Minutes of the 13th GST Council Meeting held on 31st March 2017 - GST - 13th GST Council Meeting

Minutes of the 13th GST Council Meeting held on 31 st March 2017 The thirteenth meeting of the GST Council (hereinafter referred to as ' the Council') was held on 31 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 13 th Meeting of the Council - 1. Confirmation of the Minutes of the 12th GST Council Meeting held on 16 March 2017 2. Approval of the Draft GST Rules on: (a) Input Tax Credit (b) Valuation (c) Transitional Provisions (d) Composition 3 . Approval of amendments to the following Draft GST Rules approved in the 2nd Meeting of the GST Council held on 30 September 2016: (a) Registration (b) Return (c) Payment (d) Refund (e) Invoice , Debit / Credit Note 4. Any other agenda item with the permission of the Chairperson 5. Date of the next meeting of the GST Council 3 . The Hon ' ble Chairperson welcomed all the Members to the Council meeting. He extended a warm welcome to the four new Members of the Council from Goa , Punjab , Uttar Pradesh and Uttarakhand. He then commenced discussion on the various agenda items. Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 12th GST Council Meeting held on 16 March, 2017: 4. The Hon ' ble Chairperson invited comments of the Members on the draft Minutes of the 12 th Meeting of the Council (hereinafter referred to as . ' Minutes') held on 16 March 201 7 before its confirmation. 4 . 1 . The Hon ' ble Minister from Karnataka stated that the version of the Secretary to the Counc il (hereinafter referred to as ' Secretary ' ) in paragraph 12.6 of the Minutes , in regard to levy of value A dd e d Tax (VAT) o n 'Bidi '; t h o u g h reco r ded co rr ect l y, c r eate d a n im press i o n t h at VAT was c h arge d o nl y in si x Sta t es. He s t a t e d t h at up on f ur t h er inqu i r y , it ha d co m e to hi s n o ti ce t h a t VAT o n ' Bidi ' was l evied i n about 2 1 States, n ame l y , Rajast h a n (65%) , J a m m u Kas h mir (40%) , Hi mac ha l P r a d es h (22%), De lh i (20%) , Ta mil Na du ( 1 4 . 5%) , P unj ab ( 1 4.3%) , U t tar Prades h ( 1 4%), Mad h ya Pra d es h (65 % ) , C h a n digar h (20%) , Harya n a (13 . 1 2 5 %), Ma h aras h t r a ( 1 3 . 5%) , An dhr a Pra d es h (exe m p t ) , Te l a n ga n a (exempt) , Ka r nata k a (exempt) , C hh att i sga rh (5%) , Od i s h a ( 1 0% ) , Assa m ( 30%) , West Be n ga l (exe mp t) , J h ark h a nd (5%), B ih a r ( 1 5%) , Ut t arak h a nd (20%), Goa (25%) , P udu che r ry ( 1 4 . 5%) , Kera l a ( 1 4.5%) a nd G uj arat (22 . 5%) . T h e Sec r etary s t ated t h a t i n o rd er to avo id a n y conf u sion , his vers i on recorde d in this p aragra ph co ul d b e s l ight l y mo d ifie d a nd th e wor d ' lik e ' ( b e f o r e t h e wo r d ' Raja sth a n ') in t h e 5th l in e co uld be rep l ace d b y t h e w or d s 'for exam pl e '. T h e Counc il ag r e e d to thi s s uggestio n . 5 . In v i ew of t h e above di sc u ss i o n , for Agenda item 1 , th e Co u nc il dec i ded t o a d o p t th e M inu tes of t h e 1 2th Mee tin g of t h e C o u nc il wi th th e c h ange as reco r ded be l ow : 5 .1 . I n pa r agra ph 1 2 . 6 of t h e Min u tes , to m odify t h e vers i o n of t h e Sec r etary recor d e d in the 5 t h lin e b y re pl ac in g the word ' like ' (a p pear in g befo r e t h e word ' Ra j as t ha n ' ) w i t h the wo r ds ' fo r exa mpl e ' . A g enda Item 2 : Ap p roval of the Draft GST Rules on: (a) Input Tax Credit ; (b) Valuation; (c) Transi t ional Provisions ; and (d ) Composition: 6 .1 . In trod u c in g t h i s agen d a it e m , t h e Secretary informed that h e h ad a very co n str u ctive meet in g w i t h th e off i cers of the Ce n tre a n d t h e States i n t h e mor n ing l asti n g from 11 A.M. t o 4.30 P . M . dur in g wh i c h a ll t h e ni ne R ul es o n t h e age n da were d isc u ssed i n deta il a nd the officers ma d e ce r ta in s u ggestio n s t o a m en d t h e var i ous provi s i ons of the R u les. He stated t h a t the R ul es wou l d b e rev i sed o n the basis of t h e s e s u ggestio n s and c ir c u lated to th e States wit hin a d ay . He then in v i te d S hri Upe n d e r G u pta , Commiss i o n er (GST Po li cy W in g ), Centr a l Board of Exc i se an d C u sto m s ( C BEC) to m ake a br i e f prese n tat i o n on t h ese fo u r R ul es . In hi s p resentatio n , the Co mmi ss i o n er (GST P o l icy W in g) , CBEC , o u t li ned t h e sa l ient feat ur es o f t h e GST R ul es o n (a) I nput Tax Cre di t; ( b ) Va lua t i o n ; (c) Tra n sitional Prov i sions ; and (d) Co m posit i o n . T h e pr esen t a ti o n i s at t ac h e d as Ann e xure 3 to t h e Minutes . 6 . 2 . Th e Secre t ar y i n for m ed that the co mm e n ts of the officers on t h ese four R ul es h ad a l read y been ta k e n note of and i nv i ted f u rt h er comme n ts of t h e Ho n ' b l e Mem b ers of t h e Cou n ci l . T he Ho n ' b le M in is t e r f r o m K era l a p o in ted o u t t h at R ul e 5 of t h e Va lu at i o n R ul es r e l at in g to s u p pl y of l ottery ticke t s was co m p l ex an d enquired w h et h er t hi s stood de l eted i n lig h t of t h e off i cers ' l eve l disc u ssio n today. T h e Secretary s t ated t h at d ur i n g t h e discuss i on i n the off i cers ' m eet i ng , i t was dec id e d th at th e propose d R ul e 5 o n va lu a ti o n of s up p l y of l o tt er y t i c k ets wou ld be d elete d a nd th e l otte r y t i c k ets wou l d b e taxed on t h e face va l ue of i ts sa l e . T h e Hon ' b l e Ministe r fro m Utta r Pra d es h state d th at t h e l a n guage of t h e Ru les was comp l ex a n d t h is co ul d ca u se p rob l ems i n i n ter p retation . He o b served t h at s im p l e a n d c l ear words s h o ul d b e u sed w h i l e formu l a tin g t h e Ru l es. 6 . 3 . T h e Hon ' bl e De p u t y Chief Mi n ister of De l h i observed th at w h i l e t h e GST l aw pr o v i ded a b roa d framework , t h e GST R ul es dea l t wi th th e n i tt y - gr i tty of proce du res a n d th ey n ee d ed more time to s tu d y th e R ul es. T h e Secretary s t a t ed t h a t t h e i ndu stry a n d bu si n es s h ad been demanding th ree c l ear m o nth s afte r th e f in a l isat i on of t h e GST Laws a nd R ul es to p re p a r e t h e m se l v e s for t h e c h a n ge - over to th e GST r eg im e. He reca ll ed t h at t h e f i ve GST Rul es on Registrat i o n , Re tu r n , Pay m e n t , R efu nd and I n vo i ce an d Deb it / Credit Note had been p u t in t h e pub li c d o m a in ear l ier an d the four new Rules also needed to be put in the public domain at the earliest. He suggested that the Council could approve the four new Rules and authorise the Law Committee of Officers to make minor changes and inform the Council. The Hon'ble Chairperson stated that a more appropriate approach would be for the Council to approve these four draft Rules along with the changes agreed upon today by the officers. These Rules could then be circulated to the States and also put in the public domain and after taking note of the comments received from the public, final version of the Rules would be brought to the Council for its approval. The Council agreed to this suggestion. 6.4. The Hon'ble Minister from Jammu Kashmir stated that the Goods and Services Tax Network (GSTN) should be open to incorporating small changes that might arise in the Jammu Kashmir GST Rules drafted in exercise of the powers conferred under their Constitution. The Hon'ble Chairperson stated that presently the Central Goods and Services Tax (CGST) Act would apply to all States except Jammu Kashmir but once the Jammu Kashmir law on GST integrated itself to the CGST, the existing exception in regard to the State of Jammu Kashmir in CGST would be removed by exercising the power under Section 172 of the CGST Act regarding removal of difficulties. The Hon'ble Minister from Jammu Kashmir informed that Section 173 and 174 of the Model SGST Bill relating to amendments and repeal and saving of existing law would not apply to his State as there were no such provisions in their legislation to be deleted. He further added that his State would draft its SGST Law in consultation with the Law Committee of officers and the Council and that they hoped to enact their SGST law by the end of May, 2017. 7. For agenda item 2 , the Council approved, in principle, the four draft GST Rules, namely, Input Tax Credit; Valuation; Transitional Provisions; and Composition along with the changes agreed upon during the meeting of the officers held on 31 March, 2017. The Council further approved that these Rules would be circulated to the States and would be put in the public domain, and after taking note of the comments received from the public, final version of these Rules would be brought to the Council for its approval. Agenda Item 3: Approval of amendments to the five Draft GST Rules approved in the 2 nd Meeting ofthe GST Council held on 30 September 2016, namely (a) Registration; (b) Return; (c) Payment; (d) Refund; and (e) Invoice and Debit/Credit Note: 8.1. Introducing this agenda item, the Secretary informed that the five GST Rules relating to Registration; Return; Payment; Refund; and Invoice and Debit/Credit Note had been approved by the Council in its 2nd Meeting held on 30 September, 2016, but subsequently changes had to be made to them for various reasons like comments from stakeholders, changes in the Model GST Law as approved by the Council, changes on account of a new Union Territory Goods and Services Tax (UTGST) Act and minor editorial corrections for coherence in the revised law. He informed that these changes were discussed in the meeting of the officers held today and the suggestions made by them for making certain changes in these five Rules were taken note of and would be incorporated suitably. He then invited Commissioner (GST Policy Wing), CBEC to make a brief presentation on the changes made in these five Rules. The presentation made before the Council is enclosed as Annexure 3 to the Minutes. 8.2 The Secretary invited comments of the Members on the changes proposed in the five draft Rules. The Hon'ble Minister from Nagaland stated that Rule 1(e) of the Tax Invoice Rules provided that the name and address of an unregistered recipient should be recorded in the tax invoice only where the value of taxable supply was ₹ 50,000 or more. He observed that as per the Business Process Report on Return, it was provided that where the value of an outward supply of a taxpayer was less than ₹ 50,000, and it did not have the address on record of the purchaser, it would be treated as an intra-State supply. He stated that this would be detrimental to the revenue interest of the smaller States of the North-East region and that this provision could be misused by the unscrupulous persons to escape threshold for registration or to stay within the Composition threshold. He added that this issue was discussed in a meeting chaired by the Revenue Secretary on 20 October, 2016 where it was agreed that the Law Committee of Officers would re-examine this issue but the provision had remained unchanged. He suggested that the monetary limit should be lowered from ₹ 50,000 to ₹ 20,000. He added that this was also proposed by some other smaller States of North-East like Meghalaya and Arunachal Pradesh during the officers' meeting held in the morning. The Secretary stated that during the morning meeting of the officers, this issue was discussed and it was recognised that reduction in the monetary limit from ₹ 50,000 to ₹ 20,000 for recording the address of the purchaser in the Business to Consumer (B2C) transaction would have to be done on an all-India basis to track the flow of funds to a State of the North-East for the purchases made by traders of those State from big cities like Kolkata or Guwahati. He stated that in this view, lowering the monetary limit from ₹ 50,000 to ₹ 20,000 only for the smaller States of the North-East would not meet the concern of these States. He added that most of the other States were not in favour of applying this lower threshold at an all-India level as they felt that this would considerably increase the compliance burden on the taxpayers as well as the buyers. He suggested that an alternative method to address the revenue concern of the smaller States of the North-East could be to encourage setting up of good quality outlets for high value consumer products in the smaller States of the North-East, if necessary, through co-operative societies and that this would encourage local purchase of high value consumer goods. 8.3. The Secretary suggested that the five Rules with the suggested amendments, including those which were agreed upon in the officers meeting in the morning, could be approved and that these amended Rules could be shared with the States and also put in the public domain. The Council agreed to this suggestion. 9. For agenda item 3 , the Council approved the amended five GST Rules, namely, Registration; Return; Payment; Refund; and Invoice and Debit/Credit Note including the amendments suggested during the meeting of the officers held in the morning and agreed to circulate it to the States and to also put them in the public domain. Agenda Item 4: Any other agenda item with the permission of the Chairperson 1 0 . T h e Ho n ' bl e M ini ste r f r o m C hh a tti sgar h state d t h at as E nt ry 52 of List II of Sc h edu l e 7 of the Co n st i t uti o n re l at i ng to taxatio n powe r of Ent r y Tax b y Sta t es s t oo d de l ete d , t h e prov i s i o n to i ss u e For m C fo r i n ter - State sales of p e tr o l e um p rod u cts sho u l d b e d o n e away wit h . He s t a t e d th at w ithout t hi s a m end m e n t, p e t ro leu m p rod uct s wo ul d be i mpo rte d fro m ot h e r States a t a co nc ess i o n a l ra t e o f 2% CST w h ic h wo uld l ea d to co n s id e r a bl e l oss o f r even u e to t h e im po rt i n g S t ate . He s u ggeste d t h a t duri n g the GST reg im e, a ll States s h o ul d p ay t ax at n o r ma l r ate fo r in ter - S t ate sa l e of p e tr o l e um pro du cts. T h e Secre t ary stated t h at Co mm iss i o n er of Com m erc i al Tax (CCT) , G u ja r at h ad c i rc ul ated a p aper o n th is issue duri n g t h e off i cer ' s m eet in g i n t h e mor ni ng , bu t it co uld n o t be di scussed d u e to pa u city of t im e . He a dd ed t h a t G uj arat wo uld furt h er l ook in to it s p a p e r as t hi s i ss u e n ee d e d careful co n side r a ti o n a n d cou l d a l so affec t th e co n su m er ind u stry. T h e Ho n ' bl e Mi n i s t e r fr o m Ke r a l a sta t ed t h at t h is i ss u e s h o uld b e d i sc u sse d as a se p arate Agen d a i t e m. T h e C oun c il ag r ee d t o thi s s u gges tion . 11. The Hon'ble Chairperson stated that the officers would have to start work on fitment of rates of goods and services under GST. The desirability of sharing the proposed rates of tax on goods and services in advance of the Meeting of the Council was discussed. The Hon'ble Minister from Jammu Kashmir stated that the proposed rates of tax should not be put in public domain in advance as this would create distortions in the market. The Hon'ble Minister from Kerala supported this suggestion. The Hon'ble Deputy Chief Minister of Delhi stated that their present practice was not to inform the proposed changes to the rates of VAT in advance as this led to hoarding and black marketing of goods and suggested that the rates of tax should not be notified in advance in the GST regime. The Secretary suggested that the agenda relating to GST rates of goods and services could be brought on the table for the Council's discussion on the day of the meeting itself instead of circulating it in advance. The Hon'ble Deputy Chief Minister of Delhi supported this view and stated that the GST rate proposals should be discussed and finalised on the table itself. The Council agreed to this suggestion. 12. The Hon'ble Minister from Uttarakhand stated that during the Financial Year 2015-16, under the area-based industrial package in his State, an amount of Rs. ten thousand one hundred and three crore was to be disbursed to 3,156 industry. He recalled that in the 3rd agenda item of the 2 nd Meeting of the Council held on 30 September, 2016, it was decided that the Central Government shall reimburse 58% of the total amount of Central Excise exemption to the eligible units in the State and enquired regarding the schedule for such re-imbursement by the Central Government. The Secretary stated that during the 2nd Meeting of the Council, modalities for continuation of area based exemption schemes were discussed and recalled that in case such a scheme was continued by the Central Government, then only 58% of the total CGST amount shall be reimbursed to the eligible industries in the States where area-based Central Excise exemption was in force. He informed that the Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry was devising a re-imbursement scheme and stated that they should be ready with the scheme before 1 July 2017. He also advised that the Tax Research Unit in the Department of Revenue should follow up this matter with the DIPP. 13. The Hon'ble Minister from Uttar Pradesh stated that his State had an outstanding CST compensation due of ₹ 280 crore and enquired as to when this would be disbursed by the Central Government. The Secretary stated that 50% of the compensation amount had already been disbursed as part of the first instalment and that the remaining 50% was due to be paid today. He stated that an additional compensation requirement of ₹ 1,000 crore had arisen and that they were pursuing for release of this amount from the Department of Expenditure. He stated that minus this amount, the rest of the amount totalling about ₹ 4,000 crore would be released today. He further added that the remaining amount of about ₹ 1,000 crore would be released in Financial Year 2017-18 after getting allocation from the Department of Expenditure. 14. The Hon'ble Chairperson informed the Council that Shri Najib Shah, Chairman, CBEC, was retiring today and he placed on record his appreciation of the wonderful work done by him during his tenure, and in appreciation of the same, he presented him a bouquet. The Hon'ble Members of the Council acknowledged the contribution of Shri Najib Shah with loud applause. The Hon'ble Chairperson also introduced the new Chairperson, CBEC, Ms. Vanaja Sarna and informed that, h e n ce f o r t h , s h e wo uld p a r t i c ip a t e in th e d e l ibe r at i ons of t h e Co un ci l . Agenda Item 5: Date of the next meeting of the CST Council 15. The Hon'ble Chairperson observed with satisfaction that the nine primary GST Rules had been approved by the Council. He observed that the next important items of work for the roll out of GST were to complete the drafting of the remaining minor GST Rules and to complete the fitment of GST rates of goods and services. He stated that the remaining Rules should be drafted by the Law Committee of Officers at an early date and should be put in the public domain. He further stated that after taking into account the comments from the public, the remaining GST Rules should be presented to the Council for approval during its next meeting. He further stated that the officers would prepare the fitment rates for goods and services and bring it for discussion in the next Meeting of the Council. After deliberation, the Council agreed to hold its next meeting on 18 and 19 May, 2017 in Srinagar. 16. The meeting ended with a vote of thanks to the Chair. (Arun Jaitley) Chairperson, GST Council