KEY CHANGES IN DIRECT AND INDIRECT TAX:
Key Changes and Recommendations – 37th GST Council Meeting:
On 20th September 2019, as anticipated, the all-powerful Goods & Services Tax Council (hereinafter ‘Council’), in its 37th Meeting held in Goa, took certain key decisions. Recent economic slowdown coupled with industry’s downward trend and genuine demand for suitable measures has compelled the Central Government to give a thought on further action. Latest proposals, no doubt, in the right direction but revenue forgone (from both GST and Corporate Tax proposals made during the same day) estimated at Rs. 1 trillion to Rs. 1.5 trillion, though short term fiscal pain, yet to see how the Indian economy will do perform in the upcoming festival season. The said decisions may be classified into two broad categories, Recommendations with respect to GST Rates – Goods & Services – and Procedural aspects.
The Council has taken certain decision with respect to Goods, key recommendations are as follows:
| Product Name | Old Rate | New Rate |
| Goods: | ||
| Slide Fasteners | 18 % | 12 % |
| Marine Fuel | 18 % | 5 % |
| Wet Grinders (stone as a grinder) | 12 % | 5 % |
| Cut and polished semi- precious stones | 3 % | 0.25 % |
| Dried tamarind & Plates and cups made up of leaves/ flowers/bark | 5 % | Nil |
| Specified goods for petroleum operations under Hydrocarbon Exploration Licensing Policy | Applicable rate | 5 % |
| Reduction in Cess – Passenger vehicles of engine capacity 1500 cc in case of diesel, 1200 cc in case of petrol and length not exceeding 4000 mm designed for carrying upto 13 Persons | Currently attracting compensation cess at 15 per cent. | 1 percent in the case of petrol 3 % in the case of Diesel |
| Railway wagons, coaches, rolling stock (without accumulated Input Tax) | 5 % | 12 % |
| Caffeinated Beverages | 18 % | 28 %
plus 12 % compensation cess
|
| Packing of goods Polypropylene/Polyethylene Woven and Non- Woven Bags and sacks, laminated or not | Uniform GST rate of 12 % | |
| Services: | ||
| Hospitality – Transaction Value per Unit (Rs) per day Rs 1000 and less | Nil | |
| Rs. 1001 to Rs 7500 | 12 % | |
| Rs. 7501 and more | 18 % | |
| Outdoor catering services other than in premises having daily tariff of unit of accommodation of Rs 7501 | 5 % without Input Tax Credit | |
| Job work services in relation to diamonds | 5 % | 1.5 % |
| Supply of machine job work in engineering industry except busbody building | 18 % | 12 % |
The Council has decided to exempt certain goods from GST or Integrated GST on –
(a) Imports of specified defence goods from GST or Integrated GST which are not manufactured indigenously till 2024.
(b) Supply of goods to Federation Internationale de Football Association (FIFA) and other specified persons for organizing the Under-17 Women’s Football World Cup in India.
(c) Supply of goods and services to the Food and Agriculture Organisation (FAO) for specified projects in India.
(d) Limited period of concessional GST rate of 12 % on pulley and wheels used as parts of agricultural machinery during 1st July, 2017 to 31st December, 2018.
(e) It has been decided to exclude ‘Aerated drink manufacturers’ from composition scheme.
The Council has decided to exempt certain service sectors from GST on –
(a) Prospective services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres, coffee, tea etc.
(b) Extension of conditional exemption on export freight by air or sea till 30th September, 2020.
(c) Intermediary services to a supplier of goods or recipient of goods subject to supplier and recipient are located outside the taxable territory.
(d) An option to pay GST on royalty charged from publishers under forwarding charge subject to regular compliance.
(e) Supply of services to Federation Internationale de Football Association (FIFA) and other specified persons for organizing the Under-17 Women’s Football World Cup in India.
Recommendations – Procedural Aspects
The Council has taken certain decisions on procedural aspects to ease the burden on tax payers, they are –
(a) GST Annual Return – With respect to GST Annual Return for the financial year ended 2017-18 and 2018-19, the Council has decided to grant some relief to MSMEs and composite taxpayers –
| Form GSTR 9 | Optional for those taxpayers who have an aggregate turnover up to Rs. 2 crores. |
| Form GSTR 9A | Fully waived-off for composition taxpayers |
Further, it has been decided to constitute a Committee of Officers (CoO) to examine the simplification of Annual Returns and Reconciliation statement.
(b) Appeal to GSTAT – Since non-operation of GST Appellate Tribunal, the last date for filing of appeals against orders of Appellate Authority before the GSTAT to be extended. Interestingly, on the same day of the Meeting, the Hon’ble Madras High Court has pronounced its reserved Judgment while declaring that composition of GST Appellate Tribunal as Unconstitutional.
(c) Non-compliance – Certain restrictions on availment of Input Tax Credit (ITC) by the recipients in cases where details of outward supplies are not furnished by the suppliers under Section 37 of the Central GST Act, 2017.
(d) New Return System – In order to give sufficient time to taxpayers to file GSTR 1 and GSTR 3B during last quarter of the financial year, the Council has decided to implement the proposed simplified new return system with effect from April 2020 instead of 1st October, 2019 as decided in one of its previous meetings.
(e) Set of Circulars for uniformity in application of the law across all jurisdictions –
i. To prescribe a procedure to claim a refund in FORM GST RFD-01A subsequent to favourable order in appeal.
ii. To eligible to file a refund application in FORM GST RFD-01A for a period and category under which a NIL refund application has already been filed.
iii. To clarify that supply of IT enabled Services (ITeS services) being made on own account or as an intermediary.
iv. To rescind a Circular ab-initio issued in respect of post-sales discount.
v. To bring suitable amendments in Central GST Act, 2017 Union Territory GST Act, 2017, and the corresponding State GST Acts in view of creation of Union Territories of Jammu & Kashmir and Ladakh.
vi. To introduce ‘Integrated Refund System’ by Single Authority with effect from 24th September, 2019.
vii. To link Aadhar with the registration of taxpayers under GST and examine the possibility of making Aadhar mandatory for claiming refunds.
viii. To prescribe reasonable restrictions to tackle the menace of fake invoices and fraudulent refunds.
KEY CHANGES IN INCOME TAX:
The Government has brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance (No. 2) Act 2019. The Finance Minister elaborated further, the salient features of these amendments, which are as under:-
- In order to promote growth and investment, a new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22% subject to condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.
- In order to attract fresh investment in manufacturing and thereby provide boost to ‘Make-in-India’ initiative of the Government, another new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any new domestic company incorporated on or after 1st October 2019 making fresh investment in manufacturing, an option to pay income-tax at the rate of 15%. This benefit is available to companies which do not avail any exemption/incentive and commences their production on or before 31st March, 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.
- A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period. After the exercise of the option they shall be liable to pay tax at the rate of 22% and option once exercised cannot be subsequently withdrawn. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%.
- In order to stabilise the flow of funds into the capital market, it is provided that enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP.
- The enhanced surcharge shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).
- In order to provide relief to listed companies which have already made a public announcement of buy-back before 5th July 2019, it is provided that tax on buy-back of shares in case of such companies shall not be charged.
- The Government has also decided to expand the scope of CSR 2 percent spending. Now CSR 2% fund can be spent on incubators funded by Central or State Government or any agency or Public Sector Undertaking of Central or State Government, and, making contributions to public funded Universities, IITs, National Laboratories and Autonomous Bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.
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