Recommendations made by the GST Council in the 22nd meeting at New Delhi on 6th October, 2017

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1 October, 2017 Volume 56 Noida I New Delhi I Mumbai Dehradun Singapore The GST Council under the chairmanship of Union Finance Minister Shri Arun Jaitley, in its 22nd meeting held in Vigyan Bhavan at New Delhi on 6th October 2017 has recommended various changes in GST structure. All the major decisions taken by the council has been discussed below: Recommendations made by the GST Council in the 22nd meeting at New Delhi on 6th October, 2017 Deferment of certain key provisions: The reverse charge mechanism under sub-section (4) of section 9 of the CGST Act, 2017 and under sub-section (4) of section 5 of the IGST Act, 2017 shall be suspended till and accordingly no tax would be leviable in case of purchase from unregistered suppliers. Registration and operationalization of TDS/TCS provisions shall be postponed till The e-way bill system shall be introduced in a staggered manner with effect from and shall be rolled out nationwide with effect from Exports: 1. Processing of held-up refunds The GST council has identified that the major difficulties constraining the export sector are on account of delays in refunds of IGST and input taxes on exports. Currently, refund of IGST paid on goods exported outside India is payable after furnishing the monthly return (GSTR-3). The delay in due dates of filing monthly return of July & August resulted in cash blockage for exporters.

2 The held-up refund of IGST paid on goods exported outside India in July would begin to be paid by despite being the due date of filing of GSTR-3 for the month of July. The refund for the month of August would get cleared from and refunds for subsequent months would be handled expeditiously. Other refunds of IGST paid on supplies to SEZs and of inputs taxes on exports under Bond/LUT, shall be processed from onwards. Central and State GST officers will be suitably empowered so that exporters get refunds from one authority only. 2. Decisions to prevent cash blockage of exporters due to upfront payment of GST Under GST, exporters have to upfront pay taxes on inputs and capital goods for export production or for procuring goods for exports resulting in cash blockage. To prevent cash blockage of exporters due to upfront payment of GST on inputs etc. the Council has approved two proposals, one for immediate relief and the other for providing long term support to exporters. To give immediate relief to exporters, following things have been worked out; Holders of Advance Authorization (AA) / Export Promotion Capital Goods (EPCG) / 100% EOU schemes would enjoy status like pre- GST era & accordingly not have to pay IGST, Cess etc. on imports. Also, domestic supplies to holders of AA / EPCG and EOUs would be treated as deemed exports under Section 147 of CGST/SGST Act and accordingly refund of tax paid on such supplies would be given to the supplier. Merchant exporters will now have to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export. However, the details relating to complete scheme has not been released yet. The permanent solution to cash blockage has been worked out as "e- Wallet" which would be credited with a notional amount as if it is an advance refund. This credit would be used to pay IGST, GST etc. The Council desired that the e-wallet solution should be made operational w.e.f. 1st April Sale of Duty Credit Scrips. The duty credit scrips such as MEIS were losing value due to its reduced usability as it could no longer be used to pay IGST / GST. To restore the lost incentive on sale of duty credit scrips, the GST on sale-purchase of these scrips has been reduced from 5% to 0%. Oil & Gas Sector: 1. IGST exemption on imports of rigs imported for oil / gas exploration and production projects under lease Import of rigs for oil / gas exploration and production projects has been exempted from the IGST as opposed to current IGST rate of 5% subject to fulfilment of certain conditions/procedures. To take this exemption benefit, rigs have to be imported under a lease transaction for oil / gas exploration and production projects on which IGST is leviable. Such rigs cannot be sold without the prior permission of the Commissioner of Customs of the port of importation. Rigs are also required to be re-exported within three months from the expiry of period for which they were supplied under said lease transaction. 2. Reduction in GST rate on works contract services Works contract services in respect of offshore works contract relating to oil and gas exploration and production (E&P) in the offshore area beyond 12 nautical miles shall attract instead of current applicable rate of 18%.

3 3. Transportation of natural gas through pipeline GST shall be 12% with ITC or 5% without ITC for transportation of natural gas through pipeline. Small and Medium Enterprises: 1. Composition Scheme 2. Reduction in periodicity of returns To facilitate the ease of payment and return filing for small and medium businesses with annual aggregate turnover up to Rs. 1.5 crores, it has been decided that such taxpayers shall be required to file quarterly returns in FORM GSTR-1, 2 & 3 and pay taxes only on a quarterly basis, starting from the third quarter of this financial year i.e. October- December, The composition scheme shall be made available to taxpayers having annual aggregate turnover of up to Rs. 1 crore as compared to the current turnover threshold of Rs. 75 lacs. This threshold of turnover for special category States, except Jammu & Kashmir and Uttarakhand, shall be increased to Rs. 75 lacs from Rs. 50 lacs. The facility of availing composition under the increased threshold shall be available to both migrated and new taxpayers up to The increase in the turnover threshold will make it possible for greater number of taxpayers to avail the benefit of easier compliance under the composition scheme and is expected to greatly benefit the MSME sector. Persons who are otherwise eligible for composition scheme but are providing any exempt service (such as extending deposits to banks for which interest is being received) were being considered ineligible for the said scheme. It has been decided that such persons who are otherwise eligible for availing the composition scheme and are providing any exempt service, shall be eligible for the composition scheme. The last date for filing the return in FORM GSTR-4 by a taxpayer under composition scheme for the quarter July-September, 2017 shall be extended to The due dates for filing the quarterly returns for such taxpayers shall be announced in due course. Meanwhile, all taxpayers will be required to file FORM GSTR-3B on a monthly basis till December, All taxpayers are also required to file FORM GSTR-1, 2 & 3 for the months of July, August and September, No tax at the time of receipt of payment on account of supply of goods It has been decided that taxpayers having annual aggregate turnover up to Rs. 1.5 crores shall not be required to pay GST at the time of receipt of advances on account of supply of goods. The GST on such supplies shall be payable only when the supply of goods is made. 4. No compulsory registration in case of inter-state supply of services Presently, anyone making inter-state taxable supplies, except inter-state job worker, is compulsorily required to register, irrespective of turnover. It has now been decided to exempt those service providers whose annual aggregate turnover is less than Rs. 20 lacs (Rs. 10 lacs in special category states except J & K) from obtaining registration even if they are making inter-state taxable supplies of services. Miscellaneous: 1. Abatement in GST rate for motor vehicles affected due to transition to GST Leasing of vehicles purchased and leased prior to , shall be taxed at 65% of the applicable GST + Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1st July 2017;

4 The vehicles covered by the above leases (i.e. leases of vehicles purchased and leased prior to ), when disposed off/ sold shall also be taxed at 65% of the applicable GST + Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1st July 2017; Sale/supply of vehicles by a registered person, who had procured the vehicle prior to 1st July 2017 and has not availed input tax credit of central excise duty, VAT or any other taxes paid on such vehicles, would be taxed at 65% of the applicable GST + Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1st July Extension of services notified to be taxed under Reverse Charge Mechanism Following services shall be included in the list of GST applicable under RCM; The services provided by Overseeing Committee members to RBI and Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc by Central Government, State Government, Union Territory or a local authority, to any person. 3. The last date for filing the return in FORM GSTR-6 by an input service distributor for the months of July, August and September, 2017 shall be extended to The services provided by a GTA to an unregistered person (under GST law) including unregistered casual taxable person other than the recipients liable to pay tax on GTA services under reverse charge shall be exempted from GST. 5. GST of 5% without ITC and 12% with full ITC available to transport of passengers by motor cab/ renting of motor cab shall be extended to any motor vehicle; 6. ITC of input services shall be allowed in the same line of business at GST rate of 5% in case of transport of passengers by motor vehicle. 7. Works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to Central Government, State Governments, Local Authority, Governmental Authority or Government Entity shall be taxed at 5%. 8. GST rates on job work services have been rationalized & are reduced in most type of job-works. 9. Exemption from IGST on imports of medicines supplied free by international agencies like UNICEF, WHO, Red Cross etc. has been provided. 10. Exemption from IGST on imports of bona fide gifts upto CIF value limit of Rs imported through post or air has been provided. 11. GST rates on various items have also been rationalized. Please note that all the changes will come in force only after issuance of proper notifications in this regard. NANGIA S TAKE: The decisions taken in 21 st meeting of GST council held in New Delhi has come as a major relief for small taxpayers accounting upto 90% of total taxpayer base. The facilitative changes like quarterly returns are expected to significantly reduce the compliance cost of small suppliers. The relief package and incentives for exporters would provide immediate relief to the export sector and enhance export competitiveness of India. Also, deferment of provisions like TDS/TCS, E-way bills indicates that industry is not able to fully acclimatize itself with the GST regime and demanded deferment from such compliance driven provisions. One of the major decisions taken in the meeting was suspension of Reverse Charge Mechanism in case of procurement from unregistered supplier till This provision will also be reviewed by a committee of experts before reintroducing again. This will benefit small businesses and substantially reduce compliance costs but will reduce tax base for revenue, the intent behind introduction of such provision itself.

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