Last Wednesday, the Goods and Services Tax (GST) Council met, in the backdrop of falling revenues and failure of the central government, to compensate some states for shortfall in revenues. The Council decided to restrict input tax credit
(ITC) for unmatched invoices, improve tax collection, get more persons to file returns and rationalise some rates.
On October 9, a Rule 36(4) was inserted in the Central GST
Rules, 2017. This restricted a registered entity from availing of ITC in respect of invoices for which details have not been uploaded by suppliers beyond 20 per cent of the eligible amount, the details of which have been uploaded. Now, the GST
Council has decided that ITC to a recipient in respect of invoices or debit notes that are not reflected in his/its GSTR-2A shall be restricted to 10 per cent of the eligible credit available in respect of invoices or debit notes reflected in his/its GSTR-2A.
Through this change, the Council expects that such recipients will pressurise their suppliers to file their GSTR-1 returns, on uploading the details of their supplies. Many large companies have already made it a practice to chase their suppliers and make sure that the latter do upload the details of their supplies. Others are likely to follow suit vigorously.
The Council also decided to take suitable action for blocking of fraudulently availed ITC in certain situations — the main intent is to check fake invoices. A standard operating procedure for tax officers will be issued in respect of action to be taken in cases of non-filing of GSTR-3B returns. These measures aim at improving the tax collection.
To ensure prompt filing of returns, the e-way bill for those not having filed their GSTR-1 for two tax periods shall be blocked. So, those who delay timely filing of returns will find it difficult to transport their goods.
The Council has allowed all pending GSTR-1 returns to be filed before January 10, 2020, without payment of late fee. The due dates for filing GST
returns for the month of November will be extended in respect of a few northeastern states. The limit filing annual returns GSTR-9 and reconciliation statement GSTR-9C for financial years 2017-18 and 2018-19 are being extended to end-January and end-March, respectively.
Grievance redressal committees will be set up at zonal/state levels, consisting of central GST and state GST officers, and representatives of trade and industry, with other stakeholders (GST practitioners, GST Network, etc). These will address grievances at those levels.
The tax rates for lotteries, long-term lease of industrial/ financial infrastructure plots and polyester/ polypropylene woven and non-woven bags, including flexible intermediate bulk containers, are being rationalised. The Council did not tinker with other rates.
The Council also approved various legal amendments, to be introduced in Union Budget 2020. The proposed changes might appear in the public domain for eliciting of comment.
The main worry of state finance ministers was the delay in receiving compensation from the central government.
One of them has said this amounts to sovereign default. Some others alleged the delay is despite the Centre having the requisite funds. Unless the economy revives, these complaints are likely to get louder.