GST Council Introduces New COVID Measures to Reduce Burdens for Taxpayers

In May 2021, the 43rd GST Council (‘Council’) met along with the Union Finance Minister, the Union Minister of State for Finance & Corporate Affairs, and the various finance ministers of states. Through the meeting the council has decided to introduce Covid relief measures, an amnesty scheme for taxpayers, and changes in the GST rates for supply of certain goods and services. This article highlights all the important measures the taxpayers should be aware of.

In May 2021, the 43rd GST Council (‘Council’) met along with the Union finance Minister, the Union Minister of State for Finance & Corporate Affairs, and the various finance ministers of states. Through the meeting the council has decided to introduce Covid relief measures, an amnesty scheme for taxpayers, and changes in the GST rates for supply of certain goods and services.

These recommendations have been made by the Council, and subsequent circulars and notifications will be released to put them into force. The recommendations made by the Council are explained in detail below:
 
Covid Relief Measures:

Due to the hardships brought in by the second wave of the Covid pandemic the GST council has provided the following recommendations to provide some relief for taxpayers:
1. For small taxpayers:

For small GST taxpayers (i.e., with annual aggregate turnovers of up to INR 5 crore), there will be NIL interest rates for the first fifteen days from when the return in the FORM GSTR-3B is furnished for the March and April 2021 period. Beyond the first 15 days, a reduced rate of 9% interest will be applicable for the next 45 days for the March tax period, and 30 days for the April tax period. A similar NIL interest rate will also be applicable for taxpayers furnishing the CMP-08 statement under the composition scheme. A reduced rate of 9% will also be applicable for 45 days after the initial period.

For the tax period of May 2021, the NIL rate of interest will also continue for the first 15 days and then a reduced rate of 9% will be allowed for 15 more days.

A late fee waiver will also be provided for any delays in filing the FORM GSTR-3B for March and April 2021 tax periods for up to 60 and 45 days each, from the due date.
 
2. For Large Taxpayers:

For any large taxpayers (i.e. with aggregate turnovers greater than INR 5crore), a lower interest rate of 9% will be provided for 15 days after the due date of filing returns in FORM GSTR-3B for the May 2021 tax period.

A late fee waiver will also be provided for the first 15 days after returns in FORM GSTR-3B was filed for the tax period of May 2021.
 
Amnesty Scheme:

To provide further relief for all GST taxpayers, the council has recommended the introduction of an amnesty scheme. The details late fee waivers or reductions to help reduce the tax burden for taxpayers during the covid pandemic period. All of these late fees will be applied prospectively.

Under the amnesty scheme, the late fee for not submitting the FORM GSTR -3B for the periods of July 2017 to April 2017 has been waived or reduced. The late fee will be capped to INR 500 per return for taxpayers who had zero tax liability for that period, and to INR 1000 per return for other individuals. These fees will apply for these forms submitted for these periods between 1st June 2021 and 31st August 2021. 

Furthermore, they have also introduced the following scheme for late fee payments: 
  • For small taxpayers, the upper cap of the late fee is harmonised with the taxability of the taxpayer. Hence, a late fee for submitting FORM GSTR-3B and FORM GSTR-1 are capped as follows:
o   For individuals with NIL tax liability, the late fee is capped at INR 500.
o   For individuals with aggregate turnover up to INR 1.5 crore, the late fee is capped at INR 2000.
o   For individuals with an aggregate turnover of INR 1.5 crores to INR 5 crores, the late fee is capped at INR 5000.
o   For individuals with aggregate turnover greater than INR 5crores, the latter will be capped at INR 10,000.
  • The late fee for filing FORM GSTR-4 will be capped at INR 500 per return if the taxpayer’s liability is zero, or INR 2000 per return for others. This is applicable or all filing under the composition scheme. 
  • The late fee for filing FORM GSTR-7 will be INR 50 per day with a maximum of INR 2000 per return.
 
Extensions For Tax Returns:

To reduce compliance burdens for taxpayers, Council has recommended that extension to return filings be allowed in the following ways:
  • Dude dates for filing FORM GSTR-1 have been extended by 15 days for the May 2021 tax period.
  • The timeline for filing FORM GSTR-4 or the FY 2020-21 has been extended to 31st July 2021; while the date for filing ITC-04 for QE March 2021 has been extended to 30th June 2021.
  • Companies may also file via Electronic verification code (EVC) instead of using a digital signature certificate until 31st August 2021.
  • If any timelines are further extended by the Supreme Court of India, then those would be applicable.
 
Exemptions For Services:

The Council has also clarified certain exemptions from GST payments for services supplied to certain taxpayers. The Council has clarified that the provision of services such as mid-day meals supplied to educational institutions, will be exempt from GST payments. Such services provided for examinations including entrance exams and any such input services will also be exempt from GST payment.

The Council also clarified that landowner promoters can utilise any credits of GST charged to them by construction developers, in relation to any apartments subsequently sold by the developers.

Services supplied by the government to undertaking or public sector undertakings through guaranteeing loans from banks or NBCs will also be exempt from GST.

Concluding Remarks:

The measures recommended by the Council will bring relief to individual taxpayers and businesses. The measures have also focused on providing greater relief to small taxpayers or businesses that might be hit very hard by the second pandemic wave. However, it is important to keep in mind the new dates and exemptions when filing GST returns.