Minutes of the 22nd GST Council Meeting held on 6 October 2017 - GST - 22nd GST Council Meeting

Minutes of the 22 nd GST Council Meeting held on 6 October 2017 The twenty second Meeting of the GST Council (hereinafter referred to as the Council') was held on 6 October, 2017 in Vigyan Bhawan, New Delhi under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley. A list of the Hon'ble Members of the Council who attended the meeting is at Annexure 1 . A list of officers of the Centre, the States, the GST Council and the Goods and Services Tax Network (GSTN) who attended the meeting is at Annexure 2 . 2. The following agenda items were listed for discussion in the 22 nd Meeting of the Council:- 1. Confirmation of the Minutes of 21 st GST Council Meeting held on 9 September 2017 2. Decisions of the GST Implementation Committee (GIC) for information of the Council 3. Minutes of 1 st Meeting of Group of Ministers (GoM) on IT Challenges in GST Implementation for information of the Council and discussion on GSTN issues 4. Note on revenue collected in August and September, 2017 under Goods and Services Tax (GST) and Compensation paid to States for the period July - August, 2017 5. Report and Recommendations of the Committee on Exports 6. Issues for consideration for relief to small taxpayers i. Proposal for increasing the aggregate annual turnover threshold under Composition scheme from ₹ 75 lakh (₹ 50 lakh in Special Category States except Uttarakhand and Jammu Kashmir) to Rs. one crore; and not taxing the exempt supplies made by a composition dealer ii. Proposal for quarterly filing of returns along with quarterly payment of taxes by taxpayers having annual turnover up to ₹ 1.5 crore iii. Proposal for suspension of application of provisions of sub-section (4) of section 9 till 31 March, 2018 iv. Proposal for deciding the date for the operationalization of provisions of nationwide e-Way bill 7. Issues recommended by the Fitment Committee for consideration of the GST Council i. GST Rate in respect of government works contract services having high labour content ii Definition of Governmental Authority and GST on Government Grants iii Rate of tax on car leasing, sale of leased cars, sale of old and used cars and reverse charge mechanism on sale of used/seized vehicles, scrap etc. by government departments iv GST on renting of motor cab and transport of passengers by motor cab services v Reduction in rate of tax on some Job Work Services vi Rate of tax on works contract in offshore areas beyond twelve nautical miles and transportation of natural gas through pipeline vii Reverse charge mechanism for Overseeing Committee of the Reserve Bank of India (RBI) under GST viii Amendment in GST notifications in respect of 5% GST rates on cereals, pulses and flours etc. put up in unit container and bearing a brand name ix Changes in GST rates on certain goods/ clarifications to be issued 8. Issues recommended by the Law Committee for consideration of the GST Council i. Extension of timelines for filing of FORM GSTR-5A and FORM GST ITC-01 ii. Amendment of some provisions of CGST Rules, 2017 [relating to invoice (rule 46, 54 (2), additional instruction in FORM GSTR 4)] iii. Inclusion of additional items in Notifications No. 32/2017-Central Tax and No. 8/2017-Integrated Tax iv. Clarification regarding the due dates for the generation of FORM GSTR-2A and FORM GSTR-1A for the month of July, 2017 9. Proposal for issuing notifications on cross-empowerment for ensuring single interface under GST 10. Proposal for deemed ratification of notifications, circulars and orders by the GST Council 11. Procedure for implementing GIC decisions of urgent nature requiring immediate implementation 12. Issues carried forward from the 21 st GST Council Meeting: - i. Approach Paper on principles for Fitment post-implementation of GST ii. Issues listed in Annexure IIB of Agenda item 7 of 21 st GST Council Meeting (List of goods discussed by the Fitment Committee where no change in rate of tax was proposed) iii. Issues listed in Annexure III of Agenda item 7 of 21 st GST Council Meeting (GST rates on services - Proposals found NOT acceptable by the Fitment Committee) iv . List of Acts from the Central and State Governments as per Section 5(4) of the GST (Compensation to States) Act, 2017 13. Any other agenda item with the permission of the Chairperson i. Exemption from obtaining registration for persons making inter-State supply of services whose aggregate turnover is below the threshold limit ii. Decision on effective date for starting Tax Deduction at Source and Tax Collection at Source iii. Changes in GST rates on certain goods and exemption from IGST in certain cases iv. Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure-exemption thereon v. Additional relief to Small Tax Payers- Composition Scheme vi. GST on development charges collected by Gift City Company Limited for allotment of land on long term lease (of 30 years or more) to developers for development of commercial and residential spaces vii. Additional relief to Small Tax Payers - GTA to unregistered persons 14. Date of the next meeting of the GST Council 3. The Hon'ble Chairperson welcomed the Members of the Council. He stated that originally this Meeting was proposed to be held through video conferencing but as various letters and suggestions were received from States and other stake holders, a regular Meeting was being held . He commenced discussion on the agenda items. Discussion on agenda items: Agenda item I: Confirmation of the Minutes of the 21 st GST Council meeting held on 9 September, 2017 4. The Hon ble Chairperson requested the Chairman, CBEC to inform regarding corrections suggested in the draft Minutes of the 21 st Meeting of the Council held on 9 September, 2017 (hereinafter referred to as the Minutes ). 4.1. Ms. Vanaja N. Sarna, Chairman, CBEC, informed that four States, namely, Gujarat, Odisha, Sikkim and Punjab had requested for modification in the Minutes. She invited Shri Arun Goyal Additional Secretary, GST Council [AS (GSTC)], to inform regarding the suggestions for change in the Minutes to the Council. 4.2. The AS (GSTC) informed that the State of Gujarat had suggested to suitably add the following in paragraph 5.3 of the Minutes: Dr. PD. Vaghela, CCI, Gujarat, stated that the report of CCTs on CST may be considered by the Council which has recommended that issuance of Form C should be left to the wisdom of the States as no State would like to hurt the interest of its own tax-payers. In the absence of Entry Tax, the local tax-payers of the States would suffer as these goods would be brought from other States on Form C . Also, the State revenue from petroleum goods and natural gas would be reduced considerably if this issue is not resolved even when the definition of goods has been amended and restricted to five petroleum products, namely, crude oil, petrol, diesel, aviation turbine fuel and natural gas and alcoholic liquor, in Section 8(3) of the CST Act, other three sectors i.e. telecom, mining and generation and distribution of electricity or any other form of power has been retained. This has created a confusion as to whether Form C will be required to be issued for this set of activities also. The Council agreed to suitably add the version proposed by the CCT, Gujarat. 4.3. The AS (GSTC) informed that the State of Gujarat had suggested to replace the existing sentence in the fourth line from the end of the paragraph 5.13 of the Minutes relating to the version of the Hon ble Deputy Chief Minister of Gujarat ( He added that for new contracts, the rate of tax could be kept at 18% ) with the following: He added that for new contracts, the rate of tax could be kept at 12% . The Council agreed to replace the existing version with that proposed by the State of Gujarat. 4.4. The AS, GSTC stated that the State of Gujarat suggested to add the following in the beginning of paragraph 5.15 of the Minutes: CCT Gujarat made it clear that two issues raised by Gujarat with regard to definition of governmental authority and transfer of budgetary grant are to be discussed independently of the issue of works contract even when these two issues have been discussed in relation to works contract also . The Council agreed to add the version proposed by the State of Gujarat. 4.5. The AS, GSTC informed that the State of Gujarat had requested to replace the first sentence of paragraph 5.22 of the Minutes with the following: CCT Gujarat stated that if a Government corporation or authority or board was allotted grants by the State government (for example grant allocated to construct a jail or police line, etc.), such transaction should not attract GST at the rate of 18% . The Council agreed to add the version proposed by the State of Gujarat. 4.6. The AS, GSTC informed that the State of Odisha had suggested to replace the version of the Hon ble Minister from Odisha recorded in paragraph 33.2 (ii) of the Minutes ( The Hon ble Minister from Odisha stated that fly ash was a very important commodity and that tax on it should be Nil ) with the following: Fly Ash caused environmental pollution. There was no consideration for fly ash. 1f it was kept in taxable category, e-way bill would be required for movement/transportation and this would cause harassment. He suggested that Fly ash should be exempted under GST . The Council agreed to replace the existing version with that proposed by the State of Od isha. 4.7. The AS, GSTC informed that the Government of Sikkim had requested to suitably insert the following in paragraph 47.9 or 47.10 of the Minutes: Shri Manoj Rai, Joint Commissioner, Commercial Tax, Sikkim requested GSTN to modify the registration software application to provide field requiring the applicant to fill in licence details. He said that this was necessary to make the software compatible with the GST law as Section 22(2) of the CGST Act, 2017 prescribed that holding of licence was pre-requisite for filing registration application. He also requested the Council to authorise GSTN to carry out the needful modification. The Council agreed to add the version proposed by the State of Sikkim. 4.8. The AS, GSTC informed that the State of Punjab had requested to amend the version of the Hon ble Minister from Punjab recorded in paragraph 31.2 of the Minutes ( He suggested that in one Chapter, there should not be more than three rates of tax and that ...) with the following: He suggested that similar goods should attract same rate and in one chapter there should not be more than three rates and that... The Council agreed to add the version proposed by the State of Punjab. 4.9. The AS, GSTC informed that the State of Punjab had requested to add the following line in paragraph 33(vi) of the Minutes n the statement of the Hon ble Chairperson: The Hon ble Chairperson suggested that the idols made of clay could be exempted from tax whereas all other idols (except made of precious metals) could be taxed at 12% . The AS, GSTC further informed that the State of Punjab had also suggested to replace the Council s decision in paragraph 34.1(iv) of the Minutes with the following: Idols other than those made of clay and precious metals shall be taxed at the rate of 12% and idols made of precious metals shall be taxed at the rate of 3%. The AS, GSTC informed that the Hon ble Chairperson s version was correctly recorded in paragraph 33(vi) of the Minutes as idols made of some material like glass and crystal were not proposed to be covered under this decision. He added that in view of this, the amendments proposed by the State of Punjab in paragraphs 33(vi) and 34.1 (iv) of the Minutes could not be accepted. The Council agreed not to make amendments in paragraphs 33(vi) and 34.1(iv) of the Minutes. 4.10. The Hon ble Minister from Punjab drew attention to the Council s decision recorded in paragraph 7.1 of the Minutes that the issue of Form C under the Central Sales Tax (CST) Act shall be examined further in light of the court decision and requested that this issue should be examined urgently and issue necessary clarification as another judgment had been delivered by the Hon ble Mumbai High Court on this issue. Shri Udai Singh Kumawat, Joint Secretary, Department of Revenue, (DOR) informed that an amendment proposed in Section 8(3) of the CST Act was presently being examined by the Union Law Ministry and the same would be issued shortly. 5. In view of above discussion, for agenda item 1 , the Council decided to adopt the Minutes of the 21 st Meeting of the Council with the changes as recorded below: 5.1. To suitably add the following version in paragraph 5.3 of the Minutes: Dr. P.D. Vaghela, CCI , Gujarat, stated that the report of CCTs on CST may be considered by the Council which has recommended that issuance of Form C should be left to the wisdom of the States as no State would like to hurt the interest of its own tax-payers. In the absence of Entry Tax, the local tax-payers of the States would suffer as these goods would be brought from other States on Form C . Also, the State revenue from petroleum goods and natural gas would be reduced considerably if this issue is not resolved, even when the definition of goods has been amended and restricted to five petroleum products, namely, crude oil, petrol, diesel, aviation turbine fuel and natural gas and alcoholic liquor, in Section 8(3) of the CST Act, other three sectors i.e. telecom, mining and generation and distribution of electricity or any other form of power have been retained. This has created a confusion as to whether Form C will be required to be issued for this set of activities also. , 5.2. To replace the existing sentence in the fourth line from the end of paragraph 5.13 of the Minutes relating to the version of the Hon ble Deputy Chief Minister of Gujarat with the following: He added that for new contracts, the rate of tax could be kept at 12% . 5.3. To add the following in the beginning of paragraph 5.15 of the Minutes: The CCT, Gujarat, made it clear that two issues raised by Gujarat with regard to definition of governmental authority and transfer of budgetary grant are to be discussed independently of the issue of works contract even when these two issues have been discussed in relation to works contract also . 5.4. To replace the first sentence of paragraph 5.22 of the Minutes with the following: CCT, Gujarat, stated that if a Government corporation or authority or board was allotted grants by the State government (for example grant allocated to construct a jail or police line, etc.), such transaction should not attract GST at the rate of 18%. 5.5. To replace the version of the Hon ble Minister from Odisha recorded in paragraph 33.2(u) of the Minutes with the following: Fly Ash caused environmental pollution. There was no consideration for fly ash. If it was kept in taxable category, e-Way bill would be required for movement/transportation and this would cause harassment. He suggested that Fly ash should be exempted under GST . 5.6. To suitably insert the following in paragraph 47.9 or 47.10 of the Minutes: Shri Manoj Rai, Joint Commissioner, Commercial Tax, Sikkim requested GSTN to modify the registration software application to provide field requiring the applicant to fill in licence details. He said that this was necessary to make the software compatible with the GST law as Section 22(2) of the CGST Act, 2017 prescribed that holding of licence was pre-requisite for filing registration application. He also requested the Council to authorise GSTN to carry out the needful modification. 5.7. To amend the version of the Hon ble Minister from Punjab recorded in paragraph 31.2 of the Minutes with the following: He suggested that similar goods should attract same rate and in one chapter there should not be more than three rates and that... Agenda item 2: Decisions of the GST Implementation Committee (GIC) for information of the Council 6. The Chairman, CBEC invited Shri Upender Gupta. Commissioner, (GST Policy), CBEC, to make a presentation on the decisions taken by the GST Implementation Committee (GIC) since the 21 Meeting of the Council held on 9 September, 2017. The presentation made by the Commissioner (OST Policy), CBEC is at Annexure 3 of the Minutes. 6.1. In his presentation, the Commissioner (GST Policy), CBEC informed that between the 21 st and the 22st Meeting of the Council, GIC took some decisions by circulation due to urgency of the issues and some decisions were taken during the 9 th and the 10 th meeting of the GIC. The decisions related to: (i) Extension of time limit to file FORM GST TRAN-1 under Rule 120A and Rule 117 of the CGST Rules; (ii) changes in Rates notification relating to services provided by Advocate to comply with the order of the Hon ble Delhi High Court; (iii) allow for amendment of rule 24(4) of CGST Rules for extension of date of application for cancelation of migrated taxpayers; (iv) minor Changes in FORM GST REG-29 prescribed for cancellation of registration of migrated person; (y) time limit for submitting the declaration in FORM GST TRAN-1 under Section 141 and 142 of the CGST Act, 2017 should be the same as the time limit for submitting the declaration in FORM GST TRAN-1 under Section 140 of the Act - Rule 118, 119 and 120 proposed to be amended; (vi) extending the facility of supplying goods or services for export without payment of integrated tax under Letter of Undertaking in place of bond to all registered persons; and (vii) extension of time limit for intimation of details of stock on the date preceding the date from which the option for Composition levy is exercised in FORM GST CMP-03. He also mentioned the related notification and Order numbers under which these decisions of the GIC had been implemented. 6.2. The Hon ble Minister from West Bengal stated in his written comments that proposals at serial numbers (i) and (iii) to (vi) were in the interest of small and medium enterprises and many taxpayers had been raising these issues. 7. For agenda item 2 , the Council took note of the decisions of the GIC. Agenda item 3: Minutes of 1 st Meeting of Group of Ministers (GoM) on IT Challenges in CST implementation for information of the Council and discussion on GSTN issues 8. The Hon bie Chairperson invited the Hon ble Deputy Chief Minister of Bihar, the Convenor of the GoM, to brief the Council regarding the deliberations of the GoM. The Hon ble Deputy Chief Minister of Bihar informed that till date, two meetings of the GoM had taken place (on 16 September 2017 and 4 October 2017). He stated that about 48 issues had been identified to be addressed by the GSTN. He informed that timelines had been given for the development of priority functionality and mostly the timelines, as given, were maintained, except for delay of about 2-3 days. He further informed that return filing was getting stabilised and about 13 lakh Returns were filed on 20 September 2017, and in one hour, more than one lakh Return had been filed. He informed that the GoM had also decided that technical team from Infosys should be deployed in each State and that Infosys had already deployed some people but in the next two weeks, this deployment would be beefed up by deploying more technical persons. He added that the GoM had also asked Infosys to deploy separate team for development of Backend Applications for Model 2 States (27 in number) for which Infosys was developing the backend facility of the tax administration. 8.1. The Hon ble Chairperson desired to have a briefing about the main IT related problems being faced by the taxpayers and how these were being addressed. Shri Prakash Kumar, Chief Executive Officer (CEO), GSTN made a presentation on this issue which is attached as Annexure 4 . 8.2. In the presentation, the CEO, GSTN, gave an update on the number of Registrations, Returns, Invoices, daily collection statistics and daily filing status of GSTR-3B. He informed that as on 4 October 2017, 25.96 lakh new registrations had been approved. As on 5 October 2017, the status of uploading of GSTR-3B Returns was 53.36 lakh for the month of July, 2017 and 45.14 lakh for the month of August, 2017. Further, 34.90 lakh GSTR-1 Returns for the month of July, 2017 were also uploaded. He informed that 26.74 crore invoices had been processed and that filing through the GST Suvidha Providers (GSPs) was picking up. The peak for GSTR-3B for the month of August was 20 September, 2017 and that the System was able to handle the filing of large number of returns without putting stress on the IT infrastructure. He informed that a total of 13.76 lakh Returns were filed on 20 September, 2017 in addition to 7.48 lakh payment transactions conducted on the portal that day. He added that 1.36 lakh Returns were filed in one hour. He also informed that they had increased the limit for circuit breaker from 60,000 Returns to 80,000 Returns and now to one lakh Returns concurrent users, which implied that the System could handle one lakh people preparing Returns, Challans, etc. on the portal simultaneously. He added that last week, they had to apply circuit breaker once when this limit was breached. As regards tax payment, he informed that an analysis of payment trends in July, 2017 showed that 95% of the taxes came by 31 August, 2017 and that the Returns filed thereafter did not involve payment of large sums of tax. He stated that as per their analysis, 41% of Returns were filed with nil tax liability, 45% of the Returns involved payment through input tax credit (ITC) and Cash and 13.4% paid taxes only through ITC. Ile stated that 7,617 taxpayers falling under the tax slab of Rs. one crore and more (only 0.32% of total taxpayers) accounted for payment of 66.5% of the total tax collected. 8.3. The CEO, GSTN, also gave a brief update of the GoM review meetings. He stated that in its first meeting on 16 September 2017, the GoM had identified 48 items for time bound resolution. He informed that out of these 48 items, 8 were completed and status was presented to GoM in its second meeting held on 4 October 2017. The list of completed items are as follows: (i) Placement of Resident Engineers (Interim/Permanent) at 37 locations (CBEC/States/UTs) - Infosys was advised to replace interim personnel with permanent ones who are qualified to do this job, in next two weeks; (ii) Sharing of data on the following items with Model 1 and 2 in csv (comma separated values) format: (a) Enrolment Report-Daily incremental is being shared after sharing of complete data dump ; (b) New Registration Report - Daily incremental is being shared after sharing of complete data dump; (e) Return Filer- Daily incremental is being shared after sharing of complete data dump; (d) Dealers complete Address list- Complete data dump (one time) shared for both, migrated as well as newly registered ones; (e) GSTR 3B filer-Complete data dump (one time); (iii) Sharing of data with Model 1 States -the root cause for difference in data reported and records (registration form, returns etc.) pulled by CBEC/Model I States has been found and corrective action taken; (iv) Enabling tax payers stuck at submit stage to edit the same and file GSTR-3B (2.2 lakh taxpayers); (v) Amendment of core and non-core items of Registration form rolled-out on the portal; (vi) Tran-1 Filing (Negative Credit issue) resolved for future use. Cases done in past are being dealt with separately by data fix; (vii) Suo moto Registration rolled-out on the portal having following functionalities: (a) ID creation, (b) Create Challan and (c) Making Payment; (viii) Opt-out from Composition scheme rolled-out. 8.4. The CEO, GSTN further stated that out of these 48 items, 4 were in progress with some delay, namely (a) GSTP Registration Application Processing; (b) TDS/TCS Registration Application Processing; (c) Revised TRAN-1 (Reopening Tran 1 to enable submission of revised TRAN-1); (d) Refund for Export - ICEGATE API (Application Programme Interface). He added that for 4 items, release dates had been advanced based on directions of GoM and these are: (a) GST PMT-07: Application for intimating discrepancy relating to payment; (b) GSTR-3B: Enhancement to enable Preview and Print out /PDF Download; (e) Revocation of RC (Registration Certificate); (d) Change of Authorised signatory by tax official. He also informed that the proposed date for roll out of TCS and TDS was from 1 December, 2017 and the filing would start from 1 January, 2018. He further informed that the GoM had advised the IT Committee of officers to go through all the compiled issues and present only those issues before the GoM which were not resolved at the level of the Committee and to also provide a progress report regarding the issues resolved. He informed that the IT Committee was meeting every week and trying to resolve the issues. 8.5. The Hon ble Minister from Kerala requested for a hard copy of the presentation. Dr. Hasmukh Adhia, Secretary to the Council (hereinafter referred to as the Secretary ) assured that the presentation shall be shared with all the Hon ble Members (subsequently circulated to all States). The Hon ble Minister from Kerala suggested that for Composition dealers and for taxpayers up to a certain turnover, the provisions of fine and penalty should be postponed for some time as there had been long delays in the filing of Returns. He added that small taxpayers were not yet familiar as to how to deal with Returns and accountants were having a field day. The Hon ble Chief Minister of Goa supported the proposal for postponement of fines and penalties for small taxpayers. He observed that taxpayers were unable to file Returns without their fault and fine and penalty in such a situation was creating problem. He observed that the System should be such that all taxpayers should be able to file their Returns on the last date, if they so choose, and that overload on the System should not be a factor for inability to file Returns. He suggested that until the System stabilised, fine and penalty should be deferred. The Hon ble Minister from Odisha stated that there should be a one-time measure not to impose fine and penalty. The Hon ble Chairperson observed that if fine and penalty was deferred for the next six months, then no one would file Returns. He observed that the sanctity of dates for filing Returns should be maintained. The Hon ble Deputy Chief Minister of Bihar suggested that this issue could be decided at a later date. 8.6. The Secretary informed that late fee was waived for July, 2017 Return but no late fee waiver was announced for August Return as it could discourage filing of Returns leading to loss of revenue. He observed that the amount of late fee leviable was not very high. The Hon ble Chief Minister of Goa stated that those taxpayers who paid tax in July, 2017 but could not file their Returns due to glitches in the System should not be penalised for late filing of the Returns for the month of August, 2017. The Secretary observed that filing of GSTR-3B was necessary for fund settlement, and therefore, this could not be postponed indefinitely. He suggested that an additional 10 days time could be given for filing Return by those registered persons who had no tax liability. The Hon ble Minister from Punjab stated that late filing of Returns and consequent late payment of tax attracted 18% interest which a taxpayer was legally bound to pay. The penalty was only ₹ 100 per day of non-filing of Return which was not much and this should be waived to avoid unrest amongst the taxpayers. 8.7. The Hon ble Chairperson observed that GSTN should give a more disaggregated break up of taxpayers as this would be helpful in formulating policy and procedure. He observed that 40% Returns involved nil tax and only a few thousand taxpayers paid 65% of the tax and getting their break up would be helpful. He also observed that bulk of the tax had been paid by the due date and the tax payment amount after the due date was small, and therefore, it appeared that late filers paid a very low amount of tax. The Hon ble Chairperson further enquired whether the System was capable of taking the load if a large number of Returns were filed on the last date. The CEO, GSTN stated that this had posed some problem for Returns filed for the month of July, 2017 but no such problem was faced for filing Returns for August, 2017. The Hon ble Chief Minister of Goa contradicted this claim and informed that in order to have a first-hand experience, he personally sat for Return filing and it took three hours to get one tax Return filed. Shri A.B. Pandey, Chairman. GSTN, stated that if the last date for filing Return was 20th of the month and 88 lakh taxpayers were entitled to file their Returns on the last date and if they tried to do so in the afternoon of that day, it would create problem for the System. He suggested to have turnover wise staggering for filing Returns and taxpayers up to a certain turnover could file their Returns by 18 th of the month and the rest by the 20 th of the month. The Hon ble Chairperson observed that as the number of taxpayers paying large amount of tax was relatively less, such taxpayers, say with annual turnover above ₹ 2 or 3 crore, could be given one date for Return filing, and the taxpayers below this turnover could be given another date. 8.8. The Hon ble Minister from Jammu Kashmir stated that new categories of taxpayers should not be introduced in the law. He suggested to do the staggering on the basis of existing categorisation like exemption threshold of ₹ 20 lakh per annum, composition threshold, etc. The Hon ble Minister from Karnataka stated that before taking decision on revising the dates for filing Returns, one should wait for one cycle of GST Return filing to be completed. He observed that once offline utility was fully operational in the next two weeks, the time spent by a taxpayer on the System for filing Return could come down from 40 minutes to 5-10 minutes and the throughput of the System would go up substantially. The Secretary stated that some modification in timelines for filing Returns by small taxpayers was already in the agenda of this Meeting [Agenda item 6(ii)]. 8.9. The Hon ble Deputy Chief Minister of Delhi raised three issues. First, he suggested that GSTN should also look at the capacity of the income tax IT System for accepting the number of Returns every hour and the load of Return filing that it can withstand on the last day of the Return filing. Second, he observed that there was no service level agreement with GSTN for delivery of services in a time bound manner and an action plan for not following the agreed upon timelines. Third, he observed that Infosys was a vendor of GSTN and Ministers should deal with GSTN and not its vendors. The Hon ble Deputy Chief Minister of Bihar clarified that GoM had held a combined meeting of GSTN and Infosys and it helped to understand issues better. The Hon ble Minister from West Bengal stated in his written comments that the agreed timelines of priority functionalities must be strictly adhered to. 8.10. Shri Arvind Subramanian, the Chief Economic Advisor (CEA), Government of India suggested that GSTN s data should have distribution by tax and distribution by turnover. 9. For agenda item 3 , the Council took note of the presentation of the GSTN and the recommendations of the GoM in its meeting held on 16 September, 2017. Agenda item 4: Note on revenue collected in August and September, 2017 under Goods and Services Tax (GST) and Compensation paid to States for the period July-August, 2017 10. The Chairman, CBEC invited the Joint Secretary, DOR, to make a presentation on this agenda item. The Joint Secretary, DOR, stated that a corrigendum had been circulated in respect of Table 1 (GST Revenue up to 3 1.8.2017 for July, 2017 Return period) of the agenda notes relating to this agenda item as per which the figures for fund transferred under the head of SGST for July 2017 return period had been revised from ₹ 7,504 crore to ₹ 7,680 crore. He informed that with this corrigendum, as per Table 1 of the agenda notes, the net revenue after settlement for CGST was ₹ 18,560 crore, for SGST was ₹ 30,950 crore, for IGST was ₹ 37,337 crore and for Cess was ₹ 7,216 crore. The total revenue was ₹ 94,063 crore. He stated that the total amount of fund settlement for August-September, 2017 was ₹ 10,977 crore. He further stated that the total revenue collected till 28 September, 2017 was ₹ 92,474 crore and out of this, the total revenue after settlement for COST was ₹ 20,038.7 crore, SGST was ₹ 32,625 crore, IGST was ₹ 31,966.3 crore and Cess was ₹ 7,844 crore. He further informed that a compensation of ₹ 8,698 crore for the period July-August, 2017 had been provisionally released to the States. He informed that for calculating compensation amount, they had taken into account the revenue collection of VAT and SGST for the months of July and August, 2017 and the settlement fund released to States based on July and August, 2017 Returns. He informed that compensation could not be released to Arunachal Pradesh as the State had not yet reported the revenue collection in the month of August, 2017. He stated that revenue figures for the State of Rajasthan were also being further verified as the revenue collection figure reported by the State was very low. 10.1. The Hon ble Minister from Assam stated that in order to ensure full transparency, the Department of Revenue of the Government of India should share the calculation sheet for compensation to the States. The Hon ble Minister from Rajasthan stated that compensation for his State should not have been withheld on account of variation in the figures of revenue as the law was very clear in this regard. He observed that the Department of Revenue could ask reasons for variation but there was clear and categorical protection of law for not stopping compensation. The Joint Secretary, Department of Revenue, informed that the officers from Rajasthan had informed that they would clarify the issue shortly. The Secretary stated that as the difference in the revenue figure was high, there was a risk of giving extra compensation of about ₹ 500 crore and hence compensation was withheld for a few days awaiting clarification from the State. The Hon ble Chief Minister of Goa stated that there should have been some release of compensation amount to the State of Rajasthan as it would need to pay salaries, etc. The Hon ble Minister from Kerala stated that the grievance of the Hon ble Minister from Rajasthan was justified and that if there was over-payment, it could have been adjusted in the next month after due verification. The Hon ble Chairperson stated that the ) Hon ble Chief Minister of Rajasthan had spoken to him on the subject and that the f Department of Revenue had requested for some data, which should come in a day or so. The Hon ble Chief Minister of Goa stated that the Centre should have paid an amount which it deemed to be payable correctly. The Hon ble Chairperson observed that compensation money was held in trust and due care and caution is to be taken before releasing it and that a huge fall in revenue in one month certainly needed a deeper look. 10.2. The Hon ble Minister from Jammu Kashmir stated that his State had not yet got compensation of ₹ 330 crore and they had been waiting for the same. The Hon ble Minister from Telangana stated that after implementation of GST in July, 2017, compensation amount could not be based on VAT revenue. The Hon ble Chairperson stated that the compensation law provided for taking into account the revenue collection in the month of July, 2017 for compensation and this was VAT revenue. The Hon ble Minister from Telangana reiterated that the VAT revenue should not have been considered for compensation. The Secretary stated that the residual VAT revenue would come to the States in the next few months and these receipts would also be taken into account for calculating compensation. 10.3. The Hon ble Minister from Jammu Kashmir enquired whether the revenue trend of the last two months was better off or worse off. The Secretary stated that due to large scale destocking of goods by dealers in the month of June, 2017, there was very high collection from VAT in July, 2017 and this lowered the compensation requirement due to which there was some surplus under the compensation account. He observed that this surplus could be depleted in the next 2-3 months depending upon the revenue trend. The Hon ble Chairperson stated that in the coming months, buoyancy on account of VAT revenue would not be available and the amount available in the Cess fund was a floating fund which could be used as per the requirements of compensation. The Hon ble Minister from West Bengal stated in his written comments that the downturn in revenue and reduction in the number of Returns filed for the month of August. 2017 as compared to the month of July, 2017 showed that there were serious procedural issues and shortcomings in the GSTN framework plaguing the implementation of GST, thereby adversely affecting the small and medium enterprises and this precarious situation required serious correction. 10.4. The CEA stated that there should be transparency in respect of compensation and each State should know the compensation given to other States including those States which had surplus revenue. The Secretary pointed out that the Hon ble Minister from Assam had already made a similar demand. He added that revenue of the first two months would not show a reliable trend. The Hon ble Minister from Punjab requested to share data of tax collection and compensation of other States to enable States to benchmark with each other. The Hon ble Chairperson suggested that a chart showing revenue figure of each State and its compensation requirement (including the calculation for the same) should be prepared for each State on bi monthly basis and shared with all the States while disbursing the compensation amount to the States. The Council agreed to this suggestion. 10.5. The CEA enquired about the revenue position of the Central Government and the revenue under IGST. The Secretary stated that the Central Government got a lesser amount after settlement due to higher utilisation of transitional credit of the Central taxes. He stated that the revenue to be protected for all the States after projecting a growth rate of 14% per year on base year revenue of 2015-16 was about ₹ 43,000 crore per month. He added that IGST accumulation would slowly subside once the goods transferred inter-State on stock transfer basis were sold in the further retail chain. He added that if it was decided in today s meeting to allow exemption from tax payment on imports and inter-State supplies by using Advance Authorisation etc., the IGST collection would go down anyway. He further stated that IGST amount of ₹ 75,000 crore also included the pending IGST refunds on exports. He added that the future buoyancy in revenue would also be determined after matching the figures filed in the returns of GSTR-3B and GSTR-3. 10.6. The Hon'ble Deputy Chief Minister of Delhi stated that about ₹ 70,000 crore was locked in IGST which was not being used. He questioned the need to have IGST and observed that since GST was a destination based tax, if it was collected properly in the destination State, there would be no need to collect IGST. He suggested to get rid of IGST as it was not a destination based tax. The Secretary stated that IGST was an interim mechanism to provide for transfer of tax to the destination State. The CEA stated that IGST would also be required as a levy on imports. The Hon'ble Deputy Chief Minister of Delhi observed that in such a case, IGST could be kept only for imports. The CEA observed that prior to GST, the ratio of revenue for the Centre and the States was 50:50 and the ratio of August, 2017 collection for CGST and SGST needed to be examined. The Hon'ble Minister from Kerala stated that the share of revenue of the Centre and the States pre-GST was 45:55. The Hon'ble Chairperson observed that compensation related issues of the States of Rajasthan, Sikkim and Jammu Kashmir should be resolved at the earliest. 11. For agenda item 4 , the Council took note of the GST collection for August and September, 2017. The Council also agreed that a chart showing revenue figure of each State and its compensation requirement (including the calculation for the same) shall be prepared on bi-monthly basis and shared with all the States while disbursing the compensation amount to the States. Agenda item 5: Report and Recommendations of the Committee on Exports 12. The Chairman, CBEC, invited Shri Sandeep M. Bhatnagar, Director General, Directorate General of Export Promotion (DGEP), CBEC and Member Secretary of the Committee on Exports to brief the Council on the report and the recommendations of the Committee. DG, DGEP, made a presentation on the report of the Committee on Exports, which is attached as Annexure 5 . He informed that the Committee and its Sub-groups met six times between 19 September, 2017 and 29 September, 2017. He further informed that there was wide scale consultations within and outside the Government which included the Commerce Secretary, CEA, GSTN, Controller General of Accounts (CGA), Principal Chief Controller of Accounts (Pr. CCA), CBEC and the major Export Promotion Councils, such as Federation of Indian Export Organizations (FIEO); Gem and Jewellery Export Promotion Council (GJEPC); Engineering Export Promotion Council (EEPC); Council for Leather Exports (CLE); Basic Chemicals, Cosmetics Dyes EPC (CHEMEXlL); Apparel Export Promotion Council (AEPC); Pharmaceuticals Export Promotion Council (PHARMEXCIL); and Handicrafts Export Promotion Council (HEPC). 12.1. DG, DGEP, stated that the Committee identified the following major problems being faced by exporters: (i) Delays in grant of refunds of IGST and input tax credit on goods and / services used in exports; (ii) Working capital blockage for manufacturer exporters including EOUs due to requirement of upfront payment of GST on inputs/capital goods, and for merchant exporters due to requirement of upfront payment of GST on finished goods; (iii) Increased transaction cost due to requirement of bond/letter of undertaking (LUT) and for bank guarantee in certain cases; (iv) Reduced usability of duty credit scrips and levy of GST on their sale-purchase; (v) Levy of GST on bunker fuel supplies to foreign going vessels eroding competitiveness. 12.2. DG, DGEP, elaborated on the recommendations of the Committee. He stated that for delay in refund (due to various reasons like non-availability of GSTR-1 for the month of August, 2017 and subsequent months till the cycle of filing GSTR-1, GSTR-2, GSTR-3 is completed for previous months and lack of readiness of refund module in GSTN), the Committee recommended to process refunds manually till such time the System related issues were resolved. On refund of IGST paid on goods exported outside India, he explained that this was to be dealt with by Customs Officers. After discussion, all stakeholders were in agreement that refunds for July, 2017 would begin by 10 October, 2017 and that for August, 2017, would begin by 18 October, 2017. In this direction, the GSTN would make available electronically to CBEC, Table 6A of GSTR-1 of exporters containing details of zero rated supplies. He added that refunds for subsequent months shall be dealt in like manner as for August 2017 till the time the GSTR-1 was made available as per prescribed timelines in routine. He stated that refund of IGST paid on export of services, supplies to SEZs and refund of accumulated input tax credit on account of export of goods/services and supplies to SEZs under Bond/LUT had to be dealt with by jurisdictional Central/State GST officers. With concurrence of all stakeholders, the Committee had decided certain timelines for dealing with such refund claims. Thus, by 6 October 2017, the GSTN and the DG Systems, CBEC would finalize modalities for CBEC to receive all GSTR-1 and all GSTR-3B; by 10 October 2017, GSTN would make available on the website a new utility form RFD 01A for refund claimant which would contain a request to debit the credit ledgers for ITC refund being claimed; and by 30 October 2017, GSTN would make available facility in a new form RFD 01B for GST officers to order re-credit of the amount of refund rejected. He informed that Pr. CCA, CGA, CAG, Budget' Division in the Department of Economic Affairs, Department of Revenue and State accounting authorities were finalizing the accounting procedure and settlement of funds. He added that GIC was looking into the cross empowerment of State/Central GST officers for grant of refunds and developing a Standard Operating Procedure (SOP) for the grant of refunds manually till such time the Systems related issues were resolved. 12.3. DO, DOEP, further stated that another major problem identified by the Committee was the working capital blockage for exporters due to (i) discontinuing the facility to use Advance Authorization (AA), Export Promotion Capital Goods (EPCG) and Export Oriented Units (EOUs) for duty free procurement of inputs/capital goods for export production (as now the users of these schemes had to pay IGST on imports and GST on domestic supplies) and (ii) discontinuing the facility to merchant exporters to procure export goods free of taxes (earlier permitted under Rule 19 of the Central Excise Rules and Form-H under VAT). He explained that the Committee had explored two options to address the issue of blockage of working capital of exporters. Option-1 was to grant exemption from IGST and Cess under Section 6 of the IGST Act, 2017 read with Section 25 of the Customs Act, 1962 to imports for exporters availing AA/EPC0/1 00% EOU schemes. For domestic supply, it was proposed to notify supplies of goods as deemed exports under Section 147 of the CGST/SGST Acts, 2017, to allow supply of goods on payment of taxes by the suppliers and thereafter, to allow refund of tax so paid to supplier by an amendment to Rule 89. The exporter having AA/EPCG or EOU status would issue Advance Release Order (ARO) in the name of supplier. The existing monitoring mechanism for exports under these schemes, which had been in place for many years would continue. He added that for refund of IGST on inter-State deemed export supplies, settlement mechanism as well as cross-empowerment of State and Central Government officers would be required. He further stated that to address the problem of fund blockage for merchant exporters, it was proposed that supplies of goods to merchant exporters registered with EPC/Commodity Boards shall be on payment of nominal 1% GST and to prevent misuse, adequate safeguards shall be provided such as requiring export goods to be aggregated in export warehouses etc. Option-2 was to create an e-Wallet for exporters and give a notional credit in advance on the basis of the past export performance. An exporter could use the balance in e-Wallet to pay tax liability and then adjust the credit against the refund paid to him. He added that notional credit in e-Wallet was like an advance refund, with the restriction that this could only be used to pay taxes and would be adjusted against final payment of refunds. He explained that the credit in e-Wallet could be used for payment of IGST on imports thus ensuring that there was no additional burden of working capital. As regards payment of GST on domestic purchases, he explained that thee-Wallet system would permit transfer of balances from the exporter's account to his supplier's account so that GST could be paid by the supplier on the basis of the amount transferred in his e-Wallet by the exporter. He reiterated that balance in e-Wallet would be allowed only to pay taxes. He observed that the working capital requirement in the eco-system would get reduced by the amount of the notional credit given in the e-Wallets. 12.4. DG, DGEP, further informed that another cause of increased transaction cost identified by the Committee was the requirement of bond/letter of undertaking (LUT) for all exports and bank guarantee in certain cases. He stated that the Committee's recommendation was to dispense with the requirement of a bond as well as a bank guarantee and prescribe only a LUT and that this recommendation was endorsed by the GIC and implemented vide Notification No.37/2017-Central Tax dated 04.10.2017. 12.5. DG, DGEP stated that another problem being faced by the exporters was on account of reduced re-usability of duty credit scrips as post GST, these scrips could be used only for payment of Basic Customs Duty. The Committee recommended that for the present, the GST rate on sale-purchase of duty credit scrips should be reduced from 5% to 'Nil' and when the option of e-Wallet was adopted, even MEIS scrip could be deposited in e-Wallet in which case this concession might not be necessary. 12.6. DG, DGEP. recalled that in its 21 st Meeting held on 9 September 2017, the Council had desired that the Committee should examine the proposals to disallow provisional refund under Section 54(6) of the CGST/SGST Acts to (a) exporters who obtain registration within 6 months of applying for refunds and (b) exporters who do not furnish returns for 3 consecutive tax periods preceding the refund application [Agenda item 5(i) of the 21 st Council Meeting]. He stated that the Committee recommended that provisional refund should not be denied to new exporters as the need of the hour was to encourage exports, especially by new exporters, and also refund was linked to the factum of export which is to be necessarily established. As regards the proposal at (b), the Committee felt that the proposal was infructuous and need not be proceeded with as the grant of refund was incumbent on the completion of the return cycle. 12.7. DG, DGEP, further stated that the issue of GST on bunker fuel supplied to foreign going vessels was discussed by the Committee and it recommended that GST rate on bunker fuel may be reduced to 5% for both foreign going vessels and those on coastal run. Explaining the rationale, he stated that the Committee observed that high rate of GST on bunker fuel supplied to foreign going vessels was making India less competitive vis a vis neighbouring countries and oil marketing companies reported that business was shifting to countries like Sri Lanka. The Committee took a view that the GST rate on bunker fuel should be such that it encourages coastal shipping at par with foreign going vessels and it also obviates the administrative problems of monitoring the end use. 12.8. Initiating the discussion on the recommendations of the Committee on Exports, the Hon'ble Minister from Punjab observed that it was an excellent report and congratulated the Committee members on their work. On the issue of working capital blockage to exporters, he suggested that presently Option-1 (allowing tax payment through Advance Authorisation/EPCG/EOU schemes) could be implemented and Option-2 (e-Wallet) could be implemented by April, 2018. The Hon'ble Minister from Jammu Kashmir stated that Option-1 damaged the basic structure of GST of not giving exemptions which also applied for duty exemption schemes for North-Eastern States. He stated that the basic structure of GST should not be tampered with due to operational difficulties which was largely due to delay in the delivery by the IT vendor. He also expressed an apprehension that the vendor would take a long time to develop the system of e-Wallet. He cautioned that if a regime of exemptions was introduced, the GST architecture might collapse. The Hon'ble Minister from Karnataka stated that problems of exporters were critical and solution must be found but the proposed solutions were not the answer to the problems of exporters. He supported the view of the Hon'ble Minister from Jammu Kashmir and observed that enough compromise had already been made with the original intent of GST and further compromises should be avoided. He stated that a regime of exemption would create a very high arbitrage on both sides and once people got used to it, it would be difficult to get rid of it. He added that e-Wallet was not proposed to be developed by the original vendor but either by NPCI (National Payments Corporation of India) or NSDL (National Securities Depository Limited). He suggested to work on the proposal fore-Wallet and not adopt the exemption route. 12.9. The Hon'ble Minister from Assam stated that the North-Eastern States wanted to continue with the area based exemption scheme but the decision was to adopt the reimbursement mode which was accepted in the larger national interest. He observed that eWallet was likely to take about 8 months to develop and the question was how to address the problem of exporters during the interim period. He emphasised that the need of the hour was to protect the industry and exports. He suggested to go by the recommendations of the Committee regarding payment of GST through Advance Authorisation etc. and to give a time bound deadline for development of e-Wallet within 8-9 months. He stated that without immediate relief, exporters might not be able to survive as the Government gave only 8% interest on delayed refund whereas Banks gave loan at more than 9% interest rate. The Hon'ble Chief Minister of Puducherry stated that there should be no compromise on policy on account of suffering by one sector as this would lead to a total disarray in policy. He suggested to have a mechanism by which the Department of Revenue, the Department of Commerce and the Reserve Bank of India could provide cushion to the exporters to raise resources. He cautioned against tinkering with the basic policy as this would lead to large scale dilution in the GST design. The Hon ble Chief Minister of Goa stated that GST was a consumption based tax and exporters were not liable to be taxed. They were being brought into the system only to avoid revenue leakage, which was a procedural issue. He suggested to accept Option-1 with a time bound implementation of Option-2. 12.10. The Hon'ble Deputy Chief Minister of Delhi observed that provisions of GST law were proposed to be tweaked due to the problems of the IT vendor. He enquired regarding the impact on revenue of 1% tax was levied on merchant exporters. He also enquired whether this proposal was discussed with the exporters. DG, DGEP explained that the issue was discussed with the various export associations and their preference was to have an upfront exemption but once they were explained the GST design, they agreed that 1% tax on supplies to merchant exporters was the best solution. Shri Khalid A. Anwar, Senior Joint Commissioner, Commercial Taxes, West Bengal, stated that the Hon'ble Minister from West Bengal had desired him to convey that exports were in a very bad shape and the Export Promotion Councils had reported that exports had come down drastically. He stated that as e-Wallet would take some time to develop, Option-1 proposing an upfront exemption should be considered. He stated that merchant exporters also enjoyed similar exemption through Form 'H' under VAT and they should not be discriminated against by charging tax at the rate of 1% on supplies made to them. The Hon'ble Deputy Chief Minister of Bihar observed that the officers from the States of Gujarat, Maharashtra, Karnataka, Uttar Pradesh, West Bengal and Tamil Nadu were members of the Export Committee and the recommendations of the Committee were unanimous. He stated that the fundamental question was how to save exports and the proposed exemption was only an interim measure until the scheme of e-Wallet was implemented. He observed that even if it involved some compromise with the GST design, the Council should support Option-1 to help exporters. 12.11. The Hon'ble Minister from Telangana stated that a way must be found to help the exporters. He supported the proposal of the officer from West Bengal to exempt merchant exporters from tax. The Hon'ble Minister from Punjab stated that non-payment of tax by exporters was not an exemption but an entitlement. The Hon'ble Chairperson stated that the exporters were facing problem as they have to block funds upfront and then wait for refund which would be available only after the exports were made. The Hon'ble Minister from Jammu Kashmir stated that more thought could be given on this subject. He stated that one option could be to give 75% refund on the basis of self-assessed return and do the final settlement in a period of three years and that the banks could support this procedure. He stated that Council should not react in a state of panic to the situation of economic downturn for which GST was not the only factor. He emphasised that he did not object to taking corrective action for downturn in exports but the methodology could be different. The Hon'ble Chairperson observed that the Committee had suggested certain interim and some long-term solutions. DG, DGEP stated that the dialogue was already on with NPCI for development of e-Wallet and at this stage, a firm time-line might not be available but it would take at least four months, if not more. The CEA observed that some compromise could tear into the basic structure of GST. He suggested to have a simpler system of say 1% subsidy or to adopt the proposal suggested by the Hon'ble Minister from Jammu Kashmir. 12.12. The Hon'ble Chairperson raised a question whether e-Wallet maintained the integrity of the GST system. The Hon'ble Minister from Karnataka stated that e-Wallet would maintain the integrity of the GST system and he fully supported it. He added that the system would be used only for payment of tax. He stated that in the interim, some measures could be taken to help the exporters meet their working capital requirement. The Hon'ble Minister from Jammu Kashmir suggested to give upfront subsidy to exporters. He observed that the industry in Jammu Kashmir was in crisis due to removal of area based exemption scheme and they would demand its restoration if exemption for exports was permitted. He added that no refund had been given to the industries in Jammu Kashmir for the last three months and till now he had been explaining to them that it was a systemic reform, and now they would again demand upfront exemption. He observed that e-Wallet was virtual currency and the proposed solution was sectoral in nature and so not desirable. He also expressed worry about the technology to be used for e-Wallet after the experience with the current vender. The Deputy Chief Minister of Gujarat desired to know as to how much money was blocked due to pending refunds on exports. The CEO, GSTN stated that this amount would have to be culled out from the GSTR-3B returns. The Secretary stated that GSTN might not have full data because GSTR-1 had been uploaded only till the month of July 2017. 12.13. The Hon'ble Minister from Assam stated that exporters fell into a different category as they were not required to pay GST on consumption based principle. He, therefore, supported the proposal to give them exemption in the interim period till the system of e-Wallet was developed. The Hon'ble Chief Minister of Goa stated that the discussion was only to find interim solution for exporters who were not making domestic supplies. He suggested that they should be given the facility of exemption for short period. He also suggested that tax for supplies to merchant exporters should be kept at 0.1% instead of the proposed 1%. He warned that without these support measures, the exports might collapse. Shri Alok Chaturvedi, Director General of Foreign Trade (DGFT) stated that the size of the problem of funds blockage for the exporters could be gauged from the fact that the revenue foregone for one year from advance authorization, EOU and EPCG was around ₹ 45,000 crore. He stated that ₹ 28,000 crore of duty foregone was due to advance authorization scheme, ₹ 9,000 crore was due to EPCG and ₹ 8,000 was due to EOUs scheme. He emphasised that exporters were facing competition in the international market and they had to compete against exporters from countries like Bangladesh, Vietnam, Cambodia and Philippines. He also reminded that Indian exporters faced problems in relation to infrastructure, lack of flexible labour laws and lack of economies of scale. He stated that the exporters needed support for the next seven to eight months and the system of e-Wallet could be developed by then. 12.14. The Hon'ble Minister from Goa stated that exporters were in a different category and therefore giving exemption to them was not diluting the GST structure. He stated that as per some media reports, ₹ 67,000 crore of working capital of exporters was blocked and they would find it very difficult to survive without support. He observed that the various slabs of tax rate had already created a very negative impact. He observed that it was important to be practical and not diluting the principle of GST could not be a ground to defer decision on this issue. He stated that Option I was the best available solution to get exporters out of trouble. He reiterated that tax for supplies to merchant exporters should only be 0.1 %. The Hon'ble Chief Minister of Goa cautioned that once an exporter lost his market, he would not get it back as the buyer would switch to another supply chain. He recalled that Goa was once the biggest exporter of iron ore but once it lost its market due to certain reasons, it was not able to regain it. He suggested that the old system of exemption should be retained for some time. The Hon'ble Minister from Odisha supported the suggestion of the Hon'ble Chief Minister of Goa. The Hon'ble Minister from Chhattisgarh stated that export was exempt from tax as GST was a consumption based tax. He stated that the Committee had given unanimous recommendation and the Council should accept Option-1 as an interim measure and move to Option-2 later. The Hon'ble Minister from West Bengal stated in his written comments that till e-Wallet was introduced, he favoured the time-tested model of exemption like Section 5(3) of the Central Sales Tax Act for not only merchant exporters, but also for manufacturing exporters and EOUs. He further stated that the concern was whether, even after treating the supplies of domestic suppliers to exporters as deemed exports, they would become eligible for provisional refund under Section 54(6) which is meant for zero rated supplies. In his opinion, no discrimination should be made between 'exports' and 'deemed exports'. 12.15. The Hon'ble Minister from Kerala stated that he supported the proposal for temporary accommodation to exporters. However, there was another important issue of tax on gifts sent by Non-Resident Indians during festivals etc. and this issue also needed to be taken up. The Secretary stated that this was already part of another agenda item [ 13(iii)]. The Hon'ble Chairperson observed that exporters formed a different category who were not to be taxed and there was agreement to move to a system of e-Wallet by a particular date. It needed consideration as to what steps could be taken in the interim period to help the exporters. The Hon'ble Chief Minister of Puducherry reiterated that a scheme could be worked out jointly by the Department of Commerce, the Department of Revenue and the Reserve Bank of India. The Hon'ble Chairperson stated that this would be a long-drawn process and exporters needed to be given quick relief. The Hon'ble Minister from Haryana suggested to accept Option-1 with a sunset clause. The Hon'ble Chief Minister of Goa suggested that Option- 1 could be kept operational till 31 March 2018. The Hon'ble Minister from Andhra Pradesh supported Option 1 at this stage and e-Wallet to be developed at a later date. He also added that the system of GSTR-1, 2 and 3 should be set right at the earliest. The Hon'ble Minister from Karnataka stated that it was important to have an idea as to by when e-Wallet system would be up and running. He expressed an apprehension that if it was too delayed, the exporters would get used to the exemption route and then it would be difficult to remove it. He observed that the Committee had placed two options on the table and he supported the option fore-Wallet. The Secretary stated that ideally, e-Wallet should be with GSTN as it would be a third ledger for making payment of CGST, SGST and IGST. However, due to the difficulties faced by them, they might not be able to implement it. He stated that the GSTN had indicated a time-line of four to six months and the option was to develop e-Wallet in the GSTN system or have a separate system of e-Wallet with linkage to GSTN. He stated that this would take a minimum of six months to develop. The Hon'ble Chairperson stated that e-Wallet could be implemented by 1 April 2018 and till then the old system as proposed in Option-1 could be continued. 12.16. Shri Tuhin Kanta Pandey, Principal Secretary (Finance), Odisha stated that the system of e-Wallet should be legally examined as this system involved creating money to pay tax. The Hon'ble Chairperson stated that this issue could be looked at by officers who were not associated with drafting of the original Law. He stated that a new Committee of officers should review the law and propose changes in the CGST/SGST Acts and the IGST Act taking into account various feedbacks and these proposals could be brought before the Council. The Secretary stated that during the Budget session of the Parliament, changes in the Law could be introduced and for this a new Law Review Committee of officers could be constituted in which the old members of the Law Committee could be called for consultation but decisions should be taken by the new Law Review Committee. He added that the existing Law Committee could continue to look into day-to-day operational issues of the GST law and rules. The Hon'ble Chairperson observed that the Law Committee of officers should also look at the technology issues fore-Wallet. 12.17. The Hon'ble Minister from Jammu Kashmir reiterated that if exemption mechanism was to be kept for exports till March 2018, then exemption scheme for Special Category States should also be continued till March 2018. The Hon'ble Chairperson stated that exporters formed a different category and for them too, exemption would be phased out. The Senior Joint Commissioner (Commercial Taxes), West Bengal reiterated that supplies to merchant exporters should not be subject to a tax of 1%. The Hon'ble Minister from Karnataka raised a question whether the proposed exemption scheme would also apply to export of services. DGFT clarified that the present scheme of advance authorisation, EPCG, etc. applied only to goods. The Secretary suggested that no new dispensation should be created under the GST. The Council agreed to this suggestion. The Secretary suggested that supplies to merchant exporters could be exempt if the goods were moved immediately to the port of shipment or to an export warehouse. The Senior Joint Commissioner (Commercial Taxes), West Bengal stated that in the earlier scheme of Form H under VAT, no tax was paid when goods were sold to merchant exporter but full tax became payable if goods were not eventually exported. He stated that a similar procedure should be continued and there should be no mandatory requirement of directly sending the goods to warehouses for export. The Secretary stated that input tax credit would not be available if full exemption was given for supply to merchant exporter. He suggested that a tax of 0.1% could be levied on supplies to merchant exporters. The Hon'ble Deputy Chief Minister of Delhi supported the proposal to keep the rate of tax on supplies to merchant exporters at the rate of 0.1 %. The Council agreed to this proposal. The Council also agreed to the other recommendations of the Committee on Exports. 13. For agenda item 5 , the Council approved the following: (i) Refund of IGST paid on goods exported during July, 2017 shall begin by 10 October, 2017 and those exported during August, 2017 shall begin by 18 October, 2017. Refund for subsequent months shall be dealt in like manner as for August 2017 till the time GSTR-1 was made available. GSTN shall make available electronically to CBEC, Table 6A of GSTR-1 of exporters containing details of zero rated supplies. These refunds shall be dealt with by Customs Officers. (ii) For Refund of IGST paid on export of services, supplies to SEZs and refund of accumulated input tax credit on export of goods/services and those supplied to SEZs under Bond/LUT, the following timelines were approved: (a) The GSTN and the DG Systems, CBEC shall finalize modalities for CBEC System to receive GSTR-1 and GSTR-3B from the GSTN by 6 October 2017; (b) by 10 October 2017, the GSTN would make available on the website a new utility Form RFD 01A for refund claimant which would contain a request to debit the credit ledgers for lTC refund being claimed; (c) by 30 October 2017, the GSTN would make available facility in a new Form RFD 01B for GST officers to order re-credit of the amount of refund rejected; (d) these refunds would be dealt with by jurisdictional Central/State GST officers. (iii) To grant exemption from IGST, Cess, etc. under Section 6 of the IGST Act, 2017 read with Section 25 of the Customs Act, 1962 to import of goods for exporters availing the schemes of Advance Authorisation/Export Promotion Capital Goods/100% Export Oriented Units up to 31 March 2018 and to continue the existing monitoring schemes for exports. (iv) To notify domestic supplies of goods made to exporters as deemed exports under Section 147 of the CGST/SGST Acts, to allow payment of taxes by suppliers and to allow refund of tax so paid to supplier. An Advance Release Order (ARO) shall be issued in the name of domestic supplier by exporter having AA/EPCG or EOU status. This scheme shall be in place up to 31 March 2018.The existing monitoring mechanism for exports to continue. (v) Supplies of goods to merchant exporters registered with Export Promotion Council / Commodity Boards shall be on payment of tax at the rate of 0.1% and to prevent misuse, adequate safeguards shall be provided. (vi) To make the e-Wallet scheme for exporters (make available to exporter a notional credit in advance on the basis of the past export performance) functional by 1 April 2018. (vii) GST rate on sale-purchase of duty credit scrips shall be reduced from 5% to Nil for the present. (viii) Exporters who obtain registration within 6 months of applying for refunds shall not be denied the benefit of provisional refund under Section 54(6) of the CGST/SGST Acts. (ix) Proposal made in the 21 st GST Council Meeting that exporters who do not furnish Returns for 3 consecutive tax periods preceding the refund application shall be denied the benefit of provisional refund under Section 54( 6) of the CGST/SGST Acts is infructuous and need not be proceeded with. (x) Rate of tax on bunker fuel shall be reduced to 5% for both foreign going vessels and those on coastal run. (xi) To constitute a new Law Review Committee of officers which will propose changes in the CGST/SGST Acts and the IGST Act taking into account various feedbacks and these proposals shall be brought before the Council. The existing members of the Law Committee could be called for consultation but decisions shall be taken by the new Law Committee. The existing Law Committee shall continue to look into day-to-day operational issues of the GST law and rules and also look at the technology issues fore-Wallet. Agenda item 6: Issues for consideration for relief to small taxpayers: 14. The Chairman invited Commissioner (GST Policy), CBEC to make a presentation on this agenda item. The Commissioner (GST Policy), CBEC stated that these issues were discussed during the meeting of the officers held on 5 October 2017 and the changes proposed by them were indicated in red colour in the presentation. The presentation is attached as Annexure 3 . The discussion for each agenda item is recorded below. Agenda Item 6(i): Proposal for increasing the aggregate annual turnover threshold under Composition scheme from ₹ 75 lakh (₹ 50 lakh in Special Category States except Uttarakhand and Jammu Kashmir) to ₹ 1 crore; and not taxing the exempt supplies made by a Composition dealer 15. The Commissioner (GST Policy), CBEC stated that it was proposed to increase the aggregate annual turnover threshold under Composition scheme from the existing ₹ 75 lakh to ₹ 1 crore. He stated that the limit for the Special Category States could also be discussed by the Council. The facility of availing such increased limit could be extended to both the migrated as well as the new tax-payers and would become valid from the first day of the subsequent month in which the option to migrate to the Composition scheme was exercised. He added that the increase in the turnover threshold would make it possible for greater number of taxpayers to come within the Composition fold and avail its facility of easy compliance and that this was extremely important for the MSME sector. He stated that as per the data circulated during the 9th Meeting of the Council (held on 16 January, 2017), there were about 66 lakh and 74 lakh taxpayers having turnover up to ₹ 50 lakh and Rs. one crore respectively and they contributed around 3% to 4% revenue. Accordingly, he stated that by making this change, around 4-5 lakh more taxpayers could avail the benefit of the Composition scheme. He stated that the second proposal under this agenda item was that the exempted turnover of Composition taxpayers should be nil rated to ensure that tax is collected on taxable supplies only. He explained that in the current Composition scheme, if a person is supplying both taxable and exempted supplies, he would need to pay tax on aggregate turnover of both the supplies. He added that this benefit was not proposed to be extended to persons engaged in supply of services (restaurants) and that this benefit would be available to a Composition taxpayer only if he maintained separate accounts for taxable and exempt supplies. He explained that by taxing exempted supplies under Composition scheme, the whole purpose of Composition was getting defeated as large number of traders dealt in relatively large amounts of exempted items (e.g. unbranded wheat, rice, flour etc.) as compared to taxable items. He added that in the Officers meeting held on 5 October 2017, it was felt that exempt turnover should not be excluded as it would be difficult to maintain separate records and it could lead to harassment. 15.1. The Hon'ble Chairperson observed that presently about 15 lakh taxpayers had opted for Composition scheme when the turnover limit for Composition scheme is ₹ 75 lakh per annum and the question was how to encourage more tax payers to opt for this scheme. The Hon'ble Ministers from Jammu Kashmir and Kerala suggested that the annual turnover limit for Composition could be increased to ₹ 15 crore. The Secretary pointed out that the provision of Section 10 of the CGST/SGST Acts dealing with Composition scheme had prescribed annual turnover ceiling of Rs. one crore, and therefore, presently the turnover threshold could not be raised beyond Rs. one crore. The Hon'ble Chairperson stated that the new Law Review Committee could look at recommending a higher turnover threshold for the Composition scheme. 15.2. The Hon'ble Minister from Chhattisgarh stated that after three months of implementation of GST, his discussions with small taxpayers had revealed large scale dissatisfaction with procedures under GST amongst Micro, Small and Medium Enterprises (MSMEs). He stated that MSMEs and cottage industry had suffered setback after introduction of GST and that while they accounted for large scale employment, barely 5% of total revenue came from them. He stated that there was a need for balance between 5% revenue and employment scenario. In this light, he supported the proposal for increasing the threshold turnover for Composition taxpayers from ₹ 75 lakh per annum to Rs. one crore per annum and to also exclude the exempt supplies from the calculation of the turnover of the Composition dealer. The Hon'ble Chief Minister of Goa, the Hon'ble Ministers from Jammu Kashmir, Kerala, Odisha, Punjab, Haryana, Madhya Pradesh, Karnataka and Telangana, and the Senior Joint Commissioner (Commercial Taxes), West Bengal supported the proposal to increase the turnover threshold of Composition taxpayers from ₹ 75 lakh to Rs. one crore per annum. The Hon'ble Minister from Karnataka added that the Composition rate was not a lower tax rate but only a mechanism to ease compliance. He observed that the challenge was how to make the compliance easier for regular taxpayers so as to encourage movement of Composition taxpayers into the fold of regular taxpayers as Composition scheme was basically a distortionary intervention. 15.3. The Hon'ble Chief Minister of Puducherry supported the proposal to increase the annual turnover threshold for Composition from ₹ 75 lakh to Rs. one crore and to exclude the exempted turnover from the taxable turnover. The Hon'ble Minister from Andhra Pradesh supported the proposal to increase the Composition limit to Rs. one crore. The Hon'ble Minister from West Bengal stated in his written comments that Composition threshold should be increased from ₹ 75 lakh to Rs. one crore and the exempted supplies should not be taxed. He stated that the latter could not be done without bringing an amendment to the definition of the term 'turnover in a State' in Section 2(112) as referred to in Section 10(1) of the CGST/SGST Acts, 2017. He suggested to introduce a bill or an ordinance immediately and give this amendment retrospective effect (i.e. from 1 July, 2017). He further suggested that while excluding exempt supplies, only those supplies should be exempted which were exempt from tax and not those supplies, which were non-taxable under the Act. 15.4. The Hon'ble Minister from Karnataka opposed the proposal to exclude the exempted supplies from the Composition turnover threshold and warned that this would lead to arbitrage and exercise of a lot of discretion at the field level. He pointed out that the rate of Composition had been arrived at after taking into account the supply of exempted goods into the total basket, and that if this turnover was proposed to be exempted now, then the rate for Composition taxpayers should also be revisited. He also cautioned that excluding the exempt turnover would fundamentally change the nature of the Composition scheme. 15.5. The Hon'ble Deputy Chief Minister of Gujarat supported the proposal not to tax the exempt supplies made by a Composition taxpayer and added that such taxpayers should not be forced to maintain separate books of accounts. The Hon'ble Deputy Chief Minister of Delhi stated that exclusion of exempt turnover would lead to inspectors visiting taxpayers to verify their books of accounts to ascertain the quantum of exempt supplies. The Hon'ble Minister from Tamil Nadu also expressed an apprehension that taxpayers would find it difficult to segregate their turnover into taxable and exempt categories and that this would lead to Inspector Raj. He suggested that tax for Composition dealers could be reduced to less than one per cent. The Hon'ble Minister from Assam stated that the fear of arbitrage and return of Inspector Raj was exaggerated. He added that it was not proper to always vilify Inspectors as the Government was paying them salary and they also did good work in expanding the taxpayer base and collecting more revenue. He supported the proposal to exclude the value of exempted goods from the total turnover value for the Composition taxpayers. The Hon'ble Minister from Kerala stated that it would have been desirable to extend the limit of Composition turnover to ₹ 1.5 crore if the law so permitted, but in its absence, it would be better to exclude the exempt turnover, so that the limit of Composition turnover de facto became ₹ 1.5 crore. The Hon'ble Minister from Jammu Kashmir expressed his reservation on this proposal as it changed the whole scheme of Composition. He warned that if these proposals were implemented, it could create severe economic problem and would increase the need for compensation. 15.6. The Senior Joint Commissioner (Commercial Taxes), West Bengal, stated that Section 10(1) of the CGST/SGST Acts, 2017 provided that the term aggregate turnover included exempt turnover, and therefore, change in law would be required to exclude the exempt supplies from the value of aggregate turnover of the Composition dealer. He added that it would be very difficult for small taxpayers to maintain two different accounts. The Secretary stated that exempt supplies would be counted towards aggregate turnover but tax would only be levied on the taxable turnover and the exempted turnover would not be subject to tax. The Hon'ble Minister from Assam stated that Composition was a voluntary scheme and if a taxpayer feared an Inspector Raj, he might not opt for Composition scheme. The Hon'ble Minister from Jammu Kashmir stated that if the Act had to be changed regarding Composition scheme, then it would be desirable to increase the annual turnover threshold to ₹ 1.5 crore rather than to create an exemption for the exempt turnover. 15.7. As regards the turnover limit for Composition taxpayers in the Special Category States, the Hon'ble Ministers from Uttarakhand and Jammu Kashmir stated that they would like to increase the annual turnover threshold for Composition scheme in their States to Rs. one crore. Shri R. Selvam, Commissioner (Excise and Taxation), Himachal Pradesh stated that his State would increase the turnover threshold for Composition taxpayers from ₹ 50 lakh to ₹ 75 lakh. He also stated that his State would like to increase the turnover threshold for taking registration from ₹ 10 lakh to ₹ 20 lakh. The Hon'ble Minister from Uttarakhand expressed that his State would also prefer to increase the turnover threshold for registration from ₹ 10 lakh to ₹ 20 lakh. The Hon'ble Chairperson stated that this would not be possible at this stage because the turnover threshold for registration for the Special Category States was provided in the Law. The Hon'ble Deputy Chief Minister of Manipur expressed to increase the turnover threshold for Composition taxpayers from ₹ 50 lakh to ₹ 75 lakh in his State. Shri Y. Mhathung Murry, Commissioner of Taxes, Nagaland, Shri Hrisheekesh Modak, Commissioner (Commercial Taxes), Manipur, Ms. Dipa Basnet, Secretary (Commercial Taxes), Sikkim and the Principal Secretary (Finance), Tripura also expressed to increase the turnover threshold for Composition taxpayers from ₹ 50 lakh to ₹ 75 lakh in their respective States. The Hon'ble Chairperson suggested that the Council may agree with the proposal to increase the aggregate annual turnover threshold for eligibility for Composition scheme from ₹ 75 lakh to Rs. one crore for normal States and for the two Special Category States, namely Jammu Kashmir and Uttarakhand. The Council agreed to the suggestion. He further suggested to increase the aggregate annual turnover threshold under Composition scheme for Special Category States other than Jammu Kashmir and Uttarakhand from ₹ 50 lakh to ₹ 75 lakh. He also suggested that the issue regarding excluding the turnover of exempted goods from the total turnover threshold for levying tax under the Composition Scheme could be examined by a Group of Ministers to be constituted by him and they could submit their recommendation in two weeks. The Council agreed to these suggestions. 15.8. The Hon'ble Deputy Chief Minister of Delhi stated that increasing the turnover limit from ₹ 75 lakh to Rs. one crore would not be very beneficial as it would cover only a small number of taxpayers. He stated that he had flagged an issue regarding Composition in the 16th Meeting of the Council (held on 11 June 2017) and he would like to reiterate the same. He pointed out that in his State, out of 4.5 lakh registered taxpayers, only 18,000 were in the Composition scheme. He stated that the coverage of taxpayers under the Composition scheme was very limited as its benefit was available only to those who made intra-State supplies. He stated that there was large scale movement of goods between Gurugram and Delhi even by small dealers and the number of taxpayers making supplies within the State only was very limited. He proposed that Composition scheme should also be allowed for taxpayers making inter-State supplies. The Hon'ble Deputy Chief Minister of Bihar supported this proposal and observed that due to such limitations, only 15 lakh taxpayers had opted for this scheme. He stated that it was rather odd that under the old VAT Composition scheme, even inward inter- State purchases were not allowed and that though this was allowed under the GST Composition scheme, the outward inter-State supplies should also be allowed to make the Composition scheme more popular. He also suggested that no upward limit of turnover should be provided for Composition in the GST Law to give flexibility to the Council to increase the Composition limit as per the requirement. The Hon'ble Minister from Jharkhand supported the proposal to allow Composition scheme for taxpayers making inter-State supplies. 15.9. The Hon'ble Ministers from Jammu Kashmir and Andhra Pradesh did not support the proposal to allow Composition scheme to taxpayers making inter-State outward supplies. The CCT, Manipur did not support the proposal to allow the benefit of Composition scheme to taxpayers making outward inter-State supplies and stated that this would go against the interest of small States. The Principal Secretary (Finance), Tripura also supported this view. The Hon'ble Minister from Mizoram pointed out that the present agenda was only in respect of increasing the turnover threshold for Composition scheme and not to relax the provision of Section 10(2)(c) of the CGST/SGST Acts, 2017, which prohibited Composition taxpayers to make inter-State outward supplies. The Hon'ble Minister from Assam stated that the North Eastern States would lose revenue if benefit of Composition scheme was extended to inter-State supply of goods as these States mostly got goods from the neighbouring bigger States like West Bengal and there was hardly any reverse supply from the North-Eastern States to the bigger neighbouring States. He stated that if such a provision was introduced in the law, there should be a provision for its review after five years once the scheme of compensation to the States for loss of revenue came to an end. 15.10. Shri Ritvik Pandey, CCT, Karnataka stated that for supplies made by a normal tax payer, under destination principle, the tax travels to the consuming State when input tax credit is utilised by the seller. For Composition tax payers, as tax was not on supplies but on turnover, no input tax credit was available and therefore taxes paid by Composition taxpayers would get trapped in the origin State. The Hon'ble Chairperson observed that the destination State would also gain tax for supplies made by Composition taxpayers located there and therefore the gains and losses could average out in the long run. He further observed that small taxpayers in any case paid very small amount of tax. The Hon'ble Chairperson suggested that the issue whether Composition scheme can be extended to taxpayers making inter-State outward supplies of goods could also be examined by the proposed Group of Ministers (GoM). The Council agreed to this suggestion. 15.11. Shri V.K. Garg, Advisor (Finance), Government of Punjab stated that the Council could also use the power of exemption vested under Section 11I of the CGST/SGST Acts to exempt supplies on the basis of certain conditions without calling it a Composition scheme. He stated that the Council could use this provision to expand the eligibility of Composition scheme for inter-State supplies and to also permit supply of services up to a value of say Rs. one lakh per annum to a Composition taxpayer. The Senior Joint Commissioner (Commercial Taxes), West Bengal, stated that to allow Composition taxpayers to make inter-State outward supplies, Section 10 of the CGST/SGST Act, 2017 would need to be amended rather than to use some other provision of law. He further stated that the aggregate turnover included exempt supplies and if this was not to be subject to tax under the Composition scheme, an amendment to Section 10 of the CGST/SGST Acts, 2017 would be required. He added that the demand of small taxpayers was only to keep the rate of tax low. The Hon'ble Chairperson observed that Section 10 of the CGST/SGST Acts, 2017 contained a prohibition regarding inter-State supplies by Composition taxpayers and it was debatable whether this prohibition could be part of exemption under Section 11 of the CGST/SGST Acts, 2017, as generally a specific provision of law could not be over-ruled by a general provision. The Advisor (Finance), Government of Punjab stated that a rate of tax could be specified subject to certain conditions and this could be worded as a decision of the Council. 15.12. The Hon'ble Minister from Punjab suggested that the exemption Iimit for services for the Composition dealers should be ₹ 5 lakh. He also suggested to collect tax on maximum retail price (MRP) in some sectors like telecommunication where taxing supply of vouchers at each stage was bringing an additional 25 to 30 lakh people with small turnover in the tax net. The Advisor (Finance), Government of Punjab pointed out that the definition of aggregate turnover in Section 2(6) of the CGST/SGST Acts included all taxable supplies but excluded CGST, SGST, etc. He stated that this exclusion did not cover the earlier tax like VAT and as a result, the aggregate turnover of Composition taxpayers in the first year would be inclusive of VAT and as a result, their de facto turnover for benefit of Composition scheme in the first year would continue to be ₹ 75 lakh (even when it is increased to Rs. one crore) in the first year. He suggested to clarify this issue. 15.13. The Hon'ble Deputy Chief Minister of Bihar stated that entities in the MSME (Micro Small and Medium Enterprises) sector availing the Composition scheme also made supplies to registered entities and there should be a provision that the registered buyers should be able to take input tax credit of the purchases made from Composition taxpayers. He suggested that purchases from Composition taxpayers in MSME sector should be allowed 2% input tax credit and they should have a simplified one-page return like the Sara/ Form of Income Tax . He suggested that a Committee could be formed to simplify the forms and to seek minimal data. He also suggested that the exemption limit for purchases under reverse charge mechanism should be increased from ₹ 5,000 to ₹ 15,000. The Hon'ble Deputy Chief Minister of Gujarat supported the proposal to allow input tax credit on purchases from Composition taxpayers and observed that in its absence, the registered tax payers were not buying goods from the small-scale sector. The Hon'ble Minister from Chhattisgarh also supported this proposal and observed that big industries purchasing from Composition dealers could not take input tax credit which was a disadvantage for the Composition taxpayers. He suggested that in the alternative, no tax might be charged on inputs bought by large tax payers from the Composition taxpayers. The Hon'ble Deputy Chief Minister of Delhi suggested that input tax credit should be allowed on purchases from Composition taxpayers. The Hon'ble Chairperson suggested that the issue whether input tax credit could be made available to registered persons receiving inward supplies from Composition taxpayers could also be examined by the proposed Group of Ministers (GoM). The Council agreed to this suggestion. 15.14. The Hon'ble Minister from Kerala stated that no free software had been made available to small taxpayers as yet. The Hon'ble Minister from Assam suggested that free software should be available on 'cloud' to enable easy download by the taxpayers. The CEO, GSTN informed that NTC in Bengaluru had developed a free accounting software and given a demo for the same and that he had requested NIC to make it available countrywide. 15.15. The Hon'ble Deputy Chief Minister of Bihar stated that consumers were still not able to understand that under GST, hitherto hidden Central Excise duty had become visible. He suggested that a provision should be introduced that suppliers should quote price as MRP and CGST and SGST should be mentioned in the invoice after doing the back calculation. He observed that a large part of opposition to GST would be addressed by this measure. The Hon'ble Minister from Assam supported this proposal and stated that people had developed a negative impression of GST because of mention of separate rates for CGST and SGST. The Hon'ble Minister from Jammu Kashmir stated that the requirement of declaring MRP and the GST were two different systems and it would not be possible to reconcile GST with MRP. He stated that MRP belonged to the pre-GST regime and that the margin of distributors etc. was taken into account while fixing the MRP. He observed that GST applied at every level of the retail chain and the perception problem was because a tax of, say 18%, was being charged on MRP. He suggested that the system of MRP should be abolished in the GST regime. He added that another concern of the taxpayers was the fear of retrospective inquiry regarding their turnover in the pre-GST period and suggested that the Council should clarify that retrospective tax inquiry relating to returns filed during -the pre-GST period shall not be initiated by the Central or State tax administration merely on the basis of returns filed during the GST period. The Hon'ble Chairperson supported this suggestion. The Council agreed to this suggestion. 15.16. The Hon'ble Chief Minister of Goa raised another issue regarding HSN Code. He stated that HSN Code was very confusing for traders due to multiple rate slabs and suggested that the traders should be exempted from the requirement of declaring HSN Code and that this should be declared only by manufacturers. 15.17. The Hon'ble Deputy Chief Minister of Gujarat stated that earlier, there was no tax on textiles and after introduction of GST, goods worth several crore of rupees were lying in warehouses and transporters were demanding double the charge for transporting such goods. He stated that the Council should explore some solution to this problem. 15.18. The Hon'ble Minister from Kerala stated that tax rate of 18% on restaurants had brought a lot of disrepute to GST and it caused additional financial burden to the ordinary people. He stated that 28% rate of tax on 5-star restaurants was causing large scale shift of business to Sri Lanka where rate of tax was about 16%. He recalled that the Hon'ble Minister from Goa had also been consistently raising the issue of high rate of tax on restaurants. He suggested that there should be a differential rate of tax for air conditioned and non-airconditioned restaurants and this would send a message that the Council was responding to the concerns of people. The Hon'ble Minister from Goa supported this proposal and observed that people bad mouthed GST whenever they came out of a restaurant. He suggested that rate of tax on restaurants should be reduced to I 2% as everyone went to restaurants. He added that Goa was a tourism State where the number of chartered flights had gone up by about 27% but now tourists were shifting to Dubai, Sri Lanka, Bali etc. The Hon'ble Chairperson observed that there was an increase of 30% in the export of services sector and hoteliers were adopting various mechanisms to pay tax in the lower slab of 12% by keeping the room tariff at less than ₹ 7500/- per night. One such method was to charge for breakfast separately from the room rent. The Hon'ble Minister from Goa reiterated that rate of tax on restaurants should be reduced. 15.19. The Hon'ble Minister from Karnataka stated that the provision of splitting the tax rate for air conditioned and non-air-conditioned parts of the restaurant was a legacy of service tax regime and should be discontinued. The Hon'ble Chairperson stated that data of tax on restaurants could be evaluated before having a relook at the rate of tax on restaurants. The Hon'ble Minister from Karnataka stated that perception about GST was important and for a restaurant having air conditioned and non-air-conditioned portion, tax should be charged at the rate of 18% if the bill was raised from the air-conditioned part of the restaurant and 12% if the bill was raised from the non-air-conditioned part of the restaurant. He stated that this change would generate a lot of good will for GST amongst the consumers. The Hon'ble Minister from Goa stated that this meeting should send a message that the Council cared for the common people. The Hon'ble Ministers from Tamil Nadu and Odisha supported the proposal made by the Hon'ble Ministers from Kerala and Goa. The Hon'ble Chairperson suggested that the proposed Group of Ministers tasked to look into the Composition issue~ could also examine the rate of tax on restaurants. He stated that a uniform rate of tax of 12% with input tax credit could cause revenue loss because aerated drinks attracted tax at the rate of 43% and this could lead to greater compensation requirement for the States. The Hon'ble Minister from Goa stated that input tax credit could be denied to the restaurant but the rate of tax should be kept at 12% to give due deference to public perception. The Hon'ble Chairperson stated that revenue was as important as public perception as the government had to fulfil several obligations including payment of salaries. The Hon'ble Minister from Kerala stated that a person going for a cup of tea in a restaurant also had to pay tax at the rate of 18% which created a very bad image for GST. The Hon'ble Deputy Chief Minister of Delhi stated that as the annual turnover for Composition had gone up to ₹ 1 crore, its implication on restaurants could be examined first. The Hon'ble Minister from Kerala stated that the revenue earned from restaurant was not significant and new registrations for restaurants were minimal. After further discussion, the Council agreed that the proposed Group of Ministers would also examine the tax structure of different categories of Restaurants, with a view to their possible rationalisation/reduction. Agenda item 6(ii): Proposal for quarterly filing of returns along with quarterly payment of taxes by taxpayers having annual turnover up to ₹ 1.5 crore 16. The Commissioner (GST Policy), CBEC stated that it was proposed to introduce quarterly filing of returns (GSTR- 1, 2 3) along with quarterly payment of taxes for taxpayers having annual turnover of up to ₹ 1.5 crore in the previous year. He added that taxpayers having annual turnover of more than ₹ 1.5 crore would continue to file monthly returns (GSTR- 1, 2 3) and pay monthly tax. He stated that GIC could be authorized to approve the changes in the CGST/SGST Rules, 2017 required to implement this proposal as may be recommended by the Law Committee. He stated that this step would help provide relief to a large number of taxpayers (around 85% contributing not more than 6% of the total revenue) from the onerous responsibility of filing monthly returns and would also substantially reduce the stress on the IT system. 16.1. The Commissioner (GST Policy), CBEC informed that this proposal was discussed in the meeting of the Officers on 5 October 2017 and several modifications were suggested to this proposal. The suggested changes were: (i) Option may be given to small taxpayers to file monthly return; (ii) lTC on purchases from such taxpayers may be permitted monthly; (iii) GSTR-3B may continue to be filed by all taxpayers for the month of December, 2017 as announced earlier; (iv) Cycle for July, 2017 returns may be completed by all taxpayers (including those taxpayers having an annual turnover of up to ₹ 1.5 crore in the previous year) as announced earlier; (v) Dates for August and September, 2017 Return filing may be announced after seeing experience from July cycle; (vi) Quarterly returns for small taxpayers may start from quarter starting October, 2017; (vii) Last date for filing of GSTR-4 for the first quarter may be 15 November, 2017; (viii) Last date for filing of GSTR-6 for July, August and September, 2017 may also be 15 November, 2017. He stated that this would help GSTN and all other partners to make necessary changes in software. He added that GSTN had informed that FORM GSTR-4 and GSTR-6 would be available by 03 November, 2017 and 23 October, 2017 respectively. 16.2. The Hon'ble Minister from Chhattisgarh supported this proposal and suggested to further enhance the value of turnover of taxpayers eligible to file quarterly return. The Hon'ble Deputy Chief Minister of Delhi supported the proposal of quarterly return for small taxpayers. However, he observed that as these taxpayers were also supplying to each other, this provision could lead to complication and suggested that quarterly return should be introduced for all taxpayers while tax should be paid monthly. The Secretary stated that the GST design was such that the tax could not be paid without filing return. The Hon'ble Minister from Uttarakhand supported the proposal of quarterly return filing for all taxpayers. The Hon'ble Chief Minister of Goa also suggested that all returns should be filed on quarterly basis and payment of tax should be done on monthly basis. The Secretary stated that the proposal to have quarterly return for all taxpayers was discussed during the meeting of the Officers on 5 October 2017 but several complications were identified. For instance, this would require continuance of GSTR-3B on monthly basis and would also require tallying the figures in the returns filed under GSTR-3B and GSTR-3 and demanding tax on any shortfall between the two. He informed that all this would be a big exercise. He informed that due to these complications, the experience of States was that no interest could be recovered under the VAT regime for short payment of tax. The Commissioner (GST Policy), CBEC stated that if return was made quarterly for all taxpayers, then IGST settlement would also have to be done only on quarterly basis. The CCT, Karnataka stated that the smaller taxpayers with annual turnover below ₹ 1.5 crore accounted for only 6%-7% of tax collection and hence, their input tax credit contribution would also be around 6%-7%. Input tax credit matching for such taxpayers could be postponed to quarterly basis. He added that it would not be advisable to postpone matching of input tax credit for big taxpayers from monthly to quarterly cycle. The Hon'ble Ministers from Kerala, Punjab, Haryana, Karnataka, Andhra Pradesh and Odisha supported the proposal to file quarterly return for taxpayers having annual turnover up to ₹ 1.5 crore. The Hon'ble Deputy Chief Minister of Bihar stated that during the VAT regime, in his State, return was filed quarterly but tax was paid on monthly basis. He suggested that taxpayers with turnover of up to ₹ 5 crore should file quarterly return with monthly payment of tax and taxpayers with turnover above ₹ 5 crore should file monthly return. The Hon'ble Chairperson observed that, as stated by the Hon'ble Minister from Jammu Kashmir, it would not be advisable to make too many categories of taxpayers for compliance. 16.3. The Hon'ble Chief Minister of Puducherry stated that the small taxpayers were finding the return filing to be highly cumbersome and they were forced to employ a person permanently to submit return. He supported the proposal of filing quarterly return by small taxpayers but suggested that payment of tax should be done on monthly basis so that the small taxpayer did not keep the tax collected from the buyer with himself for three months. The Hon'ble Minister from Telangana supported the proposal. The Hon'ble Minister from Madhya Pradesh supported the proposal of fi ling quarterly return for taxpayers with turnover up to ₹ 1.5 crore per annum and suggested that this could be implemented from 1 October, 2017. The Senior Joint Commissioner (Commercial Taxes), West Bengal supported the proposal of filing quarterly return for taxpayers with turnover up to Rs.l.5 crore per annum by using the enabling provision under Section 148 of the CGST/SGST Acts, 2017. 16.4. The Hon'ble Deputy Chief Minister of Delhi stated that this proposal would make the working of input tax credit more complex as big taxpayers would not be able to take credit of the taxes paid on purchases from small taxpayers. The Secretary explained that under the Law, credit could be taken by the big taxpayers upon their own declaration and the matching could be done subsequently when the small taxpayer filed his quarterly return. The Hon'ble Minister from Kerala supported the proposal of quarterly return and quarterly tax payment for taxpayers with turnover up to ₹ 1.5 crore. He cautioned that quarterly return should not be introduced for bigger taxpayers as it would then lead to breakdown of the self-policing mechanism provided for under GST. The Secretary suggested that the taxpayers with annual turnover below ₹ 1.5 crore may file GSTR-3B only till September, 2017 instead of till December, 2017 as proposed during the officers meeting held on 5 October, 2017 and from October, 2017, they could switch to quarterly filing of Returns. 16.5. The Hon'ble Chairperson observed that most of the States supported the proposal of filing quarterly Returns and quarterly payment of tax by taxpayers having annual turnover up to ₹ 1.5 crore and filing monthly Returns and monthly payment of tax for taxpayers having annual turnover above ₹ 1.5 crore. He suggested that the Council may approve the same. The Council approved this proposal. The Council also approved the proposals at paragraph 16.1 with the modification that for small taxpayers with annual turnover of Jess than ₹ 1.5 crore, a view regarding GSTR 3B filing for months beyond September, 2017 could be taken after evaluating the experience of filing return cycle of GSTR 1, 2 and 3 for the month of July, 2017 (likely to be completed by 10 November, 2017). The CEO, GSTN, stated that this decision would require changes in software as different categories of taxpayers would file returns in different cycles and the big taxpayers would always need to add their purchases from small taxpayers (with annual turnover below ₹ 1.5 crore) in their GSTR-2. He stated that the impact of this change on the other parts of the software would require a thorough review and the changes in software would take between 8 to 1 0 weeks to implement. The Secretary observed that the changes might not be major and only change of dates were to be made in the software. The Chairman, GSTN, suggested that staggered dates for different categories of taxpayers should be prescribed for filing ofGSTR-1, GSTR-2 and GSTR-3. The Secretary stated that the Law Committee could examine this suggestion. The Council agreed to this suggestion. Agenda item 6(iii): Proposal for suspension of application of provisions of sub-section (4) of section 9 till 31 March, 2018 17. The Commissioner (GST Policy), CBEC stated that this agenda item proposed suspension of application of provisions of sub-section ( 4) of Section 9 till 31 March, 2018. He added that in the meeting of the officers held on 5 October 2017, it was felt that this would also be required for section 5(4) of the IGST Act. He explained that the provision had virtually eliminated the exemption limit provided to the small taxpayers and increased compliance for larger taxpayers. He added that establishments making small quantity of taxable supplies but substantial quantity of exempt supplies (e.g. educational and religious institutions) were adversely affected. He stated that the provision of exempting purchases up to ₹ 5,000 per day from the purview of this Section was also proving to be difficult to implement as many entities had several business locations in one State. He also explained that the Union Law Ministry had suggested to prescribe an end date for suspension. This provision brought huge compliance burden without commensurate benefits. He stated that the proposed suspension of this provision would give trade and industry time to acclimatize itself with the GST system and allow its compliance matrix to get stabilized. 17.1. The Hon'ble Deputy Chief Minister of Delhi suggested that Section 9(4) of the CGST/SGST Act should be repealed altogether. The Hon'ble Minister from Jammu Kashmir stated that while drafting the GST Law, some provisions were kept in the current shape on the consideration that any possibility of leakage of revenue could be addressed through reverse charge mechanism under Section 9(4). He supported the proposal to suspend this provision up to March, 2018 but not to repeal it. The Hon'ble Deputy Chief Minister of Bihar stated that there was a strong opposition to this provision in his State and it should be suspended for a year or two till GST stabilised. The Hon'ble Chairperson stated that the provision of reverse charge mechanism would check cash transactions. The Hon'ble Chief Minister of Goa supported the proposal to repeal the provision under Section 9(4) of the CGST/SGST Acts, 2017 and observed that easier ways should be found to check cash transactions. He suggested that one alternative mechanism could be to make a voluntary Composition scheme for micro sector with an annual filing of return and payment of 0.1% tax on their turnover. He added that such units should remain exempt from the provisions of Section 9( 4) of the CGST/SGST Act. He suggested that the provision of reverse charge mechanism should be suspended till 31 March 2018 and alternate mechanisms could be considered during this period. The Hon'ble Minister from Madhya Pradesh suggested not to implement the reverse charge mechanism. The Hon'ble Minister from Kerala did not support the proposal to repeal the provisions of Section 9(4) of the CGST/SGST Acts, 2017 and observed that in its absence, GST would effectively become VAT on the total value of transaction. He supported the proposal to suspend this provision as a temporary measure. The Hon'ble Minister from Telangana also supported a temporary suspension of reverse charge mechanism. 17 .2. The Advisor (Finance), Government of Punjab, stated that reverse charge mechanism had certainty of levy for goods but its applicability was uncertain in many cases in the services sector. He gave an example of an unregistered person providing free software to a registered recipient on the condition that the recipient would not share it with anyone else. This amounted to agreeing to not doing something which was also a supply of service by the unregistered person to the registered person making the latter liable to tax under reverse charge mechanism. He stated that because of such uncertainties, large taxpayers were shy of making purchases from smaller taxpayers. The Senior Joint Commissioner (Commercial Taxes), West Bengal recalled that originally, the reverse charge mechanism under Section 9(4) of the CGST/SGST Acts, 2017 was meant only for Composition taxpayers buying from unregistered persons but the Council took a considered decision to apply it to all taxable persons. He pointed out that when small taxpayers raised objection, daily purchases up to ₹ 5,000 from one or more unregistered persons by a registered person had been exempted from this provision. He suggested to raise this limit to ₹ 10,000 to provide more cushion to the small and medium enterprises instead of removing the provision of reverse charge mechanism. The Hon'ble Minister from Andhra Pradesh supported this proposal. 17.3. The Hon'ble Ministers from Haryana and Assam supported the proposal to suspend reverse charge mechanism till 31 March, 2018. The Hon'ble Minister from Haryana added that the basic purpose of this provision was to expand the tax base and the original design of GST should be maintained. The Commissioner (GST Policy), CBEC stated that this proposal also applied to suspending the application of reverse charge on Composition taxpayers for purchases from unregistered persons. 17.4. The Hon'ble Chairperson suggested that keeping in view the discussions, the provision of reverse charge mechanism under Section 9(4) of the CGST/SGST Acts, 2017 and Section 5(4) of the IGST Act, 2017 could be suspended till 31 March, 2018 for all categories of registered persons including Composition taxpayers. In the meantime, the scheme could be reviewed by the new Law Review Committee constituted to review the changes required in the law. The Council agreed to this suggestion. Agenda item 6(iv): Proposal for deciding the date for the operationalization of provisions of nationwide e-Way bill 18. The Commissioner (GST Policy), CBEC stated that the Council may decide the date of operationalization of provisions of nationwide e-Way bill. He informed that in the meeting of the Officers held on 5 October 2017, GSTN was requested to inform about the dates from which software would be made available. He stated that the taxpayers were already facing challenges in complying with the existing compliances and overloading them with this measure might only increase their dissatisfaction with the system. He added that the software for e-Way bill was likely to take at least one more month to be ready and then it was to be tested. 18.1. The Hon'ble Minister from Chhattisgarh stated that e-Way bill was a barrier to trade and it should be dispensed with. The Hon'ble Chief Minister of Goa also suggested not to have an e-Way bill system as this could lead to different types of problems and would become like check posts. The Hon'ble Minister from Kerala stated that e-Way bill system was very important and delay in its implementation was very unfortunate. He stated that as software had already been developed by NIC in Karnataka and its implementation was held up due to procurement of hardware, those States could start implementation that already had the requisite hardware. The Hon'ble Chief Minister of Puducherry stated that e-Way bill should be implemented at the earliest possible. The Commissioner (Commercial Taxes), Manipur also stated that the e-Way bill should be implemented at an early date. The Hon'ble Minister from Madhya Pradesh stated that e-Way bill should be implemented after the software was developed. The Hon'ble Minister from Punjab suggested that the e-Way bill should be implemented from 1 April, 2018 on goods which are prone to evasion. The Senior Joint Commissioner (Commercial Taxes), West Bengal, stated that e-Way bill system should not be introduced until the existing glitches in the System relating to registration, return and payment were successfully addressed. The Hon'ble Minister from Odisha stated that e-Way bill system should be studied properly before its implementation. The Hon'ble Minister from Haryana stated that e-Way bill system should be introduced as soon as possible and that his State was suffering tax evasion in its absence. 18.2. The Hon'ble Minister from Karnataka stated that in their experience, e-Way bill system reduced harassment. He observed that it was a very simple procedure where supplier of goods requiring e-Way bill has to register, fill up 6 or 7 mandatory fields and the vehicle number, and generate an e-Way permit. On being stopped, the transporter only needed to show e-Way permit which could also be carried on a mobile phone. He stated that as per the experience in his State, only 2% of e-Way permits were checked and physical examination of goods was only about 0.2% while rest of the goods moved without any interference from the tax administration. He observed that e-Way bill system would improve the climate of compliance without extra exertion by the tax administration and that the system would be further streamlined after installation of RFID (Radio Frequency Identification). He stated that this simple mechanism would encourage the taxpayer to comply with the law and this would also help to expand the tax base. The Hon'ble Deputy Chief Minister of Gujarat stated that the e-Way bill system was in vogue during the VAT regime also and that while taxpayers should be extended easier compliance, revenue should also be protected. He added that if manufacturing States lost revenue, other States would also lose revenue. He emphasised that e-Way bill system should be introduced at the earliest. 18.3. The Hon'ble Minister from Assam stated that a timeline should be indicated by when the e-Way bill system would be ready. He observed that e-Way bill system would be a good instrument to check evasion which was going on in large scale today. The Hon'ble Minister from Andhra Pradesh stated that national e-Way bill system should be introduced at an early date. The Hon'ble Deputy Chief Minister of Bihar stated that presently, in his State, e-Way bill system was required for intra-State movement of goods of value more than ₹ 2 lakh and inter-State movement of goods of value more than ₹ 50,000. He stated that a national e-Way bill system should be implemented quickly. The CEO, GSTN stated that the hardware for the e-Way bill system was expected by the end of October, 2017 and the earliest that they could implement e-Way bill system was from 1 December, 2017. He suggested to introduce the e-Way bill system from 1 January, 2018 after a month of beta testing. The Hon'ble Minister from Karnataka suggested to roll out e-Way bill system from one State, and then scale it up to 4-5 States by 1 November, 2017. 18.4. The Hon'ble Chairperson suggested that e-Way bill system could be rolled out from 1 January, 2018 in a staggered manner in State after State and could be implemented across the country from 1 April, 2018. The Council agreed to this suggestion. 19. For agenda item 6, the Council took the following decisions: (i) To increase the aggregate annual turnover threshold for eligibility under the Composition scheme from ₹ 75 lakh to Rs. one crore for normal States and for two Special Category States, namely Jammu Kashmir and Uttarakhand; (ii) To increase the aggregate annual turnover threshold for eligibility under the Composition scheme from ₹ 50 lakh to ₹ 75 1akh for Special Category States other than Jammu Kashmir and Uttarakhand; (iii) A Group of Ministers to be constituted by the Hon'ble Chairperson to examine the following issues and submit its recommendations in two weeks: (a) whether to exclude the turnover of exempted goods from the total turnover threshold for levying tax under the Composition Schemes; (b) whether Composition scheme can be extended to taxpayers making inter-State outward supplies of goods; (c) whether input tax credit can be made available to registered persons receiving inward supplies from Composition taxpayers; (d) to examine the tax structure of different categories of Restaurants, with a view to their possible rationalisation/reduction; (iv) Retrospective tax inquiry relating to returns filed during the pre-GST period shall not be initiated by the Central or State tax administration merely on the basis of returns filed during the GST period; (v) Taxpayers having annual turnover of up to ₹ 1.5 crore in the previous year to file quarterly Returns and make quarterly payment of tax and taxpayers having annual turnover above ₹ 1.5 crore to file monthly returns and make monthly payment of tax as well as the following: (a) Option to be given to small taxpayers to file monthly return; (b) ITC on purchases from such taxpayers to be permitted monthly; (c) For supplies up to the month of December 2017, GSTR-3B to be continued to be filed by taxpayers with annual turnover above ₹ 1.5 crore as announced earlier. For small taxpayers with annual turnover below ₹ 1.5 crore, a view regarding filing of GSTR-3B for months beyond September, 2017 to be taken after evaluating the experience of filing of return cycle of GSTR-1, GSTR-2 and GSTR-3 for the month of July, 2017 (likely to be completed by 10 November, 2017); (d) Cycle for July, 2017 returns to be completed by all taxpayers as announced earlier; (e) Dates for August and September, 2017 return filing to be announced after seeing experience from July cycle; (f) Quarterly returns for small taxpayers to start from quarter starting October 2017; (g) Last date for filing of GSTR-4 (for compounding taxpayers) for the first quarter shall be 15 November, 2017; (h) Last date for filing of GSTR-6 (for Input Service Distributors) for July, August and September, 2017 shall also be 15 November, 2017; (vi) The existing Law Committee to examine the possibility of prescribing staggered dates for filing GSTR-1 , GSTR-2 and GSTR-3 for different categories of taxpayers; (vii) To suspend the application of reverse charge mechanism under Section 9(4) of the CGST/SGST Acts, 2017 and Section 5(4) of the IGST Act, 2017 till 31 March, 2018 for all categories of registered persons including Composition taxpayers and during this period, the scheme shall be reviewed by the new Law Review Committee constituted to review the changes required in the Jaw; (viii) To roll out e-Way bill system from 1 January, 2018 in a staggered manner in State after State and to implement it across the country from 1 April, 2018; (ix) To make similar changes in SGST Act and UTGST Act, wherever required. Agenda item 7: Issues recommended by the Fitment Committee for consideration of the GST Council Agenda item 7(i): GST Rate in respect of government works contract services having high labour content 20. Introducing this agenda item, Shri Amitabh Kumar, Joint Secretary (TRU-ll), CBEC, stated that some States had requested to levy tax at the rate of 5% on those works contracts which had predominantly labour component and the material component was less than 25%. He stated that the details of various kinds of works provided by the Government of Telangana were examined and it showed that there were broadly eight categories of works contract services having varying content of labour and materials. While in the category of Irrigation and CAD (Command Area Development) i.e. canal works, the effective GST rate seemed to have gone down vis-a-vis the pre-GST rate, the effective GST rate for another category of Irrigation and CAD (Earth Works) had gone up by about 11% (Component of earth work in this work contract as reported by Telangana is 95%). In all other categories, namely, Irrigation and CAD (Electro mechanical Works, Dams and Barrages, Drinking Water Supply Scheme etc.), the incidence in the GST regime was less than the cumulative incidence of headline and embedded taxes in pre-GST regime. He further informed that for other categories of works contract, for instance, irrigation and CAD (dams and barrages), Drinking Water Supply Scheme/ Mission etc., the effective GST rate appeared to be less than the pre- GST rate and that for the following category of works, 12% GST rate could lead to a situation of giving refunds: (a) Roads and Buildings; (b) Road Renewals; (c) Bridge Works. He further informed that a communication had been received from the State of Tamil Nadu stating that works contracts which involved material component less than 25% of the contract value, for instance, digging of canals, deepening of ponds/lakes/other lake bodies, the rate may be 5%, provided the work is executed by using own labour but if the labour is supplied by the manpower supplier, then the GST rate for contracts involving material component less than 25%, should be 12%. He stated that it was proposed that the rate of tax in case of works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to the Central Government, the State Governments, local authority or a governmental authority may be reduced to 5%. He added that if the agenda note for extending the reduced rate on specified works contract services to Central Government, State Government, local authority or Governmental authority to a Government Entity [agenda item 7(ii)] was approved, reduced rate on works contract service covered by this proposal would also be available to Government Entity. 20.1. Initiating the discussion, the Hon'ble Minister from Madhya Pradesh suggested that high labour content should be defined where the material component was less than 33%. The Hon'ble Minister from Jammu Kashmir stated that if material component was kept at 25% and even if these attracted tax at the rate of 28%, there would be no outgo of refund but increasing the material component to 33% would lead to a situation of refund. The Secretary stated that this issue had been carefully considered by the Fitment Committee and the Council should go by its recommendation. 20.2. After discussion, the Council agreed that the rate of tax in case of works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to the Central Government, State Governments, Iocal authority or a governmental authority shall be reduced to 5%. In view of decision in respect of agenda item 7(ii), this reduced rate on works contract service would also apply to Government Entity. Agenda item 7(ii): Definition of Governmental Authority and GST on Government Grants 21. Introducing this agenda item, Joint Secretary (TRU-ll), CBEC, recalled that in the 21 st Meeting of the Council (held on 9 September, 2017), the State of Gujarat had pointed out that the existing definition of Governmental Authority was limited to those authorities which have been entrusted with the functions of municipality under Article 243 W of the Constitution and that reference to authorities entrusted with the functions assigned to Panchayat under Article 243G of the Constitution was missing. Consequently, the above-mentioned works contract services provided to a body which has been entrusted with the functions of a Panchayat may not be able to get the benefit of the lower rate of GST of 12%. He stated that another issue raised in the 21 st Meeting of the Council was that instead of equity of 90%, any authority with 51% or more of Government equity should be considered a Governmental authority. In this regard, he pointed out that the benefit of tax exemption from the Service Tax regime was intended for bodies essentially governmental in nature, carrying out sovereign functions, and having no or little private equity and extending the benefit of tax exemption to corporations/companies having substantial private equity participation would enrich such private equity investors at the cost of the Government exchequer. He suggested that the requirement of 90% or more participation of Government by way of equity or control should not be diluted. He stated that another issue raised during the 21 st Meeting of the Council was that the Governmental Authority should include all corporations, boards, statutory bodies which receive budgetary grants as also the SPVs (Special Purpose Vehicles) set up by Governments for carrying out Government Construction Works. In this regard, he pointed out that the definition of Governmental Authority, as it exists in Section 2( 16) of the IGST Act, and as proposed to be included in the notifications includes ... Authority or a Board or any other body . .. Thus, it already covered all corporations, boards, statutory bodies, SPVs which meet other requirements of the definition and hence no amendment needed to be carried out in the definition on this count. 21.1. He further pointed that the words Central Government, State Government, Union Territory, local authority appeared to have been omitted in Serial No.5 of Notification 12/2017 -CT (Rate) dated 28.06.2017, and that the corresponding Service Tax exemption (Notification No. 25/2012-ST, Sl. No. 60 dated 20.06.2012) covered services provided by Central Government, State Government, Union territory, local authority as well as governmental authority. He informed that the Law Committee had recommended to modify the Entry at Sl. No. 5 of Notification No. 12/2017-CT (Rate) dated 28.06.2017. and corresponding IGST, UTGST and SGST notifications accordingly. 21.2. He stated that an incidental amendment connected with reduction in GST rate on specified works contract services was required to be carried out in paragraph 2 of notification No. 11/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications. He explained that the said paragraph provides that In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3 of the Table above involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply. The said paragraph referred to only the service specified at item (i) against serial no. 3 of the Table of the said notification as at the time of issue of the said notification, only the service specified therein involved transfer of property in land or undivided share of land. However, subsequently, works contract services have been specified at other items against Sl. No. 3 at GST rate of 12%, which may involve transfer of property in land or undivided share of land, such as construction of low cost houses under scheme of affordable housing in partnership or Pradhan Mantri Awas Yojana. In view of this, it was proposed that provision in paragraph 2 of notification No. 11/2017-CT dated 28.06.2017 may be made applicable to services specified against serial no. 3 at item (i), item (iv) [sub-item (b), sub-item (c), sub-item (d)], item (v), [sub-item (b), sub-item (c) and sub-item (d)] and item (vi) [sub-item (c)] in column (3) of the Table of the said notification and item (vi), [sub-item (c)], involving transfer of property in land or undivided share of land. 21.3. The Joint Secretary (TRU-ll), CBEC, further suggested to replace the word Government appearing in column (3) of the entry at item (iii) against serial No. 3 of the Table in Notification No. II /2017-CT dated 28.06.2017 (as amended by notification No. 20/2017-CT dated 22.08.2017), with the words Central Government, State Government, Union Territory . He pointed out that in the Finance Act, 1994 (which governed Service Tax), government included Central and State Governments and UTs, while in the CGST/SGST/UTGST Acts, government means only the respective government. He suggested that corresponding IGST, UTGST and SGST notifications may also be amended accordingly. 21.4. He stated that another issue covered in this agenda item related to GST on Government grants and informed that the Law Committee had recommended that grants given by the Central Government, State Government or a local authority to a government entity which is set up by an Act of Parliament or State Legislature, or established by any government with ninety per cent or more participation by way of equity or control, may be exempt under GST Jaw. He informed that as per the proposal received from the Government of Gujarat, the State Government had set up various Boards/Corporations/Societies/ Institutes to implement various schemes of the Government and to carry out functions on its behalf, such as Gujarat Medical Services Corporation Limited (GMSCL), Gujarat Rural Industries Marketing Corporation (GRIMCO), Gujarat Municipal Finance Board (GMFB) etc. Government provided budgetary grants to these entities which in tum carried out allotted functions using these grants and it could be argued that the transfer was not solely a transfer of money as Government was expecting the entity to perform certain activities on its behalf, particularly keeping in view the fact that business was defined in very broad terms in Section 2(17) of the CGST/SGST Acts. He stated that the recommendations of the Law Committee could be accepted with certain modifications as highlighted in bold letters below: (a) Grants given by Central Government, State Government or a local authority to a Government Entity may be exempt under GST. Government Entity may be defined as an authority or a board or any other body including a society, trust, corporation which is, - (i) set up by an Act of Parliament or State Legislature, or (ii) established by any government, with ninety per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority . 21.5. He stated that it was further proposed that the reduced rate of 12% on specified works contract services supplied to the Central Government, State Government, Union Territory, Local Authority and Governmental Authority may also be extended to a Government Entity, where such specified works contract services have been procured by the government entity in relation to the work entrusted to it by the Central Government, State Government, UT or Local Authority. 21.6. The Joint Secretary (TRU-ll), CBEC, further stated that the Law Committee had suggested to examine exempting on-going works contract from GST where services were provided before 30 June, 2017 and bill was issued after 1 July, 2017, i.e. during GST regime. He stated that the justification for this proposal was the provision of Section 142(11) (b) of the CGST/SGST Act, 2017 which stated that notwithstanding anything contained in Section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994. He pointed out that under Service Tax, point of taxation arose at the time of the earlier of the two events, time of issue of invoice or receipt of advance; if invoice was not issued within the prescribed time limit, then Point of Taxation was date of completion of service. Ongoing works contract services is a kind of continuous service, which was defined in Service Tax law (Point of Taxation Rules) and in CGST Act. A harmonious construction of these provisions leads to a conclusion that GST would not be leviable on that portion of an ongoing works contract, where service tax was leviable in accordance with the then Point of Taxation Rules. He stated that there did not appear to be any need for any exemption from GST as this is what section 142 (11) (b) of the CGST sought to achieve. 21.7. He stated that keeping in mind the above, the following proposals were placed before the Council: (I) For definition of Governmental Authority (i) To amend the definition of Governmental authority in notification 12/2017- CT and corresponding IGST, UTGST and SGST notifications as under: For the purposes of this notification, the expression Governmental Authority means an Authority or a Board or any other body (i) set up by an Act of Parliament or a State Legislature or (ii) established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243 W of the Constitution or to a Panchayat under Article 243 G of the Constitution . (ii) The same definition to be also included in the notification No.11/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications which, as amended by notification No. 20/2017-CT dated 22.08.2017, prescribes GST rate of 12% on certain works contract services provided to Governmental Authority. (iii) Entry at Sl. No.5 of notification No. 12/2017-CT (Rate) dated 28.06.2017 may be amended along the lines of entry at Sl. No. 4 to include services provided by Central Government, State Government, Union Territory and local authority in addition to those provided by governmental authority. Corresponding IGST, UTGST and SGST notifications may also be amended. (iv) Provision in paragraph 2 of notification No. 11 /2017-CT dated 28.06.2017 may be made applicable to services specified against serial no. 3 at item (i), item (iv) [sub-item (b), sub-item (c), sub-item (d)], item (v), [sub-item (b), sub-item (c) and sub-item (d)] and item (vi) [sub-item (c)] in column (3) of the Table of the said notification and item (vi), [sub-item (c)], involving transfer of property in land or undivided share of land. (v) The word Government appearing in column (3) of the entry at item (iii) against serial No.3 of the Table Notification No. 11/2017-CT dated 28.06.2017 as amended by notification No. 20/2017-CT dated 22.08.2017, may be replaced with Central Government, State Government, Union territory . Corresponding IGST, UTGST and SGST notifications may also be amended accordingly. II. Exemption from GST on Government grants: (i) Grants given by Central Government, State Government or a local authority to a Government Entity may be exempt under GST. Government Entity may be defined as an authority or a board or any other body including a society, trust, corporation which is, - (i) set up by an Act of Parliament or State Legislature, or (ii) established by any Government, with ninety per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority . (ii) The reduced rate of 12% on specified works contract services supplied to the Central Government, State Government, Union Territory, Local Authority and Governmental Authority may also be extended to a Government Entity, where such specified works contract services have been procured by the Government Entity in relation to the work entrusted to it by the Central Government, State Government, Union Territory or Local Authority. 21.8. The CCT, Gujarat, stated that the supply made by an entity that received the grant should be exempted but purchases made by such entities should not be exempt from tax. He gave an example that if an entity was implementing Sarva Shiksha Abhiyan (SSA), the stationery, slates, etc. purchased by it for distribution free of cost should be purchased on payment of tax but when they supplied the services under SSA, the service should be exempted from tax as these were being supplied out of the grant given by the Government. In this regard, the Joint Secretary (TRU-ll), CBEC, suggested the following formulation for exemption: 'Supply of service or goods by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by Central Government, State Government, Union Territory or local authority against consideration received from Central Government, State Government, Union Territory, or local authority, in the form of grants.' The Hon'ble Minister from Karnataka stated that his State had set up SPVs which might not be covered under exemption. The Joint Secretary (TRU-ll), CBEC, explained that this would be covered under the definition of 'Government Entity'. The Hon'ble Minister from Jharkhand stated that where a works contract had been entered in April, 2017 (i.e. before GST) but the bill was raised in October, 2017 (i.e. after GST), the contractor was not in a position to pay tax at the new rate of 12% when his profit was only around 9%. The Secretary stated that such contracts would need to be renegotiated taking into account the new tax liability and that a Committee of officers could be constituted for the same. The Hon'ble Minister from Punjab suggested to exempt on-going works contract from the new rate of tax. The Secretary stated that big projects like Sardar Sarovar Dam Project was being built through an SPY and would need to pay tax at the rate of 12% and continuing with old tax rate would lead to loss of revenue. The Hon'ble Deputy Chief Minister of Delhi questioned as to why a Governmental authority should have 10% non-Government equity stake as then profit to this extent would go to a non-Government entity. The Secretary clarified that this provision existed under the Service Tax and could be continued under GST. 21.9. After further discussion, the Council approved the proposals at paragraph 21.7 and the formulation for exemption suggested by the Joint Secretary (TRU-ll), CBEC, in paragraph 21.8 above. Agenda item 7(iii): Rate of tax on car leasing, sale of leased cars, sale of old used cars and reverse charge mechanism on sale of used /seized vehicles, scrap etc. by Government Departments 22. Introducing this agenda item, the Joint Secretary (TRU-ll), CBEC, stated that references had been received from the car leasing industry seeking various reliefs, like exempting CGST for vehicles leased prior to 1 July, 2017 or to fix a lower rate of tax for ongoing leases as compared to new leases. He stated that some other proposals were to increase the allowed rate of transitional credit of CGST from 40% to 70%; amend rules relating to tax invoice and to exempt the existing leases and the subsequent sale of motor vehicles from Compensation Cess. He stated that the ACS and the CCT, Tamil Nadu, had studied this issue and submitted a report to the Fitment Committee recommending an enabling provision in the GST law to extend credit of Central Excise Duty paid on the goods purchased prior to 1 July, 2017 and to grant exemption from Cess. He pointed out that the first option suggested by the CCT, Tamil Nadu, could not be accepted for various reasons, including the fact that car leasing companies had claimed depreciation of Central Excise Duty paid on cars, which precluded them from claiming input tax credit for the Central Excise Duty paid. He stated that the other available option was to exempt old leases from compensation cess but this option would benefit the larger and bigger cars (more than 4-metre-long and engine capacity more than 1500 cc) and would not resolve the issue of smaller cars where the incidence of cess was 1 %-3%. He, therefore, suggested the alternative that the rate of GST for old leases could be 65% of the applicable GST rate and Compensation Cess. He stated that this approach would make the additional tax incidence on smaller cars (below 1200 cc and less than 4 metre) lower as compared to bigger cars (greater than 1500 cc). He stated that as per this proposal, leasing for small cars (LPG/CNG/Petrol) would attract tax at the rate of 18.85% as against the present 29% and the combined pre-GST incidence of VAT and Service Tax at the rate of 17% ( 14.5% + 2.5%). He added that leasing of diesel cars (below 1500 cc) would attract tax at the rate of 20.15% as against the present 31% and cars with engine capacity of more than 1500 cc would attract tax at the rate of 31.2% as against the present 48%. He stated that it was also proposed that the vehicles covered by such leases (i.e. leases of vehicles purchased and leased prior to I July, 2017 and registered as commercial vehicles prior to that date or within 15 days of leasing), when disposed of/sold shall also be taxed at 65% of the applicable GST plus Cess rate. 22. I. He further stated that the Fitment Committee proposed that the rate of tax should be extended to old private car leasing (leased prior to 1 July 2017) apart from commercial leased vehicles with a sunset clause of 3 years from the appointed date (i.e, 1 July 2017) for availing the reduced rate of tax. He stated that another recommendation was that the sale of second hand vehicles by a registered person who had procured the vehicles prior to 1 July, 2017 and had not availed the input tax credit of Central Excise Duty, VAT or any other taxes paid on such vehicles, should also attract tax at the rate of 65% of the applicable GST and Cess rates. He added that one more recommendation was that sale by way of auction etc. of used vehicles, seized goods, scrap, etc. by Government Departments should be taxed on reverse charge basis, at the hands of the buyer, under Section 9(3) of the CGST Act, 20 I 7 so that Government Departments did not have to take GST registration only for selling old and used vehicles, seized goods, scrap, etc. 22.2. He stated that keeping the above in view, the following proposals were made for the consideration of the Council: (a) Leasing of vehicles purchased and leased prior to 1 July 2017, may be taxed at 65% of the applicable GST plus Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1 July 20 17; (b) the vehicles covered by the above leases (i.e. leases of vehicles purchased and leased prior to 1 July 2017), when disposed of/sold shall also be taxed at 65% of the applicable GST plus Cess rate. This reduced rate would be applicable for a period of3 years with effect from 1 July 2017; (c) sale/supply of vehicles by a registered person, who had procured the vehicle prior to 1 July 2017 and has not availed input tax credit of Central Excise duty, VAT or any other taxes paid on such vehicles, would be taxed at 65% of the applicable GST plus Cess rate. This reduced rate would be applicable for a period of 3 years with effect from 1 July 2017; (d) sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc. by Central Government, State Government, Union Territory or a local authority, to any person, to be subjected to GST under reverse charge under Section 9(3) of the CGST/SGST Act and Section 5(3) of the IGST Act. 22.3. The Hon'ble Minister from Assam supported the proposals made under this agenda item. The Hon'ble Minister from Karnataka stated that there would be double benefit under VAT for those who had earlier taken credit of VAT, as they would also be given the benefit of reduced tax rate. The Secretary stated that it would not be practical to separate the tax rate for the Centre and the States. The Hon'ble Minister from Karnataka suggested that Central Excise credit could be extended for such lease agreement. The Joint Secretary (TRU-ll), CBEC, stated that the time period for availing the credit of Central Excise Duty had lapsed. After further discussion, the Council approved the proposal made at paragraph 22.2 above. Agenda item 7(iv): GST on renting of motor cab and transport of passengers by motor cab services 23. Introducing this agenda item, the Joint Secretary (TRU-1), CBEC, stated that presently under Notification No.ll /2017-Central Tax(Rate) dated 28 June, 2017, the rate of tax for transport of passengers by motor cab, where the cost of fuel was included in the consideration charged for the services from the recipient, was 5% without input tax credit (lTC) of goods and services and 12% with full lTC. Similarly, for renting of motor cab where the cost of fuel is included in the consideration charged from the service recipient, the rate of tax was 5% without ITC and 12% with ITC. He stated that several representations had been received to apply these GST rates not only for transport of passengers by motor cab or for renting of motor cabs but also for maxi cab, tempo traveller, buses, etc. as the same was permitted earlier under the Service Tax regime. He stated that the Fitment Committee recommended that the rate of tax of 5% without input tax credit and 12% with input tax credit as presently applied for transport of passengers by motor cab or for renting of motor cab may also be applied for service provided by using any other motor vehicle designed to carry passengers. 23.1 . He further stated that representations were received that GST rate of 5% without input tax credit for renting of motor cabs resulted in cascading of taxes and that in renting of cab business, there was frequent use of renting of cab service provided by one operator to another. He stated that another representation was that not allowing credit of tax paid to business entities on renting of cab service was making such entities unwilling to pay GST at the rate of 12% to rent a cab operator. In view of this, he informed that the Fitment Committee had recommended that input tax credit for input service in the same line of business i.e. from another service provider of transporting passengers in any motor vehicle or renting a motor vehicle, could be allowed at the rate of tax of 5%. It was also recommended that input tax credit for renting any motor vehicle or transport of passengers by motor vehicles should be allowed to a person who supplied either of the service - renting of any motor vehicle or transport of passengers by motor vehicles. 23.2. He stated that another proposal of the Fitment Committee was to replace the word or appearing as a condition in the Notification No.ll /2017-CT(Rate) against some serial numbers allowing GST at the rate of 5% with the word and as in other entries so that no confusion was created as presently it gave an impression that input tax credit of either goods or services could be taken at the rate of 5%. The relevant condition requiring amendment is as below: Provided credit of input tax charged on goods or services used in supplying the service has not been taken . 23.3. After discussion, the Council agreed to the following proposals: (i) To apply rate of tax of 5% without input tax credit and 12% with input tax credit as presently applied for transport of passengers by motor cab or for renting of motor cab to service provided by using any other motor vehicle designed to carry passengers; (ii) To allow input tax credit for input service in the same line of business i.e. from another service provider of transporting passengers in any motor vehicle or renting a motor vehicle, at the rate of tax of 5%; (iii) To allow input tax credit for renting any motor vehicle or transport of passengers by motor vehicles to a person who supplied either of the service - renting of any motor vehicle or transport of passengers by motor vehicles. Agenda item 7(v): Reduction in rate of tax on some Job Work Services 24. Introducing this agenda item, the Joint Secretary (TRU-ll), CBEC, stated that representations had been received from various quarters to reduce the rate of tax on job work in certain services or to rationalise the rates of tax for different types of job work in the same sector like printing industry. 24.1. He stated that there was a proposal to reduce the rate of tax on job work services on imitation jewellery, on the ground of maintaining parity in rates in respect of goods and job work services. He pointed out that the imitation jewellery industry was labour intensive in nature (employed about 27 lakh work force where 60% were women) and had a high element of labour cost (about 50% to 55%) of the total cost of imitation jewellery. There was also a fear that high rate of tax could make exports internationally uncompetitive particularly vis-avis machine made imitation jewellery from China. He added that in imitation jewellery, value addition was 300% to 400% while real jewellery had value addition of only 10% to 15%. As 18% rate was applicable on the value addition while 3% rate was applicable to the final value, there was a possibility of credit accumulation. Keeping this in view, in order to bring parity in the job work rates for imitation jewellery and precious jewellery, the Fitment Committee had recommended to apply the rate of tax of 5% on job work services in relation to all products falling under Chapter 71. 24.2. He stated that in respect of papad/appalam/bread and other products, it was represented that papad falling under Heading 1904 was exempt from tax and the production process of papad entailed job work, being carried by various women groups, which attracted tax at the rate of 18% and thus increased the cost of papad because no input tax credit could be availed on it. He informed that similar request had been received from the Government of West Bengal to reduce the rate of tax on job work services in relation to bread from 18% to 5%. He pointed out that bread (other than pizza bread) was not taxable under GST but other types of bread like buns, pizza bread, etc. attracted tax in the range of 5% to 18%. He informed that representations had also been received from job workers manufacturing cattle/poultry feed on job work basis that the recipients of such supplies (suppliers of cattle/poultry feed) were contesting tax rate of 18% on such job work service as cattle/poultry feed falls under Chapter 23 and was exempt from tax under GST. He stated that representations had also been received from job workers in marble industry to reduce the rate of tax from 18% to 5% and from job workers in umbrella sector to reduce the tax from 12% to 5%. He added that representations were also received from job workers in packing of processed milk into packets to reduce the rate of tax on job work from 18% to Nil. He further stated that representations had also been received from job workers in clay bricks manufacturing to reduce the tax rate from 18% to 5%. 24.3. He informed that the issue of having the same rate of tax on job work services in relation to any goods as that on the (same) goods concerned, was discussed but was not found acceptable because this would lead to large scale classification disputes in job work services and potential differential in rate of tax on job work services for intermediate goods and final goods thus leading to problem of lobbying. He stated that the following rates were proposed by the Fitment Committee: (i) To prescribe a rate of 5% on job work services in relation to food and food products falling under Chapters1 to 22 of the HS Code; (ii) To prescribe a rate of 5% on job work services in relation to products falling under Chapter 23 of the HS code except for dog and cat food put up for retail sale (Chapter Heading 2309 1000); (iii) To reduce the rate of tax on job work services in relation to manufacturing of umbrellas from 18% to 12% as the rate of tax on umbrella was 12%; and (iv) To reduce the rate of tax on job work services in relation to manufacturing of clay bricks falling under Chapter 6900 0010 from 18% to 5% as the rate of tax on sand and clay bricks (CTH 6901 0010) was 5%. 24.4. He stated that the Fitment Committee did not recommend reduction in the rate of tax for job work in marble industry as marble blocks and marble slabs attracted tax at the rate of 12% and 28% respectively and reduction in the rate of tax for job work services might lead to misuse and loss of revenue. 24.5. He stated that the printing industry had represented to reduce the rate of tax on job ~ work services as the rate of 18% was too high to bear as compared to pre-GST rate and was disruptive for MSME industry. It was represented that the printing industry had a large range of products like books, newspapers, journals, periodicals, children's pictures, drawing or colouring books, maps, atlas, brochures, leaflets, cheque books, wedding cards, tickets, envelopes, non-corrugated paper or paper board, etc. and all these products attracted different rates of tax ranging from Nil to 18%. It was represented that if part of the entire process was outsourced, then the treatment or process applied to another person's goods would be a supply of service and could have two variants - first where goods belonged to the printer where he is eligible to avail input tax credit and second where goods were supplied either by the customer or the principal manufacturer where the printer would not be eligible for input tax credit. He also pointed out that the job works service of printing of newspapers, books, journals and periodicals was kept at a concessional rate of tax of 5%. However, in these cases of printing where only the content was supplied by the publisher and the physical inputs including paper used for printing belonged to the printer, then the rate of tax was 12% as the rate of tax on paper was also 12% and prescribing a lower rate on job work would have resulted in refund of overflow of input tax credit to the printer. He stated that keeping in view various pros and cons, the Fitment Committee had proposed the following rates of tax: (a) GST rate on services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapters 48 and 49, which attract GST at the rate of 5% or Nil may be prescribed at 5%. (Heading 9988); (b) GST rate on services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapter 48 and 49, which attract GST at the rate of 12% may be prescribed at 12% (Heading 9988); (c) GST rate on services by way of printing on job work basis or on goods belonging to others in relation to printing of goods falling under Chapter 48 and 49, other than those covered by (a) and (b) above, may continue at 18% (Heading 9988); (d) GST rate on services by way of printing in relation to printing of all goods falling under Chapter 48 and 49, which attract GST at the rate of 5% or Nil, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer may be prescribed at 12% [(Heading 9989), item (i) may be amended accordingly]. [It would not result in ITC overflow as most of the paper, paperboard attracts GST at the rate of 12%. It would also not result in any tax disadvantage to the printer because a recipient of such supply having in-house printing would have also suffered incidence of 12% on paper and paperboard]; (e) GST rate on services by way of printing of all goods falling under chapter 48 and 49 which attract GST at the rate of 12%, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, may also be prescribed at I 2%. (It would not result in lTC overflow as most of the paper, paperboard attracts GST at the rate of 12%). (f) GST rate on services by way of printing of all goods falling under chapter 48 and 49 which attract GST at the rate of 18% or above, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, may continue at 18%. (g) It may be clarified that the supply of books, pamphlets, brochures, envelopes, cartons, boxes, etc. printed with logo, design, name, address or other content supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply. Principal supply has been defined in Section 2(90) of the CGST Act as supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. In case of printing of books, brochures, annual reports, leaflets, pamphlets etc., where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, supply of printing of the content supplied by the recipient of supply is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper, etc. falling under chapter 48 and 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of chapter 48 and 49 of the Customs Tariff. 24.6. The Joint Secretary, (TRU-ll), CBEC, further stated that the hand-made carpet industry of Uttar Pradesh had represented that in pre-GST period, there was no Central Excise Duty on carpets but post-GST, there was 12% rate of tax on carpets and 5% on job work relating to manufacturing of carpets. The industry had pointed out that there were 23 processes involved in making of carpets, namely, spinning, weaving, washing and finishing activities, which were done by job workers and they were mostly poor, unorganized, illiterate and home based and it would not be possible for them to comply with GST law. Therefore, hand-made carpet exporters would not be able to claim refund of GST paid on inputs and services which would lead to increased cost and make Indian products globally uncompetitive. He pointed out that the entire textile sector had been exempt from Excise Duty when input tax credit was not availed and under GST, all textiles, whether hand-made or machine-made, were charged to tax at the rate of 5% or 12%. The job works services in relation to textile items attracted 5% tax while it was exempted under Service Tax regime and this 5% GST on jobwork was being agitated by the hand-made carpet industry on the ground of increased cost of the final products thus making the Indian carpets uncompetitive in global market. He stated that the Fitment Committee had considered these aspects and recommended to continue with the existing rate of 5% tax on job work services for making of carpets, as applicable to all textile goods. 24.7. The Hon'ble Minister from West Bengal stated in his written comments that he supported the reduction of tax on job work on imitation jewellery to 5% and that thousands of workers from West Bengal were engaged in job work of imitation jewellery. He further added that in printing industry, the rate of tax of job work for printing on goods belonging to others in all cases should be reduced to 5% and where only content was supplied by the publisher and the printer supplied paper etc., the rate of tax on job work should be 12%. 24.8. The Council agreed to the proposals made at paragraph(s) 24.1, 24.3, 24.4, 24.5 and 24.6 above. Agenda item 7(vi): Rate of tax on Works Contract in offshore areas beyond twelve nautical miles and transportation of natural gas through pipeline 25. The Joint Secretary (TRU-ll), CBEC, stated that the rate of tax on works contract in offshore areas beyond 12 nautical miles was 6% during the pre-GST regime and it had now gone up to 18%. He stated that these works were carried out for E P (Exploration and Production) companies whose output- crude oil and natural gas- was not covered under GST and hence input tax credit for such works was not available. He informed that the GST Working Group on Oil and Gas sector had expressed concern over this. 25.1. He pointed out that the area beyond 12 nautical miles was beyond the jurisdiction of States, and therefore, VAT was not applicable on the same and only Service Tax of 6% was charged. He, therefore, recommended that works contract in offshore areas beyond 12 nautical miles may be taxed at the rate of 12% instead of 18%. 25.2. He stated that another issue was that during pre-GST regime, transportation of natural gas through pipeline attracted Service Tax at the rate of 15% with full input tax credit. He stated that now all forms of natural gas were outside GST. The Sectoral Group on Oil and Gas had pointed out that transportation of goods by road and rail attracted lower GST rate of 5% because input tax credit for petrol/diesel was not available and that the case was similar to that of transportation of natural gas through pipeline as no input tax credit of tax paid on the same could be availed because natural gas was outside the purview of GST. 25.3. He stated that in view of above, there was justification to reduce the rate of tax on transportation of natural gas through pipeline from 18% to 12% with input tax credit and to give an option to tax the same at the rate of 5% without input tax credit. He further pointed out that input tax credit on pipeline was not admissible under GST law as it amounted to immovable property under Section 17 of the CGST/SGST Acts, 2017. In view of the above, he proposed the following: (i) GST be levied at the rate of 12% on works contract services and associated services in respect of E P (Exploration and Production Companies) in respect of offshore works in the area beyond 12 nautical miles; (ii) GST be levied at the rate of 12% with lTC OR 5% without ITC for transportation of natural gas through pipeline. 25.4. The CCT, Karnataka suggested that the option of 5% rate of tax might not be given. The Secretary stated that as there was no GST on output, to prevent cascading, this option was required to be given. The CCT, Karnataka stated that pre-GST also, there was cascading in this sector. Shri P.K. Jain, DG (Audit), CBEC, stated that the rate of tax for transport service by road was 5%, and through pipeline, it was 18% and the Government policy was that more and more transportation should be encouraged through pipeline in view of environmental concern. The Secretary stated that if the rate of tax was 5% on all modes of transport, then the same rate of tax should apply on transport service through pipeline. The Hon'ble Minister from West Bengal stated in his written comments that the rate of tax on transportation of natural gas should be kept at the same rate like transportation of goods by GT A i.e. 5% without input tax credit and 12% with input tax credit. The Council agreed to the suggestion made at paragraph 25.3 above. Agenda Item 7(vii): Reverse charge mechanism for Overseeing Committee of Reserve Bank of India (RBD under GST 26. Introducing this agenda item, the Joint Secretary (TRU-ll), CBEC, stated that the Reserve Bank of India has constituted an Overseeing Committee as an advisory body to advise any banking company on resolution of stressed assets and it (RBI) pays sitting fees and retainer ship fees to OC members. The RBI has pointed out that the OC members do not have necessary infrastructure for registering themselves for payment of GST and suggested that the services provided by OC members could be included under the reverse charge mechanism. He further pointed out that services by a director of a company or a body corporate to the said company or body corporate was already under the reverse charge mechanism and the tax would be paid by the company or the body corporate but the members of OC could not be considered as directors of the body corporate i.e. the RBI. In view of this, he proposed that the Council may agree to the request of RBI to include the services provided by OC members to Reserve Bank of India under the reverse charge mechanism under Section 9(3) of the CGST/SGST Acts, 2017 and Section 5(3) of the lGST Act. The Council agreed to this proposal. Agenda Item 7(viii): Amendment in GST notifications in respect of 5% GST rates on cereals, pulses and flours, etc. put up in unit container and bearing a brand name 27. Introducing this agenda item, Shri Alok Shukla, Joint Secretary (TRU-1), CBEC, stated that the Council, in its 21st Meeting held on 9 September, 2017 had recommended that in respect of 5% rate of tax on cereals, pulses and flours, etc. put up in unit containers and bearing a registered brand name, the following amendments may be made to the existing Notifications, so as to provide that: (i) A brand registered as on 15.05.2017 shall be deemed to be a registered brand for the purposes of levy of 5% GST, irrespective of whether or not such brand is subsequently deregistered; (ii) A brand registered as on 15.05.2017 under the Copyright Act, 1957 shall also be treated as a registered brand for the purposes of levy of 5% GST; (iii) A brand registered as on 15.05.2017 under any Jaw for the time being in force in any other country shall also be deemed to be a registered brand for the purposes of levy of 5% GST; and (iv) A mark or name in respect of which actionable claim is available shall be deemed to be a registered brand name for the purposes of levy of 5% GST. 27.1. He stated that accordingly, Notifications No. 27/20 17-Central Tax (Rate), 28/2017- Central Tax (Rate), 27/2017-Integrated Tax (Rate), 28/2017-Integrated Tax (Rate), 27/2017- Union Territory Tax (Rate), 28/2017-Union Territory Tax (Rate) and similar notifications under SGST Acts were issued on 22 September, 2017 giving effect to the recommendations of the Council. 27 .2. He also stated that the said amending notifications also provided that 5% rate of tax would not apply if the person concerned voluntarily foregoes any actionable claim or enforceable right on such brand name. The amending notifications provide that the rate of 5% tax shall apply to such goods if: put up in unit container and, - (a) bearing a registered brand name; or (b) bearing a brand name on which an actionable claim or enforceable right in a court of law is available (other than those where any actionable claim or any enforceable right in respect of such brand name has been voluntarily foregone), subject to certain conditions. For this purpose, the phrase registered brand name means: (A) a brand registered as on the 15th May, 2017 under the Trademarks Act, 1999, irrespective of whether or not the brand is subsequently deregistered; (B) a brand registered as on the 15th May, 2017 under the Copyright Act, 1957; (C) a brand registered as on the 15th May, 2017 under any law for the time being in force in any other country. 27.3. Further, it has been provided that for foregoing an actionable claim or enforceable right on a brand name, - (a) the person undertaking packing of such goods in unit containers which bear a brand name shall file an affidavit to that effect with the jurisdictional Commissioner of Central Tax that he is voluntarily foregoing his actionable claim or enforceable right on such brand name as defined in Explanation (ii)(a); and (b) the person undertaking packing of such goods in unit containers which bears a brand name shall, on each such unit container, clearly print in indelible ink, both in English and the local language, that in respect of the brand name as defined in Explanation (ii)(a) printed on the unit containers, he has foregone his actionable claim or enforceable right voluntarily. 27.4. He stated that the implementation of the decision of the Council required some drafting changes in the Notifications No.27/2017-Central Tax (Rate), 28/2017-Central Tax (Rate), 27/2017-Integrated Tax (Rate), 28/2017-Integrated Tax (Rate), 27/2017-Union Territory Tax (Rate), 28/20 17-Union Territory Tax (Rate). 27.5. He stated that in view of this, the aforesaid notifications were being placed before the Council for ratification. The Council agreed to the proposal and ratified the notifications. 27.6. The Joint Secretary (TRU-1 ), CBEC further stated that it is possible that the person having actionable claim or enforceable right on a brand name and the person undertaking packing of such goods in unit containers are two different persons and in such cases, it would be necessary to provide that the affidavit (as mentioned in paragraph 27.3 above) is filed by the person having actionable claim or enforceable right on such brand name and he shall state the following in the affidavit: (a) He is voluntarily foregoing his actionable claim or enforceable right on such brand name, and (b) He has authorised the person (undertaking packing of such goods in unit containers bearing said brand name) to print on such unit containers in indelible ink, both in English and the local language, that in respect of such brand name, he (the person owning the brand name) is voluntarily foregoing the actionable claim or enforceable right on such brand name. 27.7. He requested the Council to approve the above proposal. The Council accordingly approved the proposal. Agenda Item 7(ix): Changes in GST rates on certain goods/clarifications to be issued 28. Introducing this agenda item, the Joint Secretary (TRU-1), CBEC, stated that during the 21 st Meeting of the Council held on 9 September, 2017, the Council had requested the Fitment Committee to examine two issues - nutritious diet (pusthaahar) distributed under the Integrated Child Development Scheme (ICDS) and all goods falling under Heading 6802 (other than those of marble and granite or those which attract 12% rate of tax) afresh. He stated that in addition, the Fitment Committee examined a number of other issues referred to it by the States of Gujarat, Maharashtra and Uttar Pradesh and the recommendations on these issues were also presented before the Council for consideration. A record of discussion on these issues is as below: 28.1. Food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government (SI. No. 1): The Joint Secretary, TRU-1, CBEC informed that recommendation of the Fitment Committee was to reduce the rate of tax on food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government from 18% to 5%, subject to the condition that the manufacturer of the food preparations produces a certificate from an officer not below the rank of Deputy Secretary to the concerned State Government or Government of India to the effect that such food preparations have been distributed free to the economically weaker sections of the society under a programme duly approved by the Central Government or the State Government concerned, within five months from the date of clearance of such goods or within such further period as the jurisdictional Commissioner of GST may allow in this regard. 28.2. The Hon'ble Deputy Chief Minister of Delhi suggested that the rate of tax on such products should be kept at Nil. In his written comments, the Hon'ble Minister from West Bengal also suggested to exempt these products as these were meant for the weaker sections of the society. The Secretary pointed out that it would be desirable to keep tax at the rate of 5% because there would be tax on inputs like ghee, transport, rent, etc. which could be used for paying tax at the rate of 5%. The Council agreed to the recommendation of the Fitment Committee to tax the food preparations put up in unit containers and intended for free distribution to economically weaker sections of the society under a programme duly approved by the Central Government or any State Government at the rate of 5% subject to the condition as mentioned in the paragraph 28.1. 28.3. All goods falling under heading 6802 (other than those of marble and granite or those which attract 12% GST)(SI. No. 2): The Fitment Committee had recommended that tax on all goods falling under Heading 6802 (except those of marble and granite or those which attract 12% GST) should be reduced from 28% to 18%. However, Statues, statuettes, pedestals; high or low reliefs, crosses, figures of animals, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paper weights, artificial fruit and foliage, etc.; other ornamental goods essentially of stone, falling under 6802, should continue to attract 12% GST. 28.4. The Hon'ble Minister from West Bengal stated in his written comments that the rate of tax on all goods falling under Chapter Heading 6802 should be reduced from 28% to 18%. The Hon'ble Minister from Chhattisgarh stated that the proposed rate of tax of 18% was too high and due to this, mining work in his State had stopped leading to large scale unemployment. The Hon'ble Minister from Rajasthan stated that the tax rate of 18% on Napa stone and Kota stone was too high. The Joint Secretary (TRU-1), CBEC, stated that all polished tiles, other than marble and granite stones, were proposed to be taxed at the rate of 18%. The Secretary stated that the rate of tax on these goods should not be brought to 12% if tax on all these goods were to be harmonised. The Hon'ble Minister from Chhattisgarh stated that rate of tax on fly ash bricks was 12% whereas it was 5% on normal bricks. This did not send a good message. The Council agreed to the recommendations of the Fitment Committee in this regard. 28.5. Khakra (Sl. No. 5) : The Fitment Committee had recommended to reduce the rate of tax on khakra from 12% to 5% at par with that on rusk, pizza bread, seviyan, and sabudana. The Senior Joint Commissioner (Taxes), West Bengal, suggested that plain roti should also be kept in the same tax bracket of 5%. The Hon'ble Chairperson agreed to this suggestion. The Council agreed to tax khakra and plain roti/chapati at the rate of 5%. 28.6. Imposing GST only on the net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear Alkyl Benzene (LAB) (Sl. No. 6): Shri Parag Jain Nainutia, Special Commissioner of Sales Tax, Maharashtra stated that they had sent written comment on this proposal pointing out that there were several court cases going on this issue in Maharashtra and the proposed decision could adversely affect the outcome of the court cases. He stated that the State of Maharashtra had disallowed this claim and had treated the supply of SKO in the reverse stream as a separate sale altogether. He pointed out that the Advocate General of Maharashtra had also given an opinion that return of kerosene after extraction of N-Paraffin out of the original supply of kerosene would not be legally allowable as sales returns. The Joint Secretary, TRU-1, CBEC stated that the recommendation of the Fitment Committee had taken note of this objection and pointed out that if refineries were asked to pay tax on the whole quantity of SKO supplied to LAB manufacturer, then refineries would have to reverse a large portion of such credit as the majority of their final products were outside GST. Keeping in view this recommendation, the Council approved the proposal to issue a clarification stating that in such cases, GST will be payable only on the net quantity of superior kerosene oil (SKO) retained for the manufacture of Linear Alkyl Benzene (LAB). 28.7. Staple pin (SI. No. 10): Shri P.K. Mohanty, Consultant (GST), CBEC, suggested to rationalise tax on all items falling under Chapter Heading 8305 and to subject them to a uniform rate of tax of 18%. The Council agreed to this suggestion. 28.8. Parts of (a) fixed speed diesel engine of power not exceeding 15 HP, and (b) submersible pumps: The Hon'ble Deputy Chief Minister of Gujarat stated that a view needed to be taken regarding the rate of tax on these items. The Secretary stated that these items were covered under Agenda item 13(iii) circulated in the morning and could be discussed when that agenda item came up for discussion. 28.9. Real zari (not listed): The CCT, Gujarat suggested to reduce the rate of tax on real zari (of silver) from 12% to 5% as the rate of tax on saree was 5%. The Council agreed to this proposal. 28.1 0. The Hon'ble Minister from Jammu Kashmir suggested that the list of goods attracting tax at the rate of28% should be trimmed as much as possible. The Hon'ble Minister from Tamil Nadu stated that the request of his State for reduction in rate of about 50 items is under consideration by the Fitment Committee and he had highlighted these goods in the 20th Meeting of the Council (held on 5 August 2017) which included items like packaged drinking water, fishnet and fishnet twine, wet grinders, dried fish, kadalaimittai, fire crackers, etc. He suggested that for arriving at pre-GST duty incidence, only the VAT rate where it was listed in the VAT schedule should be taken and that the residuary rate should not be taken as it artificially inflated the rate of VAT. He suggested to take average of only the rate of VAT of the schedules where it was a listed rate. He said that had this approach been followed, their request for rate reduction on several items would not have been rejected by the Fitment Committee. He added that since a Sub-Group comprising of officers had been constituted to study and recommend chapter-wise reduction of tax on goods and it had to submit its report within 15 days, discussion on the items for consideration before the Fitment Committee should be deferred till the Sub-Group submitted its report. The Hon'ble Minister from West Bengal stated in his written comments that the rate of tax on mango sliced dried (HSN 0804) and singhada dry should be reduced from 12% to 5%. He also suggested that the rate of tax on poster colour (HSN 3213) and on modelling paste for children (HSN 3407) should be reduced from 28% to 18%. 29. For agenda item 7, the Council approved the following: (i) GST Rate in respect of government works contract services having high labour content 29.1. To reduce the rate of tax in case of works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to the Central Government, State Governments, local authority or a governmental authority from 12% to 5%. This reduced rate shall also apply to Government Entity. (ii) Definition of Governmental Authority and GST on Government Grants (I) For definition of Governmental Authority 29.2. To amend the definition of Governmental authority in notification 12/2017-CT and corresponding IGST, UTGST and SGST notifications as under: For the purposes of this notification, the expression Governmental Authority means an Authority or a Board or any other body (i) set up by an Act of Parliament or a State Legislature or (ii) established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243 W of the Constitution or to a Panchayat under Article 243 G of the Constitution. 29.3. The definition of Governmental Authority at paragraph 29.2 above to be also included in the notification No.1/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications which, as amended by notification No. 20/2017-CT dated 22.08.2017, prescribes GST rate of 12% on certain works contract services provided to Governmental Authority. 29.4. Entry at Sl. No. 5 of notification No. 12/2017-CT (Rate) dated 28.06.2017 to be amended along the lines of entry at Sl. No. 4 to include services provided by Central Government, State Government, Union Territory and local authority in addition to those provided by governmental authority. Corresponding IGST, UTGST and SGST notifications to be also amended. 29.5. Provision in paragraph 2 of Notification No. 11/2017-CT dated 28.06.2017 to be made applicable to services specified against serial no. 3 at item (i), item (iv) [sub-item (b), sub-item (c), sub-item (d)], item (v), [sub-item (b), sub-item (c) and sub-item (d)] and item (vi) [sub-item (c)] in column (3) of the Table of the said notification and item (vi), [sub-item (c)], involving transfer of property in land or undivided share of land. 29.6. The word Government appearing in column (3) of the entry at item (iii) against serial No. 3 of the Table Notifi cation No. 11 /2017-CT dated 28.06.20 17 as amended by notification No. 20/2017 -CT dated 22.08.2017, to be replaced with Central Government, State Government, Union territory . Corresponding lGST, UTGST and SGST notifications to be also amended accordingly. D. Exemption from GST on Government grants 29.7. Grants given by Central Government, State Government or a local authority to a Government Entity may be exempt under GST. Government Entity may be defined as an authority or a board or any other body including a society, trust, corporation which is,- (i) set up by an Act of Parliament or State Legislature, or (ii) established by any Government, with ninety per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority . 29.8. The reduced rate of 12% on specified works contract services supplied to the Central Government, State Government, Union Territory, Local Authority and Governmental Authority shall also be extended to a Government Entity, where such specified works contract services have been procured by the Government Entity in relation to the work entrusted to it by the Central Government, State Government, Union Territory or Local Authority. Further, supply of service or goods by a Government Entity to Central Government, State Government, Union Territory, Local Authority or any person specified by any of these Governments against consideration received from any of these Governments in the form of grants shall be exempted from GST. (iii) Rate of tax on car leasing, sale of leased cars, sale of old used cars and reverse charge mechanism on sale of used /seized vehicles, scrap etc by Government Departments 29.9. Leasing of vehicles purchased and leased prior to 1 July 2017, to be taxed at 65% of the applicable GST plus Cess rate. This reduced rate shall be applicable for a period of 3 years with effect from 1 July 2017. 29.10. The vehicles covered by the above leases (i.e. leases of vehicles purchased and leased prior to I July 20 17), when disposed of/sold shall also be taxed at 65% of the applicable GST plus Cess rate. This reduced rate shall be applicable for a period of 3 years with effect from 1 July 2017. 29.11. Sale/supply of vehicles by a registered person, who had procured the vehicle prior to I July 2017 and has not availed input tax credit of Central Excise duty, VAT or any other taxes paid on such vehicles, to be taxed at 65% of the applicable GST plus Cess rate. This reduced rate shall be applicable for a period of3 years with effect from 1 July 2017; 29.12. Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc. by Central Government, State Government, Union Territory or a local authority, to any person, shall be subjected to GST under reverse charge under section 9(3) of the CGST/SGST Act and Section 5(3) of the IGST Act. (iv) GST on renting of motor cab and transport of passengers by motor cab services 29.13. To apply rate of tax of 5% without input tax credit and 12% with input tax credit as presently applied for transport of passengers by motor cab or for renting of motor cab to service provided by using any other motor vehicle designed to carry passengers. 29.14. To allow input tax credit for input service in the same line of business i.e. from another service provider of transporting passengers in any motor vehicle or renting a motor vehicle, at the rate of tax of 5%. 29.15. To allow input tax credit for renting any motor vehicle or transport of passengers by motor vehicles to a person who supplied either of the service- renting of any motor vehicle or transport of passengers by motor vehicles. (v) Reduction in rate of tax on some Job Work Services 29.16. Rate of tax on job work services in relation to all products falling under Chapter 71 shall be reduced from 18% to 5%. 29.17. Rate of tax on job work services in relation to food and food products falling under Chapters 1 to 22 of the HS Code shall be reduced from 18% to 5%. 29.18. Rate of tax on job work services in relation to products falling under Chapter 23 of the HS code except for dog and cat food put up for retail sale (Chapter Heading 2309 1 000) shall be reduced from 18% to 5%. 29.19. Rate of tax on job work services in relation to manufacturing of umbrellas shall be reduced from 18% to 12%. 29.20. Rate of tax on job work services in relation to manufacturing of clay bricks falling under Chapter 6900 0010 shall be reduced from 18% to 5%. 29.21. Rate of tax on services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapter 48 and 49, which attract tax at the rate of 5% or Nil shall be reduced from 18% to 5% (Heading 9988). 29.22. Rate of tax on services by way of printing on job work basis or on goods belonging to others in relation to printing of all goods falling under Chapter 48 and 49, which attract tax at the rate of 12% shall be reduced from 18% to 12% (Heading 9988). 29.23. Rate of tax on services by way of printing on job work basis or on goods belonging to others in relation to printing of goods falling under Chapter 48 and 49, other than those covered by paragraphs 29.21 and 29.22 above shall continue at 18% (Heading 9988). 29. 24. Rate of tax on services by way of printing in relation to printing of all goods falling under Chapters 48 and 49, which attract tax at the rate of 5% or Nil, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer shall be reduced from 18% to 12% (Heading 9989). 29.25. Rate of tax on services by way of printing of all goods falling under chapter 48 and 49 which attract tax at the rate of 12%, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer shall be reduced from 18% to 12%. 29.26. Rate of tax on services by way of printing of all goods falling under chapter 48 and 49 which attract tax at the rate of 18% or above, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, shall continue to be at 18%. 29.27. To issue a clarification that the supply of books, pamphlets, brochures, envelopes, cartons, boxes etc. printed with logo, design, name, address or other content supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply. Principal supply has been defmed in Section 2(90) of the CGST Act as supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary. In case of printing of books, brochures, annual reports, leaflets, pamphlets etc., where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, supply of printing of the content supplied by the recipient of supply is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services. In case of supply of printed envelopes, letter cards and printed boxes of un-corrugated paper, tissues, napkins, wall paper etc. falling under chapter 48 and 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of chapter 48 and 49 of the Customs Tariff. (vi) Rate of tax on Works Contract in offshore areas beyond twelve nautical miles and transportation of natural gas through pipeline 29.28. Rate of tax on works contract services and associated services in respect of E P (Exploration and Production Companies) in respect of offshore works in the area beyond 12 nautical miles shall be reduced from 18% to 12%. 29.29. Rate of tax of services in relation to transportation of natural gas through pipeline shall be reduced from 18% to 12% with input tax credit OR 5% without input tax credit. (vii) Reverse charge mechanism for Overseeing Committee of Reserve Bank of India (RBD under GST 29.30. Services provided by Overseeing Committee members to the Reserve Bank of India shall be subject to tax under the reverse charge mechanism under Section 9(3) of the CGST/SGST Acts, 2017 and Section 5(3) of the IGST Act. (viii) Amendment in GST notifications in respect of 5% GST rates on cereals, pulses and flours, etc. put up in unit container and bearing a brand name 29.31. To ratify the notifications no.27/2017-Central Tax (Rate), 28/2017-Central Tax (Rate), 27/2017-Integrated Tax (Rate), 28/2017-Integrated Tax (Rate), 27/2017-Union Territory Tax (Rate), 28/2017 -Union Territory Tax (Rate) including the drafting changes made therein while implementing the decision of the Council taken during its 21 st Meeting held on 9 September 20 17 relating to rate of tax on cereals, pulses and flours etc. put up in unit container and bearing a registered brand name. 29.32. Where the person having actionable claim or enforceable right on a brand name and the person undertaking packing of such goods in unit containers are two different persons, it shall be necessary for the person having actionable claim or enforceable right on such brand name to file an affidavit (as mentioned in paragraph 27.3 above) stating the following: (a) He is voluntarily foregoing his actionable claim or enforceable right on such brand name, and (b) He has authorised the person (undertaking packing of such goods in unit containers bearing said brand name) to print on such unit containers in indelible ink, both in English and the local language, that in respect of such brand name, he (the person owning the brand name) is voluntarily foregoing the actionable claim or enforceable right on such brand name. (ix) Changes in GST rates on certain goods/clarifications to be issued 29.33. The Council approved the proposals regarding change in the rates of tax as proposed by the Fitment Committee in agenda item 7 (ix) with the following changes/additions: (i) Along with khakra (Sl. No.5), rate of tax on plain roti/chapati to be reduced from 12% to 5%; (ii) To reduce tax on all items falling under Chapter Heading 8305 from 28% to 18%; (iii) To reduce rate of tax on real zari from 12% to 5%. Agenda item 8: Issues recommended by the Law Committee for consideration of the GST Council 30. The Commissioner (GST Policy), CBEC made a presentation on the issues covered under this agenda item and the same are discussed under individual Agenda Items below: Agenda item 8(i): Extension of timelines for filing of FORM GSTR-5A and FORM GST ITC-01 30.1. Commissioner (GST Policy), CBEC stated that on the request of the GSTN, it was recommended by the Law Committee to extend the time limit for furnishing return in Form GSTR-5A for the month of July, August and September 2017 by persons supplying online information and database access or retrieval (OIDAR) services from a place outside India to an unregistered recipient referred to in Section 14 of the IGST Act 2017 and Rule 64 of the CGST Rules, 2017 was proposed to be extended up to 20 November 2017. He further stated that the Law Committee had also recommended at the request of GSTN to extend the time limit for filing Form GST ITC-01 [for the purpose of claiming input tax credit under Section 18( 1) of the CGST Act, 2017] for the taxpayers who have got registered during the months of July, August and September 2017 to 31 October 2017. He stated that similar changes would be required under the SGST Rules. The Council approved the proposals. Agenda item 8(ii): Amendment of some provisions of CGST Rules, 2017 [relating to invoice (rule 46, 54 (2), additional instruction in FORM GSTR 4)) 31 . The Commissioner (GST Policy), CBEC stated that the Law Committee had recommended to amend rule 46 so as to provide that in case of B2C supplies, the cumulative value of goods or services or both liable to tax at a particular rate and total tax thereon on all such goods or services or both can be shown as a single entry instead of indicating rate of tax against each item. He stated that another proposal made by the Law Committee on the basis of representation from trade and industry was that a supplier may issue a single tax invoice cum- bill of supply where the supplies to an unregistered recipient include both taxable as well as exempt goods or services. He stated that another recommendation of the Law Committee was that keeping in view the large number of invoices issued by banking and insurance companies, sub-rule (2) of Rule 54 of CGST Rules, 2017 could be amended to provide for issuance of a consolidated invoice or another document for supply of services in a particular month. He stated that another proposal was to amend instructions for filing return in FORM GSTR-4 so as to provide that serial No.4 A of Table 4 shall not be furnished for July 2017 to December 2017. 31.1. The Hon'ble Minister from West Bengal in his written comments supported the proposal to allow issuance of 'invoice cum bill of supply' in order to facilitate the taxpayer to issue only one invoice instead of two. The Hon'ble Deputy Chief Minister of Delhi stated that the first proposal (relating to companies showing cumulative value of items liable to tax at a particular rate when goods and services are supplied to an unregistered person) should not be implemented as it would create problem for audit. The Commissioner (GST Policy), CBEC stated that this was only meant for supplies made to unregistered persons. CCT, Gujarat clarified that the supplier would give total tax value and the rate for all items which had a common rate so that the size of the bill could be reduced by giving the details in a summary form. The Commissioner (GST Policy), CBEC stated that in big bazaar, etc. invoices for consumers were running into several pages. The Hon'ble Minister from Assam supported the proposal. The Hon'ble Deputy Chief Minister of Delhi reiterated that this was not desirable. The Principal Secretary (Finance), Odisha stated that the machines would have been programmed on the basis of the existing law. He added that the rates of tax would also need to be indicated as per the consumer law. Shri Somesh Kumar, Principal Secretary, Telangana supported the proposal and narrated his own personal experience on how the bills had become much longer because CGST and SGST rates had to be shown against each item individually. The Commissioner (GST Policy), CBEC stated that the supplier would write all the items but show the tax for the consolidated value for goods attracting the same rate. The Hon'ble Deputy Chief Minister of Delhi stated that such an arrangement could lead to problems in audit and it would not be clear as to what goods have been supplied at which rate. In view of difference of opinion, the Council decided to defer this issue. However, the Council approved the other three proposals made at paragraph 31 above. Agenda item 8(iii): Inclusion of additional items in Notifications No. 32/2017-Central Tax and No. 8/2017-Integrated Tax 32. The Commissioner (GST Policy), CBEC stated that casual taxable persons making taxable supplies of specified handicraft goods and to persons making inter-State taxable supplies of specified handicraft goods had been given exemption from registration under Notification No. 32/2017-Central Tax dated 15.09.2017 and Notification No.08/2017- Integrated Tax dated 14.09.2017. He stated that in view of the request from the State of Jammu Kashmir, the Law Committee recommended to add the following additional items in the abovementioned notifications: (i) Handmade shawls, stoles and scarves (may be added to Sl.no. 9 of the table in the notification, along with addition of Chapter 61 ); (ii) Chain stitch; (iii) Crewel, namda, gabba; (iv) Wicker willow products; (v) Toran; (vi) Articles made of shola. 32.1. The CCT, Gujarat stated that some more items, namely Terracotta figurines of the Gora Dev (tribal horse God); Plaques, inset with mirrors; Handmade blocks for fabric printing should also be added to the list. The Secretary stated that these additional items should first be discussed in the Fitment Committee. The Council approved the proposal made under this Agenda item. Agenda item 8(iv): Clarification regarding the due dates for the generation of FORM GSTR-2A and FORM GSTR-1A for the month of July, 2017 33. The Commissioner (GST Policy), CBEC stated that under Notification No.30/20 17 dated 11 September, 2017, dates for filing FORM GSTR-1, FORM GSTR-2 and FORM GSTR-3 for the month of July were extended and the queries were received regarding due date for generation of FORM GSTR-2A and FORM GSTR-IA in light of the said extension of date. He stated that it was proposed to issue a circular clarifying that (i) the due date with respect to FORM GSTR-2A stands automatically extended since the due dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. The details filed in FORM GSTR-1 will be made available to the recipient in FORM GSTR-2A not later than 11 October, 2017 while they are required to furnish the details of their inward supplies in FORM GSTR-2 not later than 31 October 20 17 and (ii) the due date for finalizing of FORM GSTR-1A also stands automatically extended when the dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. Therefore, only after the details are communicated to the supplier in FORM GSTR-1A , the supplier is required to accept or reject the details communicated to him from 1 November to 2 November, 2017, and accordingly, his FORM GSTR-1 shall stand modified. 33.1. He stated that a circular covering this aspect was proposed to be issued by the Central Government as well as the State Governments and that the draft of the circular was also part of the Agenda Note. The Council approved the proposal to issue a circular clarifying the above. 34. For agenda item 8 , the Council approved the following: (i) Extension of timelines for filing of FORM GSTR-5A and FORM GST ITC-01 34.1. To extend the time limit for furnishing return in Form GSTR-5A for the month of July, August and September 2017 by persons supplying online information and database access or retrieval (OTDAR) services from a place outside India to an unregistered recipient referred to in Section 14 of the IGST Act 2017 and Rule 64 of the CGST Rules, 2017 up to 20 November 2017. 34.2. To extend the time limit for filing Form GST ITC-01 (for the purpose of claiming input tax credit under Section 18(1) of the CGST/SGST Acts) for the taxpayers who have got registered during the months of July, August and September 2017 to 31 October 2017. (ii) Amendment of some provisions of CGST Rules, 2017 [relating to invoice (rule 46, 54 (2), additional instruction in FORM GSTR 4)] 34.3. To permit a supplier to issue a single tax invoice-cum-bill of supply where the supplies to an unregistered recipient include both taxable as well as exempt goods or services. 34.4. To amend sub-rule (2) of Rule 54 of CGST Rules, 2017 to provide that banking and insurance companies to issue a consolidated invoice or another document for supply of services in a particular month. 34.5. To amend instructions for filing return in FORM GSTR-4 so as to provide that serial No.4A of Table 4 shall not be furnished for July 2017 to December 2017. (iii) Inclusion of additional items in Notifications No. 32/2017-Central Tax and No. 8/2017-Integrated Tax 34.6. To add the following additional items in the Notifications No. 32/20 17-Central Tax dated 15.09.2017 and No. 08/2017-lntegrated Tax dated 14.09.2017: (i) Handmade shawls, stoles and scarves (to be added to Sl. No. 9 of the table in the notification, along with addition of Chapter 61 ); (ii) Chain stitch; (iii) Crewel, namda, gabba; (iv) Wicker willow products; (v) Toran; (vi) Articles made of shola. iv. Clarification regarding the due dates for the generation of FORM GSTR-2A and FORM GSTR-lA for the month of July, 2017 34.7. A circular to be issued by the Central Government and the State Governments clarifying the following: (i) the due date with respect to FORM GSTR-2A stands automatically extended since the due dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. The details filed in FORM GSTR-1 will be made available to the recipient in FORM GSTR-2A not later than 11 October, 20 17 while they are required to furnish the details of their inward supplies in FORM GSTR-2 not later than 31 October 2017; (ii) the due date for finalizing of FORM GSTR-lA also stands automatically extended when the dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. Therefore, only after the details are communicated to the supplier in FORM GSTR- 1A, the supplier is required to accept or reject the details communicated to him from 1 November to 2 November, 2017, and accordingly, his FORM GSTR-1 shall stand modified. Agenda item 9: Proposal for issuing notifications on cross-empowerment for ensuring single interface under GST 35. The Commissioner (GST Policy), CBEC stated that it was proposed to issue notification on cross-empowerment prepared in accordance with the decisions of the Council taken during its 9 th Meeting (held on 16 January 2017) and 21 st Meeting (held on 9 September 2017). He stated that while there was a broad agreement for cross-empowerment under the CGST and SGST Acts, there was disagreement on the issue of cross-empowerment under the IGST Act in relation to the Place of Supply Rules. The Secretary stated that notification of cross-empowerment was urgently required to enable refund to the taxpayers and this notification could be issued. He added that due to persistent differences on cross - empowerment for the Place of Supply Rules issues under IGST, notification regarding cross-empowerment in respect of other matters could be deferred. He stated that by cross-empowering States and Central tax officers for giving refund, it would be ensured that only one officer issued an order of refund for both CGST and SGST. The Council approved the proposal to issue a notification by the Central Government and the State Governments cross-empowering officers of the Central and State Government to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the central tax and the state tax and a similar notification to be issued under the IGST Act. 35.1. The CCT, Karnataka stated that the Council could also take a decision that till the division of taxpayers was effected between the Central administration and the State administrations, an officer of the Central and the State Government was authorised to process any refund claim filed by an applicant under his jurisdiction. The Secretary stated that division of taxpayers was likely to be done soon. The CCT, Karnataka stated that a lot of ground work was still required to be done and data such as turnover details of migrated taxpayers, removing from it the data of turnover of taxpayers with centralised registration, etc. would take time and for such period, a taxpayer should be given the freedom to approach any tax administration for claiming refund. The Secretary stated that this could be permitted subject to a declaration being given by the applicant that the same refund claim has not been claimed from the other administration having jurisdiction over the applicant. The Council agreed to this suggestion. 36. For agenda item 9 , the Council approved the following: (i) To issue notifications by the Central Government and the State Governments, cross empowering officers of the Central and State Governments to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the Central tax and the State tax. Similar notification to be issued under the IGST Act by the Central Government; (ii) Until the division of taxpayers is effected between the Central and State administration, an officer of the Central and the State Government was authorised to process any refund claim filed by an applicant under his jurisdiction subject to a declaration being given by the applicant that the same refund claim has not been claimed from the other administration having jurisdiction over the applicant. Agenda item 10: Proposal for deemed ratification of notifications, circulars and orders by the GST Council 37. Introducing this Agenda item, the Commissioner (GST Policy), CBEC stated that the Hon'ble Delhi High Court in its order dated 14 September, 2017 had directed the Central Government and the Government of NCT (GNCT) Delhi to issue a corrigendum to Notification No.13/2017-Central Tax (Rate) dated 28.06.2017 and No. 10/2017-Integrated Tax (Rate) dated 28.06.2017 so as to make them fully consistent with the decisions of the Council. It was contended in the Writ Petition that there was a difference in the press release issued immediately after the meeting of the Council and the actual notification. The Hon'ble High Court observed that the wording of the notification at Sl. No.2 of notification No.13/2017- Central Tax (Rate) dated 28.06.2017 went beyond the recommendations made by the Council and had directed the Central Government and the GNCT to issue a corrigendum. He stated that in order to avoid challenges to the legality of the notifications, circulars and orders issued by the Central Government, it shall be forwarded to the GST Council Secretariat through email for information and deemed ratification by the GST Council. He further informed that during the Officers' meeting held on 5 October 2017, it was suggested that circulars need not be ratified as they were not to be issued on the recommendations of the Council. Similarly, only those orders needed to be ratified by the Council which were issued on the recommendations of the Council. In view of this, he stated that it was proposed to place before the Council the notifications issued under the CGST Act, CGST Rules [Notification Nos. I to 37 for Central Tax and Notifications Nos. 1 to 30 for Central Tax (Rate)]; IGST Act [Notification Nos. I to 8 for Integrated Tax and Notification Nos. 1 to 31 for Integrated Tax (Rate)]; UT GST Act [Notification Nos. I to 3 for Union Territory Tax and Notification Nos. I to 30 for Union Territory Tax (Rate)]; GST (Compensation to States) Act [Notification No. 1 for Compensation Cess Notification and Notification Nos. 1 to 5 for Compensation Cess (Rate)] and Order No. 3 dated 21.09.2017 of the Central Government for their ratification. The Council ratified these notifications and Order No. 3 dated 21.09.2017 as mentioned above on deemed basis. 38. For agenda item 10, the Council ratified Notification Nos. 1 to 37 for Central Tax and Notifications Nos. 1 to 30 for Central Tax (Rate); Notification Nos. 1 to 8 for Integrated Tax and Notification Nos. 1 to 31 for Integrated Tax (Rate); Notification Nos. 1 to 3 for Union Territory Tax and Notification Nos. 1 to 30 for Union Territory Tax (Rate); Notification No. 1 for Compensation Cess Notification and Notification Nos. 1 to 5 for Compensation Cess (Rate) and Order No. 3 dated 21.09.2017 issued by the Central Government on deemed basis. Agenda item 11: Procedure for implementing GIC decisions of urgent nature requiring immediate implementation 39. The Additional Secretary, GST Council explained that the GST Implementation Committee (GIC) was formed pursuant to the decision of the Council in its 14'h Meeting held on 18-19 May 2017 and in the 17 th Meeting held on 18 June 2017. The Council approved the proposal to delegate its powers to GIC on urgent matters. He stated that a working procedure for the functioning of the GIC was approved and as per this, the decisions taken in GIC shall be circulated amongst the Council Members and their views/comments sought within two days. After suitably incorporating comments/views of the Council members, the decision would be implemented after obtaining the approval of the Hon'ble Chairperson of the Council and the decisions taken by GlC would be put up for information of the Council in its next meeting. He explained that on many occasions, it became difficult to follow the procedure as decided above when important procedural issues were required to be implemented urgently. He, therefore, proposed that the Council could consider slightly modifying the procedure outlined above in as much as important and urgent procedural issues approved by GIC may be implemented with the approval of the Hon'ble Union Finance Minister and the Chairperson of the GST Council. The same shall be circulated to the States for information and that decisions taken by the GIC would be put up for information of the Council in its next meeting. However, procedure laid down above shall be followed for normal GTC matters. He added that as decided by the Council in its 21 st Meeting held on 9 September 2017, recommendations of the GIC, involving substantive policy issues shall be placed before the Council for approval before implementation. 39.1. The Hon'ble Minister from Punjab stated that the decisions of the GIC should be sent to the States for ratification. The Secretary stated that the GIC decisions were implemented immediately and if a ratification was required from States, then it would not be possible to implement GIC decisions urgently. He stated that the decisions of GIC were only procedural in nature and these could be placed before the Council in the next meeting. The Hon'ble Minister from Jammu Kashmir suggested that the decisions of GIC should be placed before the Council for confirmation. The Secretary stated that the decisions of the GIC should come before the Council in its Meeting for information only as these would have been implemented by issuance of necessary notification, circular, etc. with the approval of the Hon'ble Union Finance Minister and the Chairperson of the Council. The Council approved this proposal. 40. For agenda item 11 , the Council approved to modify the procedure of GIC for important and urgent procedural issues. In cases involving important and urgent procedural issues, approval accorded by the GIC shall be implemented with the approval of the Hon'ble Union Finance Minister and the Chairperson of the GST Council and it shall be circulated to the States for information and the decisions taken by the GIC would be put up for information of the Council in its next Meeting. However, procedure as originally approved by the Council in its 17 th Meeting held on 18 June 2017 shall apply for normal GIC matters. Further, as decided by the Council in its 21 st Meeting held on 9 September 2017, recommendations of the GIC, involving substantive policy issues, shall be placed before the Council for approval before implementation. Agenda item 12: Issues carried forward from the 21 st GST Council Meeting: - Agenda item 12(i): Approach Paper on principles for Fitment post-implementation of GST 41. The Secretary stated that the Approach Paper along with the comments of the States and responses to the same had been approved by the Fitment Committee and was placed before the Council for approval. He suggested that the Council could approve the Approach Paper along with the comments of the States on the Approach Paper and the written responses to the same. He further suggested that the finalised Approach Paper could have a caveat that the Council may deviate from the principles laid down in the Approach Paper taking into account various considerations and circumstances. The Council approved this proposal. Agenda item 12(ii): Issues listed in Annexure IIB of Agenda item 7 of 21 st GST Council Meeting (List of goods discussed by the Fitment Committee where no change in rate of tax was proposed) 42. The Hon'ble Minister from West Bengal stated in his written comments that the rates of tax on following items should be reconsidered: bamboo and cane furniture from 18% to 5%; on basketry items made of bamboo from 12% to 5%; on bio-diesel from 18% to 5% or at least 12%; and multi-functional printers from 28% to 18%. The Hon'ble Minister from Jammu Kashmir suggested that list of goods covered under this agenda item on which earlier no change in rates of tax was proposed should be reconsidered by the Fitment Committee on the basis of the principles approved by the Council in the Approach Paper. The Council agreed to this suggestion. Agenda item 12(iii): Issues listed in Annexure III of Agenda item 7 of 21 st GST Council Meeting (GST rates on services - Proposals found NOT acceptable by the Fitment Committee) 43. The Secretary suggested that as decided for Agenda item 12 (ii), the proposals relating to services listed in Annexure III which was earlier not found acceptable by the Fitment Committee could also be referred back to the Fitment Committee for reconsideration on the basis of the principles approved by the Council in the Approach Paper. The Council agreed to this suggestion. Agenda item 12(iv): List of Acts from the Central and State Governments as per Section 5(4) of the GST (Compensation to States) Act, 2017 44. Introducing this agenda item, the Joint Secretary, Department of Revenue stated that in the 21 51 meeting of the Council held on 9 September, 2017, some States had mentioned that some Acts listed in the draft notification to be issued under Section 5(4) and 5(6) of the Goods and Services Tax (Compensation to States) Act 2017 had not been repealed entirely and also some Acts which were missing had to be added. He informed that the States were accordingly requested to send a formal request for suitably revising the said draft notification and that a total of 12 States viz., Andhra Pradesh, Delhi, Goa, Himachal Pradesh, Maharashtra, Odisha, Rajasthan, Telangana, Tripura, Uttar Pradesh, Uttarakhand and West Bengal sent requests for changes in their list of Acts under which taxes had been subsumed. He further mentioned that the proposed agenda was prepared as per Sections 173 and 174 of the SGST Acts of the concerned States and on the basis of inputs received from the States and was placed before the Council for approval. He further mentioned that a corrigendum to the agenda had been circulated wherein the United Provinces Sales of Motor Spirit Diesel and Alcohol Taxation Act, 1939 which was mentioned in the Uttar Pradesh SGST Act as taxes being subsumed but was left out inadvertently, was also proposed to be included in the list of Acts to be subsumed. 44.1. The Principal Secretary (Finance), Odisha stated that in addition to the Acts listed in serial no. 21 of the draft notification, one more Act needed to be added in the list of subsumed Acts for Odisha, namely, clause (e) of sub-section (i) of section 131 of Odisha Municipal Act, 1950 relating to Advertisement Tax. He requested to add the same to the list at serial number 21 of the draft notification. The CCT, Punjab stated that Water Act was a Central Act which was not shown to be subsumed and 80% of its revenue came to the States. The Joint Secretary, Department of Revenue stated that only two Central Government Acts had been subsumed. The Council approved the draft notification in the agenda note containing the list of Acts subsumed for different States as per Section 5(4) and Section 5(6) of the GST (Compensation to States) Act, 2017 along with the addition of clause (e) of sub-section ( 1) of section 131 of Odisha Municipal Act, 1950 relating to Advertisement Tax and the United Provinces Sales of Motor Spirit Diesel and Alcohol Taxation Act, 1939 of Uttar Pradesh. 45. For agenda item 12 , the Council approved the following: (i) Approach Paper on principles for Fitment post-implementation of GST 45.1. The Approach Paper along with the comments from the States on the Approach Paper and the written responses to the same with the caveat that the Council may deviate from the principles laid down in the Approach Paper taking into account various considerations and circumstances. (ii) Issues listed in Annexure IIB of Agenda item 7 of 21 st GST Council Meeting (List of goods discussed by the Fitment Committee where no change in rate of tax was proposed) 45.2. The list of goods in Annexure IIB on which earlier no change in rates of tax was proposed shall be reconsidered by the Fitment Committee on the basis of the principles approved by the Council in the Approach Paper. (iii) Issues listed in Annexure III of Agenda item 7 of 21 st GST Council Meeting (GST rates on services - Proposals found NOT acceptable by the Fitment Committee) 45.3. The proposals relating to services listed in Annexure III which was earlier not found acceptable by the Fitment Committee shall be reconsidered by it on the basis of the principles approved by the Council in the Approach Paper (iv) List of Acts from the Central and State Governments as per Section 5(4) of the GST (Compensation to States) Act, 2017 45.4. The draft notification in the agenda note containing the list of Acts subsumed for different States as per Section 5(4) of the GST (Compensation to States) Act, 2017 along with the addition of clause (e) of sub-section (1) of Section 131 of Odisha Municipal Act, 1950 relating to Advertisement Tax and the United Provinces Sales of Motor Spirit Diesel and Alcohol Taxation Act, 1939 of Uttar Pradesh. Agenda item 13: Any other agenda item with the permission of the Chairperson 46. After taking the approval of the Hon'ble Chairperson, some additional agenda items along with detailed agenda notes were circulated in hard copy and by email to the Members before the commencement of the Council Meeting. These are discussed in the subsequent paragraphs. Agenda item 13(i): Exemption from obtaining registration for persons making interState supply of services whose aggregate turnover is below the threshold limit 47. The Commissioner (GST Policy), CBEC stated that the GST Law provided for a threshold limit of ₹ 20 lakh for registration to give relief to small taxpayers. However, under Section 24, clause (i), registration was made mandatory for persons making inter-State supply irrespective of the turnover. He stated that due to this, small service providers such as persons teaching occasionally as a guest faculty in different institutions of the country, services of mutual fund agents, etc. had come under the ambit of GST. Keeping in view the difficulties of the small taxpayers, it was proposed to exempt from registration, small service providers, making inter-State supply of services, up to ₹ 20 lakh and up to ₹ 10 lakh for Special Category States other than the State of Jammu Kashmir. He pointed out that such an exemption had already been provided to services of job workers. 47.1. The Hon'ble Deputy Chief Minister of Delhi supported this proposal. He further suggested to repeal the provision of Section 10(2)(c) of the CGST/SGST Act so that interState supplies could also get the benefit of Composition scheme. The Hon'ble Deputy Chief Minister of Gujarat and the Hon'ble Minister from Jammu Kashmir also supported this proposal The Council approved the proposal contained in this agenda item. Agenda item 13(ii): Decision on effective date for starting Tax Deduction at Source and Tax Collection at Source 48. The Commissioner (GST Policy), CBEC informed that the facility for registration for Tax Deduction at Source (TDS) and Tax Collection at Source (TCS) was not available on the common portal till date and that the GSTN had informed the Group of Ministers (GoM) constituted to monitor and resolve IT challenges that the facility for TDS/TCS registration and processing shall be available on the GSTN portal from 7 October, 2017. He informed that the trade and industry had been enquiring regarding the effective date from which deduction/collection of tax would start so that they could prepare themselves accordingly. He also informed that the amount of TDS/TCS was to be auto-populated in FORM GSTR-2 of the taxable person on whose account the amount had been deducted or collected. He added that the process of return filing had not stabilised so far and was likely to take some more time. He stated that the .Council could decide regarding the date from which deduction/collection of tax should start in terms of section 51/52 of the CGST/SGST Acts. He further informed that in the Officers' meeting of 5 October 2017, it was suggested that the deduction/collection of tax could start from 1 April 2018. The Council agreed to this suggestion. Agenda item 13(iii): Changes in GST rates on certain goods and exemption from IGST in certain cases 49. Introducing this agenda item, the Joint Secretary (TRU-1), CBEC stated that the Fitment Committee had met on 5 October 2017 and examined the proposals for change in the rate of tax on certain goods and exemption from IGST on imports of bona fide gifts up to a value limit of ₹ 3000 through post or air and made recommendations to the Council. The record of discussion in respect of the issues raised in the Council is recorded as below: A. Changes in GST rates on certain goods: Serial No.1: IGST exemption on import of gold by nominated agencies (para 4.41 of the FTP) 50. The Secretary informed that the Ministry of Commerce had recommended for exemption from IGST on import of gold by nominated agencies. He stated that small exporters found it difficult to get gold for jewellery as nominated agencies needed to do a lot of paper work for exporters and they did not want to go through such hassles. He suggested to exempt IGST on gold imports made by 36 banks and 6 public sector undertakings mentioned as nominated agencies in Paragraph 4.41 of the Foreign Trade Policy but to exclude from its ambit nominated agencies like the Star Trading Houses which are also mentioned as Nominated Agencies under Paragraph 4.41 of the Foreign Trade Policy. He stated that with such an exemption, banks would not pay IGST at the time of import and the demand of IGST would be made at the stage when banks and PSUs supplied gold to any person, including exporters. 50.1. The CEA observed that the Council had addressed several procedural dimensions of export but it had not yet touched upon embedded taxes and duty inversion and that the Export Committee should continue to work on these issues. 50.2. The CCT, Karnataka suggested to charge IGST at the rate of 0.25% instead of exempting it so that such imports were reflected in the returns of the importers. The Secretary stated that the rate of gold fluctuated every day but the rate of gold for Customs purposes was fixed for 15 days and therefore it would be a financial burden on the banks and PSUs to pay IGST. He added that since the benefit was being extended only to banks and PSUs and not to Star Trading Houses, the chance of misuse of this exemption was minimal. The Senior Joint Commissioner (Commercial Taxes), West Bengal supported the proposal. The Council approved the proposal. Serial No.2: To reduce GST on manmade filament yarn, Spun Yarn and sewing thread 51. The Secretary stated that due to the demand of the Textile sector it was proposed to C M reduce the rate of tax on manmade filament yarn, spun yarn and sewing thread from 18% to.12% though it entailed a loss of revenue of about ₹ 2500 crore. He pointed out that staple fibre was not covered under this rate reduction and that it would continue to attract tax at the rate of 18%. The Hon'ble Minister from Rajasthan stated that the issue of inverted duty structure would continue even with this rate reduction and suggested that the rate of tax should be brought down to 5%. The Secretary responded that this would lead to a very largescale revenue loss and pointed out that even the industry had only demanded reduction in rate to 12%. He added that this rate reduction would also address the dichotomy being faced between the integrated units and the power looms. After discussion, the Council agreed to reduce the rate of tax on manmade filament yam, spun yam and sewing thread from 18% to 12%. Serial No.3: All types of Scrap (Plastic scrap; Paper scrap; Rubber scrap and Hard Rubber scrap; Glass scrap; Precious metal scrap and Wood scrap) 52. The Joint Secretary (TRU-1) stated that the Fitment Committee had recommended the rate of tax on various types of scrap which presently attracted tax rates of 18%, 12% and 28% to 5% for Plastic scrap, Paper scrap (Waste paper), Rubber scrap and Glass scrap. The Hon'ble Minister from Kerala stated that the municipalities were paying ₹ 10,000 to ₹ 20,000 per load for removing e-waste such as computers, etc. generated in schools, colleges, etc. and that this should also not be taxed. The Joint Secretary (TRU-1), CBEC, stated that municipal waste, sewage sludge and clinical waste were already exempt from tax and that the Council could take a view regarding rate of tax fore-waste. The Hon'ble Minister from Kerala suggested to tax it at the rate of 5%. The Council agreed to this suggestion. Serial No.4: Clarification regarding Unstitched Salwar suits 53. The Joint Secretary (TRU-1), CBEC, stated that fabrics are classified under Chapters 50 to 55 and attract tax at the rate of 5% with no refund of unutilised input tax credit. Mere cutting and packing of fabrics into pieces of different lengths from bundles and thans would not change the nature of these goods and such pieces of fabrics would continue to be classified under respective chapter headings as fabrics and attract 5% tax. He stated that the proposal was to clarify that unstitched salwar suit is a fabric cut from lumps or thans on which value addition is done with embroidery, handwork, patchwork, etc. and that such pieces of fabrics would continue to be classified under Chapters 50 to 55 of the First Schedule to the Customs Tariff Act, 1975 and attract 5% rate of tax. The Council agreed to the suggestions. Serial No.5: Reference from Finance Minister, Kerala 54. The Joint Secretary (TRU-I), CBEC recalled that in the 6 th Meeting of the Council (held on 11 December 2016), it was decided to reduce the rate of tax on coir mats and floor coverings from 12% to 5%. He stated that classification of these products in the relevant entry of the concerned notification was Chapter heading 5705, though these goods were also covered under Chapter headings 5702 and 5703. He stated that it was proposed to suitably amend the relevant notification. The Council agreed to the proposal. Serial No.6: To exempt IGST on imports of rigs imported for oiVgas exploration and production projects under lease 55. The Joint Secretary (TRU-1), CBEC stated that the proposal was to exempt IGST on imports of rigs and associated goods imported for oil/gas exploration and production projects under lease subject to certain conditions as listed in the Agenda note. The council agreed to reduce the IGST on imports of rigs and associated goods imported for oil/gas exploration and production projects under lease from 5% to Nil subject to the conditions mentioned in the Agenda note. Serial No.7: Rate of GST on (a) unbranded Ayurvedic, Unani, Siddha, Homeopathy medicines, whether or not registered; (b) unbranded namkeens (definition of registered brand name/brand name definition to be the same as in the case of branded cereals, pulses and flours etc.) 56. The Joint Secretary (TRU-1), CBEC, stated that the rate of tax on unbranded Ayurvedic, Unani, Siddha, Homeopathy medicines and unbranded namkeens goods was proposed to be reduced from 12% to 5%. The Hon'ble Minister from Kerala stated that classic Ayurvedic preparations should be promoted and there should be no distinction between branded and unbranded ayurvedic medicines. He stated that the products of Kottakal Ayurved Shala, Coimbatore Ayurved Shala, etc. should also be charged to tax at the rate of 5%. The Hon'ble Chairperson stated that if no distinction was made between branded and unbranded Ayurvedic products, products of Dabur/ Patanjali, etc. would also attract reduced rate oftax of 5%. The Finance Secretary, Odisha stated that there was a very large market for over the counter Ayurvedic products and tax rate of 5% only on unbranded Ayurvedic medicines was reasonable. The Council agreed to the proposal. The Joint Secretary (TRU-1), CBEC, stated that tax on unbranded namkeen was proposed to be reduced from 12% to 5%. The Council agreed to the proposal to reduce the rate of tax from 12% to 5% on unbranded Ayurvedic, Unani, Siddha, Homeopathy medicines and unbranded namkeens. Serial No.8: To shift the time of supply on advances received against supply of goods to be made by a dealer whose aggregate turnover in a financial year does not exceed ₹ 1.5 crore to issuance of invoice or actual supply of goods if invoice is not issued within stipulated time 57. The Commissioner (GST Policy), CBEC introduced this agenda item and stated that this was essentially proposed to ease the compliance burden on small taxpayers. The Hon'ble Minister from Jammu Kashmir observed that for advances received by small taxpayers with turnover of less than ₹ 1.5 crore, there should be no distinction between the treatment for supply of goods or supply of services. The Secretary stated that in the services sector, there was an existing provision and it was required as supply of services was intangible in nature whereas supply of goods was tangible. After discussion, the Council agreed to this proposal. Serial No.9: Exemption from IGST on medicines supplied free by international agencies like UNICEF, WHO, Red Cross etc. 58. The Joint Secretary (TRU-1), CBEC stated that the proposal was to exempt IGST on medicines supplied free by international agencies like UNICEF, WHO, Red Cross etc. which currently attract tax at the rate of 12% or 5% in order to make the import less costly for the international organisations. The Council agreed to the proposal. Serial No.10: Reduction of tax on parts of Fixed Speed Diesel Engine of power not exceeding 15HP and parts of power driven pumps primarily designed for handling water - centrifugal pumps, deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps 59. The Secretary stated that the proposal was to reduce tax on parts suitable for use solely or principally in Fixed Speed Diesel Engines of power not exceeding 15HP and parts suitable for use solely or principally in power driven pumps primarily designed for handling water, namely, centrifugal pumps (horizontal and vertical), deep tube-well turbine pumps, submersible pumps, axial flow and mixed flow vertical pumps from 28% to 18%. The Council agreed to the proposal. B. Exemption from IGST on imports of bona fide gifts up to value limit of ₹ 3000 through post or air 60. Introducing this agenda item, the Joint Secretary (TRU-l), CBEC stated that it was proposed to exempt from IGST import of bona fide gifts up to a value limit of ₹ 3000 imported through post or air. The Hon'ble Minister from Kerala stated that earlier the value limit was ₹ 20,000 and that this value limit should be maintained. The Secretary stated that such a high value limit had led to widespread misuse of this scheme leading to loss of revenue. He proposed that the value limit could be increased to ₹ 5,000. The Hon'ble Minister from Jharkhand stated that the value limit should be ₹ 1,000. The Hon'ble Minister from Goa stated that a large number of Non-Resident Indians were sending gifts and value threshold of ₹ 20,000 should be considered even at the risk of some misuse. He stated that genuine transactions should not be punished and that the limit of ₹ 5,000 was very low. The Hon'ble Minister from Kerala enquired as to what was the total amount of tax collected on imported gifts. The Joint Secretary (TRU-I), CBEC stated that field level data was not available as such imports were not yet computerised. He further added that a value limit of ₹ 20,000 would be very high and even mobile phones, high end shoes, etc. would get imported as gifts. The Hon'ble Minister from Andhra Pradesh supported the proposal to increase the threshold to₹ 5,000 per parcel. The Council agreed to exempt IGST on import of bonafide gifts up to a value of₹ 5,000 per parcel. Agenda item 13(iv): Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure - exemption thereon 61. Introducing this Agenda item, the Joint Secretary (TRU-Il), CBEC stated that while toll is a payment made by the users of road to concessionaires for usage of roads, annuity is an amount paid by the National Highways Authority of India (NHAI) to concessionaires for construction of roads in order that the concessionaire did not charge toll for access to a road or a bridge. In other words, annuity is a consideration for the service provided by concessionaires to NHAI. He stated that construction of roads was now subject to tax at the rate of 12% and due to this, there was free flow of input tax credit from EPC (Engineering, Procurement and Construction) contractor to the concessionaires and thereafter to NHAI. He stated that as a result, tax at the rate of 12% leviable on the service of road construction provided by concessionaire to NHA1 would be paid partly from the input tax credit available with them. He stated that the Council may take a view for grant of exemption to annuity paid by NHAI/State Highways Construction Authority to concessionaires during construction of roads. He added that access to a road or bridge on payment of toll was already exempt from tax. The Hon'ble Minister from Haryana suggested to also cover under this provision annuity paid by State-owned Corporations. After discussion, the Council decided to treat annuity at par with toll and to exempt from tax, service by way of access to a road or bridge on payment of annuity. Agenda item 13(v): Additional relief to Small Tax Payers - Composition Scheme 62. The Commissioner (GST Policy), CBEC, stated that this was an additional relief proposed to be given under the Composition Scheme. He explained that in the current Composition Scheme, if a person was engaged in any supply of services other than the supply of service specified in clause (b) of paragraph 6 of Schedule II (Restaurant Services), he could not opt for Composition Scheme. He stated that even interest on deposits made in banks is considered as service (though exempted) and therefore a person receiving interest would be ineligible for Composition Scheme. He stated that it was proposed to issue an Order under Section 172 of the CGST/SGST Act (providing for removal of difficulty) to exclude such services from Section 10 as per the following: (i) Section 10(2)(a) of the CGST/SGST Acts to be read so as to exclude the services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount; (ii) Section 10( 1) of CGST/SGST Acts to be read so as to exclude the interest earned from deposits, loans or advances from the aggregate turnover. He added that in the absence of such an exemption, Composition Scheme would be completely unavailable to manufacturers and dealers who were earning interest from deposits, etc. It was suggested that such dispensation could be provided for all exempt services and need not be restricted to interest or discount only. The Council agreed to the proposal. It was also decided by the Council to issue a removal of difficulty order under Section 172 of the CGST/SGST/UTGST Acts to the effect that if a person supplies goods and/or services referred to in clause (b) of paragraph 6 of Schedule II of the said Acts and also supplies any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, the said person shall not be ineligible for the Composition scheme under Section 10 and in computing his aggregate turnover in order to determine his eligibility for Composition scheme, value of supply of any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account. Agenda item 13(vi): GST on development charges collected by Gift City Company Limited for allotment of land on long term lease (of 30 years or more) to developers for development of commercial and residential spaces 63. Introducing this Agenda item, Joint Secretary (TRU-ll), CBEC stated that presently the upfront amount charged by State Industrial Development Corporations/Undertakings (known as premium, salami, development charges, etc.) for long term lease (of 30 years or more) of industrial plots to industrial units was exempt from GST. Gift City Company h Limited which is developing international financial services centre (IFSC) in Gujarat has requested for a similar exemption for the amount charged by it for granting development rights to developers for construction of commercial and residential spaces in the Domestic Tariff Area. He stated that the present request was different from the existing exemption in as much as it covered long term lease of commercial and residential plots and that allotment of land by authorities such as Delhi Development Authority, Ghaziabad Development Authority, NOIDA, on long term lease for residential purpose was presently not exempt from tax. He stated that as Gift City Company was developing the first international financial services centre in India to attract international financial business to India which has a lot of potential, the development rights granted by Gift City Company to developers for construction of commercial and residential buildings on long term lease of 30 years or more could be exempted as this would reduce the initial cost of development and encourage them to invest in the project. He stated that the proposal before the Council was to exempt from tax upfront, amount (called as premium, salami, development charges or by any other name) payable in respect of service, by way of granting of long term lease (30 years or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations/Undertakings or any other entity having 50% or more ownership of Central Government, State Government, Union Territory to industrial units or developers in any industrial or financial business area. The Council agreed to this proposal. Agenda item 13(vii): Additional relief to Small Tax Payers - GTA to unregistered persons 64. Introducing this Agenda item, the Joint Secretary (TRU-ll), CBEC, stated that services provided by a GTA attracted tax at the rate of 5% without input tax credit under Reverse Charge Mechanism or 12% with input tax credit under forward charge. He stated that for specified categories of persons, tax on services provided by a GTA operating under 5% GST rate scheme was payable by the recipient of the service under Reverse Charge Mechanism. However, when a GT A provided service to an unregistered person other than the specified recipients, the GTA is required to pay tax at the rate of 5% under forward charge. He informed that it had come to light that GTAs were not willing to provide services to an unregistered person in order to avoid taking registration. He stated that in order to remove hardship being faced by small unregistered businesses, it was proposed that services provided by a GTA to an unregistered person including an unregistered casual taxable person, other than to the following recipients, may be exempted, namely: (a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or (e) anybody corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person. 64.1. He stated that exemption may be provided in case of services by GTAs operating under 5% GST rate under Reverse Charge Mechanism and also those paying GST at the rate of 12% under forward charge as otherwise it would by disadvantageous for GTAs who choose to come under lTC chain at 12% rate. 65. For agenda item 13 , the Council approved the following: (i) Exemption from obtaining registration for persons making inter-State supply of services whose aggregate turnover is below the threshold limit 65.1. To exempt from registration, small service providers, providing inter-State supply of services, up to a turnover of ₹ 20 lakh per annum and up to ₹ 10 lakh per annum for Special Category States other than the State of Jammu Kashmir for which the turnover limit for exemption shall be ₹ 20 lakh per annum. (ii) Decision on effective date for starting Tax Deduction at Source and Tax Collection at Source 65.2. Deduction/collection of tax in terms of the provisions of Tax Deduction at Source and Tax Collection at Source under section 51 and 52 of the CGST/SGST Acts respectively shall start from 1 April 2018. (iii) Changes in GST rates on certain goods and exemption from IGST in certain cases 65.3. The rates of tax proposed under the agenda note with the following modification: (i) rate of tax one-waste (Sl. No.3) shall also be 5%; (ii) IGST on import of bona fide gifts of a value up to ₹ 5,000 per parcel shall be exempt instead of the originally proposed value of ₹ 3,000 per parcel. (iv) Issue of Annuity being given in place of Toll Charges to Developers of Public Infrastructure - exemption thereon 65.4. To exempt from tax, service by way of access to a road or bridge on payment of annuity. (v) Additional relief to Small Tax Payers -Composition Scheme 65.5. To issue an Order under Section 172 of the CGST/SGST/UTGST Acts to the effect that if a person supplies goods and/or services referred to in clause (b) of paragraph 6 of Schedule II of the said Acts and also supplies any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, the said person shall not be ineligible for the Composition scheme under Section 10 and that in computing his aggregate turnover in order to determine his eligibility for Composition scheme, value of supply of any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account. (vi) GST on development charges collected by Gift City Company Limited for allotment of land on long term lease (of 30 years or more) to developers for development of commercial and residential spaces 65.6. To exempt from tax upfront, amount (called as premium, salami, development charges or by any other name) payable in respect of service, by way of granting of long term lease (30 years or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations/Undertakings or any other entity having 50% or more ownership of Central Government, State Government, Union Territory to (a) industrial units or (b) developers in any industrial or financial business area. (vii) Additional relief to Small Tax Payers-GT A to unregistered persons 65.7. To exempt services provided by a GTA to an unregistered person including unregistered casual taxable person, other than the following recipients, namely: (a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or (e) anybody corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person. Other Issues: 66. The Hon'ble Minister from Tamil Nadu circulated a written speech which was taken on record. He requested that the working sheet for calculation of composition should be made available to the State. He also suggested that taxpayers should be subject to one single authority and that the single authority should either be the State or the Centre which should administer all the three laws i.e. CGST, SGST and IGST in respect of such taxpayer. He observed that such an arrangement was in consonance with the larger objective of the new tax regime. He did not support the proposal to place restriction on cross-empowerment under the IGST Act in case where place of supply was under dispute. He stated that GIC had requested Tamil Nadu to prepare a draft note on the matter for detailed discussion in the Council and that a detailed note had been prepared and sent to the Council Secretariat for circulation amongst the Members. On the subject of manual refund till GSTN provided an online facility, he supported the proposal but suggested that a standard operating procedure should be put in place before actual implementation of this recommendation. On the subject of increasing the annual turnover threshold under Composition Scheme from ₹ 75 lakh to Rs. one crore; to treat exempt supplies of the aggregate turnover under the Composition Scheme as Nil rated; to allow filing of returns quarterly in respect of taxpayers having turnover up to ₹ 1.5 crore and to temporarily suspend the provision of reverse charge levy under section 9( 4), he stated that while Tamil Nadu always championed the cause of small taxpayers, the legal basis of the proposal should be studied by the Law Committee and discussed by GIC before a final view is taken by the Council. He also expressed his apprehension that suspension of reverse charge mechanism would encourage taxpayers to purchase from unregistered sources thereby impacting revenue collection. He added that to curb tax evasion, there was a need to operationalise nation-wide e-way bill. He said that his government supported most of the proposals of the Fitment Committee but it had reservation in respect of the proposal of car leasing. He added that levy of GST at the rate of 65% of GST plus Cess would reduce the share of SGST from the sale of small and medium cars when compared to the earlier VAT at the rate of 14.5% which accrued to the States. On this account, he did not support this proposal. He further added that as regards the proposed amendment to expand the definition of brand name in respect of cereals, pulses and flours, etc. he had consistently advocated to exempt all food grains irrespective of whether put in unit container or whether branded or not. He pointed out that this had caused wide-spread resentment and the present proposal to mandate filing of affidavit by the person having an actionable claim or enforceable right on brand name would further aggravate the resentment amongst small retailers who pack and sell food grains. He stated that as regards the Approach Paper on principles of fitment post implementation of GST, his State suggested that tax incidence should be based on the average of the tax rates actually specified in the various schedules and not to take maximum rate for residuary items at 14.5% as this artificial increase resulted in placing several goods under 28% rate slab though they were neither luxury nor sin goods. He stated that for the purpose of arriving at the weighted average, tax on residuary entries should not be reckoned. 67. The Hon'ble Minister from West Bengal circulated a written note where his views on various Agenda items were given. They have been incorporated suitably in relation to discussion under relevant Agenda items. In addition, he has also pointed out that the State share of Central taxes used to be devolved on the first day of every month but it has recently been changed to 15 th day of every month. He had raised this issue during the 21 st Meeting of the Council held on 9 September, 2017 and the Hon'ble Chairperson had stated that he would revert on this issue after discussing it with the Expenditure Secretary. He reiterated that the old time-tested system should be reintroduced; otherwise it would severely upset the cash management system of the States. Agenda item 14: Date of the next meeting of the GST Council 68. The Hon'ble Chairperson observed that this was a very fruitful meeting and that a lot of ground had been covered. He suggested that the next meeting of the Council could be held on 10 November 2017 in Guwahati. The Council agreed to the suggestion. 69. The Meeting ended with a vote of thanks to the Chair. Annexure