Eagerly awaited results of the 42nd GST Council meeting held on 5-10-2020 have since been made available in the press release of CBIC issued on the same day. Apart from policy decisions regarding extension of cess and allotment of funds to States etc., Points 3 and 4 of the press release contain the practical issues in the matter of filing of returns and payment of tax.
It has been mentioned that the dealers having aggregate turnover below Rs. 5 crores have been allowed “filing of returns on a quarterly basis with monthly payments by such taxpayers to be implemented w.e.f. 01.01.2021” (emphasis given in the press release). Here it is implied that such dealers have to pay monthly tax on provisional basis calculated at 35% of previous quarter for the first two months of the quarter and shall file quarterly return at the end of third month along with balance of tax due. How it can be considered useful to the dealers, on the contrary the process would be cumbersome more than filing of regular monthly returns.
Further it has been mentioned as “Auto-population of input tax credit from suppliers’ GSTR-1s through the newly developed facility in FORM GSTR-2B for monthly filers w.e.f. 01.01.2021 and for quarterly filers w.e.f. 01.04.2021”. Hence the claim of ITC is being left with GSTN rather than the tax payers. Heredoubts have also been raised in respect of buyers (having more than Rs. 5 crores) from these quarterly dealers in the matter of auto population of ITC based on GSTR-1 of the sellers and it would be an irritating element in filing monthly returns by buying dealers.
In the matter of HSN codes, hitherto generally not practiced by small dealers, the present announcement states as follows:
“Revised Requirement of declaring HSN for goods and SAC for services in invoices and in FORM GSTR-1 w.e.f. 01.04.2021 as under: a. HSN/SAC at 6 digits for supplies of both goods and services for taxpayers with aggregate annual turnover above Rs. 5 crores;
b. HSN/SAC at 4 digits for B2B supplies of both goods and services for taxpayers with aggregate annual turnover upto Rs. 5 crores;
c. Government to have power to notify 8 digit HSN on notified class of supplies by all taxpayers.”
These specific conditions evoke fear of mismatch of HSN codes and may invite unnecessary troubles to the tax payers, either big or small. Apart from the purpose of statistics we cannot perceive any fruitful results on these conditions.
Further the dates of implementation have been given as 1-1-2021 and in some events as 1-4-2021 and several tax payers and their reps have expressed why not these changes be introduced at the next financial year ie., on 1-4-2021 instead of 1-1-2021. At this juncture I want to say one irritating element in GST Acts. In GST Acts the definition of “year” has not been given and usually in all fiscal acts it is defined as “financial year”.
As such, the period of assessment has not been prescribed anywhere in the Act. Section 59 of CGST Act 2017 speaks of assessment as per the returns mandated in Section 39. Hence either the monthly returns or quarterly returns can be assessed individually without considering the end of financial year. I came across events wherein GST officers issuing SCN collectively for months spreading over two financial year and in some cases individual monthly return has been considered for assessment on best judgement for the inconsistencies found in those returns. Though Section 44 and 45 prescribe Annual returns in Forms GSTR-9 and 9-C no where it is said that those annual returns are the base for making out an assessment. Further in respect of dealers having turnover below Rs. 2 crores it is not mandatory to file annual returns. Hence the annual return, though prescribed in the Act cannot be considered as an element for making final assessment for any specific period.
At the end it has been said that various amendments in the CGST Rules and FORMS have been recommended, for which we have to wait for appropriate notifications by the Government. At the end of the press release it has been specifically mentioned as “t he decisions of the GST Council have been presented in this note in simple language for easy understanding. The same would be given effect to through Gazette notifications/ circulars which alone shall have force of law”.. Yes we have to wait for proper notifications and amendments to the CGST Act and Rules to analyze the actual impact of these matters.
Further it is not known how long it would take to give effect to these recommendations of the GST Council. We had bitter experience in the matter of Interest under Section 50 of the Act, amending the provision for levy of interest only on the net cash payable. The recommendation in this regard was made in the 35th GST Council meeting on 21-6-2019, amendment made in the Finance Bill 2 of 2019 dated 1-8-2019 which was given effect after more than one year on 25-8-2020 as effective from 1-9-2020.
As in the past we have to wait for unspecified period to know about the full impact of these decisions of this 42nd GST Council Meeting.
S. SUTHANTHIRANATHAN is a Retired Assistant Commissioner (CT), Madurai, Tamil Nadu.