Finance Minister Nirmala Sitharaman chaired the 40th GST council meeting through video conferencing on June 12, 2020. During the press briefing after the meeting, the Finance Minister said that no late fee will be charged from small taxpayers who have not filed their GST returns between July 2017-January 2020.
The Finance Minister noted that a lot of GST return filing has been pending for the period from July 2017 to January 2020, prior to the COVID-19 outbreak. To provide relief to small taxpayers, Sitharaman said that no late fees will be charged for non-filing of GST returns during the stipulated period by those who have no tax liabilities.
For those who have tax liability, the GST Council has capped the maximum late fee for non-filing of GSTR-3B returns for the period between July 2017-January 2020 at Rs 500. This will apply to all returns submitted between July 1 and September 30, 2020.
For people who have tax liability, maximum late fee for non-filing of GSTR-3B returns for period July 2017 - January 2020 has been capped to Rs 500. This will apply to all returns submitted during July 1, 2020 - September 30, 2020: FM Nirmala Sitharaman https://t.co/Fl0OPirQzV
— ANI (@ANI) June 12, 2020
Reduction in Rate of Interest for Small Tax Payers
FM Nirmala Sitharaman announced that for all small taxpayers whose aggregate turnover is up to Rs 5 crore, the rate of interest for late filing of GST returns for Feb, Mar and April 2020 and beyond July 6, 2020 will be reduced from 18% to 9% per annum. This will only apply until September 30.
The small taxpayers with aggregate turnover up to Rs 5 crore will be provided a waiver of late fees and interest if they file the form GSTR-3B for the supplies affected in May, June and July 2020 by September 2020.
Small tax payers whose aggregate turnover is up to Rs 5 crore will be provided a waiver of late fees and interest if they file the form GSTR-3B for the supplies affected in months of May, June and July 2020, by September 2020, no late fee or interest: FM Nirmala Sitharaman https://t.co/PCVIRhxqlp
— ANI (@ANI) June 12, 2020
Compensation Cess to States
The Finance Minister announced that there shall be a meeting in July to exclusively discuss compensation cess to be given to states. The meeting has been set up on the request of all ministers. The dates will be fixed subsequently. The meeting will discuss ways to get funds to compensate states for the revenue loss they have incurred due to GST implementation.
Integrated Goods and Service Tax (IGST)
FM Nirmala Sitharaman observed that before the introduction of the formula-based sharing of IGST between centre and states, there was a huge accumulation of IGST from 2017-'18. This anomaly had to be corrected, stressed Sitharaman.
Before the introduction of formula-based sharing of IGST between centre and states, there was a huge accumulation of IGST from 2017-'18, which led to an ad hoc decision of sharing accumulated IGST in two halves. This anomaly had to be corrected-FM Nirmala Sitharaman pic.twitter.com/zNOKzVAobG
— ANI (@ANI) June 12, 2020
She further said that the move was undertaken understanding the need for states to have money in their hands. Under the new sharing formula, the centre can release the money to states without states having to do any adjustments. As a result of this, the Finance Ministry could clear bills for compensation that were lying between December, January and February.
Significance
The GST Council met for the first time after the imposition of the nationwide lockdown to contain COVID-19. Under the GST law, payment of loss in revenue to the state is guaranteed for the first 5 years by the centre from the date of implementation of the law, July 1, 2017.
The shortfall in revenue of the states is calculated by assuming a 14 percent annual growth in GST collections by states over the base year of 2015-16.
Background
Finance Minister Nirmala Sitharaman had said during the last meeting, which held in March, that the centre will look into the legality of GST Council borrowing from the market to meet compensation requirements.
Under the current GST structure, the taxes are levied on products and services based on four slabs, which include - 5 percent, 12 percent, 18 percent and 28 percent slabs.
The central government is yet to release the monthly GST revenue collection figures for April and May after the deadline for filing GST returns was extended in the wake of coronavirus pandemic.
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