Minutes of the 12th GST Council Meeting held on 16th March 2017 - GST - 12th GST Council Meeting

Minutes of the 12th GST Council Meeting held on 16th March 2017 The twelfth meeting of the GST Council (hereinafter referred to as 'the Council') was held on 16 March 2017 in Vigyan Bhavan, New Delhi under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley. The list of the Hon'ble Members of the Council who attended the meeting is at Annexure 1. The 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 12th Meeting of the Council 1. Confirmation of the Minutes of the 11 th GST Council Meeting held on 4 March 2017 2. Approval of the Draft Model SGST Law as modified in accordance with the decisions of the GST Council and as vetted by the Ministry of Law Justice, Government of India 3. Approval of the Draft UTGST Law as vetted by the Ministry of Law Justice, Government of India 4. Additional Agenda Items 4.1. Amendments to the draft IGST Law 4.2. Amendments to the draft Goods and Services Tax (Compensation to the States) Bill, 2017 4.3. Constitution of a Task Force to suggest measures for creating an eco-system for seamless freight movement (Based on an agenda note received from MoRTH) 5. Any other agenda item with the permission of the Chairperson 6. Date of the next meeting of the GST Council 3. In his opening remarks, the Hon'ble Chairperson welcomed all the Members of the Council. He noted that representation in the Council would undergo a change after the recent State elections and that the Hon'ble former Ministers from Punjab (Shri Parminder Singh Dhindsa), Uttarakhand (Ms. Indira Hridayesh) and Uttar Pradesh (Shri Abhishek Mishra) would no longer be attending the meetings of the Council. He placed on record the positive contribution of the outgoing Ministers in the Council's deliberations which the Council fully endorsed. Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 11th GST Council Meeting held on 4 March, 2017: 4. The Hon'ble Chairperson invited comments of the Members on the draft Minutes of the 11th Meeting of the Council (hereinafter referred to as 'Minutes') held on 4 March 2017 before its confirmation. The Members suggested the following amendments to the draft Minutes. 4.1. The Hon'ble Minister from Jammu Kashmir stated that in paragraph 8.3 of the Minutes, in the second sentence, the expression 'Article 5 of the Constitution of Jammu Kashmir' should be replaced by the expression 'Section 5 of the Constitution of Jammu Kashmir'. The Council agreed to this suggestion. 4.2. Shri R.K Tiwari, Additional Chief Secretary, Uttar Pradesh stated that in paragraph 6.2.8 of the Minutes, the version of the Secretary to the Council (hereinafter referred to as 'Secretary') was recorded as 'if the refund was not given within a certain period of the passing of an adjudication or appellate order where the order had acquired finality, the rate of interest for delayed refund would be 9% .. .' and that it appeared odd that the same principle did not apply to a refund arising out of an assessment order. The Secretary stated that the word 'adjudication' also included an assessment order. He further observed that this was a discussion summary and based on the decision taken on this subject, the relevant amendment had been incorporated in Section 56 of the CGST Law and circulated to all the States. He suggested that at this stage, the Minutes need not be amended on this issue. The Council agreed to this suggestion. 5. In view of the above discussion, for Agenda item 1 , the Council decided to adopt the Minutes of the 11th Meeting of the Council with the change as recorded below: 5.1. In paragraph 8.3 of the Minutes, in the second sentence, the expression' Article 5 of the Constitution of Jammu Kashmir' to be replaced by the expression 'Section 5 of the Constitution of Jammu Kashmir'. Agenda Item 2: Approval of the Draft Model State Goods and Services Tax (SGST) Law as modified in accordance with the decisions of the GST Council and as vetted by the Ministry of Law Justice, Government of India: 6. Introducing this agenda item, the Secretary informed that the draft SGST Law was almost a replica of the Central Goods and Services Tax (CGST) Law, with some minor changes. He invited Dr. P.D. Vaghela, Commissioner, Commercial Taxes (CCT), Gujarat to briefly explain the changes in the SGST Law vis-a-vis the CGST Law. CCT, Gujarat explained that there were three major changes in the SGST Law as compared to the CGST Law, namely (i) the transitional provisions would be different in each State; (ii) Advance Ruling Authority would be constituted under the SGST Law; and (iii) the repeal and saving clause would be State specific. He further stated that there were other small changes like substituting reference to Central tax in the CGST Law to State tax in the SGST law. He informed that all such changes were indicated in 'bold' and 'italics' in the draft SGST Law circulated to the States. The Secretary stated that the draft SGST Law circulated to the States was discussed today in a four-hour meeting with the officers of the States and the Centre and they suggested a few changes which were also circulated for the consideration of the Members as part of the discussion on the draft SGST Law. The Hon'ble Chairperson desired that an officer should explain the changes proposed in the SGST Law that were circulated to the States just before the commencement of the Council meeting. Shri Upender Gupta, Commissioner (GST Policy Wing), CBEC explained these changes and the same are included as Annexure-3 to the Minutes. The Secretary invited comments of the Members on the draft SGST Law circulated as an Agenda Note and the amendments proposed thereto as contained in Annexure- 3. 6.1. The Hon'ble Deputy Chief Minister of Delhi stated that in Section 67(1) of the draft SGST Law, it was provided that a proper officer not below the rank of Joint Commissioner could authorise inspection or search of a premise. He observed that this power should only vest with the Commissioner as otherwise, all officers of the rank of Joint Commissioner could exercise the power of inspection, search and seizure. The Secretary stated that this provision restricted the power to authorise inspection and search to an officer not below the rank of Joint Commissioner and this did not preclude this power to remain vested only with the Commissioner. Dr. Reeta Vasishta, Additional Secretary, Legislative Department, Ministry of Law explained that an officer below the rank of Joint Commissioner could not be designated as a proper officer under Section 67(1) of the draft SGST Law. The Secretary stated that not all Joint Commissioners would be proper officers under this Section and that only a Joint Commissioner who had been assigned the function under this Section could exercise this power as a proper officer. The Hon'ble Chief Minister of Puducherry observed that under Section 67(1), a proper officer would be one who had been assigned this power by the Commissioner. The Hon'ble Chairperson stated that under this Section, the decision to inspect or search a premise would be taken by an officer not below the rank of Joint Commissioner and then he could authorise any other officer to carry out the inspection or search. 6.2. The Hon'ble Minister from Jammu Kashmir stated that while all other States would enact their SGST Act by exercising the enabling power under Article 246A(1) of the Constitution of India, for his State, it would be done by exercising the enabling power under Section 5 of the Constitution of the State of Jammu Kashmir. He stated that on this account, if certain drafting changes were required in the SGST Law of the State of Jammu Kashmir, it would be done in consultation with the Council. The Hon'ble Chairperson observed that the SGST Legislation of Jammu Kashmir could be enacted by the Jammu Kashmir Legislature itself without reference to the Council and that their SGST Law would need to have a provision to integrate it to the GST process of the country. The Hon'ble Minister from Jammu Kashmir raised an issue that since the SGST Law of his State was to be enacted under its own Constitution, whether it could enact a more ambitious SGST Legislation, like including sectors such as real estate and power under their SGST Law. The Secretary observed that this would not be feasible as a seprate dispensation on real estate or power sector in the SGST Act of Jammu Kashmir would create problem in relation to operation of the IGST Law. 6.3. The Hon'ble Minister from West Bengal stated that under Section 51(1) of the draft SGST Law, a department or establishment of the Central Government or a State Government was required to carry out tax deduction at source and the amount so deducted was to be deposited in the CGST and SGST heads of account in equal proportion. He observed that such Government departments would not have an annual turnover, and, therefore, there should be clarity as to which administration would carry out scrutiny or audit of such tax deductor, if required. He suggested that the Central Tax Administration could carry out audit and scrutiny of the departments of the Central Government and the respective State Tax Administration could carry out audit and scrutiny of departments of the concerned State Government. The Secretary suggested that such a provision could be made in the relevant GST Rule. The Council agreed to the suggestion. 7. For agenda item 2 , the Council approved the draft SGST Law with the changes as indicated in Annexure-3 of the Minutes (the changes as suggested in the meeting of the officers of the Centre and the States held on 16 March 2017 in New Delhi). The Council also authorised the Law Committee of Officers to make minor corrections and rectify typographical errors, wherever required, and that the revised draft SGST Law shall be shared with the States. The Council also agreed that the relevant GST Rule shall provide that, if so required, the Central Tax Administration would carry out audit and scrutiny of the departments of the Central Government which deducted tax at source under Section 51(1) of the draft CGST/SGST Law and similarly, the respective State Tax Administration would, if so required, carry out audit and scrutiny of departments of the concerned State Government. Agenda Item 3: Approval of the draft Union Territory Goods and Services Tax (UTGST) Law as vetted by the Ministry of Law Justice, Government of India 8. Introducing this agenda item, the Secretary informed that the UTGST Law circulated as an agenda note for this meeting was discussed extensively in the meeting of the officers of the Central and the State Governments in the morning of 16 March, 2017 and that they had suggested some changes which were also circulated for the consideration of the Members. He invited Commissioner (GST Policy Wing); CBEC to explain the changes and the changes, as explained, are included as Annexure-4 of the Minutes. 8.1. The Secretary observed that the UTGST Law was a short law and a large number of provisions under this law were drawn through a cross-referencing to the draft CGST Law. He further stated that the officers from some of the Union Territories had attended the Officers' meeting held earlier during the day and had given their inputs. He invited the comments of the Members on the draft UTGST Law and the changes suggested to the same circulated during the Meeting of the Council. No Member offered any comment on the draft UTGST Law. The Council thereafter approved the draft UTGST Law along with the proposed changes. 9. For agenda item 3 , the Council approved the draft UTGST Law with the changes as indicated in Annexure-4 of the Minutes (the changes as suggested in the meeting of the officers of the Centre and the States held on 16 March 2017 in New Delhi). The Council also authorised the Law Committee of Officers to make minor corrections and rectify typographical errors, wherever required, and that the revised UTGST Law shall be shared with the States. Agenda Item 4.1: Amendments to the draft Integrated Goods and Services Tax (lGST) Law 10. Introducing this agenda item, the Secretary stated that certain changes were proposed in the draft IGST Law due to the strong concerns expressed by the Ministry of Commerce in respect of certain provisions of the draft IGST Law which could adversely affect the export competitiveness of the units working in Special Economic Zones (SEZs). He invited Shri Alok Chaturvedi, Additional Secretary, Department of Commerce to give a brief overview of the concerns regarding the impact of the IGST Law on SEZs. 10.1. The Additional Secretary, Department of Commerce stated that the concept behind SEZs was that they were like zero tax territories with an excellent eco-system to promote exports. He stated that this environment was necessary for India to compete with other countries like Singapore, Dubai, China, Hong Kong, Philippines and Thailand. He stated that SEZs accounted for 27% of total exports from the country and had a total investment of ₹ 4 lakh crore and provided employment to 16.88 lakh persons. He observed that all this could be adversely affected if the existing SEZ concept was not continued under the GST framework. He stated that presently, supplies from the Domestic Tariff Area (DTA) to SEZs were treated at par with physical exports and therefore they enjoyed exemption from Customs and Central Excise duty, Service Tax, Central Sales Tax and also from Value Added Tax in some States. He observed that in the IGST Law, the provision in respect of supplies to SEZs was to pay the tax first and to claim refund later. He added that the provision of refund, within seven days, of 90% of the amount of refund claimed was only provided for physical exports and was not available for supplies to SEZs. He further observed that the procedure of export under bond was not available for supplies from DT A to SEZs. He stated that due to such provisions, supplies from DT A to SEZ would be at a disadvantage vis-a-vis physical exports and as a result, SEZ units would be discouraged to source their raw material from DTA. He said that this would adversely affect the 'Make in India' campaign and would also be against the principle of ease of doing business. He therefore strongly suggested that supplies from DT A to SEZs should be treated at par with physical exports and both should be extended the same facilities. 10.2. The Secretary explained that in the GST Law, for a person doing physical export, there were two options - namely to pay IGST and to take refund after export or to give a bond and export without payment of duty. He stated that for supplies from DT A to SEZ, the draft IGST Law gave only one option, namely to pay IGST and then the recipient of the supply located in SEZ to claim refund later. He stated that this put SEZs at a serious disadvantage. He added that like all other countries, India exempted imported goods when used for export and if the domestic supplier did not enjoy a similar benefit, it would adversely affect his competitiveness. He suggested that physical exports and supply to SEZs should be given similar treatment of zero rating. He added that in the Officers' meeting held earlier that day, this proposition was supported by all officers except from Karnataka. He explained that in view of this, an amendment had been suggested in Section 16 of the draft IGST Law where it was proposed to delete sub-Section 4 and to replace in sub-Section 3 the expression 'exporting goods and services or both' with the expression 'making zero rated supply'. He stated that some other small consequential changes were also suggested in sub-Section 3 of Section 16. 10.3. The Secretary stated that another concern in relation to exports that needed to be addressed related to cascading of input taxes for six products which were not under GST, namely the five petroleum products (petroleum crude, high speed diesel, motor spirit or petrol, natural gas and aviation turbine fuel) and alcoholic liquor for human consumption. He stated that the existing wording in sub-section 1 and sub-section 2 of Section 16 of the IGST Law gave the benefit of zero rating to only taxable supplies and thus exported petroleum products and alcoholic liquor would not be eligible to get refund of GST paid on the. inputs used in relation to such exported products. He stated that for petroleum products, input taxes constituted about 1.5% of the value of the final product and if this was cascaded, the Indian petroleum products (which accounted for around 9.3% of country's total export) would lose their competitiveness as the price of petroleum products was benchmarked globally. He stated that alcoholic liquor for human consumption also had a good export potential and India's export in 2015-16 was approximately ₹ 2000 crore. He stated that on account of these considerations, it was proposed to delete the word 'taxable' in sub-Section 1 of Section 16 as also the phrase 'other than non-taxable supply' in sub-Section 2 of Section 16 of the IGST Law. The changes proposed to the IGST Law, including some other editorial corrections, are at Annexure-5 of the Minutes. 10.4. The Hon'ble Deputy Chief Minister of Gujarat stated that suppliers of raw material from DTA to SEZ should be encouraged and they should get more business as compared to import. The Hon'ble Minister from Karnataka stated that GST was based on a seamless refund mechanism and if time-bound refunds were assured, the changes proposed for supply to SEZ were not required. He stated that the Council should not question the fundamentals of the efficacy of the refund mechanism under GST and the efficient functioning of the Goods and Services Tax Network (GSTN). He stated that an underlying tenet of GST was to get rid of the existing system of declarations, bonds, etc. and this should not be reintroduced for DT A supplies to SEZ. The Secretary pointed out that under the existing tax regime, goods could be bought from DT A for use in SEZ without payment of duty and that the new dispensation under GST should not be disadvantageous for supplies to SEZ. He observed that in order to avoid misuse and diversion of goods when supplied to SEZ, the principle to pay IGST first and then take refund was being introduced under the IGST Law but the old provision was continued for physical exports. He observed that about 75% of India's exports were physical exports and it would be unjustified to keep a different procedure for the remaining 25% of exports accounted for by SEZs. 10.5. The Hon'ble Minister from Karnataka stated that his State administration had come across large mismatches between Form-I, Form-C and Form-H and this had led to a demand of about ₹ 5,000 crore in the financial year 2015-16. He stated that if he was given some time, he could furnish more disaggregated data of the misuse relating to SEZ. The Hon'ble Chairperson observed that the principle of paying tax first and claiming refund later blocked the working capital of DTA suppliers and this favoured import. The Hon'ble Minister from Karnataka stated that the blocking of fund would only be for 20 days and that it was important to remember that there were other costs like bank credit, etc. for undertaking import. He cautioned that if such a dispensation was allowed for supplies to SEZs, other segments of business might seek a similar dispensation. He further observed that this issue had been debated several times in the Law Committee of Officers before the provision was drafted in the present form and that it should not be changed at this late stage. He suggested that this provision should be retained presently in the IGST Law, and in case it caused severe disadvantage to domestic suppliers, it could be amended later on and that such an amendment would be relatively easy to carry out as it was to be done only by the Parliament and not simultaneously by the State Legislatures. 10.6. The Secretary stated that one difference between the existing procedure and the procedure under GST would be that the existing Forms like I, H, C etc., were issued manually and this lent them to greater misuse whereas in the GST regime, there would be an all-India record of movement of goods through GSTN and that the Customs ICEGATE (Indian Customs Electronic Commerce/Electronic Data Interchange (EC/EDI) Gateway) would also monitor the receipt of goods in SEZs. He stated that greater use of technology would make diversion of goods meant for SEZs more difficult and that in this background, it would not be fair to withdraw a facility which was presently available to SEZs. He added that as regards the apprehension that many other segments might demand similar concessions, it needed to be kept in mind that several new provisions were being introduced for domestic suppliers which were- different from and more stringent than the presently followed system like tax on stock transfer, but it was important to draw a distinction between domestic supply and exports: He strongly urged that this proposal be accepted. The Hon'ble Minister from Karnataka stated that insertion of such a provision would re-introduce audit of forms and would increase the workload of officers. He reiterated that this issue could be revisited after GST implementation if it caused a serious bottleneck. The Hon'ble Chairperson stated that it would not be advisable to discriminate between domestic supplies and imports to SEZs. 10.7 The Hon 'ble Chief Minister of Puducherry stated that exports through SEZs should be encouraged. He further stated that if a refinery was outside SEZ and they were given certain special facility, others would also claim the same. The Secretary stated that the facility of refund of input taxes on exported goods which were outside GST related to only 6 products and that, in the absence of such a provision, these goods would suffer loss of international competitiveness in the GST regime due to tax cascading. After further discussion, the Council approved the proposed changes to Section 16 of the draft IGST Law as contained in Annexure 5 of the Minutes. 10.8. The Secretary stated that as supply to SEZs was to be treated at par with physical exports, it would be desirable to carry out another consequential change in Section 54(6) of the CGST Law by replacing the word 'export' with the words 'zero rated supply' so that supplies to SEZs also qualified to get 90% of the claimed refund amount in a shorter time frame as envisaged for physical exports. The Council agreed to this suggestion. 10.9. The Commissioner (GST Policy Wing) stated that there was an inadvertent omission in Section 20 of the IGST Law approved by the Council where the 'scope of supply' was not listed as one of the topics which was to be cross-referenced to the CGST Law and accordingly, an amendment was proposed in Section 20 of the IGST Law. The Council agreed to this suggestion. 11. For agenda item 4.1 , the Council approved certain additional changes to the IGST Law which were earlier approved by the Council in its 11th Meeting (held on 4 March 2017). These approved changes are shown in Annexure-5 of the Minutes. The Council also approved the consequential change in Section 54(6) of the CGST Law, approved earlier by the Council in its 11 th Meeting (held on 4 March 2017), by replacing the word 'export' with the words 'zero rated supply'. Agenda Item 4.2: Approval of the amendments to the draft Goods and Services Tax (Compensation to the States) Bill, 2017 12. Introducing this agenda item, the Secretary informed that in light of the approval of the CGST Law and the IGST Law with certain changes by the Council in its 11 th Meeting (held on 4 March 2017), certain consequential changes were required in the Goods and Services Tax (Compensation to the States) Bill, 2017. He further stated that ceiling rates for imposition of cess were also to be provided in the Compensation Law and on this account, certain consequential changes were proposed to Section 8 of the Goods and Services Tax (Compensation to the States) Bill, 2017 and a Schedule of ceiling rates of cess was presented for the approval of the Council. The Hon'ble Chairperson asked an officer to explain the method of arriving at the ceiling rates of cess. The Secretary invited Shri Alok Shukla, Joint Secretary (TRU-I), CBEC to explain the method of arriving at the ceiling rates for cess. 12.1. Joint Secretary (TRU-I) explained the rationale behind the various ceiling rates. He stated that the proposed ceiling rate for Pan Masala (135%) was arrived at by summing up the existing rate of Central Excise and the highest existing rate of VAT, subtracting from it the GST rate of 28% and then adding to it an additional 25% as a cushion. He stated that for Tobacco products, the ceiling rate (₹ 4,170 per thousand sticks or 290% ad valorem or a combination thereof) was arrived at by taking into account the highest prevailing specific rate and the ad valorem rate and subtracting' from each the GST rate of 28%. He added that as the rates were already very high, no cushion had been kept while proposing the ceiling rate of cess on Tobacco products. He stated that for coal, lignite etc. the existing rate of clean energy cess of ₹ 400 per tonne had been retained because this rate was already quite high and any further increase would have negative effect on other sectors of the economy. He stated that for aerated waters containing added sugar, there was a large dispersion of VAT rates and for calculating the ceiling rate of cess, the average of the highest and the second highest rate of VAT was taken and this was added to the existing rate of Central Excise and then, like in other cases, 28% of GST rate was subtracted and an additional 25% was added as a cushion and the resultant rate of 13% was rounded off to arrive at the ceiling rate of 15%. He stated that for motor cars, the proposed ceiling rate (15% ad valorem) was arrived at by summing up the existing rate of Central Excise and the highest existing rate of VAT, subtracting from it the GST rate of28% and then adding to it an additional 25% as a cushion. He stated that another residuary category of 15% ceiling rate was kept for all other supplies which would also include supply of services. The proposed amendments to the Goods and Services Tax (Compensation to the States) Bill, 2017 and the Schedule of the proposed ceiling rates for cess is at Annexure-6 of the Minutes. 12.2. Starting the discussion on this agenda item, the Hon'ble Minister from West Bengal stated that the decision of the Council in its 4th Meeting (held on 3 and 4 November, 2016) was to levy cess on cigarette and chewing tobacco, but now the product indicated in the Schedule was tobacco and manufactured tobacco substitute, including tobacco products and that this would also include 'Bidi', He suggested that 'Bidi' should not be subject to cess. The Hon'ble Chief Minister of Puducherry supported the suggestion of the Hon'ble Minister from West Bengal. He observed that lakhs of workers were employed in the 'Bidi' industry and only poor people smoked 'Bidi'. The Hon'ble Minister from Rajasthan stated that in his State, 'Bidi' was taxed at a rate of 65%. He observed that for 'sin' goods, there should be no special categorisation for poor people and that it was, in fact, more harmful for the poor people. The Hon'ble Chief Minister of Puducherry stated that the issue of employment was equally important. The Hon'ble Minister from Madhya Pradesh stated that he did not support the view of the Hon'ble Minister from Rajasthan. He observed that as 'Bidi' was a handmade product, it was a source of employment for a large number of people and that it was also smoked by the poor people. The Hon'ble Minister from Bihar stated that no cess be levied on 'Bidi' as it was a source of employment and also that it was smoked by poor people. The Hon'ble Minister from West Bengal pointed out that the Hon'ble Minister from Kerala had written a letter to the Hon'ble Chairperson pointing out that cess on 'Bidi' would affect about 3 crore 'Bidi' and 'Tendu Leaf collectors and pointed out that his State also had about 10 lakh persons working in the 'Bidi' industry. The Hon'ble Minister from Maharashtra stated that in his State, 'Tendu' leaves were used by the tribal community and therefore, he did not support levy of cess on 'Bidi', 12.3. The Hon'ble Minister from Kamataka stated that his State had a large number of tobacco leaf growers and that the Mysuru region produced some of the finest quality of tobacco leaves. He further stated that the farmers' income from this crop was so high that they were unwilling to shift to growing some other crop despite the State Government's effort in this direction. He stated that by this logic, in order to protect the livelihood of the farmers growing tobacco leaves, no cess should be imposed on cigarettes too. He further stated that his State had banned 'Pan Masala' as it posed a health hazard though such a ban went against the livelihood interests of the areca nut farmers. He observed that it was wrong to give a favourable treatment to 'Bidi' vis-a-vis cigarettes on the ground that it was a poor man's 'puff as it caused greater harm than cigarettes. He observed that if a poor man got cancer due to his' Bidi' smoking habit, his family would be ruined as there was no social health care system for the poorer sections of the society whereas a cigarette smoker, being relatively better off, could still afford medical treatment for cancer. He warned that a huge burden was being cast on the poor man by allowing him his 'puff and that this burden finally fell on the society. He therefore suggested that the existing schedule covering both cigarette and 'Bidi' should be retained. 12.4. Shri P. Mara Pandiyan, Additional Chief Secretary, Kerala stated that the Hon'ble Minister from Kerala had written a letter dated 16 March, 2017 to the Hon'ble Chairperson stressing that' Bidi' should be exempted from cess on tobacco. He stated that about 60 lakh workers were involved in the 'Bidi' industry and a large number of them were women and their earnings were quite meagre. He stated that imposing cess on 'Bidi' would harm their interest and, therefore, requested that no cess be imposed on 'Bidi'. Shri Sanjeev Kaushal, Additional Chief Secretary, Haryana stated that the present proposal before the Council was only to fix the maximum rate of cess which could be kept as proposed and that it could be decided later whether cess should be imposed on 'Bidi'. The Hon'ble Minister from Assam also suggested to keep the provision of cess on tobacco products in its present form. 12.5. The Hon'ble Chief Minister of Puducherry stated that 'Bidi' was less harmful than cigarettes. The Hon'ble Minister from Karnataka disagreed with this observation and stated that' Bidi' was actually tobacco wrapped in tobacco leaf and therefore it was doubly harmful. The Hon'ble Chairperson informed that the Central Government had power to levy Central Excise duty on 'Bidi' but due to considerations like large number of tobacco growers and workers involved in the 'Bidi' trade, during the last 8 to 9 years, it had refrained from imposing Central Excise duty on 'Bidi', though the Union Ministry of Health and the cigarette lobby had always argued for parity in the treatment of cigarette and 'Bidi' as the latter was equally harmful. He further stated that the decision to levy cess on 'Bidi' could be kept with the Council. The Hon'ble Minister from Assam stated that the enabling provision to levy cess on 'Bidi' should be retained in the law. The Hon'ble Minister from West Bengal reiterated that in the 4th Meeting of the Council (held on 3 and 4 November, 2016), it was decided to levy cess only on cigarette and chewing tobacco and therefore 'Bidi' should be left out of the scope of cess. He further stated that most States did not charge VAT on 'Bidi' though society was aware of the health issues. He requested that this meeting itself should decide not to levy cess on 'Bidi' instead of postponing the decision to a later date. The Hon'ble Chairperson observed that if such a decision was taken in this meeting, it would be commented upon adversely by the civil society organisations and health organisations. He stated that the potential health cost due to 'Bidi' smoking could also be high. He suggested that the decision whether or not to levy cess on 'Bidi' could be taken by the Council at a later date. The Hon'ble Deputy Chief Minister of Delhi suggested to keep this issue open at this stage. 12.6. The Hon'ble Deputy Chief Minister of Gujarat stated that States imposed tax on 'Bidi' in the range of 25% to 30% and wondered whether States could be given flexibility to keep different rates of tax on 'Bidi' in the GST regime. The Secretary observed that presently, the rate of Central Excise duty on 'Bidi' was ₹ 28 per thousand which translated to an ad valorem rate of 5% to 6% and that different States charged varying rates of VAT, for example Rajasthan (65%), Himachal Pradesh and Gujarat (22.5%), Tamil Nadu and Uttar Pradesh (14.5%) and Haryana (12.5%). He stated that the rate of tax on 'Bidi' and the issue of imposing cess on it could be addressed at a later date. The Hon'ble Minister from West Bengal suggested that the Council could take a decision to keep' Bidi' in the Schedule of cess but not impose any cess on it. The Hon'ble Minister from Karnataka stated that the Council should not arrive at any conclusion regarding leviability of cess on 'Bidi' at this stage. He stated that both awareness and the stick of taxation was required to combat the scourge of cancer. He observed that livelihood of one person could not be at the cost of life of another person. The Hon'ble Minister from West Bengal stated that all views expressed during the meeting should be clearly recorded. The Hon'ble Chairperson stated the all views would be recorded to convey the deep concern of both sides and that the issue of leviability of cess on 'Bidi' could be considered by the Council at a later date. The Council agreed to this suggestion. 12.7. The Hon'ble Minister from Assam stated that Entry at Serial No.4 of the Schedule of cess conveyed an impression that cess would be levied even on normal water. The Secretary stated that under this Entry, cess would be levied only on water which had added sugar. The Hon'ble Deputy Chief Minister of Delhi stated that 'sherbet' was also water with added sugar but no cess should be imposed on it. The Hon'ble Minister from West Bengal stated that adopting the description of relevant Harmonised System of Nomenclature (HSN) Code created some confusion and suggested that the Entry should be limited to aerated water with added sugar. The Secretary stated that cess could be limited to aerated water with added sugar and no cess-be put on packaged water as people should be encouraged to drink clean water. Shri Arvind Subramanian, Chief Economic Advisor, Government of India suggested that cess should also be charged on mineral water but the Hon'ble Minister from West Bengal disagreed with this suggestion. 12.8. The Secretary suggested that in order not to levy cess on lemonade which was covered under the description of the 6-digit HSN Code of 220 12, the description under the relevant 8-digit HSN Code, namely 22021010 could be adopted which covered only aerated water. The Hon'ble Minister from West Bengal stated that no cess should be levied on soda water. The Hon'ble Deputy Chief Minister of Gujarat supported this suggestion and observed that soda water was also consumed to relieve gastric trouble. The Secretary stated that the 8-digit Code 22021010 covered only aerated water containing added sugar or other sweetening matter and that the Entry in the Schedule for levying cess could be limited to this 8-digit Code. The Council agreed to this suggestion. 12.9. Dr. C. Chandramouli, Additional Chief Secretary, Tamil Nadu suggested that Serial No.6 of the Schedule for cess covered all other supplies at the rate of 15% ad valorem and, therefore, Entries relating to water and motor car at Serial No.4 and 5 respectively could be deleted. The Hon'ble Chairperson stated that presently items covered under Serial No. 4 and 5 of the Schedule were taxed at a higher rate, and that these Entries should be retained. The Secretary stated that retaining the Entries at Serial No.4 and 5 would convey a message to the public at large of the Council's intention to levy cess on the goods covered under these two Serial Numbers. The Council agreed not to delete the Entries at Serial No.4 and 5 of the Schedule of rate for Cess. 12.10. The Hon'ble Deputy Chief Minister of Delhi observed that Entry at Serial No.6 of the Schedule was a residuary Entry excluding the products covered under Serial No.1 to 5 and, therefore, a more appropriate description for Entry under Serial No.6 would be 'Any other supplies' instead of the existing description 'All other supplies'. The Council agreed to the suggestion to change the description for Entry under Serial No.6. 13. For agenda item 4.2 , the Council approved certain additional changes to Goods and Services Tax (Compensation to the States) Bill, 2017 which was earlier approved by the Council in its 10 th Meeting (held on 18 February 2017) and also the Schedule of the rates of Cess to be part of the Goods and Services Tax (Compensation to the States) Bill, 2017. These approved changes are shown in Annexure-6 of the Minutes, subject to further modifications as recorded below: 13.1. In Serial No.4 of the Schedule, in column number (3), to replace the existing 6-digit HSN Code 220210 of Central Excise Tariff with the 8-digit Code 22021010 and to replace the description in column number (2) for Serial No.4 corresponding to that in the 8-digit Code 22021010, namely 'aerated water'. 13.2. To substitute the description for Entry under Serial No.6 of the Schedule of Cess, namely 'All other supplies' with the description 'Any other supplies'. Agenda Item 4.3: Approval for constit,!ltion of a Task Force to suggest measures for creating an eco-system for seamless freight movement (Based on agenda note received from MoRTH) 14. Introducing this agenda item, the Secretary stated that under GST, the check post of the VAT Departments was proposed to be done away with but the Ministry of Road Transport and Highways (MoRTH) had identified several other Departments of the Central and the State Governments which maintained check posts. He stated that MoRTH had requested to take up this agenda in order to work towards a complete, seamless and barrier free freight transport system across the country. He recalled that in the 11 th Meeting of the Council (held on 4 March, 2017), Ms. Sujata Chaturvedi, CCT, Bihar had also suggested to consult with MoRTH while developing the e-Way Bill System in the GST regime. He stated that this agenda item was only to seek the approval of the Council to set up a Task Force of officers from the State Government Departments like Indirect Tax, Road Transport, State Excise and the Union Ministry of Road Transport and Highways and the Department of Revenue. This Task Force of officers, after their deliberations, could make a presentation to the Council suggesting measures to achieve seamless transport connectivity across the country. He added that subsequently, if required, there could be a joint meeting of the Hon'ble Ministers of Taxation and Transport to deliberate on this issue. He stated that those States which wanted to be represented in this Task Force should send a formal communication to the Council. The Council agreed to this suggestion. 15. The Council approved the proposal under agenda item 4.3 to set up a Task Force of officers from the State Government Departments like Indirect Tax, Road Transport, State Excise and the Union Ministry of Road Transport and Highways and the Department of Revenue, which after its deliberation, shall make a presentation to the Council suggesting measures to achieve seamless transport connectivity across the country. Agenda Item 5: Any other agenda item with the permission of the Chairperson 16. The Hon'ble Deputy Chief Minister of Delhi stated that presently, tax exemptions were given to certain types of cinemas. He observed that educational cinemas needed support to keep their cost low to encourage viewership. He stated that there was a need to discuss in the Council the ways to provide a mechanism for granting tax exemption to certain kinds of cinemas like educational cinema. Agenda Item 6: Date of the next meeting of the GST Council 17. The Hon'ble Chairperson observed with satisfaction that the five primary legislations, namely the CGST Law, the Model SGST Law, the IGST Law, the UTGST Law and the Compensation Law had been approved by the Council and that the next item of work would be to approve the GST Rules. The Secretary stated that earlier, five GST Rules were approved relating to Registration, Return, Payment, Refund and Invoice but due to changes made in the CGST, SGST and IGST Laws, these would require some amendments. He further stated that in addition, Rules on Input Tax Credit, Valuation, Composition and Transitional Provisions were being framed by the Law Committee of officers. On an enquiry by the Hon'ble Chairperson regarding the likely date for completing this task, CCT, Gujarat stated that these Rules were likely to be completed by 25 March, 2017. The Secretary stated that it was important that all GST Laws and Rules should be known to the trade at least three months before the implementation of the GST. He suggested that a short meeting could be called before the end of March, 2017. After deliberation, the Council agreed to hold its next meeting on 31 March 2017 in New Delhi. 18. The meeting ended with a vote of thanks to the Chair. (Arun Jaitley) Chairperson, GST Council