From the 1st of April 2020, the GST (Goods and Services Tax) on mobile phones will be increased to 18% from the existing tax of 12% after the GST Council rectified the inverted duty structure that the industry was facing.
After the conclusion of the 39th GST Council meeting that held on Saturday, the Union Finance Minister Nirmala Sitharaman said, “Mobile phones and specified parts to attract 18% versus 12%. All other items, if there’s a need to calibrate the rates, to remove the inversion, we can take them up in future, examination of that can happen at a later time,”.
GST for Maintenance, Repair and Overhaul (MRO) service providers in the country was lowered to 5% GST from 18% with the provision availing full Input Tax Credit (ITC). Ms. Sitharaman said, “This will assist in setting up of MRO services in the country,”.
On top of this, the GST rate for handmade and machine-made matchsticks was rationalised to 12% from the current range of 5% to 18%. However, the Council deferred the rationalising of the tax structure of the man-made yarn, fertilizers, footwear, and fibre until the next GST Council meeting.
PwC India’s Partner and Leader Indirect Tax, Pratik Jain that the “Increase of GST rate on mobile phones to 18%, arguably to correct the inverted duty structure, may lead to increase in prices,”
He added, “Given the current economic scenario, perhaps an option to provide quicker refund of input tax credit (including on input services which is not allowed currently) could have been explored,”.
|Particulars||Updated GST (%)||Current GST (%)|
|MRO Services For Aircraft||5||18|
|Handmade and Machine-made Matchsticks||12||5-18|
The GST Council has also approved 60 additional skilled people and better hardware for improving the capacity of handling entries – from existing 1.5 lakh to 3 lakh entries – for Infosys, to get a significant improvement in countering the issues faced by taxpayers to file returns and other documents on the GST Network.
The Council has given a deadline to make the improvements in stages – July 2020 – instead of January 2021 time limit that the Infosys Chief, Nandan Nilekani sought. Nilekani will be attending the next 3 GST Council Meetings said Ms Sitharaman, to update the progress made for the same. Nilekani assured that he, personally, would monitor the progress of this GSTN Project.
Nilekani suggested the stage-wise improvements and implementations into the system, starting with the linking details of the statement of outward supplies in FORM GSTR-1 to liability in FORM GSTR-3B, which will be followed by linking if the ITC in FORM GSTR-3B to details of supplies in FORM GSTR-2A.
To combat the evasion, implementation of Aadhaar Authentication and Spike rules would be introduced.
The GST Council has decided that the new returns will come into effect from July 2020, however, the interest on the delay in payment of GST will be charged on the net cash tax liability of the taxpayer. The law will be amended to bring in the change with hindsight from 1st Julu 2017.
The Council has also decided to defer the implementation of e-invoice and QR (Quick Response) Code until the 1st October 2020, and exempted the companies in banking, insurance, non-banking financial institutions, financial institutions, and passenger transportation service sectors from issuing e-invoices or even capturing any dynamic QR Codes.
Partner at Ernest & Young, Bipin Sapra said, “While postponement of e-invoicing and new returns will allow both government and Industry to get completely ready, it still brings uncertainty given that industry had been gearing up to implement the new changes,”.
The GST Council approved the Aadhaar authentication for the new taxpayers and said that the “Know Your Supplier” feature will be soon introduced which will provide some basic information of the particular suppliers.
Additionally, the late fee will not be levied on the delay of filing of returns and reconciliation statements for Financial Years 2017-19 for businesses whose turnover is up to Rs. 2 crore, aiding Micro, Small & Medium Enterprises (MSMEs). The last date for filing of returns and reconciliation statements for taxpayers with income under Rs 5 crore has also been extended to 30th June 2020 from 21st March 2020.
FM Nirmala Sitharaman said that legal opinion will be taken to decide whether the Council can borrow – the guarantor of the loan and its impact on the Fiscal Responsibility and Budget Management Act – for providing compensation to the states as they generated low revenues which impacted the cess collections.
Ms Sitharaman said, “Rs 78,000 crore is the compensation cess collected this FY, while the Centre has given out Rs 1.2 lakh crore,”. She said that a special meeting of the Council will be called in under 2 weeks from the Parliament session to take a view on this issue.
As of now, the government is looking directly at a deficit of more than Rs. 53,000 crore in this Financial Year in compensation cess. However, she added that the government is not looking at the isse as a “Financial Emergency”.