Here on, Interest to apply just on net cash obligation of unpaid GST

The Union Budget 2019 has furnished relief to GST-enrolled taxpayers with many new updates. One such correction identifies with the interest on the delayed payment of GST liability. This is a major relief for taxpayers as until this correction was passed, interest has consistently been charged on the whole measure of tax paid after the due date.

The present rate of interest on the late payment of tax liability is 18% per annum on unpaid GST. Such interest rate is charged on all methods of payment of tax, also when actual money has not been paid, however input tax credit(ITC) has been utilized instead. This arrangement is harsh if the taxpayer had ITC to set off a tax liability. ITC credit emerges when tax has been paid to the government and credit is eligible. A basic fact that input buys by a business are made well before the final items are available for sale and if the tax on these sales has been represented and paid, credit on buys must be available. Subsequently, charging interest rate on the whole amount, including such segment paid by using input tax credit, appeared to be unrealistic and unreasonable.

Two months prior, a writ petition was filed in the Telangana High Court, testing the levy of interest on the gross measure of tax payable. The petitioner bid against interest rate being charged on the input tax credit bit of the tax due, as the GST portal do not enable a return to be filed except if the liability due in real money has also been paid. While specialists were giving opinion that this rule by the Government is against its targets and built up practices, the Law did not explain the degree of obligation interest rate ought to be imposed on. Henceforth, an order was passed approving the interest rate charge by the tax experts, and in this way cancelling the writ petition.

The 31st GST Council meeting suggested changing this Law to give that only the net liability of a taxpayer would from this point onward be subjected to interest. This alteration to the Central Goods and Services Tax Act (GST), was presented under the Finance Bill, 2019. Under this new alteration governing section 50 of the Act, interest rate will currently be charged on just that segment of the GST liability which is paid by charging the electronic cash ledger. The part paid using money, getting much wanted relief to taxpayers.

The correction to section 50 was proposed in the Union Budget on the July 5, 2019, and the Finance Bill 2019 was passed in the Lok Sabha on the July 18, 2019. For taxpayers who have effectively paid interest rate on the full tax liability in the current financial year, including that bit paid utilizing credit, the official notification, once published, will give clear picture on whether they are qualified for a refund.

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18% GST for Flat owners paying more than Rs 7,500 maintenance

Flat owners should pay GST at 18 percent if their monthly contribution to resident welfare association (RWA) surpasses Rs 7,500, the Finance Ministry said Monday. According to the rules, RWAs are required to gather GST on monthly membership/commitment charged from its members if such installment is more than Rs 7,500 for each flat for every month and the yearly turnover of RWA by method for supply of services and goods surpasses Rs 20 lakhs.

In a circular issued to handle workplaces on in what manner should the RWA figure GST payable where the maintenance charges surpass Rs 7,500 every month for every member, the Finance Ministry said the exclusion from GST on maintenance charges charged by a RWA from residents is accessible just if such charges don’t surpass Rs 7,500 per month for each member.

“In case the charges surpass Rs 7,500 every month for every member, the whole amount is taxable. For instance, if the maintenance charges are Rs 9,000 every month for each member, GST @18 percent will be payable on the whole measure of Rs 9,000 and not on (Rs 9,000-Rs 7,500) = Rs 1,500,” it said.

On how the tax liability would be determined for an individual who possesses at least two flats in the housing society or residential complex, the Ministry said in such cases the ceiling of Rs 7500 per month per member will be applied independently for each residential apartment owned by him.

“For instance, if an individual owns two residential apartments in a private complex and pays Rs 15,000 per month as maintenance charges towards maintenance of every apartment to the RWA (Rs. 7500/ – every month in regard of each residential apartment), the exclusion from GST will be accessible to every apartment,” it said.

The Ministry further explained that RWAs are qualified to take input tax credit (ITC) of Goods and Services Tax (GST) paid by them on capital goods (generators, water pumps, lawn furniture and so forth.), goods (taps, funnels, other sterile/equipment fillings and so forth.) and input services, for example, repair and maintenance services.

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Relief for exporters as Center to pay ITC discount for State GST

In a big relief to exporters, the Center will presently make the input tax credit (ITC) discounts of state taxes, subsequently decreasing transaction time and expenses, and manual interface in claim preparing.

According to industry, there is an immense distinction in the amount claimed, state goods and services tax (SGST) sanctioned amount received from central tax expert and the amount really disbursed.

“The central government has been approved to pay the measure of refund towards state taxes to the tax payers,” as indicated by the 2019-20 budget plan. At present, the tax payers file discount claims with the central tax officer, who clears a large portion of the claims, and the rest are cleared by the state tax experts, prompting higher time taken in claim handling and refund sanctioning.

Exporters also state that ITC discount is halfway electronic and partly manual. The exporter files discount application at the portal, takes a printout alongside affirmation and conveys it to GST experts in printed version alongside required reports, which also change from specialists to specialists. The physical interface adds to the transaction time and cost.

“The states and Center did their very own particular approval of ITC refund however at this point one will approve both. This is an relief for exporters as it would diminish transaction time and expenses,” said Ajay Sahai, chief general at Federation of Indian Export Organizations.

The breather comes as exporters think about tight credit standards in the midst of slowing global trade development. Absolute payment of export credit was Rs 7.38 lakh crore in December 2018, a decline of 20% on year.

Share of PSU banks in complete disbursement of export credit declined from 65% in FY16 to 45% in FY18.

Exporters have said the no. of refund applications filed on the portal are higher than those gotten in the state tax office.

“The capacity for Center to give the refund for both the CGST and SGST will ease the issues being confronted at present specially by the exporters and evacuate the delay in getting the whole money post the approval of  refunds,” said Bipin Sapra, partner at EY

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