The 39th GST Council Meeting, held on 14 March 2020, brought several important changes to simplify compliance, clarify rules, and ease trade practices. To give effect to these decisions, the Central Board of Indirect Taxes and Customs (CBIC) issued a series of notifications and circulars between 18 March and 31 March 2020.
These changes covered a wide range of areas, including Aadhaar authentication for registration, amendments in rules relating to input tax credit, modifications in refund processes, extensions for annual returns, deferment of e-invoicing, special procedures for taxpayers in specific regions, and sector-specific rate changes. Alongside, clarifications were issued for businesses undergoing reorganisations, insolvency proceedings, and refund claims.
This blog provides a detailed yet simplified walkthrough of all these amendments and circulars.
1. Background
The GST Council, in its 39th meeting, recommended a set of measures to ease compliance and support trade. These were formalised through notifications and circulars by CBIC, and the following sections capture each amendment in detail. Importantly, these amendments are distinct from COVID-19 relief relaxations, which were separately notified.
2. Key Highlights of the amendments
2.1 Amendments in GST Rules [Notification No. 16/2020 dt. 23 March 2020]
2.1.1 Aadhaar Authentication for GST Registration
From 1 April 2020, Aadhaar authentication became mandatory for new registrations. Individuals, sole proprietors, partners, and authorised signatories in companies, LLPs, HUFs, and other entities were all required to undergo this process. Non-citizens of India were exempt.
If Aadhaar authentication was not completed, registration could still be granted, but only after physical verification of business premises within 60 days. Where Aadhaar was not issued, alternative identification methods were to be provided.
2.1.2 Insertion of Proviso to Rule 80(3) – Threshold limit for GSTR 9C increased
For FY 2018–19, the threshold for mandatory filing of reconciliation statement in GSTR-9C was raised from Rs. 2 crores to Rs. 5 crores, reducing compliance for smaller taxpayers.
2.1.3 Amendment in Rule 43 – Input Tax Credit on Capital Goods
Changes were made to how ITC is computed when capital goods, initially used exclusively for exempt supplies, were later used for both taxable and exempt purposes.
- Now, the entire ITC as per invoice could be credited to the electronic credit ledger, and ineligible portions (calculated at 5% per quarter of prior exempt use) would be added to output tax liability.
- This differed from the earlier system, where only net eligible ITC after reducing ineligible portions could be credited.
Illustrations in the notification showed how these changes reduced monthly reversals and clarified that the useful life of capital goods would be considered as 5 years.
2.1.4 Amendment to definition of Turnover of Zero-Rated supply of Goods in Rule 89(4)
Export turnover for refunds was restricted to the lower of actual export value or 1.5 times the value of similar goods supplied domestically. If export value exceeded this cap, the excess would not qualify for refunds.
This aimed at curbing inflated valuations in export refund claims. An example was given showing how refund eligibility reduced when export value was disproportionate compared to domestic supplies.
2.1.5 Insertion of Rule 96B – Recovery of Refund on Non-Realisation of Export Proceeds
Refunds of ITC or IGST on exports would now be recoverable if export proceeds were not realised within FEMA timelines (9 or 15 months, including extensions). Exporters had to repay the refund with interest within 30 days of expiry of the allowed period.
If proceeds were realised later, refunds could be reclaimed within 3 months of realisation. In cases where RBI permitted write-off of export proceeds, recovery would not apply.
2.1.6 Retrospective insertion in Rule 96(10)
It was clarified that if IGST and compensation cess were paid on imports, then exporters could still claim refund through the rebate route, even if only basic customs duty exemption was availed.
2.1.7 New Sub-Rule 92(2) – Refund of Excess Payment of Tax
Refunds would now be split between cash and ITC in proportion to how the tax was originally paid. Any outstanding demand adjustment would apply against the cash portion.
2.1.8 Power to Dispose Seized Goods
The authority to dispose of seized goods under Rule 141(2) was delegated to the proper officer, instead of being limited to the commissioner.
2.2 Due date of Annual Return
The due date for filing GSTR-9 and GSTR-9C for FY 2018–19 was extended from 31 March 2020 to 30 June 2020.
2.3 Waiver from filing of Form GSTR 1 for certain class of persons
Taxpayers who could not opt for the special composition scheme were exempted from furnishing GSTR-1 for FY 2019–20, provided they had filed all required GSTR-3B or CMP-08 returns.
2.4 Deferment of E-Invoicing and QR Code [Notification Nos. 13/2020 & 14/2020 dt. 21 March 2020]
The rollout of mandatory e-invoicing and QR code requirements was deferred to 1 October 2020.
Exemptions were granted to insurance companies, banks, NBFCs, goods transport agencies, passenger transport services, and cinema operators. OIDAR service providers located abroad supplying to Indian consumers were also exempted from QR code requirements.
2.5 Notifications for prescribing due dates for filing certain Forms
Several notifications set or revised due dates for GSTR-1, GSTR-3B, and GSTR-7 filings for taxpayers in Jammu & Kashmir, Ladakh, and small taxpayers elsewhere. These ensured continuity after the state reorganisation and for regular quarterly/ monthly compliance.
2.6 Special Procedure for Taxpayers in Dadra and Nagar Haveli and Daman and Diu
Following the merger of the two union territories, special procedures were laid down for return filings and transfer of input tax credit. Businesses could transfer balances from old registrations to new GSTINs by intimating tax officers and reflecting the transfer in GSTR-3B before 31 May 2020.
2.7 Special procedure for corporate debtors under IBC
Corporate debtors undergoing insolvency proceedings were treated as distinct persons under GST law. The IRP or RP had to obtain new GST registrations within 30 days, while old registrations continued.
Supplies and ITC during this period were to be reported under new registrations, and pre-insolvency dues were to be treated as operational debt, not recoverable from IRPs/RPs.
2.8 Change in Place of Supply for aircraft-related services
For maintenance, repair, or overhaul (MRO) services of aircrafts and parts, the place of supply was shifted to the recipient’s location. This effectively made such services exports when provided to overseas entities.
2.9 Notification for changes in GST Rates effective 1 April 2020
- MRO services for aircrafts: reduced from 18% to 5%.
- Handmade safety matches: increased from 5% to 12%.
- Other matches: reduced from 18% to 12%.
- Mobile phones and parts: increased from 12% to 18%.
3. Important aspects of CBIC circulars issued
3.1 Apportionment of ITC in case of business reorganisation [Circular No. 133/03/2020]
The value of assets for apportioning ITC during mergers or demergers was clarified to be at the state level, not all-India level. ITC transfer through Form ITC-02 was required only in states where both entities were registered. The formula applied to all reorganisations involving partial transfer of assets and liabilities.
Apportionment had to be done on the balance as on filing of ITC-02, but using asset values as on the appointed date of the demerger.
3.2 Clarification on companies under IBC process [Circular No. 134/03/2020]
- No coercive action could be taken for recovery of pre-insolvency GST dues; such claims had to be filed before NCLT as operational debt.
- Registrations of erstwhile entities could be suspended but not cancelled outright.
- IRPs/RPs were only responsible for GST compliance after their appointment.
3.3 Clarification on refund-related issues [Circular No. 135/03/2020]
- Refund of accumulated ITC was restricted to invoices reflected in GSTR-2A, though Rule 36(4) allowed a 10% variation, creating a practical gap yet to be resolved.
- Applicants had to provide HSN/SAC details in refund applications, except where suppliers themselves were exempt from mentioning HSN codes.
- Refund was disallowed in cases where ITC accumulation was due to GST rate reductions (inverted duty).
- Refunds of excess payment or wrong head payments were to be issued in the same proportion of cash/credit originally used.
- Clubbed refund applications across successive financial years were permitted.
Conclusion
The 39th GST Council Meeting triggered a wide set of changes that touched almost every aspect of GST—from registration to ITC, refunds, rate changes, and compliance for special cases like insolvency or territorial reorganisation.
By raising thresholds, clarifying refund rules, extending deadlines, and simplifying procedures, these amendments aimed at making GST compliance more practical while plugging gaps that were being misused. The sector-specific rate changes also reflected the Council’s effort to balance revenue with industry demands.
Overall, these measures strengthened the GST framework while reducing friction for businesses.
