, then the late fee will be capped at Rs.2000. Taxpayers having an AATO between Rs.1.5 crore and Rs.5 crore will have their late fees capped at Rs.5,000. Taxpayers having an AATO exceeding Rs.5 crore will have their late fees capped at Rs.10,000.

Late fees have also been rationalised on the late filing of Form GSTR-4 by composition taxpayers. The fees are capped at Rs.500 per return for nil tax liabilities and Rs.2,000 per return in other cases. For tax filers furnishing Form GSTR-7, the late fee has been reduced to Rs.50 per day and a maximum of Rs.2,000 per return.

Due date extensions given

The GST return filing due dates have been further extended for March and April 2021 tax periods in a move that brings great relief to taxpayers. For small taxpayers with turnover up to Rs.5 crore, a nil rate of interest will apply for the first 15 days post the due date for Form GSTR-3B and challan PMT-06. Thereafter, a reduced rate of 9% will apply for 45 days and 30 days for March and April 2021, respectively. Late fees will be waived up to 60 days and 45 days post the due date for the month/quarter ending March 2021 and April 2021. For CMP-08 filers, a nil rate of interest will apply for the first 15 days post the due date and a reduced rate of 9% for the next 45 days post the due date for the quarter ending March 2021.

For the tax period of May 2021, a nil interest rate and a 9% interest rate will be applicable for the delayed filing of GSTR-3B and PMT-06 for the first 15 days and the next 15 days, respectively. A 30-day late fee waiver will be granted for the delayed filing of Form GSTR-3B. This is for small taxpayers only. For large taxpayers, a reduced rate of interest of 9% will apply for the 15 days after the return filing due date, as well as a 15-day late fee waiver.

Other due date extensions announced, such as the Invoice Furnishing Facility (IFF) and GSTR-1 due dates for May 2021, have been extended by 15 days. The Form GSTR-4 for the financial year 2020-21 has been extended until 31st July 2021. Form ITC-04 for the quarter ending March 2021 has been extended to 30th June 2021. Cumulative adjustment of the input tax credit will apply under Rule 36(4) of the CGST Rules for the tax periods of April to June 2021.

GST annual return to be simplified

The FM also announced that the GST annual return would be simplified, the details of which are yet to be notified. Besides, it will continue to be made optional for small taxpayers. The GSTR-9C reconciliation statement will be scrapped as announced in Budget 2021. However, taxpayers with a turnover exceeding Rs.5 crore will be required to file the reconciliation statement for the financial year 2020-21.

Other matters discussed

A new Quarterly Return Filing and Quarterly Return scheme has been discussed, the modalities being looked into by a law committee. Rate corrections due to the inverted duty structure in the footwear and textile sectors have been dropped. The GST levy on certain services was reduced/clarified in the press release issued post the Council meeting.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in