Executive summary

India's Goods and Services Tax (GST) Council held its 26th meeting in New Delhi on 10 March 2018 to review the compliance process, decide on the implementation of the e-way bill system and address the concerns of exporters on refunds under GST.

Following deliberations, the key recommendations of the Council are:

• The e-way bill system will be introduced for interstate movement of goods across the country from 1 April 2018 and it will be introduced in a phased manner for intrastate movement by 1 June 2018.
• The present system of filing the Forms GSTR-3B and GSTR-1 has been extended for another three months until June 2018.
• The tax exemption on procurements for exporters will continue for an additional period of six months until 1 October 2018.

A new model for a simplified return filing process was discussed by the Council. The Group of Ministers on IT (information technology) has been mandated to finalize the process.

The Council also determined that the variances as an outcome of preliminary data analyses may be further examined and adequate action may be initiated accordingly.

Detailed discussion

Background

As noted above, the 26th meeting of the GST Council was held on 10 March 2018 in New Delhi. In the meeting, the Council recommended the introduction of the e-way bill system for interstate movement of goods from 1 April 2018.

The outcome of the preliminary data analysis revealed the following:

• There is variance between the amounts of IGST & Compensation Cess paid by importers at Customs ports and input tax credit of the same claimed in Form GSTR-3B.
• There are major data gaps between self-declared liability in Form GSTR-1 and Form GSTR-3B.

It was determined that this information may be further analyzed and adequate action initiated accordingly.

Key Recommendations

E-way Bill

The e-way bill system will be introduced for interstate movement of goods from 1 April 2018. The e-way bill system will be phased in for the intrastate movement of goods by 1 June 2018.

The other changes approved by the Council include:

• The e-way bill is required to be generated only if the individual consignment value of the consignment exceeds INR50,000.
• Presently, there is no requirement to generate an e-way bill if an individual consignment value is less than INR50,000, even if the transporter is carrying goods of more than INR50,000 in a single conveyance.
• For the purpose of e-way bill generation, the value of exempted goods have been excluded from the value of the consignment.
• Public conveyance has also been included as a mode of transport and the responsibility of generating an e-way bill in the case of movement of goods by public transport would be that of the consignor or consignee.
• Railways have been exempted from the generation and carrying of the e-way bill with the condition that railways will not deliver the goods to the recipient without the production of an e-way bill. However, railways would be required to carry invoice, delivery challan, etc.
• The time period for the recipient to communicate his acceptance or rejection of the consignment would be the earlier of the validity period of the concerned e-way bill or 72 hours.
• In the case of the movement of goods on account of job-work, the registered job worker can also generate an e-way bill. The consignor can authorize the transporter, courier agency and e-commerce operator to fill PART-A of the e-way bill on his behalf.
• Movement of goods from the place of the consignor to the place of transporter up to a distance of 50 km (increased from 10 km) does not require the filling of PART-B of the e-way bill.
• An extra validity period has been provided for "Over Dimensional Cargo."
• If the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period in the case of trans-shipment or in the case of circumstances of an exceptional nature.
• Validity of one day will expire at midnight of the day immediately following the date of the generation of the e-way bill.
• Once verified by any tax officer, the same conveyance will not be subject to a second check in any State or Union territory, unless and until, specific information for the same is received.
• In the case of movement of goods by railways, airways and waterways, the e-way bill can be generated even after commencement of movement of the goods.
• Movement of goods on account of "Bill-to-Ship-to" supply will be handled through the capturing of place of dispatch in PART-A of the e-way bill.

The CGST Rules were amended vide Notification 12/2018-Central tax dated 7 March 2018 to give effect to the majority of the above improvements.

Continuation of the present compliance system

Until the new simplified return system is finalized, the present system of filing returns in Forms GSTR-3B and GSTR-1 will continue for another three months, i.e., until June 2018.

Extension of tax exemptions for exporters

The Council deferred the implementation of the e-Wallet scheme by six months, i.e., until 1 October 2018.

The Council also extended the present dispensation in terms of exemptions, which is available up to 31 March 2018 for an additional six months, i.e., until 1 October 2018. The dispensation, inter alia, includes:

• A special scheme of payment of GST at 0.1% on the procurements by the merchant exporter
• Exemption to domestic procurement made under the schemes of Advance Authorization, Export Promotion Capital Goods (EPCG) and Export Oriented Units (EOU) which were recognized as "deemed exports."

Other recommendations

The liability to pay tax on a reverse charge basis on procurements from unregistered dealers has been deferred until 30 June 2018.

The provisions for the deduction and collection of tax at source (TDS and TCS) shall remain suspended until 30 June 2018.

Implications

The exemption with respect to small intra-state consignments and the exclusion of the value of exempt supplies for e-way bill compliance is a positive development as it may facilitate the hassle-free movement of goods.

Also, the extension of tax exemptions for exporters was expected considering the refund process issues that resulted in the blockage of working capital.

Finally, deferring the reverse charge on procurements from unregistered dealers and the suspension of the TDS/TCS mechanism is expected to provide relief to the industry from the additional compliance burden.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (India), India VAT Team, Gurgaon

• Harishanker Subramaniam
  harishanker1.subramaniam@in.ey.com

Ernst & Young LLP (India), India VAT Team, Mumbai

• Uday Pimprikar
  uday.pimprikar@in.ey.com

Ernst & Young LLP, Indian Tax Desk, New York

• Riad Joseph
  riad.joseph1@ey.com

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ATTACHMENT

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