The decision of the 39th Council meeting would be effective from April 1, finance minister Nirmala Sitharaman said.
As was widely expected, the GST Council on Saturday hiked the GST rate on mobile phones to 18% from 12% currently, which is likely to make phones more expensive. However, the price hike is expected to remain lower than the corresponding rate hike. The rate hike was proposed by the fitment committee to correct the inverted duty structure — tax on finished product being higher than on inputs — faced by several other products.
The decision of the 39th Council meeting would be effective from April 1, finance minister Nirmala Sitharaman said. Inverted duty structure leads to cash flow issues due to delayed refunds, which is a cost to the firms, revenue secretary Ajay Bhushan Pandey said after the meeting. He added that the higher tax on phones doesn’t mean the new price would change in the same proportion given some of the cost due to inversion would be done away with now. Apart from mobiles, rate hikes for footwear, textiles and fertilisers were discussed, but a consensus couldn’t be achieved.
Additionally, in what would bring relief to thousands of taxpayers, the Council said it would amend the relevant law retrospectively (from July 1, 2017) to mandate that interest on delayed payment of tax be calculated on the net cash liability—which is actual tax liability minus the input tax credit. The tax department had sent notices to taxpayers earlier, which had stated that such calculation would be based on gross liability, thus inflating the due amount significantly.
Further, the Council slashed rate on maintenance, repair and overhaul (MRO) services for aircraft to 5% from 18% with full ITC and to change the place of supply for B2B MRO services to the location of recipient.
However, the Council deferred implementation of several anti-evasion measures by six months due to lack of preparedness on part of the IT infrastructure of GST. E-invoicing mechanism will now be implemented on October 1, six months later than originally planned. The current return system of GSTR-3B and GSTR-1 would also continue to be in force till September 30. The new simplified return system were expected to be implemented from April 1.
“The approach of the Council to proceed with changes in returns, e-invoicing, etc, on an incremental basis would permit businesses to embrace these changes in a calibrated manner. Introduction of multiple changes from April 1, as was proposed earlier, would have put added pressure on businesses, which have been grappling with multiple business and regulatory headwinds,” MS Mani, partner, Deloitte India, said.
The Council also exempted MSME — those with turnover below Rs 5 crore — from annual reconciliation statement in form GSTR-9C for fiscal 2018-19. Further, due date for filing the annual return and the reconciliation statement for financial year 2018-19 has been extended by three months to June 30.
It also decided to waive late fees for delayed filing of the annual return and the reconciliation statement for financial year 2017-18 and 2018-19 for taxpayers with aggregate turnover less than Rs 2 crore.