38th GST Council: GSTR 9/9C Extension & Lottery Tax

The 38th GST Council meeting extended the GSTR-9 and GSTR-9C annual return deadlines and set a uniform GST rate on lotteries. This article summarises those key decisions and their impact on taxpayers.

The 38th Goods and Services Tax (GST) Council meeting occurred on Wednesday, December 18, 2019, in New Delhi. Union Finance Minister Nirmala Sitharaman presided over the session.

Recent Updates from GST Council Meetings

The 47th GST Council meeting, held on June 28-29, 2022, in Chandigarh, was chaired by Union FM Nirmala Sitharaman. Key recommendations included revising rates for revenue enhancement, correcting inversion issues, and streamlining the GST exemption list. Additionally, compliance relief was provided to e-commerce suppliers and taxpayers under the composition scheme. The 47th GST Council meeting details were provided.

On December 31, 2021, the 46th GST Council meeting in New Delhi, led by Union FM Nirmala Sitharaman, decided to postpone the increase of the GST rate on textiles to 12%. Further details are available regarding the 46th GST Council meeting.

The 45th GST Council meeting took place on September 17, 2021. Topics on the agenda included extending tax concessions for COVID-19 essential goods, discussions on GST compensation for states, and addressing the inverted tax structure. Information about the 45th GST Council meeting was published.

During the 43rd GST Council meeting on May 28, 2021, the Council approved the reintroduction of the GST amnesty scheme, rationalized late fees for all taxpayers (especially small businesses), and exempted IGST on imported COVID-19 treatment equipment and relief supplies until August 31, 2021. More information can be found on the 43rd GST Council meeting.

Main Decisions from the 38th GST Council Meeting

GSTR-9 and GSTR-9C Due Dates Extended for FY 2017-18

The deadline for filing GSTR-9 and GSTR-9C for Fiscal Year 2017-18 was extended from December 31, 2019, to January 31, 2020. This extension aimed to provide taxpayers with additional time to utilize the GSTR-9C offline tool, which was anticipated to be released on December 21, 2019.

Further Restrictions on Provisional ITC Claims in GSTR-3B

The provisional Input Tax Credit (ITC) claim allowed in GSTR-3B was reduced from 20% to 10% when invoices or debit notes are not reflected in GSTR-2A. Consequently, frequent invoice matching and effective vendor communication have become crucial for taxpayers.

GSTR-1 Late Fee Waiver through Amnesty Program

An amnesty scheme was introduced, waiving late fees for GSTR-1 filings for tax periods between July 2017 and November 2019, provided the returns were submitted by January 10, 2020. However, if a taxpayer failed to file for more than two consecutive tax periods, their e-way bill generation would be blocked.

Standard Operating Procedure for Non-Filing of GSTR-3B

A Standard Operating Procedure (SOP) was scheduled for release to guide tax officers on actions to be taken in cases of non-filing of GSTR-3B. These guidelines are intended to help prevent or reverse the claiming of fraudulent Input Tax Credit.

GST Return Deadlines Extended for Specific Taxpayer Categories

The due date for GST returns for certain North Eastern States for November 2019 was extended until December 31, 2019.

Uniform 28% GST Levy on All Lotteries

The GST Council decided to impose a uniform 28% tax on all types of lotteries, effective March 1, 2020. This decision was reached after a voting process, standardizing the tax rate from the previous structure where state-owned lotteries were taxed at 12% and state-authorised lotteries at 28%.

GST Rate Rationalization to Address Inverted Tax Structure

To rectify the inverted tax structure, the GST Council mandated a uniform 18% rate on bags falling under HSN code 3923/6305 (including woven and non-woven bags and sacks of polythene or polypropylene strips used for packing goods, such as FIBCs), effective January 1, 2020. Previously, these were taxed at 12%.

GST Exemption for Industrial Land Developers

An exemption from GST was granted for the long-term lease of industrial or financial infrastructure plots, provided the Central or State Government holds 20% or more shares in the developer’s capital (reduced from the previous requirement of at least 50%). This exemption became applicable from January 1, 2020.

Additional Resolutions

Amendments to the GST law were slated for discussion in the Union Budget 2020-21. Various proposals concerning GST revenue augmentation were considered. Furthermore, Grievance Redressal Committees (GRCs) were to be established at the Zonal/State level to address taxpayer grievances, whether specific or general.

Anticipations Prior to the 38th GST Council Meeting

Streamlining the Upcoming New GST Return System

The Finance Ministry engaged with various stakeholders over two months to assess the practicality of the new return system and monitored the progress on the GSTN portal. A ‘GST Feedback Diwas’ was organized on December 7, 2019, to gather nationwide input on the new GST returns. Significant procedural challenges were foreseen with the new system, such as the need for frequent invoice matching and tracking. It was widely expected that the new return format and filing procedure would be refined for taxpayer convenience.

Assessment of GST Compensation for States

The GST Council was expected to review the revenue situation during this meeting, particularly in light of a continuous decline in revenue over the preceding months of the fiscal year. A primary concern was the Central Government’s delay in disbursing compensation cess to states for the past four months. Many states experiencing revenue losses proposed alternative compensation mechanisms. Additionally, some states, like Chhattisgarh, had petitioned the Prime Minister to extend the compensation period from 2021-2022 to 2026-27.

Discussion on Issues from Inverted Tax Structure

The 38th GST Council meeting was anticipated to address and correct the inverted tax structure affecting numerous items. This included products like fabric bags, solar modules, railway locomotives, fertilizers, and steel utensils, where output tax rates (5-12%) were lower than input tax rates (typically 18%).

Potential Restructuring of GST Tax Rate Slabs

Speculation suggested a significant overhaul of GST rates. It was expected that the current five-slab structure might be reduced to three slabs, potentially by increasing the 5% rate to 9-10% and eliminating the 12% rate. Moreover, certain previously exempted or nil-rated items could be brought back under the tax framework. The GST Council’s previous 37th meeting on September 20, 2019, primarily focused on rate reductions. With the 38th meeting emphasizing potential rate increases, consumers might face the impact of revised rates amidst rising inflation.

Frequently Asked Questions

What did the 38th GST Council decide on GSTR-9 and GSTR-9C?

The Council extended the due dates for filing the annual return (GSTR-9) and reconciliation statement (GSTR-9C), giving taxpayers more time to complete their annual compliance.

What was decided about GST on lotteries?

The Council approved a single uniform GST rate on the sale of lottery tickets, replacing the earlier differential rates for state-run and state-authorised lotteries.

Who needs to file GSTR-9 and GSTR-9C?

GSTR-9 is the annual return for regular taxpayers above the prescribed turnover; GSTR-9C is the reconciliation statement required for taxpayers above the higher turnover threshold.