Highlights of 40th GST Council Meeting

Recommendations of GST council related to Law & Procedure

The 40th Goods and Services Tax Council meeting was held on June 12, 2020, and was chaired by the Union Finance & Corporate Affairs Minister, Nirmala Sitharaman. The Council made recommendations regarding relief measures for MSMEs, extensions to revoke GST registration cancellation and reduction in late fees for late filing of GSTR3B among other announcements. These decisions were aimed at easing the burden of businesses facing challenges because of the Covid-19 crisis. Here are the highlights from the 40th GST Council Meet. 

Reduction in late fee for past returns

The Council announced a reduction in the late fee for delayed filing and payment of GSTR3B for the tax period of July 2017 to January 2020. This measure has been announced to speed up pending GSTR3B return filing. Generally, the late fee for filing GSTR3B is ₹100 per day per Act viz. ₹100 per day for SGST and CGST respectively and a maximum of ₹5,000 can be charged as a late fee, but the Council reduced this amount and capped the late fee to a maximum of ₹500. Additionally, if the taxpayer is filing a Nil return, a late fee will no longer be applicable. This reduced cap will be applicable only if the taxpayer is filing their GSTR3B return between the period of July 1, 2020, and September 30 2020. 

More relief for small taxpayers for late filing of returns for February, March & April 2020

The Council announced a reduction in the rate of interest for late furnishing of returns for the month of February, March and April 2020 for taxpayers who fall under the category of small taxpayers viz. taxpayers whose annual aggregate turnover for the preceding financial year was up to ₹5 crores. The interest on late filing is generally 18% annually and is calculated from the stipulated deadline to the date when the returns are furnished. But in a bid to reduce the burden on small taxpayers, the Council announced the reduction in the rate of interest from 18% to 9% for late furnishing of returns beyond specified dates (staggered up to July 6 2020). In a nutshell, small taxpayers will not be charged any interest till the notified dates for relief and thereafter will be charged 9% interest on late filing of GST returns till September 30 2020. 

Relief for small taxpayers for subsequent tax periods May, June & July 2020

The Council made further announcements to help struggling small taxpayers stay afloat during the COVID-19 pandemic and consequent lockdown. The late fee and interest have been waived off for delayed filing of GSTR3B for the supplies of the months of May, June and July 2020, provided they are furnished by September 30 2020. 

One time extension in period for seeking revocation of cancellation of registration

The Council has announced a one time only extension in the period for seeking revocation of cancellation of GST registration. As such, taxpayers who could not restore or revoke their GST registration cancellation due to the lockdown or any other reasons can file the application for revocation of cancellation of GST registration by September 30 2020. This extension, however, is only applicable to registrations that have been cancelled till June 12 2020.  There are specific clauses of the Finance Act, 2020 amending CGST Act 2017 and IGST Act, 2017, which will be brought into force from 30.06.2020.

In Summary 

• Relief measures for small taxpayers - From reducing the maximum cap for late fees for delayed furnishing of returns and the interest for delayed filing to the extension of the revocation period for restoring cancelled registrations, this council meeting focused on announcing relief measures for small taxpayers. 
• Compensation to States - After clearing pending compensation worth ₹15,340 crores to the States for the months of December 2019 to February 2020 last week, the GST council has announced a meeting in July to discuss borrowing to compensate the States. 
• Tax collection 45% lower than usual - Tax collections have suffered in the wake of the Coronavirus pandemic and consequent lockdown. The Finance Minister announced collections for the month of April and May were 45% lower than the usual range. 
• Inverted duty structure might be corrected  - The GST Council is looking to correct the inverted duty structure under which tax levied on inputs is higher than the tax on finished products leading to a higher amount of refunds. This might be corrected but must be done at the right time, said the Finance Minister. 

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