42nd GST Council Meeting Highlights, Updates, Outcome, and More

The Council conducted the 42nd GST meeting virtually on October 5, 2020, with Smt. Nirmala Sitharaman, the Finance Minister, serving as chairperson. Along with senior officials from the Ministry of Finance and States/UTs, Union Minister of State for Finance and Corporate Affairs Shri Anurag Thakur also attended the meeting. Let’s examine the findings of the 42nd GST Council Meeting. 

Updates from 42nd GST Council Meeting

Expectations from the 42nd GST Council Meeting 

The Council therefore intended to reveal the much-anticipated GST compensation cess solution at the 42nd GST meeting.

As a result, the 41st GST Council Meeting decided to schedule another brief meeting to finalize one of the two GST compensation cess options proposed by the Central Government.

Following this, the states had just seven working days after the 41st GST Council Meeting to evaluate both options

They had to submit their final recommendations to the Council within this period.

However, the Council meeting has been rescheduled by the Center for October 5, 2020, for a variety of reasons.

What Were the Key Agendas of the 42nd GST Council Meeting?

The 42nd GST Council meeting was quite significant for GST regulation laws, here are the key agendas of the meeting: 

1. TRAN-1/ TRAN-2 Declaration

The IT Grievance Redressal Committee discussed timelines for TRAN-1/TRAN-2 declarations at its 13th meeting on September 1, 2020.

2. Update on REAP

Return Enhancement and Advancement Project (REAP) update and in-principle architecture approval. 

3. Suggestions from the Law Committee

• Extending the GSTR-1/3B return filing system and altering the quarterly taxpayers’ deadline upon the launch of the new GSTR-2B features.

• Concerns about the 2019–20 Financial Year Annual Return.
• The Council mandated GSTR-1 filing before GSTR-3B to enhance taxpayer compliance.
• Modifications to Notification 12/2017-Central Tax, dated June 28, 2017, specifically aim to improve data quality, while changes to Form GSTR-1 further seek to enhance tax administration.
• Additionally, an agenda note proposes that refunds be issued only to the same bank account linked to Aadhaar and PAN, where GST registration has been obtained.
• Moreover, the CGST Rules, 2017, are set for amendment.
• Lastly, the statute of limitations for instituting legal action or gaining recognition under GST is under review.

4. Fitment Committee Recommendations 

Agenda Note on the representation from HADMA requesting a 12% GST rate on sanitizers based on Ayurveda, Unani, and Siddha (AUS) ingredients. 

5. Product and Service Tax Network (GSTN) Concerns

• The status of receiving Advance User Charges (AUC) from CBIC and the states.

• Resources must be transferred from the CR model to the T&M model due to significant developments.

• The Council reviewed the status report on transitioning the Goods and Services Tax Network (GSTN) into a fully government-owned company.

6. Tax Cess

An agenda item regarding cessation after the transition period was discussed in the meeting. 

7. GST Compensation 

Various factors were identified for GST Compensation and working against shortfall. 

8. Revenue Option

A close review was suggested for the multiple revenue models as per their efficiency in the 42nd GST Council meeting.  

9. Addition of UPI for GST Payment

Allowing the payment methods of IMPS and UPI for the payment of goods and services tax. 

10. Report on States/UT

Status report on States/UTs and GRC Zone-wise (CBIC) creation as of April 9, 2020. 

11. First-quarter NAA Performance Report 

A detailed discussion took place over the first quarter performance report released by NAA(National Anti-Profiteering). 

Highlights of the 42nd GST Council Meeting

The 42nd meeting of the GST Council covers a number of topics, including the urgent compensation cess issue, ease of filing returns, and lowering the GST rate. Below are the key highlights of the 42nd GST Council meeting.

1. Compensation Cess Levy Extension

At the 42nd GST Council meeting, all members agreed to extend the levy of Compensation Cess beyond the five-year transition period or beyond June 2022, for as long as necessary to close the revenue gap.

2. GSTR 1 and GSTR 3B for Taxpayers with Less Than ₹5 Crores in Revenue

The 42nd GST Council meeting resolved to move the deadline for quarterly taxpayers to submit their GSTR-1 reports to the 13th of the month that follows the quarter, with effect from January 1, 2021.

Taxpayers with annual revenue of less than Rs 5 crore will not have to file GSTR-1 and GSTR-3B returns on a monthly basis as of January 1, 2021. Rather, they were to be carried out every three months.

Nevertheless, during the first two months of the quarter, these quarterly taxpayers would have the choice to use an auto-generated challan to pay 35% of the net cash tax liability from the prior quarter.

3. Road Map for GSTR-3B to be Automatically Generated from GSTR-1 

The Council approved the future roadmap for return filing under GST to enhance compliance and ease of doing business.

Authorities developed a plan for the automatic generation of GSTR-3B, where the system will automatically derive the tax liability from the business’s GSTR-1 and the input tax credit from the supplier’s GSTR-1.

But in order to do this, starting on April 1, 2021, it would be mandatory to file the GSTR-1 before the GSTR-3B.

In this sense, the approved framework seeks to further lessen the taxpayer’s compliance burden by streamlining the return filing process.

The government decided to amend GST laws to make the GSTR-1 and GSTR-3B return filing system the default. Authorities also extended the GSTR-1/3B return filing system until March 31, 2021.

4. HSN and SAC Declaration Requirements for Goods and Services

HSN codes up to six digits must be specified for goods and SAC codes for services in invoices and in FORM GSTR-1, effective April 1, 2021, for taxpayers with turnover exceeding ₹5 crores.

The HSN codes up to four digits must be stated for B2B supplies of both goods and services if the turnover is less than Rs 5 crore.

Taxpayers must mention eight-digit HSN codes for notified classes of goods and services.

5. Changes to the CGST Regulations

All taxpayers were to continue to use a straightforward challan to pay their monthly GST dues.

Taxpayers could file a NIL CMP-08 via SMS.

The system disbursed refunds on January 1, 2021, to verified bank accounts linked to the registrant’s PAN and Aadhaar.

Refund applications could now use the Aadhaar authentication feature (with an OTP). Taxpayers were cautioned from misusing the system as a result.

The satellite launch services provided by ISRO, Antrix Corporation Ltd., and NSIL would be exempt in order to promote domestic satellite launches, especially by young start-ups.

Also Read:

GSTR 1 Details: Everything You Need To Know

A Comprehensive Guide: How To File GSTR-3B With Accuracy

Result of 42nd GST Council Meeting 

The following is the result of the 42nd GST Council meeting, which took place on October 5, 2020:

1. Compensation Cess 

As declared at the 42nd GST Council meeting, the compensation cess will be levied for an additional five years.

Because borrowing money would raise the yield on G-sec bonds, the center won’t be able to pay the compensation cess shortfall.

By October 5, 2020, the states will receive the Rs. 20,000 crore in compensation cess that has been collected thus far.

By the end of the following week, certain states will also receive payments totaling Rs. 25,000 crore towards the IGST of 2017–18.

2. G-Sec Deals

The Finance Minister clarified that the G-Sec deals, which serve as a benchmark for all other borrowing, will increase if the Center borrows more than it has budgeted for. States’ and the private sector’s borrowing costs will rise as a result.

3. Ease in Return Filing 

Small taxpayers with a yearly revenue of less than Rs 5 crore were to be able to file GSTR-3B and GSTR-1 on a quarterly basis as of January 1, 2021. Effective from January 1, 2021, the 13th of the month following the quarter is when quarterly GSTR-1 filings are due. Taxpayers may, however, upload invoices on a monthly basis. As a result, there are now only 8 returns instead of 24.

4. Auto-Generated Challan 

Quarterly taxpayers would be able to use an auto-generated challan to pay 35 percent of the net cash tax liability from the previous quarter.

Every taxpayer could still use a straightforward challan to pay their monthly GST obligations. It will be possible to file a nil CMP-08 via SMS.

5. Automatic Generation of GSTR-3B

The Council developed a plan for the automatic generation of GSTR-3B. Under this plan, the system would automatically derive the tax liability from the business’s GSTR-1 and the input tax credit from the supplier’s GSTR-1. In order to accomplish this, starting on April 1, 2021, it would be mandatory to file the GSTR-1 before the GSTR-3B.

6. HSN Codes

Starting April 1, 2021, taxpayers with annual revenue exceeding Rs 5 crore had to provide their six-digit HSN code.

HSN codes up to four digits must be stated for B2B supplies of both goods and services if the turnover is less than Rs 5 crore. Taxpayers must mention eight-digit HSN codes for notified classes of goods and services.

7. Refunds

The system will deposit refunds into bank accounts linked to Aadhaar and PAN. The system now accepts OTP-based Aadhaar authentication for refund requests. This deters taxpayers.

8. GST Exemption to Satellite Launch Services

To promote space launching services in India, ISRO, Antrix Corporation, and New Space India Limited (NSIL) granted a GST exemption to satellite launch services.

Sanitizers without alcohol content would still be subject to an 18% GST rate.

Also Read: 41st GST Council Meeting Highlights, Updates, Outcome and More

Conclusion

The Central Government offered two options to the states to bridge the gap created by the compensation cess. While some states favored both the presented options, others denied both. The states must agree on a solution by the end of the meeting, or they must vote to make the final decision.

More Information

You can get further details on the 42nd GST Council Meeting on sites like https://gstcouncil.gov.in/42nd-gst-council-meeting and Press_Release_42_GSTC.pdf (cbic-gst.gov.in)

Aaryan Singh

B.Com degree with finance and accounting Specialisation in Goods and Service Tax (GST) and taxation system Completed certification course on GST from ICAI in 2022 Online GST practitioner course completed in 2023 from Indian Institute of Skill Development and Training.

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