Minutes of the 18th GST Council Meeting held on 30 June 2017 - GST - 18th GST Council Meeting

Minutes of the 18 th GST Council Meeting held on 30 June 2017 The eighteenth meeting of the GST Council (hereinafter referred to as 'the Council') was held on 30th June, 2017 in Vigyan Bhawan, 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 18 th Meeting of the Council- 1. Confirmation of the Minutes of the 17 th GST Council Meeting held on 18 June, 2017 2. Decisions of the GST Implementation Committee (GIC) 3. Any other agenda item with the permission of the Chairperson i. Rules and Forms for Compounding of Offences ii. Rules and Forms for Enforcement iii. Rules and Forms for Refund (Rule 96 amended to accommodate export without payment of tax) iv. Rules and Forms for Demand and Recovery v. Value for the purpose of levy of GST on transportation of goods by a vessel from a place outside India up to the customs station in India vi. Notification of IGST Rules, 2017 vii.. Proposal to amend rule 117 (1) of the CGST Rules, 2017 viii. High Sea Sales 4. Date of the next meeting of the GST Council Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 17th GST Council Meeting held on 18 June, 2017: 3. The Hon'ble Chairperson welcomed all the Members to the 18 th Council Meeting and invited comments of the Hon'ble Members on the draft Minutes of the 17th Meeting of the Council (hereinafter referred to as 'Minutes') held on 18 June, 2017 before its confirmation. 4.1. The Secretary, GST Council (hereinafter referred to as 'Secretary') invited the Chairman, CBEC to lay before the Council requests received regarding the Minutes. Chairman, CBEC asked Additional Secretary, GST Council to inform the Council about the requests received. Additional Secretary, GST Council stated that a written request was received from the Joint Commissioner, Odisha to replace the version of the Principal Secretary (Finance), Odisha in paragraph 5.4.4 of the Minutes as follows: 'Shri Tuhin Kanta Pandey, Principal Secretary (Finance), Odisha stated that presently the State of Odisha has an e-Way Bill system for inter-state movement and not for intra-state movement and in principle, the State was against the implementation of e-Way Bill system. He explained that when one-to-one invoice matching was available in the system, there was no need for an e-Way Bill. He added that this would increase the compliance burden and that efforts should be taken to reduce compliance burden. He further informed that with effect from 1 April 2017, his State had abolished check posts and there was no problem because of that. If at all it is felt necessary to introduce the system, it should be done later after thorough deliberations, so that unnecessary compliance burden is avoided.' The Council agreed to replace the version of the Principal Secretary (Finance), Odisha as requested. 4.2. Additional Secretary, GST Council further informed that a written request had also been received from Shri Alok Gupta, Commissioner, Commercial Taxes (CCT), Rajasthan to include the views of the Hon'ble Minister from Rajasthan in paragraph 8.7.2 of the Minutes after the views of the Hon'ble Chief Minister of Puducherry as follows: 'The Hon'ble Minister from Rajasthan stated that room of ₹ 5,000/- plus was not a luxury. He requested to reconsider the rate of GST on hotel rooms and services and to reduce it to 18% from 28% for room tariff up to ₹ 10,000/-.' The Council agreed to include the version of the Hon'ble Minister from Rajasthan as requested. 4.3. Dr. C. Chandramouli, Additional Chief Secretary, Tamil Nadu informed that the name of the Hon'ble Minister from Tamil Nadu had been left out of Annexure 1 of the Minutes, i.e. List of Ministers who attended the 17 th GST Council Meeting. Chairman, CBEC mentioned that this was an inadvertent error and that the name of the Hon'ble Minister from Tamil Nadu would be included in Annexure 1 of the Minutes. 4.4. The Hon'ble Minister from Bihar stated that his views regarding palm and date jaggery and neera were not recorded in the Minutes. The Council agreed to appropriately include the views of the Hon'ble Minister from Bihar in the Minutes as follows: 'The Hon'ble Minister from Bihar requested that palm and date jaggery and all kinds of non-intoxicating neera be exempted from tax in view of the immense potential for small entrepreneurs and the beneficial effects of neera on health.' 4.5. In view of the above discussion, for Agenda item 1 , the Council decided to adopt the Minutes of the 17 th Meeting of the Council with the changes as recorded below: - (i) To replace the version of the Principal Secretary (Finance), Odisha in paragraph 5.4.4 of the Minutes with the following: 'Shri Tuhin Kanta Pandey, Principal Secretary (Finance), Odisha stated that presently the State of Odisha has an e-Way Bill system for inter-state movement and not for intra-state movement and in principle, the State was against the implementation of e-Way Bill system. He explained that when one-to-one invoice matching was available in the system, there was no need for an e-Way Bill. He added that this would increase the compliance burden and that efforts should be taken to reduce compliance burden. He further informed that with effect from 1 April 2017, his State had abolished check posts and there was no problem because of that. If at all it is felt necessary to introduce the system, it should be done later after thorough deliberations, so that unnecessary compliance burden is avoided. ' (ii) To include the version of the Hon' ble Minister from Rajasthan as requested in paragraph 8.7.2 after the statement of the Hon'ble Chief Minister of Puducherry as follows: 'The Hon'ble Minister from Rajasthan stated that room of ₹ 5,000/- plus was not a luxury. He requested to reconsider the rate of GST on hotel rooms and services and to reduce it to 18% from 28% for room tariff up to ₹ 10,000/-. ' (iii) To include the name of the Hon'ble Minister from Tamil Nadu in Annexure 1 of the Minutes, i.e. List of Ministers who attended the 17 th GST Council Meeting held on 18 June 2017. (iv) To appropriately include the views of the Hon' ble Minister from Bihar as follows: 'The Hon'ble Minister from Bihar requested that palm and date jaggery and all kinds of non-intoxicating neera be exempted from tax in view of the immense potential for small entrepreneurs and the beneficial effects of neera on health.' Agenda Item 2: Decisions of the GST Implementation Committee (GIC) 5. Introducing this Agenda item, the Chairman, CBEC stated that the Council had decided to form the GST Implementation Committee (GIC) comprising of officers from the Central and the State Governments to decide on procedural issues since it would not be feasible to bring all such issues to the Council. She invited Shri Upender Gupta, Commissioner, (GST Policy Wing), CBEC to make a presentation high lighting the key decisions of the GIC for information of the Council. The presentation is included at Annexure 3 . 5.1 . Commissioner, (GST Policy Wing), CBEC explained that certain amendments and changes were discussed in the GIC meetings held on 18 June 2017, 23 June 2017 and 28 June 2017 and that the GIC had approved the amendments, additions and deletions under the Central Goods and Services Tax Rules, 2017. The decisions of the GIC are recorded below - i. To defer by two months, bringing into force Section 51 (TDS) and Section 52 (TCS) of the Central Goods and Services Tax Act (CGST), 2017 /State Goods and Services Tax (SGST) Acts, 2017owing to the lack of preparedness of government agencies to deduct TDS and the need to be linked to fund settlement mechanism of respective States. It was also pointed out that since GSTR 2 is not getting filed in the first two months, the TDS/TCS benefit cannot be passed on to the tax payer. ii. To defer to a later date implementation of provisos to section 42(9) and section 43(9) of the CGST Act, 2017 /SGST Acts, 2017. iii. To bring into force from a later date section 15 of the Integrated Goods and Services Tax Act, 2017(13 of 2017) dealing with Tourist Refund. iv. To exempt those dealing in second hand goods and availing the margin scheme provided in Rule 32(5) of CGST Rules, 2017 from payment of tax under Section 9(4) of CGST Act, 2017/SGST Acts, 2017. v. To exempt persons liable to deduct tax under Section 51 from payment of tax under Section 9( 4) of CGST Act, 2017 /SGST Acts, 2017, if registered only for TDS as they are not engaged in supply or receipt of goods or services. vi. To levy a uniform rate of 18% on all Information Technology (IT) software, irrespective of whether supplied on tangible media or through electronic downloads. vii. In respect of guest houses and hotels which are not liable to be registered under Section 22(1), their services to be taxed at the hands of the electronic commerce operator under Section 9(5) of the CGST Act, 2017/SGST Acts, 2017. viii. To allow deemed credit of at the rate of 40% on goods which were exempted under Central Excise (such as tractor and textile). ix. To approve certain changes in Rules relating to Registration, Composition, Return, Invoices, Refund, lTC Transition as detailed below- S. No. Chapter Amendments in Rule No. Addition / Del etion Reason 1. Registration 1, 10(4), 13(4), seco nd proviso of 19( 1 ), 2 1 (b ),22(3), Second Proviso of 24( 1), 26(3), Form GST REG -1 2 , Form R EG-25 Ru le 24(3A) Addition To en ab l e de emed reg i strat ion for migrating assessees also 2. Composition Form GST CMP-03, CM P-04 , GST CMP-07 --- M inor Changes in d raft i ng 3. Return FORM GS TR -7A, 45(3), 45(4), Ru l e 6 1 (5) FOR MGS TR- 3B (addition) Shorter r eturn for fir st two mont h s of ro ll out 4 T ax Invoice , Credit and D eb it Notes Fir s t provi so of Rul e 46, Second Provi so to Rule 46 Ru le 46 (f) (add ition ) Addre ss of De livery of recip ie nt in the invoice i f the rec ip ient requests for the same 5 Refund ------ New Rule No.96 (a ddit ion), second provi so in Rule 89 (deletion) R ef und of IGST paid on goods to b e refunded th ro u g h automatic rou te 6 ITC Rule 42 (1 )(i) FORM G S T ITC-04 To enable intim a tion on job work from taxpa ye r 7 Transition FORM TRAN I 2 --- Minor changes in drafting 5.2. The Secretary informed that the decisions of GIC were discussed in the Officers' Meeting and many States were not agreeable to allowing 40% deemed credit on SGST as States would have to allow deemed credit even though they might not have collected any VAT. Therefore, in the Officers' Meeting, it was suggested not to implement the decision of the GIC regarding allowance of deemed credit of 40% on goods which were exempted under Central Excise. The Council agreed to the suggestion. 5.3. The Hon'ble Minister from Meghalaya requested for clarification on the Invoice Rules, whether the limit (for recording address in the Invoice) had been revised to ₹ 20,000/-. Commissioner (GST Policy Wing), CBEC clarified that it was decided to incorporate in the Invoice Rules that if the consumer insisted, even if the value of supply was less than ₹ 50,000/-, the address would be recorded in the Invoice. 5.4. For agenda item 2 , the Council took note of the decisions of the GIC as referred to in paragraph 5.1. However, the Council decided not to implement the decision of the GIC regarding allowance of deemed credit of 40% on goods which were exempted under Central Excise/VAT. Agenda Item 3: Any other agenda item with the permission of the Chairperson Approval of draft GST Rules and related Forms 6.1. The Council took up agenda item 3 for discussion. The Commissioner (GST Policy Wing), CBEC proceeded to make a presentation on the Rules which is included in Annexure 3.The Hon'ble Deputy Chief Minister of Delhi suggested that since these Rules had already been discussed by the officers in the Officers' Meeting held earlier, these could be approved and only issues where there was no consensus among the officers could be flagged. The Hon'ble Chairperson agreed to this suggestion. The Commissioner (GST Policy Wing), CBEC informed that the officers were in agreement on all issues discussed regarding the Rules. Agenda Item 3(i)- Compounding of Offences 6.2.1. The Commissioner (GST Policy Wing), CBEC mentioned that some changes suggested by the officers in the Officers' Meeting have been incorporated in the Rules. The modified version of the Compounding of Offences Rules is at Annexure 4. 6.2.2. The Council approved the Rules and related Forms on Compounding of offences including the changes made therein. Agenda Item 3(ii)- Enforcement (Inspection, Search and Seizure) 6.3.1. The Commissioner (GST Policy Wing), CBEC mentioned that some changes suggested by the officers in the Officers' Meeting have been incorporated in the Rules. The modified version of the Enforcement(Inspection, Search and Seizure) Rules is at Annexure 5 . 6.3.2. The Council approved the Rules and related Forms on Enforcement (Inspection, Search and Seizure) including the changes made therein. Agenda Item 3(iii)- Refund (Rule 96 amended to accommodate export without payment of tax) 6.4.1. The Commissioner (GST Policy Wing) stated that with reference to the Refund Rules, it was desirable that the process followed for export of goods from SEZ (Special Economic Zone) should be followed for export of goods under bond also. The agreed amendment to the Refund Rules is at Annexure 6 . 6.4.2. The Council approved the changes made to the Refund Rules and Forms. Agenda Item 3(iv) -Demand and Recovery 6.5.1. The Commissioner (GST Policy Wing), CBEC mentioned that some changes suggested by the officers in the Officers' Meeting have been incorporated in the Rules. The modified version of the Demand and Recovery Rules is at Annexure 7. 6.5.2. The Council approved the Rules and related Forms on Demand and Recovery including the changes made therein. 6.6. The Commissioner (GST Policy Wing), CBEC stated that there were two additional agenda items and two table agenda items listed. The Secretary informed that the remaining four items were also discussed during the Officers' Meeting and that the officers had agreed on all these items and that the Council could approve them. Accordingly, the Council approved the four items listed below. A brief summary of each of these additional agenda items is given below. Agenda Item 3(v)- Value for the purpose of levy of GST on transportation of goods by a vessel from a place outside India up to the customs station in India 6.7.1. In the existing Service Tax Law, with a view to provide level playing field to the Indian shipping companies, it has been provided that in cases where the goods are imported by an importer in India on CIF (Cost, Insurance and Freight) basis and the service of transportation of goods by a vessel from a place outside India up to the customs station in India is provided by a person located in non-taxable territory (a foreign shipping line) to a person located in non-taxable territory (overseas supplier/ exporter of goods), the importer in India shall be liable to pay Service Tax on freight. In view of the representations that where the importer purchases goods on CIF basis, he may not have the invoice issued by the shipping line for freight and may not know the amount of freight charged by the foreign shipping line from the foreign supplier; it was stipulated in the Service Tax Rules that in such cases the importer shall have the option to pay an amount calculated at the rate of 1.4% of the CIF value of imported goods. This provision was stipulated on the basis that freight roughly constitutes 10% of the CIF value of goods on an average. Under GST too, it was decided that the liability to pay GST on such transportation service provided by a foreign shipping line to a foreign supplier shall be of the importer in India and the notifications are being issued accordingly. It is proposed that the similar provision deeming value of such service at 10% of the CIF value may be incorporated in the IGST notification. Considering the nature of the service, this provision is not required in the CGST, SGST or UTGST notifications. The Council approved the proposal. Agenda Item 3(vi)- Notification of IGST Rules, 2017 6.8.1. Section 20 of the IGST Act, 2017 provides for application of certain provisions of the CGST Act, 2017 to the IGST Act and Section 22 of the said Act provides for making rules for carrying out the provisions of the IGST Act. The Central Goods and Services Tax Rules, 2017 (comprising of chapters on registration and composition levy) were notified under section 164 of the CGST Act, 2017 vide Notification No. 3/2017- Central Tax dated 19.06.2017 and have come into force with effect from 22.06.201 7. Subsequently, minor non-substantive amendments were carried out in the CGST Rules, 2017 vide notification No. 7/2017-Central Tax dated 27.06.2017 and twelve new chapters comprising of provisions for valuation, tax payment, tax invoice, returns, refund, input tax credit, assessment, appeals and revision, etc. were added to the CGST Rules, 2017 vide notification No. 10/2017-Central Tax dated 28.06.2107. The issue relating to issuance of IGST Rules was discussed with the Union Law Ministry, which opined that the Integrated Goods and Services Tax Rules, 2017 are required to be notified under section 22 of the IGST Act, 2017 to carry out the provisions of the said Act. Since the CGST Rules were being adopted, in toto, as IGST Rules, the same were notified vide notification No. 4/2017-Integrated Tax dated 28.06.2017. Rule 2 of the said rules states that the Central Goods and Services Tax Rules, 2017, for carrying out the provisions specified in section 20 of the IGST Act, 2017 shall, as far as may be, apply in relation to the integrated tax as they apply in relation to the central tax. Further, these rules have been deemed to have come into force with effect from 22.06.2017. The Council was requested to grant post facto approval for adopting the CGST Rules as IGST Rules as has been advised by the Union Law Ministry and to notify the IGST Rules with effect from 22.06.2017. The Council agreed to this proposal. Agenda Item 3(vii) - Proposal to amend rule 117 (1) of the CGST Rules, 2017 6.9.1. Rule 117 (1) of the CGST Rules, 2017 currently reads as: (I) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-I, duly signed, on the common portal specifying therein, separately, the amount of input tax credit to which he is entitled under the provisions of the said section: ... 6.9.2 To clarify that there will be no transition of credit of various cesses in GST, it is proposed to add 'of eligible duties and taxes, as defined in Explanation 2 to section 140' since cesses are not covered in the definition of 'eligible duties and taxes' This will also ensure that it applies uniformly to transition of all credits. The amended sub-rule (1) shall read as: (1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-I, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section: The Council agreed to this proposal. Agenda Item 3(viii) - High Sea Sales 6.10.1. High Sea Sales is a terminology used in common parlance for Sales in the course of import. In such cases, sale taking place by transfer of documents of title to goods before goods are cleared from customs, is a sale in the course of import. There is need to bring clarity on the issue of levy of IGST, when such sale (supply in GST parlance) takes place in high sea and a second-time levy of IGST when goods are cleared through Customs. It is proposed to clarify by way of a circular that when goods sold on high sea sales basis are imported the first time, lGST would be levied at the time of importation and the value addition due to high sea sales shall be part of the value on which IGST is collected. The Council agreed to this proposal. Other Issues 7.1. The Hon'ble Minister from Haryana complimented the Chairperson for his efforts in ensuring that all decisions taken by the GST Council were unanimous and requested on behalf of Haryana and Punjab to take a relook at the issues of the agriculture sector. He stated that this sector was in some distress right now but the Council had decided to tax fertilisers, a major input for agriculture, at the rate of 12% (which was currently exempted in Haryana). Headded that this meant that there would be an additional cost of ₹ 31 for every 50 kg. of urea and that this would, in addition send a wrong signal on how the Council considered the issues pertaining to farmers. He further added that pesticides were being taxed at the rate of 18% and that tractor parts were taxed at the rate of 28%. He requested that these issues be reconsidered. The Hon' ble Minister from Telangana stated that his Government too supported the suggestions of the Hon'ble Minister from Haryana. The Hon'ble Deputy Chief Minister of Gujarat supported the suggestion and added that the rate of tax on fertilisers should be 5% and that this would be in the interest of the farmers as well as the nation. The Hon'ble Minister from Chhattisgarh said that compared to the earlier rate, a rate of 12% would make fertilizers more expensive and that it would be a matter of concern for the farmers. He requested that the rate of tax on fertilisers should be reduced. The Hon'ble Minister from Uttar Pradesh stated that as discussed previously by the Council, gypsum, bio-fertilisers, organic fertilisers and zinc sulphate should also be considered along with fertilisers. 7.2. The Hon'ble Minister from Madhya Pradesh requested to reduce the rate of tax on fertilisers, pesticides and tractor parts. The Hon'ble Ministers from Uttarakhand and Rajasthan supported the proposal to reduce the rate of tax on fertilisers. The Hon'ble Minister from Rajasthan also requested that the rate of tax on hotels, handicrafts, hand tools, textiles (Jaipur 'rajaai ') and marble statue should be relooked. The Hon'ble Deputy Chief Minister of Gujarat stated that the cake that came out of crushing cotton seed was not treated as de-oiled cake and that it should be exempted as it was used as cattle feed by cattle herders who were not even land owners. He therefore requested to club this item along with de-oiled cake. The Secretary clarified that oil cake used as cattle feed would be exempt from GST. However, oil cake supplied to solvent extractors will be chargeable to 5% GST. The Hon'ble Minister from Kerala stated that tractor parts should be taxed at the same rate as tractors and that currently, they were taxed at a higher rate. He added that in the case of fertilisers, a rational decision should be taken. The Hon'ble Minister from Andhra Pradesh stated that he agreed with the view expressed regarding tractors and fertilisers. 7.3. The Hon'ble Minister from Karnataka stated that in the case of tractors, it was agreed in the past meetings that any exclusive tractor parts would be kept at 18% and that it was only a matter of establishing that something was an exclusive tractor part. He noted that some exclusively used tractor parts had been deemed to be of dual usage and that these could be vetted by an expert taking representations from the tractor industry and those that were exclusively tractor parts could be placed in the 18% rate schedule. The Secretary stated that the Government of Haryana had earlier submitted a list of exclusive tractor parts such as the rear wheel of tractors which were agreed to be put in the 18% category and that the tractor industry had submitted a list of items which they claimed could be used only for tractor making. He added that this was being examined and that if the Hon'ble Chairperson could be authorized, those parts which were established as exclusive tractor parts could be notified (under the 18% category). The Hon'ble Minister from Karnataka supported this suggestion. The Hon'ble Minister from Odisha stated that his State also endorsed the point regarding tractors. The Hon' ble Minister from Bihar stated that tractors were used not only for agricultural purposes but commercially as well and that even in the case of fertilisers, if tax was collected today, benefit could be given back to the farmers in the form of direct benefit transfer to their accounts. He added that the Council had taken a decision and that it could be reviewed after one year. The Hon' ble Minister from Karnataka reiterated the request of the Hon'ble Minister from Kerala to provide information on embedded taxes (on fertilisers) and that a rational decision could then be taken. 7.4. The Hon' ble Minister from Tamil Nadu supported the request to reduce rates of tax on fertilisers and tractor parts and also requested that the rates of tax of unbranded sugar confectionaries, roasted gram (locally known as fried gram), sago, wet grinders and air compressors, fish net, fish net twines and sanitary napkins be reduced. He added that the rate of tax for supply of food and drinks in small restaurants should be brought down to 5% and that a distinction needed to be made between air-conditioned restaurants that served liquor and other air-conditioned restaurants that did not serve liquor. He also added that the proposal to levy tax at 28% on the fireworks industry might harm the sector and pave the way for the market to be flooded with imported fireworks. The Hon'ble Minister from Goa stated that he supported the view of the Hon'ble Minister from Tamil Nadu in the matter of fish nets and that fishermen were very agitated by the rate of tax proposed to be imposed. He added that having decided the rates, it was not prudent to go back and review the rates so soon. He further added that the GST Council was a continuous process and that it would be meeting frequently and would review the rates also accordingly. He requested that the decisions of so many meetings be implemented first. 7.5. The Hon'ble Deputy Chief Minister of Gujarat raised the issue of rate of tax in case of fertilizers and proposed that in the light of implementation of the GST, the rate of 12% on fertilizers would adversely affect the interest of farmers, especially when input tax credit on natural gas would not be allowed as it remained outside the GST. He, therefore, proposed that the rate of tax should be reduced to 5% on fertilizer. The Hon'ble Minister from Karnataka stated that before jumping to any conclusion regarding reduction in rates of tax in the case of fertilisers, the correct data needed to be shared. The Secretary informed that for fertilisers, the rate decided was 12% and that there was an excise duty of 1% currently. He added that there was also an embedded tax of 2.44% on the inputs that went into the manufacture of fertilizers and that the weighted average of VAT rate of all States was 4.09% (except in States like Punjab ang Haryana where VAT rate on fertilisers was NIL). The tax components of CST (Central Sales Tax), Octroi, reversal of input tax credit (in the case of depot transfer) were also taken into account and the total incidence came to about 9.75%. He added that since the existing rate fell between 5% and 12%, a call had to be taken on which slab to place fertilizers in. The Hon'ble Minister from Assam stated that seeing the unrest among farmers and to give a good message, and also given that not all States had octroi, fertilisers could be placed in the 5% slab. The Hon'ble Minister from Telangana stated that fertilisers should be exempted. The Hon'ble Minister from Kerala wondered whether there would be any credit block if the tax rate (on fertilisers) was brought to 5%. The Secretary stated that there would be two implications - even at the current rate of 12%, the inputs (to fertilisers) were at 18% and there would be requirement to obtain refunds. If the rate was reduced to 5%, there would be an additional requirement for refund which would pose some difficulty for fertiliser units because they would first have to invest in the inputs (at the rate of 18%), there would be a blockage of funds for some time and depending on the sale, they would have to obtain refunds (which would be obtained in sixty days). He added that however, the current situation was tricky in the farming sector, with some fertiliser companies having already announced a price rise from 1 July 2017. 7.6. The Hon' ble Chairperson said that there were two points to consider - one was about what was being said about fertilisers and the second being what would be the process and mechanism for the Council's functioning when such issues came up for discussion after implementation. The Hon'ble Minister from Goa stated that given that data was still being collected, in the present circumstances, a message needed to go out that the GST Council cared for the farmers. The Hon'ble Chairperson stated that factually, fertiliser was exactly in between the two slabs of 5% and 12% and that a decision had been made to include it in the higher bracket and that it would be alright to decide on this either way. He suggested that the views of all the States could be taken on this matter. The Hon' ble Minister from Haryana stated that Punjab had requested him to take up the issue of taxing fertilisers at the rate of 5%. Shri Onkar Chand Sharma, Principal Secretary (Excise Taxation), Himachal Pradesh stated that his State supported the rate of 5%. The Hon'ble Minister from Kerala supported 5% rate but with the caveat that he would not be able to grant refunds. The Secretary stated that this would be regressive on the fertiliser companies who would not be able to take the losses. He added that while being kind to the farmers, it would be unfair to the fertiliser companies and that they would possibly then increase the price of fertilisers to offset the losses due to denial of refund. The Deputy Chief Ministers of Gujarat, Delhi, Manipur, Arunachal Pradesh and the Hon'ble Ministers from Uttarakhand, Jharkhand, Jammu Kashmir, Haryana, Bihar, Andhra Pradesh, Assam, Manipur, Karnataka, Madhya Pradesh, Odisha and Nagaland all supported a rate of 5% on fertilisers. The Hon'ble Chairperson observed that there was a consensus on a tax rate of 5% on fertilisers and proposed to adopt the same. The Council agreed to the suggestion. 7.7. The Hon' ble Minister from Uttar Pradesh stated that he had requested for reconsideration of rates of some items to which the Hon'ble Chairperson responded that the Fitment Committee would examine the requests. The Hon'ble Minister from Telangana stated that on the subject of works contract, the Hon'ble Chief Minister of Telangana had written a letter to the GST Council stating that a rate of 18% on it would make it very difficult for his State since they had many projects relating to water such as Water Grid, Irrigation, etc. He also raised the issue of granite and beedis. 7.8. The Hon'ble Chairperson added that as per the suggestion of the Hon'ble Minister from Karnataka on tractor parts, any items that were exclusively tractor parts would be put in the 18% tax bracket. He added that any further matters could be taken up for discussion by the Council starting from the first Saturday of August. 8. In respect of Agenda Item 3, the Council approved the following - i. The Rules and related Forms on Compounding of Offences including the changes made therein. ii. The Rules and related Forms on Enforcement (Inspection, Search and Seizure) including the changes made therein. iii. The changes made to the Refund Rules (Rule 96 amended to accommodate export without payment of tax) and Forms iv. The Rules and related Forms on Demand and Recovery including the changes made therein. v. To incorporate a provision in the IGST notification that in cases where the goods are imported by an importer in India on CIF (Cost, Insurance and Freight) basis and the service of transportation of goods by a vessel from a place outside India up to the customs station in India is provided by a person located in non-taxable territory (a foreign shipping line) to a person located in non-taxable territory (overseas supplier/ exporter of goods) and in case the importer did not know the amount of freight charged by the foreign shipping line from the foreign supplier, the deemed value of such service shall be at 10% of the CIF value. vi. Post facto, adoption of the CGST Rules as IGST Rules. vii. To amend Rule 117(1) of the CGST Rules, 2017 as follows: (1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-I, duly signed, on the common portal specifying therein, separately, the amount of input tax credit of eligible duties and taxes, as defined in Explanation 2 to section 140, to which he is entitled under the provisions of the said section: viii. To clarify by way of a circular that when goods sold on high sea sales basis are imported the first time, IGST would be levied at the time of importation and the value addition due to high sea sales shall be part of the value on which IGST is collected. ix. To include fertilisers in the list of 5% items. x. To authorize the Chairperson to, after establishing parts used exclusively in tractors, include those parts in the list of 18% items. Agenda Item 4: Date of the next meeting of the GST Council 9. The Hon'ble Chairperson suggested that for the first three or four months (after implementation), the Council could meet on the first Saturday of every month (starting from August 2017) for the Council to review implementation of GST and consider the recommendations of the GIC. 10. The meeting ended with a vote of thanks to the Chair. (Arun Jaitley) Chairperson, GST Council