Steps for Transition to New GST Returns

The GST Council in its 31st meeting decided that a new GST return system will be introduced to facilitate taxpayers. In order to ease transition to the new return system, a transition plan has been worked out. The details of the indicative transition plan are as follows: -

i. In May, 2019 a prototype of the offline tool has already been shared on the common portal to give the look and feel of the tool to the users. The look and feel of the offline tool would be same as that of the online portal. Taxpayers may be aware that there are three main components to the new return – one main return (FORM GST RET-1) and two annexures (FORM GST ANX-1 and FORM GST ANX-2).

ii. From July, 2019, users would be able to upload invoices using the FORM GST ANX-1 offline tool on trial basis for familiarisation. Further, users would also be able to view and download, the inward supply of invoices using the FORM GST ANX-2 offline tool under the trial program. The summary of inward supply invoices would also be available for view on the common portal online. They would also be able to import their purchase register in the Offline Tool and match it with the downloaded inward supply invoices to find mismatches from August 2019.

iii. Between July to September, 2019 (for three months), the new return system (ANX-1 & ANX-2 only) would be available for trial for taxpayers to make themselves familiar. This trial would have no impact at the back end on the tax liability or input tax credit of the taxpayer. In this period, taxpayers shall continue to fulfil their compliances by filing FORM GSTR-1 and FORM GSTR-3B i.e. taxpayers would continue to file their outward supply details in FORM GSTR-1 on monthly / quarterly basis and return in FORM GSTR-3B on monthly basis. Non-filing of these returns shall attract penal provisions under the GST Act.

iv. From October, 2019 onwards, FORM GST ANX-1 shall be made compulsory and FORM GSTR-1 would be replaced by FORM GST ANX-1. The large taxpayers (i.e. those taxpayers whose aggregate annual turnover in the previous financial year was more than Rs. 5 Crore) would upload their monthly FORM GST ANX-1 from October, 2019 onwards. However, the first compulsory quarterly FORM GST ANX-1 to be uploaded by small taxpayers (with aggregate annual turnover in the previous financial year upto Rs. 5 Crore) would be due only in January, 2020 for the quarter October to December, 2019. It may be noted that invoices etc. can be uploaded in FORM GST ANX-1 on a continuous basis both by large and small taxpayers from October, 2019 onwards.  FORM GST ANX-2 may be viewed simultaneously during this period but no action shall be allowed on such FORM GST ANX-2.

v. For October and November, 2019, large taxpayers would continue to file FORM GSTR-3B on monthly basis. They would file their first FORM GST RET-01 for the month of December, 2019 by 20th January, 2020.

vi. The small taxpayers would stop filing FORM GSTR-3B and would start filing FORM GST PMT-08 from October, 2019 onwards. They would file their first FORM GST-RET-01 for the quarter October, 2019 to December, 2019 from 20th January, 2020.

vii. From January, 2020 onwards, all taxpayers shall be filing FORM GST RET-01 and FORM GSTR-3B shall be completely phased out.

Separate instructions shall be issued for filing and processing of refund applications between October to December, 2019.

Changes in ITR Forms AY 2019-20

1. If the taxpayer is a Director in a Company at any time during the tax year, the following details need to be furnished (ITR 2, 3):

(i) Name and Permanent Account Number (PAN) of the Company

(ii) Whether shares of the Company are listed or unlisted

(iii) Director Identification Number (DIN) of such person

2. If the taxpayer is a Partner in a Firm, then the name and PAN of the Firm need to be disclosed separately (ITR 5, 7).

3. Enhanced Reporting in case of Transfer of Immovable Property - such as name and PAN of the buyer, address of property and in case of more than one buyer, percentage share and amount paid by each buyer needs to be reported (ITR 2, 3, 5, 6).

4. Break-up of Interest Income earned needs to be bifurcated into interest earned from savings bank, deposits, income tax refund, interest in the nature of pass-through income or others. (ITR 2, 3, 5, 6, 7)

5. Break-up of certain Specified Incomes such as dividend income, winning from lotteries, puzzle, races etc. which are taxed under Income from Other Sources - The break-up period is aligned to the due dates of payment of advance tax (ITR 2, 3, 5, 6, 7).

6. Break-up of monetary Donations made in cash and other mode - Monetary donations made by taxpayer and eligible for deduction under section 80G of the Income Tax laws need to be bifurcated between donation made in cash or in any other mode (like cheque or electronic mode). (ITR 2, 3, 4, 5, 6)

7. Enhanced reporting in relation to Foreign Assets located outside India - instead of information about foreign bank accounts held, the new ITR forms require details of following assets held by resident taxpayers at any time during the tax year in Schedule FA dealing with foreign assets and income from any source outside India (ITR 2, 3, 5, 6, 7)

(i) Details of Foreign Depository accounts

(ii) Details of Foreign Custodial accounts

(iii) Details of Foreign Equity and Debt interest

(iv) Details of Foreign Cash Value Insurance Contract or Annuity Contract

Under each asset category, there is further reporting requirement such as details of country name and code, name and address of institution, account number, date of opening the account, peak balance during the tax year, closing balance, amount of interest/ amount paid/ credit. In case of insurance contract, cash/ surrender value of contract needs to be reported.

8. Enhanced reporting in Exempt Income schedule

(i) If net agricultural income exceeds Rs. 5,00,000; the following details need to be reported separately for each agricultural land (ITR 2, 3, 5, 6)

- Name of district along with pin code where agricultural land is situated

- Measurement in acres

- Whether the land is owned or leased and whether it is irrigated or rain fed

(ii) income is not chargeable as per Double Taxation Avoidance Agreement (DTAA)

(iii) it is pass-through exempt income (ITR 2, 3, 5)

9. Furnishing of PAN/ TAN of Tenant is mandatory if TDS credit on rent income is claimed by the taxpayer (ITR 2, 3, 5, 6, 7)

10. Insertion of Manufacturing Account and Trading Account - Statement of Profit and Loss has been bifurcated into Manufacturing Account, Trading Account and Profit and Loss Account. Certain additional details need to be furnished in the Manufacturing Account such as details of direct wages, direct expenses and factory overheads. (ITR 3, 5, 6).

11. In case regular books of accounts are not maintained - details of Gross Receipts as bifurcated between receipts through specified banking modes and any other mode to be reported.

12. Date of Commencement of Business to be disclosed by Companies

13. In case of Companies, Loans and Advances given and received - party wise details along with opening and closing balance, amount received and repaid during the year, rate and amount of interest

14. In case of Companies, land or building or both (whether residential or not), other assets such as motor vehicle, aircraft, yacht, jewelry, archaeological collections, drawings, painting, sculptures or any work of art or bullion - date and cost of acquisition, purpose of use needs to be disclosed.

New Method of Utilization of ITC under GST (w.e.f. 23-Mar-19)

With effect from 29th March, 2019, the manner of utilization of Input Tax Credit (ITC) has been amended vide Notification No. 16/2019-CT, following which Rule 88A has been introduced. It states as under:

“Rule 88A: Order of utilization of input tax credit – Input tax credit on account of Integrated Tax shall first be utilised towards payment of Integrated Tax, and the amount remaining, if any, may be utilised towards the payment of Central Tax and State Tax or Union Territory Tax, as the case may be, in any order:

Provided that the input tax credit on account of Central Tax, State Tax or Union Territory Tax shall be utilised towards payment of Integrated tax, Central Tax, State Tax or Union Territory Tax, as the case may be, only after the input tax credit available on account of Integrated Tax has first been utilised fully.”

Here’s breaking down the change for you.

1. If you have IGST Input Credit, first exhaust that for payment of IGST Output

2. If there is any IGST ITC left thereafter, use it for payment of CGST and SGST Output, now in no particular order, i.e. you can use the remaining IGST ITC to pay both CGST and SGST equally. It will not follow the sequence of first setting it off against CGST Output and then the remaining against SGST Output.

3. Credit can be taken in any order.

4. ITC of CGST and SGST can be utilized towards payment of IGST, CGST, SGST only after exhausting the ITC of IGST.

5. It still remains that the ITC of CGST cannot be used to pay SGST, and ITC of SGST cannot be used to pay CGST.

To put it simply, the following tables show how the manner of utilizing GST ITC has changed in the past few months.

Up to 31-Jan-2019
Payment For	First Set off From	Then Set off From
IGST	IGST	CGST and SGST
CGST	CGST	IGST
SGST	SGST	IGST

From 01-Feb-2019 due to Section 49A of CGST (Amendment) Act, 2018
Payment For	First Set off From	Then Set off From
IGST	IGST	CGST and SGST
CGST	IGST ITC left after setting off IGST	CGST
SGST	IGST ITC left after setting off IGST and CGST	SGST

From 29-Mar-2019 due to Rule 88A – Order of utilizing IGST ITC against CGST and SGST is done away with
Payment For	First Set off From	Then Set off From
SGST	IGST ITC left after setting off IGST	SGST
CGST	IGST ITC left after setting off IGST	CGST
IGST	IGST	CGST and SGST

Illustration 1: ITC Utilization in Case of No IGST Liability
w.e.f. 29-Mar-19	IGST	CGST	SGST
ITC Available	1000	1000	1000
Output Tax Payable	NIL	2000	2000
IGST Utilized	NIL	500	500
CGST Utilized	NIL	1000	N.A.
SGST Utilized	NIL	N.A.	1000
ITC Balance	NIL	NIL	NIL
Payment in Cash	NIL	500	500

Illustration 2: ITC Utilization in Case of IGST Liability
w.e.f. 29-Mar-19	IGST	CGST	SGST
ITC Available	1000	1000	1000
Output Tax Payable	500	500	500
IGST Utilized	500	250	250
CGST Utilized	NIL	250	N.A.
SGST Utilized	NIL	N.A.	250
ITC Balance Carried Fwd	NIL	750	750
Payment in Cash	NIL	NIL	NIL

GST on Real Estate Sector w.e.f. 1st April, 2019

The following is a summary of decisions taken by the GST Council in its 34th Meeting held on 19th March, 2019 regarding GST on the real estate sector.

To reduce the burden of GST on home buyers, GST council has reduced the rate of tax to 5% without ITC for non-affordable houses and 1% without ITC for affordable house. Here, affordable house/flat is one of carpet area up to 90 sq.m. in non-metropolitan cities and 60 sq.m. in metropolitan cities, having value up to Rs.45 lakhs only, in both cases.

The proposed rates shall apply from 1st April, 2019.

Conditions for Availing the New Tax Rates

1. Input Tax Credit shall not be available on adoption of new rates. However, ITC shall be available to those who continue to pay tax under the old rate.

2. 80% of inputs and input services (other than capital goods, TDR/JDA, FSI, long term lease) shall be purchased from registered persons. On shortfall of purchase from 80%, tax shall be paid by builder @18% on RCM basis. However, tax on cement purchased from unregistered person shall be paid @28% under RCM basis.

Taxing Options for Ongoing Projects

1. Under construction projects shall be given a one-time option to continue to pay tax at old rates (effective rates of 8% or 12% with ITC) on ongoing projects (building where construction and actual booking have both started before 01.04.2019) which have not been completed by 31.03.2019.

2. The option shall be exercised once within the prescribed time, and where the option is not exercised, new rates shall apply.

Transition for Ongoing Projects

1. Ongoing projects not completed by 31.03.2019 shall transition the ITC in proportion to booking of the flat and invoicing done for the booked flat, subject to a few safeguards.

2. For a mixed project, transition shall also allow ITC on pro-rata basis in proportion to carpet area of the commercial portion in the ongoing projects (on which tax will be payable @12% with ITC even after 01.04.019) to the total carpet area of the project.

Transfer of Development Rights (TDR) & Floor Space Index (FSI)

The following treatment shall apply to TDR/FSI and long-term lease for projects commencing after 01.04.2019

1. Supply of TDR, FSI, long term lease (premium) of land by a land owner to a builder shall be exempted from GST if flats are sold before issuance of completion certificate and tax is paid on them. Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses.

2. Builder has to pay GST on RCM basis. It means liability to pay tax on TDR, FSI, long term lease has been shifted from land owner to builder.

3. The builder has to pay tax under RCM basis, in respect of flats sold after completion certificate, on the date of issue of completion certificate.

Input Tax Credit (ITC) in case of Sales Promotion Activities

The GST Department has recently offered great relief to the FMCG industry by clarifying on a few matters with respect to supply of free articles under schemes such as "Buy One, Get One", where ITC was not being allowed in proportion to the free supplies made by such companies.

The details are as follows.

A. Free Sample and Gifts (No ITC): 

It is a common practice in trade and industry, such as, garment industries which often provide free sample or gifts to increase sales volume and to attract customers without any consideration.

According to section 7(1)(a) of said Act, supply made without any consideration shall be not treated as supply under GST (except in case of activities mentioned in Schedule I of the said Act).

It is clarified that input tax credit shall not be available to the supplier on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration.

However, where the activity of distribution of gifts or free samples falls within the scope of ‘supply’ on account of the provisions contained in Schedule I of the said Act, the supplier would be eligible to avail of the ITC.

B. Buy One Get One Free Offer (ITC Available):

Offers like ‘buy one soap and get one free’, are actually not an individual supply of free goods but a case where a single price is charged for two or more individual supplies. Taxability of such supply will be dependent upon whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.

It is also clarified that ITC shall be available to the supplier for the inputs, input service and capital goods used in relation to supply of goods or service or both as part of such offers.

C. Discounts on the Face of Invoice or Pre-determined (Reduced from Taxable Value):

Sometimes, suppliers give discounts which increase with the increase in purchase volume. For example, 10% discount on purchase of more than Rs. 5000 and 15% discount on purchase of more than Rs. 10000. Such discounts are often given in the invoice itself.

Suppliers also give periodic discounts, generally at end of the season or at the year end. The discounted amount would be excluded to determine the value of supply. Such discounts are passed by the supplier by issuing credit notes.

It has been clarified in this regard that ITC shall be available to the supplier for the inputs, input service and capital goods used in relation to supply of goods or service or both as part of such offers.

D. Secondary Discount (Not Deducted from Taxable Value):

When discount is provided after sale it is termed as secondary discount. For example, M/s A supplies 10000 packets of biscuits to M/s B at Rs. 10/- per packet. Afterwards, M/s A re-values it at Rs. 9/- per packet. Subsequently, M/s A issues credit note to M/s B for Rs. 1/- per packet.

Discounts in cases such as these do not fulfill the conditions laid out in section 15(3)(b) of the Act. It has been clarified in this regard that financial / commercial credit notes can be issued by the supplier even if they don’t fulfill the conditions under the aforementioned section, i.e. credit notes can be issued as a commercial transaction between two contracting parties.

It is also clarified that such secondary discounts shall not be excluded while determining the value of supply since they are not known at the time of supply, and there is no impact on availability or otherwise of ITC in the hands of supplier in this case.



Compiled by:


Shivam Tiwari
Articled Assistant
GST Team
Sandeep Ahuja & Co.