1. To provide a special borrowing window to states, in consultation with the Reserve Bank of India (“RBI”), to provide Rs 97,000 crore at a “reasonable” interest rate and this money can then be repaid after five years by extending cess collection
2. To meet the entire GST compensation gap of Rs 2.35 lakh crore this year itself after consulting with the RBI.
Twenty-one states have opted for option one and the remaining have not opted for any of the options. They wanted a third option where the Centre should borrow and compensate the states. During the 42nd GST Council meeting that was held via video conference, on October 5, 2020, the below important recommendations that were made:
1. Compensation Cess
2. Reduction of Compliance Burden
The small taxpayers having a yearly aggregate turnover of less than Rs. five crores shall be allowed to file the Goods and Service Tax Returns (“GSTR”) on a quarterly basis with monthly payments by such taxpayers. This facility will be enabled w.e.f. January 1, 2021. Such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35% of the net cash tax liability of the last quarter using an auto-generated challan.
3. Under the Indian Government’s policy of ease of doing business in India the GST Council has enhanced and improved the compliance experience of the taxpayers regarding their GSTR such as:
4. The present GSTR-1 and GSTR-3B return filing system to be extended till t March 31, 2021, and the GST laws to be amended to make the GSTR-1 and GSTR-3B return filing system as the default return filing system.
5. The GST Council revised the requirement of declaring HSN (Harmonized System of Nomenclature) for goods SAC (Services Accounting Code) for services in invoices and GSTR -1 w.e.f. April 1, 2021. Returns – HSN/SAC at six-digit for suppliers with more than Rs. 5crore turnover annually; HSN/SAC at four-digit for B2B suppliers turnover of up to Rs. five crore.
6. The GST refunds to be paid/disbursed shall be in a validated bank account linked with PAN and Aadhaar with the effective date January 1, 2021.
The Government of India has taken a positive step during the pandemic despite the heavy shortfall in GST collections and has not increased the Compensation cess. As part of ease of doing business in India initiative, the Government of India has also proposed extensions to file the GSTR-1 and GSTR-3B, with auto-generation of these returns, as well as ease of compliance to small taxpayers. If you need to further discuss or understand the recent changes by the GST Council what it means for your business, please reach out Withum’s U.S.–India Corridor leader.