Minutes of the 54th Meeting of the GST Council held on 09th September, 2024 - GST - 54th GST Council Meeting

Minutes of the 54th Meeting of the GST Council held on 09 th September, 2024 at New Delhi The 54th meeting of the GST Council was held on 09 th September, 2024 under the Chairpersonship of the Hon ble Union Finance Minister, Smt. Nirmala Sitharaman at Sushma Swaraj Bhawan, New Delhi, The list of Hon ble Members of the Council who attended the meeting is at Annexure-1. The list of the officers of the Centre, States, Union Territories, GST Council Secretariat and GSTN who attended the meeting is at Annexure-2. 1.2 The following agenda items were listed for discussion in the 54th meeting of the GST Council: September. 2024 at New Delhi S. No. Agenda Item 1. Confirmation of Minutes of the 53 rd GST Council Meeting held on 22 nd June, 2024 2. Deemed ratification by the GST Council of the Notifications and Circulars issued by the Central Government and decisions of GST Implementation Committee for the information of the Council. 3. Issues recommended by the Law Committee for the Consideration of the GST Council i) Clarification on refund of IGST paid on exports under rule 96(10) of the CGST Rules, 2017 and amendments in Rule 89 and Rule 96 of CGST Rules, 2017 ii) Clarification on the place of supply of advertising services provided to foreign entities iii) Amendment in CGST Rules, 2017 I. Consequential Amendment in Form REG-20 REG-31 due to amendment in Rules 10A, 21 (h) and 21 (i) II Agenda to modify FORM INS-01 on account of replacement of IPC 1860 with BNS, 2023 III Consequential rule and form amendments subsequent to insertion of Section 74A of CGST Act, 2017 vi) Clarification regarding the availability of Input Tax Credit on demo vehicles by the dealers of the vehicle manufacturers v) Providing a mechanism for implementing sub-sections (5) and (6) of Section 16 of the CGST Act, 2017. vi) Clarification on the place of supply in case of data hosting services provided by service providers located in India to cloud computing service providers located outside India. vii) Consequential amendments required in CGST Rules, 2017 and relevant forms subsequent to insertion of Section 128A and clarification on various related issues 4. Recommendations of the Fitment Committee for the consideration of the GST Council a) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to goods (5 issues) Annexure-I b) Issues where no change has been proposed by the Fitment Committee in relation to goods (7 issues) Annexure-II c) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to services (20 issues) Annexure-IV d) Issues where no change has been proposed by the Fitment Committee in relation to services (15 issues) Annexure-V e) Issues which have been proposed by the Fitment Committee for deferring in relation to services (9 issues)- Annexure-VI f) Agenda note on review of 51 st GST Council meeting s recommendation to amend GST laws to provide clarity on the taxation of supplies in casinos, horse racing and online gaming. g) Issuance of circular clarifying the scope of the phrase as is where is basis h) Report of Committee of Officers on Taxation of Extra-Neutral Alcohol under GST for the past period (from 1.7.2017 to 20.10.2023) i) Status update on Group of Ministers (GoM) on Rate Rationalization j) Status update on Group of Ministers (GoM) on boosting real estate sector under GST regime 5. Recommendations of the 21 st meeting of the IT Grievance Redressal Committee for approval/ decision of the GST Council 6. Performance Report of the Competition Commission of India (CCI), State Level Screening Committee (SLSC) and DG (Anti- Profiteering) for 1 st quarter of the F.Y 2024-25 along with Performance Report of Standing Committee (SC) for 3rd quarter and 4 th quarter of F.Y. 2023-24 and 1 st quarter of F.Y 2024-25 for the information of the Council. 7. Issues recommended by GSTN (a) Integration of UPI, Credit Cards and Debit Card Payment Option by Accounting Authorities (b) B2C e-Invoicing Pilot Project (c) Enhancement in the existing GST Return Architecture 8. (a) Review of revenue position under Goods and Services Tax (b) Status update on Compensation Cess (c) IGST Settlement (d) GST Appellate Tribunal - Issues for approval (e) Sharing of personally Identifiable Information of Taxpayers with other Ministries/ Departments 9. Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act, 1962 to be placed before the GST Council for information. 10. Any other agenda item with the permission of the Chairperson 1.3 The Secretary to the GST Council (hereinafter called The Secretary ), welcomed all the Hon ble Members of the Council and participating officers to the 54th meeting of the GST Council. He extended greetings to Smt. Aditi Tatkare, Hon ble Minister for Women Child Development, Maharashtra to her first GST Council meeting. 1.4 The Secretary informed the Council that the agenda for 54th Council meeting was discussed in detail during the Officers Meeting on the previous day which would immensely benefit the Council in its deliberations. 1.5 The Secretary sought permission of the Chair to begin deliberations on each item of the agenda 2. Agenda item 1: Confirmation of Minutes of the 53rd GST Council Meeting held on 22nd June, 2024 2.1 Joint Secretary, GST Council Secretariat (GSTCS) informed the Council that the draft minutes of the 53rd GST Council meeting were circulated to all the States. She stated that during the Officers Meeting held on 08th September, 2024 certain changes to the draft minutes were suggested by the state of Tamil Nadu and GST Policy Wing, CBIC which were agreed to and accordingly an Addendum to the Agenda for the 54th GST Council Meeting had been circulated during the Council meeting. 2.2 The Council took note of the changes proposed through the Addendum to the minutes of the 53rd GST Council meeting. The Secretary requested the Council to adopt the minutes of the 53rd meeting of the GST Council. Decision: The Council adopted the Minutes of the 53rd meeting of the GST Council held on 22nd June, 2024. 3. Agenda Item 2: Deemed ratification by the GST Council of the Notifications and Circulars issued by the Central Government and decisions of GST Implementation Committee for the information of the Council 3.1 The Secretary took up the next item of agenda pertaining to the deemed ratification by the GST Council of the Notifications and Circulars issued by the Central Government and decisions of GST Implementation Committee for the information of the Council. 3.2 Pr. Commissioner, GST Policy Wing stated that based on recommendations of the 53rd GST Council Meeting, 5 Central Tax Notifications, 3 Central Tax (Rate) Notifications, 1 Integrated Tax Notification, 3 Integrated Tax (Rate) Notifications, 1 Union Territory Tax Notification, 3 Union Territory Tax (Rate) Notifications and 1 Compensation Cess (Rate) Notification had been issued from 14.06.2024 till 17.08.2024. Further, 22 Circulars under the CGST Act had been issued during the said period. 3.3 The Secretary requested the Council to ratify the Notifications and Circulars issued. Decision: The Council ratified the Notifications and Circulars issued and took note of the decisions of the GST Implementation Committee. Agenda Item 3: Issues recommended by the Law Committee for the consideration of the GST Council The Secretary took up the next agenda which were issues recommended by the Law Committee for the consideration of the GST Council. He informed that these agendas were discussed in detail in the Officers meeting held on 08th September, 2024 and that there was an agreement among the officers on most of the issues. Agenda Item 3(i): Clarification on refund of IGST paid on exports under rule 96(10) of the CGST Rules, 2017 and amendments in Rule 89 and Rule 96 of CGST Rules, 2017. 4.1 Pr. Commissioner, GST Policy Wing stated that representations have been received from trade and industry requesting for clarification on restriction imposed vide rule 96(10) of the Central Goods Services Tax Rules, 2017 (hereinafter referred to as the CGST Rules) in respect of availment of the refund of IGST on goods exported if benefits of certain concessional/exemption notifications have been availed on inputs/raw materials imported or procured domestically. 4.2 Pr. Commissioner, GST Policy Wing informed that the Law committee had deliberated on the following two issues: Issue 1: Regularization of refund of IGST in cases where the exporters had imported certain inputs without payment of integrated taxes and compensation cess by availing the benefits under notification No. 78/2017- Customs dated 13.10.2017 or notification No. 79/2017-Customs dated 13.10.2017 and are now ready to pay the said IGST and compensation cess amount, along with interest: The Law Committee recommended that a clarification may be issued through a Circular that in such cases, where the inputs were initially imported without payment of integrated tax and compensation cess by availing benefits under notification No. 78/2017-Customs dated 13.10.2017 or notification No. 79/2017- Customs dated 13.10.2017, but subsequently, IGST and compensation cess on such imported inputs is paid at a later date, along with interest, and the Bill of Entry in respect of the import of the said inputs is got reassessed through the jurisdictional Customs authorities to this effect, then the refunds of IGST sanctioned may be considered to be regularized in light of the explanation to rule 96 (10) of CGST Rules. Issue 2: Review of the provisions of rule 96 (10) rule 89 (4A) and rule 89 (4B) of CGST Rules: The Law Committee observed that operation of rule 96(10) is leading to unnecessary complications without any intended benefit being served and therefore recommended that rule 96(10), rule 89(4A) rule 89(4B) of the CGST Rules, 2017 may be omitted with prospective effect and that consequential amendments in clause (b) of sub-rule (4B) of rule 86, clause B, clause C and clause E of sub-rule (4) of rule 89 and Explanation (a) to sub-rule (5) of rule 89 of CGST Rules may be made. The Law Committee also recommended that after the proposed deletion of rule 89(4A) and 89(4B) of CGST Rules, 2017, in the cases where the benefit of concessional/ exemption notifications which were specified in rule 96 (10) or rule 89 (4A) or (4B) had been availed on inputs imported or procured domestically, the refund on account of exports can be claimed through the IGST refund route under rule 96 of the CGST Rules, 2017 or as refund of accumulated Input Tax Credit (ITC) under rule 89(4) of CGST Rules. Decision-The Council agreed with the recommendations of the Law Committee to omit rule 96(10), rule 89(4A) rule 89(4B) and forthe consequential amendment in clause (b) of sub-rule (4B) of rule 86, clause B, clause C and clause E of sub-rule (4) of rule 89 and Explanation (a) to sub- rule (5) of rule 89 of CGST, Rules, 2017 along with proposed circular. Agenda Item 3(ii): Clarification on the place of supply of advertising services provided to foreign entities. 4.3 Pr. Commissioner, GST Policy Wing informed that representations have been received from trade and industry requesting for clarification regarding place of supply of the advertising services being provided by Indian advertising companies/agencies to foreign entities, as they are denied export benefits considering the place of supply of the said services as within India. 4.4 He informed that the Law Committee broadly examined the following issues and recommended as follows: Issue No 1: Whether the advertising company can be considered as an intermediary between the foreign client and the media owners in terms of section 2(13) of IGST Act, 2017 thereby resulting in determination of place of supply under section 13(8)(b) of the IGST Act, 2017? The advertising company is involved in the main supply of advertising services, including resale of media space to the foreign client, on principal-to-principal basis as detailed above and does not appear to fulfil the criteria of intermediary under section 2(13) of the IGST Act and the said circular dated 20.09.2021. Thus, the advertising company cannot be considered as intermediary in such a scenario and accordingly, the place of supply in the instant matter cannot be determined as per section 13(8)(b) of the IGST Act. However, in cases where advertising company acts merely as an agent of foreign client for arranging media space from media owner, and does not provide services on principal-to-principal basis, the advertising company would be treated as intermediary in accordance with section 2(13) of IGST Act and place of supply of such services provided by the advertising company would be determinable as per section 13(8)(b) of IGST Act, i.e., the place of location of the advertising company. Issue No 2 : Whether the representative of foreign client in India or the target audience of the advertisement in India can be considered as recipient of the services being supplied by the advertising company under section 2(93) of CGST Act, 2017? As, the foreign client is liable to pay the consideration to advertising company for the supply of advertising services, the recipient of the advertising services provided by the advertising company is the foreign client, and not the Indian representative of the foreign client based in India or the target audience of the advertisements in India as per section 2(93) of CGST Act, 2017. Issue No 3 : Whether the advertising services provided by the advertising companies to foreign clients can be considered as performance-based services as per section 13(3) of the IGST Act, 2017? The services being provided by the advertising company are neither in respect of goods being made physically available by the recipient of services, nor require physical presence of the recipient with the advertising company for availing such services, and accordingly, such services cannot be considered as performance based services under section 13(3) of IGST Act. Accordingly, the place of supply of such advertising services does not appear to be covered under any of the provisions of sub-sections (3) to (13) of the Section 13 of the IGST Act, 2017, and therefore, place of supply of the such advertising services shall be the location of the said foreign client, i.e., outside India, as per Section 13(2) of IGST Act, 2017. Decision: The Council agreed with the recommendation of the Law Committee with regard to clarification on the place of supply of advertising services provided to foreign entities along with the proposed circular. Agenda Item 3(iii): Amendment in CGST Rules, 2017. Agenda 3(iii) (I) : Consequential Amendment in Form REG-20 REG-31 due to amendments in Rules 10A, 21 (h) and 21(i) of CGST Rules, 2017. 4.5 Pr. Commissioner, GST Policy Wing stated that the Law Committee has recommended amendments in FORM GST REG-20 FORM GST REG-31 to align the same with the current GST Act/Rules. 4.6 He informed that in the discussions during the Officers meeting, the State of Punjab has suggested that in the relevant GST Rules for FORM REG-20, the number of days within which the bank details have to be submitted by the registered person may be reduced from the existing 30 days to 15 days post registration. However, such changes need amendment to the rules and it would be examined in detail by the Law Committee. He, therefore, had requested the State of Punjab to submit a proposal in this regard to the Law Committee for examination. 4.7 Pr. Commissioner, GST Policy Wing further informed that during the officers meeting, the State of Tamil Nadu has suggested that in FORM GST REG-31, the words jurisdictional officer and jurisdictional tax officer may be replaced with the words jurisdictional proper officer in order to align the same with the Act. He stated that the changes suggested by the state of Tamil Nadu would require changes at several places and correcting at one place would not serve the purpose. However, as the anomaly has been brought to the notice, in order to ensure standardization and uniformity, the issue will be examined separately by the Law Committee in detail and shall be brought before the Council as soon as it is examined. Decision: The Council agreed with the proposed amendments recommended by Law Committee in FORM GST REG-20 and FORM GST REG-3.1. The issues raised by the states of Tamil Nadu and Punjab to be examined separately. Agenda 3(iii) (II): Amendment in FORM INS-01 in the light of enactment of Bharatiya Nyaya Sanhita (BNS), 2023 4.8 Pr. Commissioner, GST Policy Wing informed that the Law Committee proposed amendment in FORM GST INS-01 to replace the references to various sections of the Indian Penal Code (IPC), 1860 in the said form with that of Bharatiya Nyaya Sanhita (BNS), 2023 and recommended that the proposed changes in Form GST INS-01 are necessary to reflect the provisions of BNS, 2023. Decision: The Council agreed with the proposed amendments recommended by Law Committee in Form GST INS-0. Agenda 3(iii) (III): Amendment in Rules and Forms due to insertion of section 74A in CGST Act, 2017 4.9 Pr. Commissioner, GST Policy Wing informed that subsequent to the insertion of Section 74A in the CGST Act, 2017, the Law Committee recommended consequential amendments in rule 36(3), rule 88B(1), rule 88D(3), rule 96B(1), rule 121 and rule 142 of the CGST Rules, 2017 and FORM GST DRC-01A. 4.10 The Law Committee also recommended that in the dropdown option for Section / sub-section under which SCN is being issued in FORM GST DRC-01 on the common portal, options for Issuance of demand under section 74A(1) read with section 74A(5)(i) and also for Issuance of demand under section 74A(1) read with section 74A(5)(ii) may be provided, so that the data regarding the number and notices issued under section 74A invoking charges of fraud, willful misstatement, suppression of facts etc. and those not invoking those charges is readily available for MIS. Decision: The Council agreed with the recommendations of the Law Committee along with proposed amendments in rule 36(3), rule 88B(1), rule 88D(3), rule 96B(1), rule 121 and rule 142 of the CGST Rules, 2017 and FORM GST DRC-01A. Agenda Item 3(iv): Clarification on availability of input tax credit in respect of Demo vehicles. 4.11 Pr. Commissioner, GST Policy Wing stated that representations have been received from trade and industry for issuance of clarification regarding availability of input tax credit (ITC) on Demo vehicles, as divergent views have been taken in multiple advance rulings due to varied interpretation of provisions of sub-clause (A) of clause (a) of section 17(5) of CGST Act, 2017 on the same matter. 4.12 The issue was deliberated by the Law Committee and it recommended to clarify the following issues through issuance of a Circular: 1. Availability of input tax credit on Demo vehicles, which are motor vehicles for transportation of passengers having approved seating capacity of not more than 13 persons (including the driver), in terms of clause(a) of section 17(5) of CGST Act. 2. Availability of input tax credit on Demo vehicles in respect of capitalization of such vehicles in books of account by the authorized dealers. 4.13 The Law Committee recommended that when demo vehicles are used by authorized dealers to provide trial run and to demonstrate features of the vehicles to potential buyers with the aim of promoting the sale of similar motor vehicles, they may be considered as being used for the purpose of making a further supply of such motor vehicles. As a result, input tax credit on demo vehicles is not blocked for dealers under clause (a) of section 17(5) of the CGST Act, as it is excluded from such blockage in terms of sub-clause (A) of the said clause. However, if the dealer merely acts as an agent or service provider for the vehicle manufacturer, offering marketing services or providing test drive facilities to potential customers on behalf of the manufacturer without directly engaging in the sale or purchase of vehicles, in such cases the dealer is not making the supply of motor vehicles on his own account. Therefore, the demo vehicles purchased by the dealer cannot be considered as being used for making a further supply of such motor vehicles. Accordingly, the Law Committee has recommended that in such cases, input tax credit on Demo vehicles would not be available to the dealer, in accordance with section 17(5)(a) of the CGST Act. 4.14 The Law committee has also opined that availability of input tax credit on Demo vehicles is not affected by way of capitalization of such vehicles in the books of account of the authorized dealers, subject to other provisions of the Act i.e. section 16(3) of CGST Act, 2017. 4.15 Pr. Commissioner, GST Policy Wing further stated that during the Officers meeting held on 08.09.2024, it was generally agreed that there may be a need for a comprehensive review of the provisions under Section 17(5) of the CGST Act, which pertain to the blocking of input tax credit (ITC). While this review is not required immediately, the need for it has been highlighted by multiple requests and observations. Decision: The Council agreed with the recommendations of the Law Committee with regard to clarification on availability of input tax credit in respect of Demo vehicles along with the proposed Circular. Agenda Item 3(v): Implementation of provisions of sub-section (5) and sub-section (6) in section 16 of CGST Act. 4.16 Pr. Commissioner, GST Policy Wing stated that the GST Council in its 53rd meeting recommended to retrospectively amend section 16 of the CGST Act, 2017 with effect from 01.07.2017: a) to provide that the time limit to avail input tax credit under Section 16(4) of CGST Act, through any FORM GSTR 3B filed till 30/11/2021 for the financial years 2017-18, 2018- 19, 2019-20 and 2020-21, be deemed to be 30.11.2021 and b) to allow for relaxation of conditions under Section 16(4) of the Act, in cases where the returns for the period from the date of cancellation of registration/effective date of cancellation of registration till the date of revocation of cancellation of registration are filed after revocation of cancellation of registration. It was also recommended that no refund of tax already paid, or input tax reversed would be allowed on account of these retrospective amendments. 4.17 He further informed that in order to implement the above recommendations of the Council, sub-section (5) and sub-section (6) have been inserted in section 16 of CGST Act, 2017 vide section 118 and 150 of the Finance (No. 2) Act, 2024. These provisions are, however, yet to be notified. 4.18 Pr. Commissioner, GST Policy Wing stated that several representations have been received from trade and industry requesting for clarification in respect of various issues pertaining to availment of benefit of the said amendments in section 16 of CGST Act, to the taxpayers against whom demands have been issued alleging wrong availment of input tax credit in contravention of provisions of sub-section (4) of section 16 of CGST Act, who are now entitled to avail the said input tax credit as per the retrospectively inserted provisions of sub-section (5) or sub-section (6) of section 16 of the CGST Act. It has further been requested that in respect of cases where the appeals have either not been filed against demand orders/ appellate orders or the time to file appeal against the said orders has already expired, the benefit of the inserted provisions may be made available without the need for filing appeals, or without requirement of payment of pre- deposit for filing appeals for vacating the demands already created. It has been represented that denial of benefit in cases where time for filing of appeals is already over, or demanding pre-deposit for filing appeals in such cases would defeat the purpose of said relief being provided through the said sub-sections and would not only result in locking of the funds of the taxpayers but would also result in subsequent workload of tax officers in processing the refund applications in respect of such pre- deposits paid. 4.19 Law Committee examined the issue and observed that different scenarios may emerge where relief under sub-section (5) or sub-section (6) of section 16 of CGST Act may be available to the taxpayers and to implement the said provision, Law Committee made the following recommendations: a. As provisions of sub-section (5) and sub-section (6) of section 16 of the CGST Act are to come into force retrospectively with effect from 1st July, 2017, section 118 and 150 of the Finance (No. 2) Act, 2024, may be notified by the Central Government at the earliest with the recommendations of the Council. Whenever the States will notify the concerned provisions in their respective SGST Acts, the same will also come into effect from 1st July, 2017. This will help in early implementation of the intended relief being provided to the taxpayers through the insertion of said provisions. b. In respect of cases, where demand notice has not been issued; or where demand notice has been issued but order has not been passed by the adjudicating authority; or where order has been passed by the adjudicating authority and appeal has been filed but no appeal order has been passed; or where order has been passed by the adjudicating authority and revision proceedings have been initiated but no order has been passed by the revisional authority, the concerned proper officer/ adjudicating officer/ appellate authority/revisional authority may decide the case by taking into consideration the said provisions of sub-section (5) and sub-section (6) of section 16 of CGST Act. c. In respect of cases, where demand order has been issued confirming the demand but where no appeal has been filed with the appellate authority yet, or where appeal order has been issued by the appellate authority or order has been issued by the revisional authority but no appeal has been filed with Appellate Tribunal yet, and the benefit of sub-section (5) and sub-section (6) of section 16 of CGST Act is now available, a special procedure for rectification of the said orders under section 148 of the CGST Act to be followed by such class of taxable persons may be notified. The said special procedure may provide for filing of such application for rectification of order within a period of six months from the date of issuance of the said notification and the proper officer may be required to take a decision on the said application for rectification and issue the order within a period of three months from the date of filing of application for rectification, as far as possible. Whenever the States will notify the said provisions of sub-section (5) and sub-section (6) of section 16 in their respective SGST Acts, they will also notify the said special procedure under section 148 of their respective SGST Acts with effect from the date on which the Centre had issued the said notification. d. A circular clarifying the action to be taken by the tax authorities and/ or by the taxpayers may be issued after issuance of the notification under section 148 of the CGST Act mentioned above. e. An MIS may be made available by GSTN for tax authorities inter alia including the number of cases where rectification application filed, number of cases where application is disposed of and number of cases where the application is pending for more than three months, enabling them to monitor the progress of the action taken by the tax officers in respect of the applications for rectification filed under the above special procedure. 4.20 The Hon ble Member from Delhi emphasized that the recent amendment will present significant challenges for the state, as over 100,000 notices issued for the years 2017-18 and 2018-19 will now require rectification. This will result in a considerable administrative burden. 4.21 Pr. Commissioner, GST Policy Wing clarified that this issue was discussed in detail during the last meeting. Several states had issued notices, but the amendment was brought to provide relief to taxpayers who faced difficulties due to a lack of knowledge about the time limits during the initial years of implementation of GST. The Pr. Commissioner emphasized that this relief is not intended to be permanent. 4.22 The Hon ble Member from Uttar Pradesh also observed that since the matter had been deliberated and discussed in detail in the last GST Council meeting and had attained finality, therefore, the same may not be re-opened. 4.23 Pr. Commissioner, GST Policy Wing further informed that officer from State of Bihar had inquired whether rectifications could be made in cases where amount of ITC has already been recovered, to which it was clarified that while there is no restriction on rectifying an order, a refund of the tax that has already been paid or recovered is not available. 4.24 Pr. Commissioner, GST Policy Wing also informed that the State of Andhra Pradesh has suggested an addition to the proposed circular concerning refunds. Currently, the draft of proposed circular states that refunds of tax already paid or ITC already reversed are not available under Section 150 of the Finance (No.2) Act, 2024. However, there is uncertainty about whether this restriction also applies to pre-deposit amounts paid while filing of an appeal, especially if the appeal is decided in favour of the taxpayer due to the new provisions. So it was decided that the following clarification be added at the end of paragraph four of the draft circular as detailed in agenda note, However, it is clarified that said restriction on refund under section 150 of the Finance (No. 2) Act, 2024 will not apply to the refund of an amount paid as pre-deposit by the taxpayer as per sub-section (6) of section 107 or sub-section (8) of section 112 of the CGST Act, at the time of filing of an appeal, where such appeals are decided in favour of the said taxpayer. Decision: The Council agreed with the recommendations of the Law Committee along with the proposed notifications and Circular including the amendment as proposed by the State of Andhra Pradesh. GSTN to provide MIS to enable tracking of applications for rectification. Agenda Item 3(vi): Clarification on place of supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India. 4.25 Pr. Commissioner, GST Policy Wing stated that representations have been received from the trade and industry seeking clarification on the place of supply of data hosting services provided by service providers located in India to clients (cloud computing service providers) located outside India. 4.26 The Law Committee examined the issue and recommended to clarify that: (a) Data hosting services provided by data hosting service provider to its overseas cloud computing service providers cannot be considered as intermediary services and hence, the place of supply of the same cannot be determined as per section 13(8) (b) of IGST Act. (b) Data hosting services provided by data hosting service provider to the said cloud computing service providers cannot be considered in relation to the goods made available by the said cloud computing service providers to the data hosting service provider in India and hence, the place of supply of the same cannot be determined under section 13(3) (a) of the IGST Act. (c) Data hosting services cannot be considered as services provided directly in relation to immovable property or physical premises and hence, the place of supply of such services cannot be determined under section 13(4) of IGST Act. (d) The place of supply for the data hosting services provided by the data hosting service provider in India to overseas cloud computing service providers does not fit into any specific provisions outlined in sections 13(3) to 13(13) of the IGST Act. Therefore, according to the default provision under section 13(2) of the IGST Act, the place of supply is determined to be the location of the recipient of the services. Where the cloud computing service providers receiving the data hosting services are located outside India, the place of supply is considered to be outside India according to section 13(2) of the IGST Act. (e) The supply of data hosting services being provided by data hosting service provider located in India to an overseas cloud computing entity can be considered as export of services, subject to the fulfilment of the other conditions mentioned in section 2(6) of IGST Act. Decision: The Council agreed with the recommendations of the Law Committee with regard to clarification on place of supply of data hosting services provided by service providers located in India to cloud computing service providers located outside India along with the proposed Circular. Agenda Item 3(vii): Consequential amendments required in CGST Rules, 2017 and relevant forms subsequent to insertion of Section 128A and clarification on various related issues. 4.27 Pr. Commissioner, GST Policy Wing stated that the GST Council in its 53rd meeting held on 22nd June 2024, had recommended insertion of Section 128A in the CGST Act, 2017 to provide for a waiver of interest or penalty or both, relating to tax demands under Section 73 pertaining to FYS 2017-18, 2018-19 and 2019-20. Section 146 of Finance (No.2) Act, 2024 provides for the same. Subsequent to the insertion of said section, corresponding rules are required to be inserted in Central Goods and Services Tax Rules, 2017, along with new forms in order to implement the same. 4.28 The Law Committee in its meetings held on 09.08.2024, 23.08.2024, 29.08.2024 and 02.09.2024 discussed the procedure for implementation of Section 128A of CGST Act in detail and recommended to insert Rule 164 in CGST Rules, as detailed in the agenda note. The Law Committee also recommended insertion of eight new Forms viz. FORM GST SPL -01, FORM GST SPL -02, FORM GST SPL -03, FORM GST SPL- 04, FORM GST SPL -05, FORM GST SPL -05A, FORM GST SPL -06 and FORM GST SPL-07 in CGST Rules, 2017, as detailed in the agenda note. Further, the Law Committee also recommended issuance of a circular to clarify the procedure to be followed by the taxpayers and the tax officers in order to avail and implement the benefit provided under Section 128A of the CGST Act. The Law Committee also recommended for issuance of the notification under sub-section (1) of Section 128A of CGST Act in order to provide for a date on or before which the payment of tax may be made by different class of registered persons, to avail the benefit of waiver of interest or penalty or both provided under Section 128A of the CGST Act. Pr. Commissioner, GST Policy Wing informed that in the Officers meeting it was proposed that this date should be finalized as 31.03.2025. He informed that in order to implement Section 128A, it must be officially notified. The Council will need to set an effective date for this provision as well as the other provisions of the Finance Act. It was agreed in the Officers meeting held on 08.09.2024 to recommend notifying Section 128A of the CGST Act with effect from 01.11.2024 for both the Centre and States. Decision: The Council agreed with the recommendations of the Law Committee for implementation of section 128A along with the proposed notifications, Circular and Forms and the decision in the Officers meeting regarding date for the notifying related provisions of the Finance Act. Agenda Item 4: Recommendations of the Fitment Committee for the consideration of the GST Council. 5.1 The Secretary introduced the agenda item relating to the recommendations of the Fitment Committee and requested the Joint Secretary, Tax Research Unit-I (TRU-I) to present the agenda. 5.2 Joint Secretary, TRU-I stated that the Fitment Committee agenda was summarized in five Annexures (I, II, IV, V and VI) wherein total 56 issues (12 issues related to Goods and 44 issues related to Services) were recommended. She stated that the Fitment Committee had recommended making changes in the rate or issue of clarification in case of 06 issues and no change was recommended in respect of 07 issues in case of goods. In case of services, there were a total of 44 agenda items, out of which the Fitment Committee had recommended making changes in the rate or issue of clarification in case of 20 items and no change has been recommended in respect of 15 items and 09 items have been deferred for the examination. Agenda Item 4(a) Thereafter, Joint Secretary, TRU-I presented the agendas pertaining to the recommendations of the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to goods. 5.3 The first item for the consideration of the Council was a request to clarify whether Roof Mounted Package Unit air conditioners for railways are classifiable under HS 8607 as railway parts or under HS 8415 as air conditioning machines. The applicable GST rate on parts of railway under HS 8607 is 18% while air conditioning machines are classified under HS 8415 and attract 28% GST rate. Fitment Committee had recommended that there is no ambiguity in classification but in order to make it explicitly clear recommended the issue of clarification that Roof Mounted air conditioners for railways would be classified under HS 8415 attracting a GST rate of 28%. Decision: The Council approved the recommendation of the Fitment Committee to issue a clarification that Roof Mounted Package Unit air conditioners for railways would be classified under HS 8415 attracting a GST rate of 28%. 5.4 Joint Secretary, TRU-I presented the agenda item pertaining to classification of car seats as to whether the same are classifiable under HS 9401 or 8708. Fitment Committee recommended that there is no ambiguity in the GST rate of car seats which are classifiable under HS 9401 attracting 18% while seats for two-wheeler motor vehicles would fall under HS 8708 and attract 28%. However, to ensure parity, Fitment Committee recommended that prospectively car seats should attract a rate of 28%. Decision: The Council approved the recommendation of the Fitment Committee that there is no ambiguity in the GST rate of car seats which are classifiable under HS 9401 attracting 18% while seats for two wheeler motor vehicles would fall under HS 8708 and attract 28% GST. The Council also approved the recommendation to tax car seats at 28% prospectively. 5.5 Joint Secretary, TRU-I presented the agenda item pertaining to extruded snack pellets. She stated that based on the recommendations of the GST Council in the 48th meeting, it was clarified that snack pellets, manufactured through a process of extrusion, are classifiable under HS 1905 attracting a GST rate of 18%. Based on the recommendation of the GST Council in its 50th meeting, the GST rate on uncooked or unfried snack pellets was reduced to 5%. The issue was whether the supply of extruded snack pellets in ready to eat form are covered under the category of namkeens as there is no definition of namkeens and there are disputes because of different rates on extruded or expanded snack pellets and namkeens. There are diverse practices in the field. Therefore, to avoid disptues, the Fitment Committee recommended to reduce the rate on extruded or expanded products, savoury or salted (other than un-fried or un- cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30, from 18% to 12% at par with namkeens, bhujia, mixture, chabena (pre-packaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90. The GST rate of 5% will continue on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion. The Fitment Committee also recommended to clarify that the reduced GST rate of 12% on extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 is applicable prospectively. While the proposal was being discussed in the Officers meeting, there were requests from certain states that there is a need to look at the whole food sector to reduce complexities and to simplify the issues therein. If the Council approves, the same would be referred to the Fitment Committee to look at the entire food sector holistically. 5.6 The Hon ble Member from Karnataka stated that he supports the suggestion but would like to advise the Fitment Committee to discuss the issue of food sector in the GoM also. He agreed in principle to the recommendation of the Fitment Committee but the same needs to be looked at from a health point of view also. He stated that under the broad category of namkeens, there are a wide variety of packaged foods. There are Indian namkeens, and whether they are healthy or not, and whether there is a need for a preferential treatment needs to be looked into, but it might be a sentimental issue as people are attached to Indian Namkeens. However, treating all packaged foods which have ill effects on our health and giving them the benefit of a reasonable rate, if not a lower rate, is definitely not advisable. So, the Hon ble Member requested the Council that the need for simplification -should not end up supporting consumption of these highly addictive products which are injurious to health and most of the consumers are in the younger age brackets and it is having a huge impact on the health of our society. The rise in juvenile diabetes, obesity and its consequent effects on the overall society and economy cannot be quantified. So, the request is to treat this within the broader idea of simplification but not to pass on any favourable consideration to foods which have ill effect on the health especially of the younger generation and which are of an addictive nature. These products have made their way into every village, nook and corner, roadside shops and even into the deepest corners of Ladakh s trekking routes. So, their reach is quite humongous and we need to be mindful of their impact on the society. 5.7 Hon ble Chairperson stated that she agreed with the Hon ble Member from Karnataka and said that rather than taxing based on whether food items are pre- packaged or not, they could be taxed on the basis of whether they are essential or non-essential in nature. Non-essential food products could be taxed at a higher rate. Therefore, on this particular issue there are so many different calibrations which may be necessary from health, from consumption point of view and also every pre-packaged food may or may not to be essential. It is now becoming essential for many of the urban households to rely on pre-packaged food, but yet health consciousness is a factor. So keeping all this in mind the suggestion of Hon ble Member from Karnataka is for a Group of Ministers to also look into it. However, since the GoM exists already, the Fitment Committee should take these points which have been highlighted for taking decision on the same. 5.8 The Hon ble Member from Uttar Pradesh welcomed the proposal of the Fitment Committee and stated that the question here is whether extruded or expanded snack pellets are to be taxed at 5% or 12% or 18%. The submission of the Hon ble Member from Karnataka on the ill effects of packaged food on health needs to be looked into by the FSSAI. On the other hand, the issue before the Fitment Committee is the tax rate on such food products. His submission was that chana, layi and chura which are very commonly used by people who are below poverty line, should be taxed at a lower rate. He stated that overall the guiding principle for taxation should be uniformity. Additionally, if there are health concerns, the same should be looked into by FSSAI for resolving the same. He requested for a reduced rate for gram or chana when packaged and labelled, by having a separate category for the same. 5.9 The Hon ble Member from Kerala stated that for a detailed discussion on food items, including discussion on their impact on the health of the consumers, there is already a GoM where such issues could be discussed. The Hon ble Member further stated that the basic issue is that all items could not be bracketed in the same category and his suggestion was that the GoM take up these issues for discussion. 5.10 The Hon ble Member from West Bengal expressed agreement with the Hon ble Members from Kerala and Uttar Pradesh, and stated that this has to be looked into from different angles. She stated that the health issue is very important, but simultaneously items like chura, chana etc. can be looked into with a different tax perspective also. The Hon ble Member desired a detailed discussion on the same and the recommendations to be placed before the Council. 5.11 The Hon ble Member from Meghalaya stated that he agreed with the opinions which had been expressed by the rest of the Members on the aspect of health and taxation. He stated that the Council should also take into consideration the health impact of products, but the question also arises as to who is the competent authority to certify whether a particular food item is healthy or not. He stated that sometimes, it might also be the case that some products are healthy, but are manufactured in a wrong or unhealthy way and with spurious/unhealthy/wrong ingredients. He opined that there are many angles to the entire classification of what is healthy and what is not. He stated that he was in agreement with the opinion of Hon ble Member from Kerala that there is need for a competent authority to look into all these issues and these are way too complicated for the GST Council to look into. Since the GoM has been set up, it may approach the competent authorities that can classify food products into what is healthy and what is not, not only in terms of the ingredients of the product, but also the process by which it is made. He stated that the GoM would be the proper authority and they can consult the necessary competent agencies to determine whether or not a food product has an adverse health impact. 5.12 The Hon ble Chairperson stated that the CBIC had approached the FSSAI for guidance on issue of which food items are healthy, that an attempt has already been made to approach FSSAI as the competent authority which was referred to by the Hon ble Members from Meghalaya and Uttar Pradesh. The same would be placed beforc the Council as soon as a reply is received, and the Fitment Committee and the GOM can benefit from it. 5.13 The Secretary said these observations have been taken into account and the approval of the Council for these particular items viz. extruded or expanded snack pellets is being sought. 5.14 Joint Secretary, TRU-I stated that there is a request to regularize the matter for the past on extruded products in ready-to-eat form. She stated that the same had been discussed in the Officers meeting and the officers felt that this matter should be sent back to the Fitment Committee for examination. 5.15 The Secretary stated that the Fitment Committee can examine whether or not there is a need to regularize the matters for the past. Decision: The Council agreed to the recommendation of the Fitment Committee to reduce the rate on extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30, from 18% to 12% at par with namkeens, bhujia, mixture, chabena (pre- packaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90. The GST rate of 5% will continue on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion. The Council also recommended to clarify that the reduced GST rate of 12% on extruded or expanded products, savoury or salted (other than un-fried or un- cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 is applicable prospectively. It also recommended that the GoM on Rate Rationalization will look in into the issue of food items holistically with the help of reply from FSSAI and place the recommendations before the Council. Further, the Council recommended that the Fitment Committee may examine the issue of regularizing the matters for the past period. 5.16 Joint Secretary, TRU-I presented the agenda item on metal scrap. She informed the Council that the issue had been discussed in the 45th and 47th Council meetings Fitment Committee after examination has recommended to introduce RCM on supply of metal scrap from unregistered person to registered person and also to introduce TDS at 2% on supply of metal scrap from registered person to registered person. The RCM is being recommended subject to the condition that the supplier will take registration as and when it crosses the threshold and also that the recipient who is liable to pay under RCM shall pay tax even though the supplier is under the threshold.. However, two additional issues were raised for further examination by the Fitment Committee: reducing the GST rate on scrap from 18% to 5%, and making E-way bills mandatory for all scrap supplies, regardless of value. These suggestions were based on requests from Tamil Nadu, Punjab, and Telangana. 5.17 The Hon ble Member from Punjab informed that they had proposed to introduce 5% under RCM with ITC along with 2% TDS. The proposal also included implementation of e-way bill on all such B2B transactions. 5.18 The Secretary informed that keeping in mind request from Punjab, the pending issues will also be taken up by the Fitment Committee. 5.19 The Hon ble Member from Uttar Pradesh expressed that there is no justification for reducing the rate, as it would create multiple issues. They were in favour of retaining the GST rate at 18%. 5.20 The Hon ble Member from Karnataka expressed agreement with views of the Hon ble Member from Uttar Pradesh. 5.21 The Hon ble Member from Andhra Pradesh supported the views of the Hon ble Member from Uttar Pradesh and added that the decision is a positive step which they fully endorse. Decision: The Council approved the recommendation of the Fitment Committee to introduce TDS @2% on supply of metal scrap by registered person to registered person (B to B) and RCM on supply of metal scrap by unregistered person to registered person. The Council recommended that mandatory generation of e-Way bills for supply of scrap be studied further by the Fitment Committee. 5.22 Joint Secretary, TRU-I presented the next agenda item. She stated that a request was received from the Ministry of Health and Family Welfare to reduce the GST rate from 12% to 5% on three drugs viz. Trastuzumab Deruxtecan, Osimertinib and Durvalumab used in the treatment of lung cancer, biliary tract cancer and breast cancer. In the July 2024-25 budget, these drugs were fully exempted from customs duty. The Fitment Committee recommended to reduce the GST rate from 12% to 5% which was agreed in the Officers meeting. Decision: The Council approved the recommendation of the Fitment Committee to reduce the GST rate from 12% to 5% on all the three drugs namely Trastuzumab Deruxtecan, Osimertinib and Durvalumab. 5.23 Joint Secretary, TRU-I presented the agenda item for issuing a clarification on the scope of regularization done on as is where is basis. The Council has generally recommended regularization in cases where there were genuine doubts, ambiguity in the language of the notification, or diverse interpretations leading to disputes. The Fitment Committee recommended issuing a circular to clarify the scope of regularisation done on as is where is basis. Decision: The Council approved the issuance of a Circular to clarify the scope of regularisation done on as is where is basis. Agenda item 4(b): Issues where no change has been proposed by the Fitment Committee in relation to goods 5.24 JS, TRU-I stated that requests have been received to issue a clarification on the rate of paper sacks for the period prior to September 30, 2021. Previously, there was a dispute regarding corrugated and non-corrugated boxes, as they attracted differential rates of 12% and 18%, which were later harmonized to 18%. In the 53rd GST Council meeting, the rate of these boxes was reduced to 12%. As there had never been any doubt or ambiguity regarding the rate on paper sacks which have always attracted a GST rate of 18%, the Fitment Committee recommended maintaining status quo. 5.25 The Hon ble Minister from Maharashtra informed that along with several other states, they have implemented a ban on plastic bags to promote eco-friendly and environmentally friendly alternatives. She further noted that as part of this initiative, they are encouraging the use of paper sacks and paper bags across various municipal corporations and urban areas. In the 53rd GST Council meeting, a recommendation was made to reduce the GST rate on corrugated boxes made of paperboard to 12%. In line with this, she requested that the GST rate on paper sacks also be reduced to 12%. She emphasized that such a reduction would further the goal of increasing the use of paper sacks and paper bags over plastic alternatives in urban and semi-urban areas, thus supporting eco-friendly and environmentally friendly materials and products. She urged the Fitment Committee to consider this request. 5.26 The Secretary noted that while the initial request was for clarification regarding the past period, if the current request is for a prospective exemption, the same can be referred to the Fitment Committee. 5.27 The Hon ble Chairperson stated that the decision for the past period should remain unchanged to avoid confusion with previous decisions. She further stated that for the prospective period, whether a complete exemption or a reduction to 12% is appropriate will need further review and urged Fitment Committee to examine it. However, subject to the Council s view, the Chairperson suggested refraining from making changes retrospectively and instead allowing the Fitment Committee to evaluate for the prospective period. Maharashtra was requested to send detailed proposal. 5.28 The Hon ble Member from Meghalaya stated that in addition to what the Hon ble Minister from Maharashtra mentioned, they are also promoting biodegradable bags made from starch. He also informed that numerous industries are being set up for these bags, which while resembling plastic, are actually made from starch and decompose automatically within 90 days. The Hon ble Member emphasized that this category should be included in the proposal under examination. 5.29 The Hon ble Chairperson suggested assigning a separate HSN code for the bio- friendly category of bags and urged the Hon ble Member from Meghalaya to provide the necessary details. Decision: Fitment Committee recommended to maintain status quo on paper bags and recommended that for the prospective period the rate be reviewed by the Fitment Committee with inputs from the states of Maharashtra and Meghalaya. 5.30 Joint Secretary, TRU-I presented the agenda item regarding request to increase the GST rate on agro-shade nets from 5% to 12 %. She informed the Council that the matter of inverted duty structure on textiles was taken up in the 45th GST Council meeting, but in the 46th Council meeting the issue was deferred and recommended to the GoM on Rate Rationalization. She said that the Fitment Committee recommended maintaining status quo, as report of the GoM on Rate Rationalization is awaited. This had been agreed to in the Officer s meeting. Decision: The Council approved the recommendation of the Fitment Committee for maintaining status quo on the GST rate on agro-shade nets. 5.31 Joint Secretary, TRU-I presented the agenda item regarding clarification of applicable rate of GST on Compressed Bio-Gas (CBG). She informed that the issue of GST rate on biogas was deferred in the 37th GST Council meeting held in 2019. Further she informed that there is no separate entry for CBG and GST rate on biogas is 5%. So, the rate is the same for CBG and as on date there is no ambiguity regarding the rate. The taxpayers are already paying 5%, so it is a non- issue now. This was agreed to in the Officers meeting. Decision: The Council approved the recommendation of the Fitment Committee that no clarification is required on the applicable rate of GST on compressed bio- gas (CBG). 5.32 The Joint Secretary, TRU-I presented the agenda item pertaining to reduction of rate of GST on feedstock like reformate, DHDT, VGO, etc. from 18% to 5%. She informed that this issue was also discussed in 47th GST Council meeting and the Council had felt that there is no significant revenue implication as far as OMC s are concerned and recommended not to accept the request for rate reduction. Fitment Committee also recommended maintaining status quo and it was agreed to in the Officers meeting. Decision: The Council approved the recommendation of the Fitment Committee to maintain status quo with regard to rate of GST on feedstock like reformates, VGO, DHDT feed, SRGO etc. 5.33 Joint Secretary, TRU-I presented the agenda item pertaining to reduction in GST rate on cathode coating and separators of lithium-ion battery. She stated that since cathodes and separators are present in all batteries including Lead- acid, Nickel- cadmium, Nickel-Metal Hydride, etc., Fitment Committee has recommended to maintain status quo as it would lead to an end use based exemption Decision: The Council approved the recommendation of the Fitment Committee to maintain status quo on GST rates for cathode coating and separators of lithium-ion battery. 5.34 Joint Secretary, TRU-I presented the agenda item pertaining to reduction in GST rates on parts used in manufacture of EVs from 18% or 28% to 5%. Fitment Committee had recommended to maintain status quo because this would have introduced inversion in the supply chain of such EV parts. She informed that Andhra Pradesh had made a request to reduce the GST rate to 5 % and that the proposal would be sent by Andhra Pradesh. This may be examined by Fitment Committee separately. 5.35 The Hon ble Member from Andhra Pradesh informed that they reiterate the submission made by them. He stated that in line with the Hon ble Prime Minister s stress on the Renewable energies, Andhra Pradesh is proposing an EV policy. The Hon ble Member requested for reduction in the tax structure on EVS along with the charging stations and stated that they would be sending a detailed proposal to the Fitment Committee. The Hon ble member from Andhra Pradesh requested the GST council to consider the whole proposal. Decision: In light of the request from Andhra Pradesh the Council recommended that the matter may be examined by Fitment Committee after receipt of detailed proposal from Andhra Pradesh. 5.36 JS, TRU-I presented the agenda item pertaining to request for reduction in GST rate on braided elastics from 12% to 5% on par with woven and knitted elastic. She stated that this was discussed in the Fitment Committee and Fitment Committee had recommended maintaining status quo as this will create further inversion in tax structure. Further she informed that this was agreed to in the Officers meeting and that Gujarat had requested to consider reducing the GST rate from 12% to 5%, whereby it was pointed out to him that this would result in refund of accumulated ITC. 5.37 The Hon ble Member from Gujarat suggested bringing about parity and emphasized that this would support small-scale units and MSMEs. He further suggested that the rate of tax on braided elastic tapes needs to be brought down to 5% from 12 %, as in the case of woven and knitted elastic tapes. He requested the Council to send this issue back to the Fitment Committee for the reconsideration of reduction in tax rate without refund of input tax credit accumulated on account of the inverted duty structure. 5.38 The Secretary explained that the braided elastic does not fall under the Chapter where woven and knitted elastic are classified. However, parity as sought by Gujarat would lead to duty inversion duc to higher input tax. 5.39 Joint Secretary, TRU-I explained that woven elastic tapes are categorized under woven fabrics, where rate of tax is 5%. However, the braided elastic is classified in different chapter under rubber thread having textile covering which can be used in textile items as well as in various items including sports goods. She further stated that if Council agrees, the request of Gujarat may be re-examined by the Fitment Committee. 5.40 The Hon ble Member from U.P added that the braided elastics are made from rubber and that duty reduction is not recommended. 5.41 The Secretary stated that the rate as recommended by the Fitment Committee may be accepted as reflected in overall sense of the House. Decision: The Council approved the recommendation of the Fitment Committee to maintain status quo on the GST rate on braided elastic tapes. Agenda Item 4(c): JS, TRU-I then presented the agenda items pertaining to services as mentioned in Annexure-IV of the Agenda item no. 4 (total 20 issues, as per Volume-I and Volume III respectively). She presented the recommendations made by the Fitment Committee in this regard, either for changing the rate of GST or for clarifying the applicable rate of GST on the concerned services. 5.42 The first item presented for discussion in Annexure-IV of the Agenda item 4 of Volume-I was to clarify that GST @ 5% is applicable on helicopter services for pilgrims. JS, TRU-I informed that this issue has arisen as notices have been issued to helicopter service operators demanding 18% GST. She further informed that in the officer s meeting, it was recommended that a separate entry be created for notifying rate of 5% on transport of passengers by helicopter on seat share basis. Therefore, as per the discussions in the Officers meeting, separate entry related to passenger transport by helicopter on seat share basis may be inserted in notification No. 11/2017-CTR. It was also recommended to clarify that services other than transport of passengers by helicopter on seat share basis i.e., for charter operations will continue to attract GST at 18%. Decision: The Council approved the recommendation of the Fitment Committee pertaining to notifying rate of 5% on transport of passengers by helicopter on seat share basis and clarifying that charter operations continue to attract GST at 18%. 5.43 The next agenda item presented by JS, TRU-I was to clarify whether incidental ancillary services such as loading, unloading, packing, unpacking, transshipment, temporary warehousing etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency (GTA) service, being composite supply, or these services are to be treated as separate independent supplies . She informed that the Fitment Committee had recommended to clarify that when ancillary/incidental services are provided by GTA in the course of transportation of goods by road and the GTA also issues consignment note, the service will constitute a composite supply and all such ancillary/incidental services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as part of the composite supply. However, if such services are not provided in relation to transportation of goods and invoiced separately, then these services will not be treated as composite supply and will be treated as standalone services. Decision: The Council approved the recommendation of the Fitment Committee pertaining to clarifying whether incidental/ ancillary services such as loading, unloading, packing, unpacking, transshipment, temporary warehousing etc., provided in relation to transportation of goods by road is to be treated as part of Goods Transport Agency (GTA) service, being composite supply, or these services are to be treated as separate independent supplies. 5.44 The next agenda item presented by JS, TRU-I was to clarify if Ro-Ro service (Truck on Train) is used for the transportation of milk, no GST is leviable on the empty tankers returning after delivery of milk. She stated that the Fitment Committee had recommended clarifying by way of letter to the concerned authority that the transport of empty tankers returning after delivery of milk is taxable and not exempt. Exemption on the said transport of empty tankers returning after delivery of milk was not recommended. Decision: The Council approved the recommendation of the Fitment Committee to not exempt GST on transport of empty tankers (Ro-Ro service: Truck on train) returning after delivery of milk. 5.45 JS, TRU-I presented the agenda item pertaining to either exempt electric vehicle (EV) charging services at public charging stations or to clarify that the activity of charging electric vehicles (EVS) in a charging station essentially involves supply of electricity and therefore should be chargeable at the same rate applicable to supply of electricity. JS, TRU-I informed that during the deliberations on the issue in the officer s meeting held on 08.09.2024, on the request of the State of Andhra Pradesh it has been recommended to defer the matter for further re-examination by the Fitment Committee. Decision: The Council approved the recommendation to defer the agenda item for further re-examination. 5.46 JS, TRU-I presented the agenda item pertaining to issue of corrigendum to the Circular No. 34/8/2018- GST dated 01.03.2018 in respect of taxation of ancillary services of transmission and distribution of electricity such as: (i) application fees for providing electricity connection, (ii) rental charges against electricity meter, (iii) testing fees for meters/ transformers/capacitors, (iv) labour charges from customers for shifting of meters/service lines (v) charges for duplicate bills etc. She stated that the Fitment Committee had recommended to partially modify the Circular No. 34/8/2018- GST dated 01.03.2018, clarifying that supply of above-mentioned services which are incidental, ancillary or integral to the supply of transmission and distribution of electricity by transmission and distribution utilities to their consumers, when provided as a composite supply are exempt. It was also informed by JS, TRU-I that the Fitment Committee has also suggested that the Special Leave Petition (SLP) pending in the Hon ble Supreme Court on this issue may be withdrawn once the clarification is issued. 5.47 The Hon ble Member from Punjab stated that these services should not be treated as a composite supply and ancillary services such as rental charges against electricity meter etc. should instead be taxed as separate supply. The Hon ble Member also suggested that if the Council decides to proceed with the modification, it should apply only prospectively as applying it retrospectively will have revenue implications for the States. 5.48 The Hon ble Member from Andhra Pradesh, however, requested that the modification be applied retrospectively. 5.49 The Hon ble Member from Uttar Pradesh also supported a prospective application, citing potential complications otherwise. 5.50 The Hon ble Member from Andhra Pradesh noted that the matter is still under judicial consideration. The Hon ble Chairperson inquired about Andhra Pradesh s position in court, to which the Hon ble Member from Andhra Pradesh replied that they had not collected GST but some parties have contested that these services are not liable for GST. 5.51 The Hon ble Chairperson summarised that the consensus was not to apply the modification retrospectively but to implement it prospectively, aligning with the suggestions from Hon ble Member from Punjab and Hon ble Member from Uttar Pradesh. She confirmed that the modification would not be applied retrospectively but implemented prospectively. The State of Andhra Pradesh s case would be addressed accordingly, as the decision aligns with their stated position. 5.52 The Secretary stated that the modification would be applied prospectively, with past collections regularized on an as is where is basis. 5.53 Member (Tax Policy), CBIC added that the implementation should be prospective and could be done by way of exemption. The past period can be regularised on as is where is basis through clarification. Decision: The Council recommended to create a separate entry in exemption notification No. 12/2017-CTR dated 28.06.2017 for exempting supply of services by way of providing metering equipment on rent, testing for meters/ transformers/capacitors etc., releasing electricity connection, shifting of meters/service lines, issuing duplicate bills etc., which are incidental or ancillary to the supply of transmission and distribution of electricity by electricity transmission and distribution utilities to their consumers. The Council also recommended to regularize the past period on as is where is basis. 5.54 JS, TRU-I presented the agenda item pertaining to clarify the applicability of GST on the affiliation fee collected by universities from affiliated colleges in respect of which the Fitment Committee had recommended to clarify by way of circular that the affiliation services provided by universities to their colleges are not covered within the ambit of exemptions provided to educational institutions in the Notification No. 12/2017- CT(R) dated 28.06.2017 and GST at the rate of 18% is applicable on the affiliation services provided by the universities. Decision: The Council approved the recommendation of the Fitment Committee pertaining to clarifying the applicability of GST on the affiliation fee collected by universities from affiliated colleges. 5.55 JS, TRU-I presented the agenda item pertaining to clarifying the applicability of GST on the affiliation fees charged by Central and State Educational Boards/council in respect of which the Fitment Committee had recommended to regularize the collection of GST on affiliation fee charged by State/Central educational boards to schools on as is where is basis for the period from 01.07.2017 to 17.06.2021 i.e., the date of issuance of Circular no. 151/07/2021 clarifying that accreditation services of boards are taxable at the rate of 18% and to exempt affiliation services provided by State/Central educational boards to Government schools prospectively. In the Officers meeting it was also recommended that exemption may be extended to educational councils and similar bodies in the States. Decision: The Council approved the recommendation of the Fitment Committee to regularize the collection of GST on affiliation fee charged by State/Central educational boards/councils and other similar boards to schools on as is where is basis for the period from 01.07.2017 to 17.06.2021 and to exempt affiliation services provided by State/Central educational boards/councils and other similar boards to Government schools prospectively. 5.56 JS, TRU-I presented the agenda item pertaining to clarify the applicability of GST on approved flying training courses conducted by Flying Training Organizations (FTOS) approved by DGCA . She stated that Fitment Committee had recommended to clarify by way of a circular that approved flying training courses conducted by DGCA approved Flying Training Organizations (FTO) are exempt from GST. 5.57 The Hon ble Member from Punjab suggested that flying training courses other than those given to first time students should not be exempted and proposed that an age criterion may be introduced to determine eligibility for such exemptions. 5.58 The Secretary then requested the State of Punjab to send a proposal in this regard. He noted that these services are generally for reskilling purposes, often involving defense personnel who have retired at a young age, which should be considered during deliberations. 5.59 The Hon ble Member from Chhattisgarh expressed the view that GST should be exempted for everyone, given the importance of aviation being a growing sector requiring higher degree of skills. 5.60 The Secretary requested the state of Chhattisgarh to submit its proposal separately. He further clarified that the Fitment Committee had only examined the exemptions as per the notifications issued and assessed whether these courses are covered by the existing exemption. He also asked other states to give other proposals, if any, to the Fitment Committee, which would then review and present them before the Council for further deliberation. 5.61 The Hon ble Member from Karnataka raised the point that while training programs are classified under education, such broad classification leads to non- core education being grouped with educational services, thus extending favorable treatment beyond its intended scope. He stated that Karnataka supported the exemption for certain educational services but suggested a thorough examination to distinguish between core and non-core education, so that some of the activities which are not core education may be treated differently. Decision: The Council approved the recommendation of the Fitment Committee to clarify by way of a circular that approved flying training courses conducted by Flying Training Organisations (FTOs) approved by DGCA are exempt from GST. 5.62 JS, TRU-I presented the agenda item pertaining to replace National Council for Vocational Training (NCVT) with National Council for Vocational Education and Training (NCVET) in the Notification No. 12/2017-CT(R) dated 28.06.2017 and include the services provided by the recognized Awarding Bodies, Assessment Agencies, Training Bodies and Skill Related Information Providers approved by NCVET in the exempted list . She stated that this agenda is more of a technical nature as NCVET has taken the place of NCVT. The Fitment Committee had recommended that amendments are required in Sl. Nos. 69, 71 and para 2(h) of Notification No. 12/2017-CT(R) dated 28.06.2017 to align the said entries with the revised vocational education and training framework set up under the NCVET and exemption to NSDC in its present form may be continued. The proposal of MSDE in relation to exempting activities of Skill Related Information Providers (SRIPS) may not be accepted since no such exemption exists currently. Decision: The Council approved the recommendation of the Fitment Committee for amending Sl. Nos. 69, 71 and para 2(h) of Notification No. 12/2017-CT(R) dated 28.06.2017 to align the said entries with the revised vocational education and training framework set up under the NCVET and continuation of exemption to NSDC in its present form. 5.63 JS, TRU-I presented the agenda item pertaining to clarifying for the period prior to 01.10.2021, the GST rate applicable on the services provided by the film distributor or sub-distributor to exhibitions for distributing films for exhibitions is @ 12%. 5.64 She informed the Council that representations have been received to clarify regarding the GST liability for the period from 01.07.2017 to 01.10.2021 on transaction between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centers. Field formations have viewed that such transaction is classifiable under SAC 9996 and attracts GST at the rate of 18%. 5.65 Prior to 1st October 2021, GST at the rate of 18% was leviable on Motion Picture, videotape and television programme distribution services under Heading 9996 whereas 12% rate of GST was leviable on temporary or permanent transfer or permitting the use or enjoyment of intellectual property right in respect of goods other than IT technology software under Heading 9973. It was observed that both entries apparently covered services by way of licensing of rights to broadcast or show films. This issue was discussed in the 45th GST Council meeting held on 17.09.2021 wherein, the Council recommended to keep a uniform rate of 18% on both these entries with effect from 01.10.2021. 5.66 She informed that the Fitment Committee had examined the issue and recommended regularizing payment of GST on transaction between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centers on as is where is basis from 01.07.2017 to 30.09.2021. Decision: The Council approved the recommendation of the Fitment Committee to regularize the payment of GST on transaction between distributors and exhibitors wherein the distributors grant the theatrical rights to the exhibition centers on as is where is basis from 01.07.2017 to 30.09.2021. 5.67 JS, TRU-I presented the agenda item pertaining to clarifying the taxability on Preferential Location Charges (PLC) collected along with consideration for sale/transfer of constructed/ under-constructed residential/commercial/industrial properties. Allowing choice of location of apartment is integral part of supply of construction services and therefore, location charge is nothing but part of consideration charged for supply of construction services before issuance of completion certificate. Being charged along with supply of construction services for the apartment, the same attract GST at same rate as of construction services before issuance of completion certificate. 5.68 The Hon ble Member from Punjab suggested that Preferential Location Charges should be taxed as separate services and should not be treated as part of a composite supply where construction services are the main service. 5.69 The Hon ble Member from Chhattisgarh stated that taxing PLC separately would further complicate matters. 5.70 The Hon ble Member from Uttar Pradesh supported the Fitment Committee s recommendation. 5.71 The Secretary acknowledged the complexity of the issue, noting that if PLC is not considered part of a composite supply with construction services, it could raise confusion about GST chargeability itself. He informed that the Fitment Committee has examined the issue and is of the view that since PLC charges are naturally bundled with the construction services, therefore are eligible for same tax treatment as the main supply i.e., the construction service. He stated that there was consensus and urged the Council Members, including Punjab, to support the Fitment Committee s recommendation to treat PLC as part of the composite supply to avoid potential legal challenges. Decision: The Council approved the recommendation of the Fitment Committee to clarify that Location charges or Preferential Location Charges (PLC) paid along with the consideration for the construction services of residential/commercial/industrial complex before issuance of completion certificate forms part of composite supply where supply of construction services is the main service and PLC is naturally bundled with it and are eligible for same tax treatment as the main supply i.e., construction service. 5.72 JS, TRU-II presented the agenda item about ascertaining the value of land for arriving the value of construction services in case of sale of commercial / residential apartments. He stated that Fitment Committee had recommended to draft Valuation Rules to ascertain the value of land for deciding the value of construction services in sale of commercial/residential apartments to be based on the notified circle rates wherever available or where the circle rates are not available, then the value of land may be deemed. 5.73 The Secretary explained that GST is charged on construction services, but when a flat is sold, the charges for construction services are typically not shown separately rather the price include both land and construction costs. Currently, a deeming provision treats one-third of the cost of such flat/apartment as the land value. However, this does not account for variations in land value, particularly in posh or expensive areas, where land value can exceed one-third of the total value, sometimes reaching two-thirds or even up to 75%. This discrepancy has led to legal challenges, and the Hon ble Gujarat High Court has struck down this valuation rule, necessitating a review of valuation rules in this regard. 5.74 The Hon ble Member from Goa suggested that the issue is covered under the Terms of Reference (TOR) of the Group of Ministers (GOM) on the Real Estate Sector, which had recently conducted a meeting and next meeting is scheduled soon. Given the different circle rates in each state, he recommended that the issue be discussed further within the GoM for a more focused and appropriate resolution. 5.75 The Secretary acknowledged the suggestion and also noted that the issue has been pending for a long time and was brought to the Council after extensive examination by the Fitment Committee, but if Council agrees, it may be examined by the GoM. Decision: The Council agreed that the matter may be referred to the existing GoM on boosting the Real Estate Sector. 5.76 The JS, TRU-I presented the agenda item pertaining to levy GST on renting of commercial property by unregistered person to registered person on Reverse Charge Mechanism (RCM) basis . She informed that Fitment Committee had recommended to bring renting of commercial property by unregistered person to registered person under RCM. Decision: The Council approved the recommendation of the Fitment Committee to bring renting of commercial property by unregistered person to registered person under RCM. 5.77 JS, TRU-I presented the agenda item pertaining to clarifying the applicability of GST on sale of participating interest in case of farm-in farm out contracts in oil and gas exploration sector. She informed the Council that the issue was deliberated in the Officers meeting held on 09.09.2024 and it has been recommended to re-examine the matter in light of fresh representation received from the Ministry of Petroleum and Natural Gas. 5.78 The Hon ble Member from Assam stated that their economy is heavily reliant on oil and natural gas. Given that the Fitment Committee had already clarified the taxability of farm-in and farm-out transactions, she suggested maintaining the position that these transactions should be subject to 18% GST. 5.79 The Revenue Secretary responded that when the Fitment Committee re- examines the issue, they will consider whether these transactions should be exempt or not, and will take Assam s views into account during their deliberations. Decision: The Council agreed to defer the issue for further examinations by the Fitment Committee. 5.80 JS, TRU-I presented the agenda item pertaining to clarifying whether exemption under entry at Sr. No. 34 of notification No. 12/2017-CTR dated 28.06.2017 is available to payment aggregators for transactions transacted through credit card, debit card, charge card or other payment cards over digital networks up to Rs. 2000/-. She stated that Fitment Committee had recommended to clarify that the services provided by payment aggregators in relation to the transaction transacted through credit card, debit card, charge card or other payment cards over digital networks up to Rs. 2000/- are not eligible for exemption under entry at Sl. No. 34 of the notification No.12/2017-CTR dated 28.06.2017 and are taxable. 5.81 The Hon ble Member from Delhi expressed the view that the exemption for digital payments up to Rs. 2000/- should also apply to payment gateways and payment aggregators. It was argued that many small businesses and startups operate almost exclusively online, using these payment gateways or payment aggregators. Imposing GST on payment gateways/payment aggregators would ultimately impact these businesses, which could be detrimental for these small businesses and startups. 5.82 The Hon ble Member from Punjab supported the views of the Hon ble Member from Delhi. 5.83 The Secretary then clarified that the Fitment Committee was tasked with providing clarification about the eligibility of the existing exemption to such payment aggregators, not to consider a new exemption. It was also noted that some payment aggregators, like PayTM, Google Pay and Amazon Pay, have already paid GST, making it difficult to justify exempting those who have not. 5.84 The Hon ble Member from Delhi then stated that while large enterprises like Amazon have their own payment gateways, smaller businesses rely on these third-party payment gateways/aggregators for online transactions. Taxing transactions under Rs. 2000/- on these aggregators would contradict the broader goal of promoting digital and cashless transactions. The Hon ble Member from Delhi suggested that the matter should be reconsidered by the Fitment Committee, a GOM, or concerned policy wing, to ensure that the exemption applies to these payment aggregators as well. 5.85 The Hon ble Member from Karnataka acknowledged the concerns but stated that the current regime should continue as it provides visibility into online transactions of goods and services. He stated that it brings some visibility into what is happening in such online transaction of goods and services. He opined that if we exempt it, that visibility and trail will be lost. He stated that he is not averse to encouraging digital payments and he welcomes it, if there is a way in which it can be done. He stressed the importance of maintaining this visibility and suggested that any examination of the exemption should consider both revenue implications and the value of visibility in these transactions. 5.86 The Hon ble Member from Delhi then stated that the key issue is the disparity in treatment between card transactions, which are exempt, and those made through payment aggregators, which are not. This disparity affects small businesses and start-ups the most. The Hon ble Member from Delhi suggested that either no transactions under Rs. 2000/- should be exempt, or the exemption should also apply to these payment aggregators as well, to maintain parity. 5.87 The Hon ble Member from Uttar Pradesh supported Karnataka s view, emphasizing the significant revenue implications and volume of transactions involved and said that it should be examined broadly. 5.88 The Hon ble Member from Meghalaya concurred with Karnataka s views, noting that introducing the exemption would further complicate the situation. The Hon ble Member emphasized the importance of maintaining the trail of information, as highlighted by Karnataka, considering it a valid point. Additionally, the Hon ble Member acknowledged the significant revenue implications as mentioned by Karnataka. Therefore, the Hon ble Member aligned with the opinions and suggestions of Karnataka and UP, concluding that the exemption in this category should not be pursued. 5.89 The Hon ble Member from Gujarat and West Bengal also agreed with Karnataka s stance, stressing the importance of considering revenue collections. 5.90 The Hon ble Member from Karnataka acknowledged concerns raised by Delhi regarding parity and emphasised need for parity between different modes of a same activity. He suggested that the Council Secretariat should examine how parity could be established without losing the current benefits of visibility and transparency. 5.91 The Secretary concluded by noting that there is a request to examine the need for parity, keeping in mind the importance of data visibility and revenue considerations. Decision: The Council approved the recommendation that the Fitment Committee shall reexamine the matter considering all the factors discussed. 5.92 JS, TRU-I presented the agenda item pertaining to clarifying whether concession amount paid to NHAI by concessionaire for grant of rights under Toll Operate and Transfer Model (TOT) is liable to GST or not, as toll is exempt under Notification- 12/2017 - Central Tax (Rate) dated 28.06.2017. She informed that Fitment Committee had recommended to clarify that the concession amount paid to NHAI by concessionaire is taxable and not covered under entry at Sl. No. 23 of Notification No. 12/2017-CT(R). However, the matter was being deferred for re- examination after discussions in the officers meeting on 08.09.2024. 5.93 The Hon ble Member from Uttar Pradesh said that present system should continue. 5.94 The Hon ble Member from Karnataka stated that they somewhat agree with the Hon ble Member from Uttar Pradesh, particularly in principle. They expressed concern about selectively granting exemptions to specific agencies, which might not be the most appropriate approach. Karnataka emphasized that the discussion isn t about taxing tolls themselves, as those have already been exempted. Instead, the focus is on taxing the service provided by the toll operator. The Hon ble Member drew a parallel with the earlier discussion on electricity, where the supply of electricity is exempt, but services like EV charging are taxable. Similarly, in this case, Hon ble Member stated that it s not the toll itself that is to be taxed, but the business service provided by the toll operator. He maintained that, as a matter of principle, the toll should remain untaxed, while the service aspect (regarding concession amount) provided by the toll operator should be taxable. 5.95 The Additional Secretary, DoR highlighted that there are two types of concession agreements: one for new roads and another for maintaining and collecting tolls for existing roads. The issue arose when enforcement actions began, and GST was imposed on these services. Fitment Committee discussed the issue, and concluded that while tolls are exempt, GST is applicable to such services. He highlighted the problem that if GST is imposed, the funds collected from tolls, which are passed on to NHAI, would be taxed, disrupting the entire system and the development model. This would negatively impact not only NHAI but also State Governments, many of which have established road development corporations responsible for building and maintaining toll roads. If the proposed clarification is issued, enforcement actions will become final, requiring NHAI and State Governments to pay taxes. This could undermine the asset monetization efforts and the promotion of PPP projects. Additional Secretary stated that in the Officers Meeting, it was decided to defer the issue and re-examine it. If, after re- examination, it is determined that there is still a technical reason for imposing GST, the possibility of granting an exemption should be considered. 5.96 The Secretary clarified that the issue under discussion is not about a separate service but an input service crucial to the toll or maintenance service, specifically the right to use the road. He explained that the toll, paid by consumers, whether passengers or vehicles, is the output service provided by the toll operator. However, to offer this service, the toll operator first needs to acquire the right to use the road from agencies like NHAI or state road development corporations. This acquisition of rights constitutes an input service to the toll operator s output service. He emphasized that while the Council has already exempted the output service (toll collection), the critical input service, which enables the toll operator to provide the output service, has not been exempted. He drew parallels to previous Council decisions, such as the exemption of reinsurance for government insurance schemes, where the input (reinsurance) was also exempted to maintain the intended benefits of the output exemption. To illustrate further, he mentioned similar cases involving exemptions on petroleum, electricity, and alcohol, where the input services or goods were also exempted to avoid indirectly taxing the output, which was supposed to be exempt. He concluded by stating that this proposed exemption should not be seen as specific to NHAI but applicable to all similar road projects and toll collections, regardless of the agency involved. He suggested that the Fitment Committee should thoroughly re-examine whether this exemption should be granted and consider its implications, including what would happen regarding taxes already collected in the past. Uttar Pradesh and other States, after this clarification, agreed to the suggestion for the re-examination by the Fitment Committee. Decision: The Council approved the recommendation to defer the issue for re- examination by the Fitment Committee. 5.97 JS, TRU-II presented the agenda item pertaining to applicability of GST on Research grants or donations received from Government or private agencies. He stated that the Fitment Committee had recommended to grant exemption to the following service under heading 9981- Supply of research and development services by- (a) a Government Entity; or (b) a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 to Central Government, State Government, Union territory, local authority or Government Entity against consideration received from them in the form of grants. 5.98 The Hon ble Member from Delhi sought clarification regarding applicability of GST on grants received by educational institutions from private agencies. 5.99 The Secretary clarified that even when there is a quid pro quo i.e. where research is conducted on behalf of the government with something given in return, such as IPR or new technology the grants would be exempt. He also mentioned that in the Officers meeting, it was deliberated that in pure research, where there is nothing in return as such any rights or IPR etc and the research conducted is purely for public good, such pure research should not be taxable. It was recommended that this issue be further examined, and if necessary, a circular should be issued to clarify that grants for pure research as discussed above should not be subject to tax. 5.100 The Hon ble Member from Delhi again sought clarification regarding the first part-whether the presence of a quid pro quo would render the transaction taxable or not. 5.101 The Secretary clarified that if there is a quid pro quo in case of a private entity, the transaction is taxed. He explained that many institutions, both in the private and public sectors, might conduct research for companies that could lead to improvements in technology, for eg. company enhancing the functionality or capacity of its car engine. In such cases, the company may provide a grant or fee in return for the intellectual property rights (IPR) or copyrights to use the technology for commercial purposes. Similarly, an agricultural company might provide a grant to develop a better seed, which would also be taxable because it involves a service provided in return. Whereas if a research grant is given for purely philanthropic purposes, such as developing a medicine with no intention of commercial exploitation, it should not be taxed. He pointed out that the global practice generally exempts research for the public good. In the Officers meeting it was decided to deliberate on how to address these issues, particularly the issue of distinguishing research for public benefit from research for commercial exploitation. 5.102 The Hon ble Member from Assam supported the exemption, noting that making research taxable under GST would significantly increase costs, potentially discouraging research and development in areas such as education and agriculture. It was also stated that exempting research under GST, consistent with provisions in the Income Tax Act, would encourage scientific research and development. It was further emphasized that exempting research from GST would send a positive message to society, about the Government s commitment to education, research and the development of scientific temper whereas if research were made taxable under GST, it would become expensive and potentially discourage research and development scenario in India. 5.103 The Hon ble Member from Meghalaya stated that the decision on taxability should fundamentally depend on the end use of the research. They suggested that where everyone is allowed to use the outcome of research, it should be non- taxable. However, if the research results in a patent held by an entity that controls its use, this should be treated differently. He proposed that research for public use is perhaps the only justifiable way to grant a tax exemption. They also expressed concern that organizations might misuse this exemption by creating proxy entities to fund and benefit from research through indirect channels. Hence, it is crucial to ensure transparency and openness in research to truly benefit the larger public. The Committee should thoroughly examine these aspects and make decisions that would foster positive research development for the greater good of the country. 5.104 The Hon ble Member from Delhi expressed some confusion regarding the decision on whether the exemption applies to research grants or if further examination is needed. 5.105 The Secretary clarified that the Fitment Committee would review the need for any orders, circulars or notifications concerning the taxability of research conducted for public good. The Committee will specifically exclude cases involving commercial exploitation of research from the exemption. 5.106 The Hon ble Member from Uttar Pradesh supported the Fitment Committee s recommendations. 5.107 The Hon ble Chairperson then summarised the key points of the discussion. First, the grants given by the Government-to-Government entities or the institutions notified under section 35 of the Income Tax Act, 1961 are exempt from GST. This exemption applies whether the research is for pure public good or otherwise. Second, pure research conducted for the larger public good, if funded by the Government, is exempt from GST. The Fitment Committee may be asked to look into certain aspects and provide clarity. The Hon ble Chairperson emphasized that clarity is needed on how private funding in such cases should be treated. When these grants lead to commercial exploitation by the private entities, the Fitment Committee shall examine the appropriate tax treatment. 5.108 The Hon ble Member from Delhi stated that a clarification is required if such grant is received from a private entity for purely philanthropic purposes. 5.109 The Hon ble Chairperson asserted that research, whether it involves government- to-government, government-to-private, or private funding, should be treated favourably. She acknowledged that sometime State and Central GST authorities issue notices to verify the nature of research funding to ensure compliance with the law. These notices are not intended to harass but to verify the compliance. She noted that recent notices were issued to seven institutions, including both Government and private entities, to investigate whether the funding was compliant with existing regulations. 5.110 The Hon ble Chairperson proposed that research funding, whether from government or private sources, should be treated favourably. She suggested that the Fitment Committee should examine how to tax or otherwise private funding for research intended for the public good, ensuring that it is treated in a manner that supports research and development. 5.111 The Hon ble Member from Mizoram highlighted that when universities receive research funding from companies, it is often categorized as a consultancy fee. According to the UGC working committee, 2019 on university-industry engagements, a portion, typically 10 to 50 percent of this consultancy fee, is allocated to the university. He urged the council to consider this aspect when the Fitment Committee reviews the matter, pointing out the challenges faced in academic research. He noted that research often follows its own hypothesis, making it difficult to predict outcomes such as patents, which can take many years to materialize. This delay poses a challenge for paying GST, as the grantor might have already disbursed the funds, and the patent could be granted years later. He expressed satisfaction that the Council is moving towards a conclusion where GST may not be applicable. 5.112 The Hon ble Member from Bihar and Meghalaya both expressed that if private entity funds research aimed at the larger public good, such funding should also be exempt from taxation. The Hon ble Member from Meghalaya further suggested that the research institution should provide an undertaking affirming that the outcome of the research, whether it be a study, patent, or any other result, will be made public and will not be kept hidden. This undertaking would ensure transparency. By committing to make the research and its outcomes publicly accessible from the outset, the process would align with the larger public interest and, therefore, should be exempt from taxation. 5.113 The Hon ble Member from Uttar Pradesh stated that research should be encouraged at every level, as innovation in any field often stems from dedicated research efforts. However, if the outcomes of this research can be used commercially, then it is advisable that revenue interests of the States should be safeguarded. The Fitment Committee shall examine it further diligently. 5.114 The Hon ble Member from Kerala stated that, if the funding is directed towards product development or patent creation, that needs to be carefully examined by the Fitment Committee. He emphasized the importance of promoting research funding from both private and public sectors. While public sector funding is already established, there is a significant need for private sector contributions to research. Generally, most aspects of research funding can be accepted without imposing a tax burden, but special considerations should be made for cases involving product or patent development. 5.115 The Hon ble Member from Nagaland remarked that the discussions have largely focused on the public good, and it is understood that Delhi has repeatedly made interventions, likely due to specific instances of irregularities. These irregularities seem to be the reason that private philanthropist donors, are being scrutinized more critically compared to others i.e. Central and State grants. The Hon ble Member suggested that it would be appropriate to clarify why the private grants are being treated differently and the specific apprehensions surrounding them. 5.116 The Hon ble Member from Uttarakhand supported Meghalaya s suggestion that research institutions should provide an undertaking affirming that the outcomes of their research, whether it be a study, patent, or any other, will be made public. Additionally, he proposed that if the undertaking is not complied with, GST should be levied. 5.117 The Hon ble Member from Telangana emphasized the importance of research for the country and suggested that funding from the Government, whether from the Centre or the State, to institutions should be exempted from taxation. If the research serves a public purpose, even if it involves quid pro quo, it should still be exempted since the funds are coming from the Government. He proposed that private institutions funding research for the public purpose should also be exempted from taxation. However, if the research is conducted solely for the benefit of the private institution, such as for patents or other proprietary purposes, it should be taxed. He recommended that only the scenario where private funding is for the institution s own benefit should be referred to the Fitment Committee for further consideration. 5.118 The Hon ble Member from Chhattisgarh emphasized the importance of creating a favourable environment for research and development (R D). He suggested that while research funding for the larger public good should certainly be exempted, R D for commercial purposes should also be promoted to enhance the competitiveness of private companies. Therefore, he opined that exemptions should be extended even to commercially-oriented R D activities. 5.119 The Hon ble Member from Arunachal Pradesh emphasized that research inherently involves development (R D) and innovation. They highlighted that the purpose of research, whether it is for public or commercial purposes, whether funded by Government or private entities, is ultimately for development and innovation. Therefore, Arunachal Pradesh strongly advocated that all research activities, regardless of their source of funding or end use, should be granted exemption to promote overall development and innovation. 5.120 The Hon ble Chairperson proposed to the Members that exemption to research which is proposed for Government entities and institutions with income tax exemptions, against government grants should also extend to private grants for research. The suggestion was to exempt all research funding, to govt. entities or institutions notified under Income Tax Act whether it is for public good or involves a quid pro quo. She emphasized that any research with a commercial outcome, such as a patent or a copyrighted product, would eventually be taxed when it enters the market. Therefore, she stated that taxing research at its initial stage should be avoided. She urged to consider exempting private funding for research to govt. entities or such institutions. 5.121 The Hon ble Member from West Bengal was in agreement with the Hon ble Chairperson, emphasizing that the proposal effectively addresses the need to encourage research for the benefit of society. She concurred that taxing research at a later stage, rather than at its inception, is the appropriate approach. 5.122 The Hon ble Member from Nagaland also expressed his agreement to the proposal of the Hon ble Chairperson, suggesting that the private funding should not be treated differently when the intention is the same as Government funding. They supported the Hon ble Chairperson s view that all research should be treated equally. 5.123 The Hon ble Member from Delhi appreciated the Hon ble Chairperson s views, agreeing that all type of research, against Govt. or private grant should be exempted from taxation. She also mentioned that considering the challenges Governments face in funding research, private sector contributions should be acknowledged and encouraged. 5.124 The Hon ble Members from Sikkim, Gujarat, Chhattisgarh, Punjab, Andhra Pradesh, Madhya Pradesh and Goa also expressed their support for the Hon ble Chairperson s views. The Hon ble Member from Goa added that private companies sponsoring research to such private institutions should also be considered for exemption 5.125 The Secretary acknowledged the overarching unanimity on exempting all research funding to Govt. entities and other notified institutions 5.126 The Hon ble Chairperson indicated that the law should be simple and straightforward, reflecting the Council s unanimous decision to support research, by exempting all forms of research funding from taxation. She also suggested that a simple definition of Research may be provided by the Fitment Committee to distinguish it from consulting. Decision: The Council recommended that all kinds of research funding made by Government and Private entities to Government, Government entities and institutions covered by section 35 of Income Tax Act 1961 may be exempted. A draft circular/notification detailing this exemption will be circulated by TRU among all the States. The Council further recommended that the Fitment Committee may examine to clarify definition of research to distinguish research from consultancy activities. 5.127 JS, TRU-II presented the agenda item pertaining to clarifying that GST is not applicable under reverse charge on the India branch office for expenses incurred by Foreign Airlines Head office or any other relief mechanism or amendment effective from 01.07.2017 that meets the request. She stated that the issue had arisen from a technical definition where the import of service, even when undertaken without consideration, is deemed taxable. After examining this issue and consulting with the Ministry of Civil Aviation (MOCA), Fitment Committee had recommended to exempt import of services by an establishment of a Foreign Airlines company from a related person or any of its establishment outside India, when made without consideration and to regularize the past period on as is where is basis. Decision: The Council approved the recommendation of the Fitment Committee to exempt import of services by an establishment of a Foreign Airlines company from a related person or any of its establishment outside India, when made without consideration and to regularize the past period on as is where is basis. 5.128 JS, TRU-II then presented the agenda item pertaining to reducing the GST paid by individuals on health insurance premiums from 18% to 5% or to exempt GST on Health Insurance premiums. He stated that the issue was also deliberated upon in the Officers meeting and following options were discussed: i. Exempting all individual health insurance premiums; ii. Exempting individual health insurance premiums which are paid by senior citizens and individual health insurance premiums where the coverage is up to Rs. 5 lakhs (irrespective of age); iii. Exempting only those individual health insurance premiums which are paid by senior citizens; or iv. Reducing the rate of GST on all individual health insurance services to 5% without ITC. 5.129 The Hon ble Member from Maharashtra expressed support for reducing the GST on health insurance premiums from 18% to 5%. She was in favour of the fourth option i.e. to reduce the GST rate on all individual health insurance services to 5%, without allowing input tax credit (ITC). She emphasized that they lack data on senior citizens for the other two options and requested to approve the same. 5.130 The Hon ble Member from Chhattisgarh highlighted the low penetration of private health insurance, noting that only 5 crore people have private insurance, while 60 crore are covered under the Government s Ayushman Bharat scheme. Whereas 75 crore individuals are still uninsured. They emphasized that the premium is essentially an advance payment for health services (which are exempt), and questioned the rationale for taxing this. He advocated for reducing GST to 5% with ITC, as without ITC it will complicate the issue and affect the benefit to the middle class. The suggestion was made to simplify the tax structure rather than creating more categories. 5.131 The Hon ble Member from Bihar welcomed the 5% reduction proposal but stressed the need to ensure that the full benefits reach the consumers. He stated that this step must directly benefit the common people and conveyed strong support for the measure. 5.132 The Hon ble Member from Uttar Pradesh also supported the proposal for reduction to GST@5% for all individuals and suggested that senior citizens should be fully exempt from GST on health insurance. He reiterated that it must be ensured that benefits of the reduction are passed on to consumers. 5.133 The Hon ble Member from West Bengal advocated for a total exemption of GST on health insurance premiums. She stated that the benefit of this should go directly to the individuals, citing a NITI Aayog report that over 30% of the population remain outside the healthcare system. To ensure affordability and accessibility for the public at large, she proposed that a complete exemption on health insurance premiums is necessary. She raised concerns about proposal to exempt senior citizens may create unnecessary complications, particularly for family health insurance schemes, where differentiating between senior and non- senior citizens would be difficult. She underscored the importance of health as a Constitutional right and urged the Council to ensure that this right is effectively exercised by all citizens. She suggested to consider supporting a total exemption of GST on health insurance, as it is essential for public health. 5.134 The Hon ble Member from Telangana supported for reducing GST on health insurance premiums from 18% to 5%. He highlighted the financial burden on the lower middle class and middle class, who often struggle to access healthcare due to high medical costs. Health insurance plays a vital role in protecting the common man from these expenses. By lowering the GST rate on premiums, more people would be encouraged to purchase health insurance, which would ultimately improve the overall health and productivity of society. He also proposed a full exemption for senior citizens, emphasizing the Government s responsibility to make health insurance affordable for all. 5.135 The Hon ble Member from Meghalaya also supported the reduction of GST on health insurance premiums to 5%, emphasizing that it will increase the coverage. He then highlighted the long-term impact of shifting from a treatment-based health sector to an insurance-driven one, where preventive medicine becomes a priority. He stated that an insurance-driven mindset could lead to a greater focus on prevention, benefiting both insurance companies and individuals. While acknowledging the technical challenges of fully exempting health insurance from GST, he suggested to start with a GST @ 5% and monitoring its effects. If positive outcomes are observed, the Council could then consider for further exemption in the sector. He reiterated support for reducing the GST rate and expressed openness to further discussions on full exemption. 5.136 The Hon ble Member from Goa advocated for a 100% exemption from GST for health insurance, arguing that even reducing it to 5% might not address affordability concerns for many people. He opined that differentiating between senior citizens and others would be difficult, and offering a full exemption would make health insurance more accessible to the wider population. He also raised concerns about whether the benefits of health insurance truly reach the insured individuals and suggested the need for better monitoring. 5.137 The Hon ble Member from Madhya Pradesh supported the fourth option, which proposes reducing GST on health insurance premiums to 5% without allowing input tax credit (ITC). He suggested careful monitoring to ensure that the benefits of the reduction are passed on to consumers. 5.138 The Hon ble Member from Kerala highlighted the importance of providing benefits to as many people as possible and supported reducing GST @ 5%. He suggested a differential approach for those who can afford higher premiums but supported the fourth option for the policies with the coverage up to 5 lakh. He stressed that the middle class and poorer sections of society should benefit the most from this reduction. 5.139 The Hon ble Member from Andhra Pradesh also supported the fourth option, emphasizing that reducing GST from 18% to 5% without ITC would have a lesser revenue impact while benefiting the common people. 5.140 The representative from Tamil Nadu supported the fourth option of reducing GST on health insurance premiums to 5% without input tax credit (ITC) and emphasized the importance of ensuring that the policyholder shall be benefited from the reduced rate. He also suggested facilitation by the regulatory bodies like the Insurance Regulatory and Development Authority of India (IRDAI) and the Department of Financial Services to ensure that this benefit is passed on to consumers. 5.141 The Hon ble Member from Sikkim expressed support for a total exemption of GST on health insurance premiums, highlighting the significance of health for a prosperous India. He stated that ensuring everyone s health is essential for the nation s wealth. 5.142 The Hon ble Member from Punjab proposed reducing GST on health insurance from 18% to 5% without ITC, but also advocated for a full exemption for senior citizens, stressing that such a move would greatly benefit their health. 5.143 The Secretary highlighted those numerous options, including additional ones with variation of the fourth option, were presented. He acknowledged significant support for the fourth option but stated that even within that, sub- options and technical considerations has emerged. He mentioned the Fitment Committee to deliberate on the nuances, such as how group policies, floater policies, or reinsurance should be handled. He further recommended further deliberation to avoid sending a fragmented or unclear message. He suggested that the Fitment Committee or a Group of Ministers (GOM) take these inputs into account for definitive proposal in the next council meeting. 5.144 The Hon ble Chairperson addressed the Council regarding the various views presented on reducing or exempting GST for health insurance, particularly for senior citizens. She acknowledged the wide variety of inputs received, including special considerations for certain groups like senior citizens and specific insurance categories such as group insurance, family insurance, individual policies or term insurance, etc. She proposed that a dedicated Group of Ministers (GoM) should be constituted to examine the matter thoroughly and provide recommendations. She suggested that this GoM would have a strict timeline to finalize its report so that the GST Council can take up the issue in its November meeting. This timeline would allow the GoM to deliberate on the different scenarios and options presented, ensuring that the recommendations align with the overall sense of the Council, which clearly favours reduction or exemption in certain cases. She invited any ministers interested in being part of this GoM to join and stressed the importance of adhering to the proposed schedule so that the report is ready by the end of October, allowing the Council sufficient time to review it before making a final decision in November. This approach would ensure a comprehensive solution that addresses all concerns raised while adhering to the Council s general direction. 5.145 The Secretary proposed that the existing GoM for rate rationalization may be tasked with examining GST on medical and health insurance, with the inclusion of additional members from the States like Andhra Pradesh, Telangana, Goa, Gujarat, Punjab, Meghalaya, and Tamil Nadu. The GoM would have terms of reference to suggest a way forward for all types of health insurance, including group, individual, family, and reinsurance for medical purposes. The report would be submitted by the end of October. 5.146 JS, TRU-II then presented the agenda item pertaining to reduction of GST on premium paid by individuals for the term/pure protection insurance plans from 18% to 5% or to exempt GST on life insurance premiums. The Secretary suggested that, to save time, the same GoM (that is being tasked with examining GST on medical and health insurance) could also review GST rates for term life insurance, ensuring a consolidated view on both medical and term life insurance policies. This proposal was made unless members specifically wanted to express their views on term insurance separately. 5.147 The Hon ble Member from Andhra Pradesh pointed out that there was another agenda item concerning Health Insurance premium for persons with Mental Illness (PMI) (S.No.6 (Annexure V, Volume I)) 5.148 The Secretary agreed, suggesting that this issue also be included in the terms of reference for the GoM, thus creating a more comprehensive review. The Council supported this integrated approach for a thorough analysis of all related insurance policies. Decision for Agenda item No. 19 20 (Annexure IV, Volume III) and S. No. 6 (Annexure V, Volume I): The Council approved GoM for rate rationalization be tasked with examining GST on Medical and Health insurance, term life insurance and insurance for persons with Mental Illness (PMI) with the inclusion of additional members from the States namely, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Telangana and Tamil Nadu. The GoM is to suggest a way forward for all types of health insurance, including group, individual, family, floater, and reinsurance of Insurance services. The report may be submitted by the end of October. Agenda Item 4(d) : Joint Secretary, TRU-I presented the agenda pertaining to recommendations of the Fitment Committee where no change has been proposed in relation to services. 5.149 The first agenda item relating to request to fully exempt from GST horticulture services supporting the environmental causes due to their potential role in improving air quality. She stated that at present, pure services and composite supply of goods and services in which the value of goods constitutes not more than 25% of the total value of supply, in relation to any function entrusted to a Municipality are exempted. CPWD has requested it to be fully exempt, however, the Fitment Committee has recommended that the request may not be accepted. This recommendation was also agreed in the Officers Meeting on 8th September, 2024. 5.150 The Hon ble Member from Delhi suggested on behalf of Delhi, PWD that giving exemption to horticulture services is important as a lot of agencies are involved in this sector. Since there are high GST rates and given the fact that Delhi faces high pollution levels so, this exemption can be given for a certain period of time. Accordingly, she suggested that a time bound exemption can be considered in this regard as this will push more service providers to get registered under GST. 5.151 Joint Secretary, TRU-I clarified that the current exemption in this regard is available as provided under S.No. 3 and 3A of notification No. 12/2017-CT(R) dated 28.06.2017 which exempts pure services and composite supply of goods and services in which the value of goods does not constitute more than 25%, respectively that are provided to Central Government, State Government or Union Territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. This exemption covers all kind of pure service or composite supply involving goods and service including horticulture. Any action expanding the scope of such exemption will impact other activities as well i.e. request of not having cap of 25% goods on such exemption will have wider ramifications. 5.152 The Secretary further clarified that the current exemption for such supply of services in which the value of goods does not constitute more than 25% is sufficient. Decision: The Council approved the recommendation of the Fitment Committee to not give exemption to composite supplies by way of horticulture/horticulture works where the value of goods constitutes more than 25 per cent of the total value of supply. 5.153 JS, TRU-I presented the next agenda item relating to reconsider 5% GST applicable on all bus bookings through e-commerce platforms. Currently, passenger transportation services supplied by non-AC contract/ stage carriage are exempt from GST. However, 5% GST is applicable on online booking done through e-commerce platforms and not applicable if the same booking is made physically in cash at bus counter or if booking is made directly from the bus operators website. She stated that Supply of any service through electronic commerce platforms is a distinct category of supply as compared to the service being supplied by individual service providers. So, Fitment Committee has recommended that the request may not be accepted. Decision: The Council approved the recommendation of the Fitment Committee to not reconsider applicable GST @ 5% on all bus bookings through e-commerce platforms. 5.154 JS, TRU-I presented the next agenda item relating on inclusion of any body corporate or corporation established under any State Act or Central Act or a Government company for purpose of exclusion under Section 9(5) of CGST Act, 2017. Based on the recommendation of the 52nd GST Council meeting, the bus operators organized as companies were excluded from the purview of section 9(5) of CGST Act, 2017 in order to enable them to utilize ITC for discharging outward liability on passenger transport services provided by them through Electronic Commerce Operators (ECOS). She stated that the present request is for expansion of scope of exclusion under section 9(5) to any body corporate. This was discussed and the Fitment Committee has recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee to not include any body corporate or corporation established under any State Act or Central Act or a Government company for purpose of exclusion under Section 9(5) of CGST Act, 2017. 5.155 JS, TRU-I presented the next agenda item relating to clarifying that the delivery services provided by delivery partners through the e-commerce operators are not taxable due to providers being below the threshold of Rs. 20 lakhs, or, to bring delivery services made in respect of those supplies made through ECOs under section 9(5) of CGST Act, 2017 with prospective effect and these delivery services may be taxed at 5%. She informed that during the deliberations on the said issue in the Officers meeting held on 08.09.2024 it has been recommended to defer the issue for comprehensive examination. Decision: The Council agreed to defer the issue for further examination by the Fitment Committee. 5.156 JS, TRU-I presented the next agenda item relating to clarifying that prior to 01.10.2021, GST @ 5% paid on job work activities qua alcoholic beverages be treated as GST fully paid and no recovery of differential tax, over and above 5%, should arise. She stated that Fitment Committee has recommended that the request may not be accepted as there is no ambiguity in the provisions of the law related to the taxability of job work activities qua alcoholic beverages. The same was also agreed in Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee that there is no ambiguity in relation to taxability of job work activities qua alcoholic beverages and no clarification is therefore required. 5.157 JS, TRU-I presented the next agenda item relating to request for exemption from 18% GST on Health Insurance premium for Persons with Mental Illness (PMI) which is a scheduled Disability under the Rights of Persons with Disabilities Act 2016 (RPWD Act). This was agreed in the officers meeting, and it was decided to take up this issue as a part of health insurance agenda that would be referred to the proposed GoM to be constituted for life and health insurance. Decision: The Council approved the recommendation of the Fitment Committee to take up the issue as a part of the health insurance agenda referred to the proposed GoM on life and health insurance. 5.158 Joint Secretary, TRU-I next presented four issues referred by the Law Committee to the Fitment Committee as under: (a) To prescribe End-use certification system / form for notification No. 12/2017- CT (Rate) [entry no. 3], which exempts pure services provided to Government, Local Authority in relation to Municipality functions; (b) To clarify whether the service of hiring manpower for providing services of Health, Public Garden, Promotion of education etc. are the functions entrusted to Municipality under Article 243W of the Constitution; (c) To clarify that the service of Enumeration Supervision provided by the implementing agency i.e. CSC-SPV, to MoSPI is exempt from GST under exemption entry 3 of notification No. 12/2017- CT(R) dated 28.06.2017; and (d) To clarify that the services of spatial planning study, provided by the institutes to Ministry of Panchayati Raj is exempt from GST under exemption entry at Sl. No. 3 of notification No. 12/2017-CT(R) dated 28.06.2017. 5.159 In addition, there was another agenda item pertaining to clarifying about liability of GST on Man Power Supply Services received by Panchayats, Municipalities and Local Bodies. She informed the council that in the earlier meetings of the GST Council, there was a proposal to prune the list of exemptions under Sr.No. 3 and 3A of the Notification Number 12/2017-CT (Rate), whereby pure services and composite supply of services provided to the Government or Local Authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or to a Municipality under Article 243W of the Constitution, are exempt from levy of GST. These issues were tagged with another proposal regarding clarification of the scope of the words in relation to . In the 52nd GST Council meeting held on 07.10.2023, the Council has recommended to retain the entries at Sl. No 3 3A of notification No. 12/2017-CT(R) dated 28.06.2017 as it exists with no change. Fitment Committee has recommended that no further clarifications are required on the issue and hence the requests may not be accepted and that status quo may be maintained. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee that no further clarification is required on the above issues. 5.160 JS, TRU-I then presented the next agenda item relating to a Writ Petition fi led before Hon ble Delhi High Court by an Association of Private Security Industry wherein they have inter-alia contested the exclusion of body corporates from making payment under Reverse Charge Mechanism (RCM) in respect of security services. [Entry at Sl. No. 14 of the notification No. 13/2017-CT (R)]. Hon ble Delhi High Court had directed to treat writ petition as a representation and to take appropriate action as deemed fit. She stated that currently, the security services (provided by way of supply of security personnel) provided by any person other than a body corporate are covered under RCM when provided to a registered person except government departments registered for TDS and entities registered under composition scheme services. The Association of Private Security Industry has represented to bring the entire security services sector including body corporate under RCM. Fitment Committee has recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee to not include security services provided by the body corporates under RCM. 5.161 Joint Secretary, TRU-I presented the next agenda item relating to exemption from GST on the services provided by Goethe Institutes/Max Mueller Bhavans, funded by the German Federal Foreign Office, in India for the period from 01.07.2017 to 31.03.2023. She stated that the Fitment Committee has examined the issue and recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee to not exempt GST on services provided by Goethe institutes/ Max Mueller Bhavans funded by German Federal Foreign Office for the past period from 01.07.2017 to 31.03.2023. 5.162 JS, TRU-I presented the next agenda item relating to request to exclude the Legislative Area Development Fund from the ambit of GST. A similar request regarding GST exemption for works carried out under MPLAD funds was placed before the 47th GST Council in its meeting held on 28th-29th June, 2022. However, the council did not accede to the request. She stated that accordingly, the Fitment Committee has recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee to not exclude the Legislative Area Development Fund from the ambit of GST. 5.163 JS, TRU-I presented the next agenda item relating to the request of uniform rate of 5% GST on all purchases charter and all services rendered by helicopters including rental paid for hangarage. The Fitment Committee examined this issue and has recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the recommendation of the Fitment Committee to NOT accept the request that on helicopters uniform rate of 5% GST should be charged on purchases charter, sale of seat tickets and all services rendered by helicopters including rental paid for hangarage. 5.164 JS, TRU-I presented the next agenda item relating to the request to rationalize GST on cargo services from 18% to 5% to bring it in line with other services. This was also examined by Fitment Committee and it has recommended that the request may not be accepted. This was also agreed in the Officers meeting on 8th September, 2024. Decision: The Council approved the Fitment recommendation of the Committee that GST on cargo services be NOT rationalized from 18% to 5%. 5.165 Joint Secretary, TRU-I presented the next agenda item relating to clarifying whether ITC of other business verticals can be used to discharge GST on outward liability in respect of restaurant service given the restriction of input tax credit as specified in notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended, against entry at Sl. No. 7 in 8, 9, 10, 23, 25, 31A. The agenda item has been withdrawn by the sponsoring state and Fitment Committee recommended to withdraw the agenda. Decision: The Council approved the recommendation of the Fitment Committee to withdraw the agenda. 5.166 JS, TRU-I presented the next agenda item relating to exemption to GST on services related to water harvest scheme. The Council was informed that the said agenda has been withdrawn and no action is due. Decision: The Council approved the recommendation of the Fitment Committee to withdraw the agenda. Agenda Item 4(e): JS, TRU-I took up the next agenda item on the issues deferred by the Fitment Committee for further examination in relation to services (circulated as Annexure-VI of Sl. No.4 in Agenda Volume I III). 5.167 She informed that 9 issues have been recommended to be deferred in the Council for further examination in relation to services as circulated in the Agenda. Decision: The Council approved the recommendation of Fitment Committee to defer the issues. Agenda Item 4(f): Review of 51st GST Council meeting s recommendation on the taxation of supplies in casinos, horse racing and online gaming 5.168 The Secretary invited Joint Secretary, TRU-I to present the next agenda item pertaining to the decision of the GST Council to review the changes made to taxation of online gaming and Casinos, as recommended in the 51st GST Council, after six months along with the status of revenues with regard to casinos and online gaming after implementation from 1st October, 2023. 5.169JS, TRU-I summarized the decisions taken in the 50th and 51st GST Council meetings based on which amendments were made in the Acts to provide clarity on taxation of casinos, horse racing and online gaming. All three would continue to be taxed at 28% irrespective of whether they are games of skill or chance, and valuation in respect of casinos and online gaming would be the amount deposited excluding bets placed out of winnings. Definitions of online gaming, online money gaming and specified actionable claims have been inserted. Special provision has also been inserted for services provided by persons located outside taxable territory; valuation rules have been brought into force w.e.f. 01.10.2023. 5.170 JS, TRU-I presented the status of revenue from online gaming. She stated that pre-amendment, the revenue paid in cash was Rs. 1,349 crores and after the amendment the revenue had increased to Rs. 6,909 crores i.e., 412% increase. In case of Casinos, the pre and post revenues were Rs. 164 crores and Rs. 214 crores respectively i.e., there has been a 30% increase. 5.171 The Secretary clarified that this revenue of Rs. 6,909 crores was only for 6 months and if the same were to be projected for 12 months, the revenues would be about Rs. 14,000 crores as against what would otherwise have been less than Rs. 3,000 crores- a 400% increase. The decision not to wait for the Hon ble Supreme Court to decide and to proactively clarify through an amendment has really helped as far as revenue collection from online gaming is concerned. 5.172 The Secretary stated that as far as revenues from casinos are concerned, there has been a 30% increase in revenue from the two states of Goa and Sikkim. 5.173 JS, TRU-I further addressed the concerns of domestic online gaming companies that the business would shift to off shore online gaming companies. She stated that a provision was specifically put in that if any offshore gaming company provides service in India, they have to either register or appoint a representative and if they fail to comply, the access to the websites can be blocked. DGGI had shared 134 URL websites with MeitY for blocking and MeitY had blocked 62 out of 134 websites so far. She further clarified that investigations are ongoing and DGGI would be listing some more of such websites to send to MeitY. 5.174 The Secretary sought comments and suggestions from the Hon ble members. 5.175 The Hon ble Member from Karnataka stated that whereas they had lost revenue on various other accounts, they are happy that substantial revenue has come to Karnataka from this. All the apprehensions that had been deliberated have not borne out to be true. Majority of these companies are in Bangalore. Post implementation, no major grievances have been heard from them. It is working well from the sectoral point of view. Even the turnover is maintaining its usual steady growth rate and there is no dip there. It seems to have worked out well for those who were really looking for some sources of revenue. It has been a good decision. 5.176 The Hon ble Member from Sikkim stated that the growth which was shown at 30% on casino was quite opposite to what Sikkim was seeing right now. There was a tremendous dip in the revenues generated, which has been brought out in data given by them. The decline of revenue by 24% was reflection of downfall in tourism which is due to recession in casino industries to a great extent. The footfall of tourists from October 22 to March 23, has decreased from 977638 to 559470- a decrease of 43%. So in respect of Sikkim it was not justified because they were at a loss and were suffering tremendously. For that the details had been given in the written speech which had circulated amongst the members. 5.177 The Secretary submitted that the figures mentioned in the speech circulated were based on some assumptions. As per actual numbers, the revenue certainly had decreased for the period if one looks at the six-month period before and after the implementation. This is because of the seasonality. Most of the tourism come in the summer months. If data for April to September 2023 is considered, which is just before the implementation of the new valuation rules, the tax collected was much higher and after that revenue might have dipped because of non-tourist season. When the comparison was made like to like month wise, which is April to July 2023 and April to July 2024, revenue had increased from Rs. 2.3 crore to Rs. 3.5 crore. For Sikkim, increase was 52%. Similarly for Goa, for April 2023 to July 2023 and then April 2024 to July 2024, it had increased from Rs. 101 crore to Rs. 148 crore which is an increase of 46%. So overall the increase even in casinos for a like to like comparison was 47%. Online gaming did not have such seasonality, so comparison of six months just prior to the implementation of the new rules with the six months after the implementation of the new rules has been done. Month wise data could change and so based on this data, comparing April to July 2024 of this year vis-a-vis same four-month period last year, the revenues increased 52% for Sikkim and 46% for Goa respectively. 5.178 The Hon ble Member from Goa stated that the revenue of Goa had increased but the casino industry is related directly to tourism industry. Hotel industries and taxi industries were also dependent on these casinos. Today it was showing increasing trend but long run it will not go on because the actual casino players had started to shift to Nepal and to the other countries. Even though the tourists, who were not actually the players but seek an experience of how the casinos work by going there for one time are much worried about the increased rate of GST. Their number has decreased. The actual comparison of revenue from casino and tourism, how it affected the tourism or comparison with the increase in the revenue from the casinos, could be presented in the next GST Council Meeting, if an opportunity is given to them. 5.179 The Hon ble Member from Sikkim stated that with Nepal they had a similar problem. Bagdogra is the only airport operational for Sikkim as Pakyong Airport is dysfunctional because of weather conditions and its road also is in a very bad state. The casinos in Nepal are about half an hour drive from the Bagdogra Airport where as to arrive in Sikkim in present conditions takes about 7 to 8 hours. So, people have been shifting their base towards Nepal. Nepal is a tax haven which is why all the revenue is flowing towards Nepal and Sikkim is losing out. This can be brought back to our country. 5.180 The Hon ble Member from Sikkim requested Hon ble Chairperson to kindly revisit the issue. They have advocated that 28% be charged on GGR (Gross Gaming Revenue) and not on the full-face value. 5.181 The Hon ble Member from Uttar Pradesh stated that he was also the member of this GoM and a lot of discussions on the issue had taken place. The Secretary had already given the data. It was always known that the revenue was not going to decrease. As for Sikkim, it is a very small state and we all have full sympathy for them. It is another fact that their revenue has not decreased. In his view, if their infrastructure and other things are better; tourism will not be affected. Between GGR and face value, it is easier to calculate face value. If tax is levied on GGR, revenue will decrease and that needs to be foreseen. It will be welcome if Sikkim could be facilitated in some other way. The system that is running at present, due to which the revenue has increased, should be allowed to continue. The fear of Goa is also not right. It has the advantage of infrastructure, climatic conditions and beaches. Casino is not the only reason to go there. It is one of the attractions only. The fear of the concerned states should be removed. Many had commented on online gaming industry that it would be closed. Today more than 17 crores people are involved in online gaming whereas in share market, only 14 crores people are involved. Taxing on face value should continue. 5.182 The Hon ble Member from Sikkim replied that taxation on this method of face value of sales of chips can encourage the players to purchase chips from fellow winning players who will not charge tax on the sale or from the bookie at the table without tax invoice. So, here also there could be evasion of tax. 5.183 On the observations made by Hon ble Member from Sikkim, the Secretary observed that while players can use the method mentioned, revenues were still increasing. 5.184 The Hon ble Member from Sikkim requested to provide one more chance to look into it, revisit the matter and get back again. 5.185 The Secretary stated that review was a continuous process. The Council had taken a view that issues once decided by the Council should not again be brought to the Council unless there was a specific Council direction to bring about a finality to the issue. This matter was deliberated in great detail and only after that that the decision was arrived at, the revenues had also increased not only for online gaming also for casinos. He reiterated that tourism was not a function primarily of casino. Goa as well as Sikkim had so much of natural beauty, climate, beaches, hills, other monuments, etc. and those were the primary drivers. If the tax was a little high, tourists participation might dip in such activities, but still, they would go and spend time in Goa and Sikkim. The other factor to consider is whether the same should be made the USP for tourism and if so, then the question is how far should it be encouraged. He suggested that other avenues to promote tourism might yield better results. He requested the Council to take on record the report presented by the TRU. 5.186 The Hon ble Member from Karnataka stated that, in a lighter vein, even the online gaming had seasonality. During the IPL, there was a spike in online games. Further, they have studied the data on turnover of top five online gaming companies. The fifth top company was declaring 167% growth rate while the top company was declaring 359% growth in their turnover. So, maybe it has brought greater transparency. If the volumes were growing by 100-300%, it is because of the growth in consumption in the online games. Transparency of data is also helping. 5.187 The Hon ble Chairperson credited the Council for the decision which was taken after so much of deliberations over a period of three years involving more than one round of discussions and which involved different interactions with different stakeholders. It was clear from the facts presented by the Karnataka s minister that the rate which the Council decided in its wisdom has not hurt the industry. The Hon ble Chairperson appreciated the wisdom and the consideration with which decisions are taken in the Council as a result of which the industry flourishes, but revenues are also being earned. More importantly, tracking and tracing happens. Decision: The Council took on record the status of revenue report with regards to Casino and Online Gaming after its implementation from 01.10.2023. Agenda Item 4 (g): Issuance of circular clarifying the scope of the phrase as is where is basis 5.188 JS, TRU-I stated that this has already been discussed earlier in the agenda pertaining to the recommendations of the Fitment Committee. Agenda Item 4 (h): Report of Committee of Officers on Taxation of Extra- Neutral Alcohol under GST for the past period (from 1.7.2017 to 20.10.2023) 5.189 The Secretary then introduced the next agenda item relating to the Report of Committee of Officers on Taxation of Extra-Neutral Alcohol under GST for the past period (from 01.07.2017 to 20.10.2023). The GST Council in its 52nd meeting had decided to keep the Extra Neutral Alcohol for use in manufacture of alcoholic liquor for human consumption outside the ambit of GST. Joint Secretary, TRU-I stated that a Committee of Officers (C O O) was constituted as per directions of the GST Council in its 52nd Meeting held on 07.10.2023 with Joint Secretary, TRU-I as Convenor and with States of Andhra Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Uttar Pradesh and West Bengal as members to study the taxation of Extra- Neutral Alcohol under GST for the past period (from 01.07.2017 to 20.10.2023). 5.190 JS, TRU-I stated that the Committee of Officers had conducted three meetings. The Committee examined the data collected from States/UTs and CGST formations including protective demands raised under GST/VAT on ENA and GST/VAT revenue collected on ENA /Rectified Spirit Undenatured Ethyl Alcohol used for alcoholic liquor for human consumption. She further stated that the committee noticed divergent practices among the states wherein some states were charging only VAT while State of Karnataka was charging only GST and some other states were charging both VAT and GST. Further, State of Uttar Pradesh had started collecting GST following the decision of Hon ble Allahabad High Court in the case of M/s Jain Distillery Private Limited. As per the collective data (including the given by State of Delhi and State of Jharkhand), GST collection is Rs.473 crores, VAT collection is Rs.6,528 crores whereas the GST demand notices have been issued for about Rs. 680 crores and VAT demand notices have been issued for about Rs.39 crores. 5.191 One of the solutions discussed in the meetings was whether to regularise the past on as is where is basis . The issue on whether States have the power to levy VAT on ENA under Entry 8 of List II is currently sub-judice before the Hon ble Supreme Court on an appeal filed by State of UP against Allahabad HC judgement in the case of M/s Jain Distillery Private Limited State of UP informed the Committee that the matter is likely to be decided soon. Members of the Committee raised the apprehension that in the event the Hon ble Apex Court upholds the HC decision then all States would have to refund the VAT collected. In such a situation if the past period is regularized on as is where is basis, recovery of GST against demands raised would also not be possible. Therefore, Committee of Officers has recommended that a view may be taken after the decision of the Hon ble Supreme Court. 5.192 The Secretary requested the Council to accept the recommendation of the Committee of Officers to wait for the decision of the Supreme Court regarding the taxability of ENA with respect to VAT and GST. Decision: The Council accepted the report of Committee of Officers and recommended to wait for the decision of the Hon ble Supreme Court regarding the taxability of Extra-Neutral Alcohol. Agenda Item 4(i): Status update on Group of Ministers (GoM) on Rate Rationalization 5.193 The Hon ble Convenor of the GoM on Rate Rationalization presented a status update. 5.194 The Hon ble Convenor of the GoM brought out that the GoM was set up based on the recommendations of the GST Council in its 45th Meeting It was entrusted with the important task related to rate rationalization. He observed that while taking into consideration any measures aimed to increase the revenue, it must be ensured that the life of common citizens does not get adversely impacted. He further stated that the GoM has been reconstituted several times and that currently, apart from him (the Hon ble Deputy Chief Minister of Bihar) the GoM includes Hon ble Ministers from the State Governments of Karnataka, Uttar Pradesh, Rajasthan, West Bengal and Kerala as its members. He also mentioned that the four Terms of Reference (ToR) of the GoM are: i. review the supply of goods and services exempt under GST; ii. review the instances of inverted duty structure; iii. review the current tax slab rates and iv. review the current rate slab structure of GST. 5.195 In addition, certain other issues have also been referred to the GoM. In the 47th meeting of the GST Council, the GoM had submitted its interim report containing recommendations on corrections in inverted duty structure and review of exemptions on supply of goods and services in the GST rate structure. The GoM had also requested 3 months time for the GoM to come up with its final report. The interim report was accepted by the GST Council and 3 months extension was also provided to submit a final report. In addition, the GST Council during various Council meetings, had referred certain additional issues to the GoM for a holistic and comprehensive examination such as: (i) Issue relating to correction of Inverted Duty structure in Textile Sector was referred to GoM in the 46th GST Council Meeting; (ii) issue relating to reduction of GST rate on silk, silk weaving material and handloom weavers was referred to GoM in the 47th GST Council Meeting and (iii) issue relating to rationalisation of rates of inputs in Fertiliser sector was referred to the GoM in the 53rd GST Council Meeting. 5.196 He informed that the 4th meeting of the GoM was recently held on 22nd August, 2024 in Delhi and that in the next meeting, the GoM shall consider the remaining two terms of reference related to the review of the current tax slab rates and review of the current rate slab structure of GST. 5.197 The Hon ble Convenor of GoM further stated that in the GoM Meeting held on 22nd August, 2024, the remaining two terms of reference pending before the GoM were discussed in detail and it was decided to hold the next meeting of GoM on 25th September, 2024. The recommendations of the GoM on the Terms of Reference and the other issues referred to it for examination shall be incorporated in the Final Report and placed before the GST Council in due course. 5.198 The Secretary sought suggestions and inputs on rate rationalization, especially in relation to the five-rate structure of GST and rate rationalization which are the remaining two terms of reference of the GoM. 5.199 The Hon ble Member from Uttar Pradesh suggested that the issue of rate rationalization of GST on Shoes , on which they had received a representation from the Shoe Manufacturers Association, may be referred to the GoM on Rate Rationalization for comprehensive examination. 5.200 The Secretary clarified that this issue was related to the duty inversion and that the GoM had already submitted their report on this term of reference. However, he added that the Council may reconsider the issue, if required. 5.201 The Hon ble Member from Uttar Pradesh again proposed that the issue of reduction in GST rate from 12% to 5% on shoes with MRP less than Rs.1000/- may be examined by the GoM on Rate Rationalization. 5.202 The Hon ble Member from Gujarat concurred with the proposal of the Hon ble Member from Uttar Pradesh. Decision: The Council took note of the status update as presented by the convenor of the GoM on rate rationalization. It also agreed to refer the issue of reduction in GST rate from 12% to 5% on shoes with MRP less than Rs.1000/- to the GoM for comprehensive examination. Agenda Item 4 (j): Status update on Group of Ministers (GoM) on boosting real estate sector under GST regime 5.203 The Hon ble Member from Goa as the Convenor of GoM for boosting real estate sector under GST regime referred to the last meeting dated 22.08.2024 of GoM in Delhi. 5.204 He asked the Joint Secretary, TRU-II, to provide the status report of the first two meetings of the GoM on boosting Real Estate Sector held in 2019 as he had not attended these meetings thereafter, he would provide the status update of the third meeting of GoM. 5.205 JS, TRU-II stated that the GST Council in its 32nd meeting held on 10th January, 2019 had recommended constitution of a Group of Ministers on boosting the Real Estate sector under GST regime. At present, the Convenor of GoM is the Hon ble Chief Minister of Goa and the Hon ble Ministers from the States of Bihar, Maharashtra, Kerala, Punjab, Uttar Pradesh and Gujarat are its members. Since its constitution, the GOM had conducted three meetings. The first meeting was held on 08.02.2019 and second meeting of the GoM was held on 21.11.2019. Third meeting had been recently held on 22.08.2024. 5.206 He stated that the Terms of Reference of the GoM are: i. Analyse tax rate of GST for boosting real estate sector by providing a composition scheme for residential construction units; ii. Examine and suggest ways for composition scheme or any other scheme, for boosting the real estate sector and suggest scheme for transition vis-a-vis introduction of suggested scheme; iii. Examine various aspects of levy of GST on Transfer of Developmental Rights (TDR) and Development Rights in a Joint Development Agreement; iv. Examine legality of inclusion/exclusion of land or any other ingredient, in composition and suggest the valuation mechanism: and v. Examine and suggest any other aspect relevant to boost Real Estate Sector. 5.207 JS, TRU-II further stated that the earlier GoM had given certain recommendations on these terms of reference. As far as the first ToR on GST rate for residential construction units by providing a composition scheme was concerned, based on the recommendations of the first GoM, the effective rate of GST was brought down from 8% with Input Tax Credit (ITC) to 1% without ITC for the affordable residential apartments and GST rate was brought down from 12% with ITC to 5% without ITC for other than the affordable residential apartments. At the same time, levy of GST on TDR and Development Rights was also discussed in the earlier GoM and that GoM had recommended for intermediate tax on Development Rights given by the land owner to the builder to be exempt and liability to pay the tax on such development rights to be shifted from land owner to builders under the Reverse Charge Mechanism (RCM). This recommendation of the earlier GoM was also accepted by the Council. As far as the ToR related to examining any other relevant aspect is concerned, the earlier GoM in its second meeting had recommended to exempt GST for an entity having 20% or more ownership of government for granting long term lease of land (30 years, or more) for industrial plot. Earlier this limit was 50% which was brought down to 20%. 5.208 Thereafter, the Hon ble Convenor of the GoM stated that the third meeting of GoM had been held on 22.08.2024 wherein the GoM discussed all the issues pending before it. It was suggested to seek reports from states who have given the status of industry to other sectors (including tourism sector) with a view to examine the issue of inclusion of other businesses in the existing exemption entry to exempt GST payable on long term lease of 30 years or above. With respect to the issue of redevelopment of buildings in own co-operative society, Hon ble Convenor informed that the State of Maharashtra has been requested to submit a detailed proposal. Similarly, State of Maharashtra has been requested to provide details on supply of construction services provided by the Co-operative Housing Society (CHS). To review the limit of Rs.45 lakhs in the definition of affordable residential apartment for metropolitan areas, the Convenor stated that the GoM is examining if the value limit should be on space basis and not on rate basis. He said that the last GoM meeting was held after a gap of four years and now the GoM is trying to expedite its meetings so that it can conclude the recommendations of GoM. He also informed that the next GoM meeting was scheduled to be held on 24th September, 2024. The Convenor stated that all the members of GoM had given good suggestions. He specially appreciated the suggestions given by the Hon ble Member from Uttar Pradesh. He further added that the GoM shall prepare concrete recommendations by the next Council meeting. Decision: The Council took note of the status update of GoM on boosting real estate sector under GST regime. Agenda Item 5: Recommendations of the 21st meeting of the IT Grievance Redressal Committee for approval/decision of the GST Council: 6.1 Joint Secretary, GST Council Secretariat presented the next agenda item relating to the recommendations of the 21st meeting of ITGRC which was held on 01.08.2024, for approval/decision of the GST Council. 6.2 JS, GST Council Secretariat stated that a total of 55 issues were tabled as agenda in the meeting of ITGRC. The first 32 issues pertained to data fixes for the period upto March, 2024. The issues which were brought before ITGRC were technical glitches which the taxpayers faced and GSTN was required to do a back-end data fix for such corner scenarios. These issues were divided into those which had financial implications and those which did involve any financial implications. Data fixes done by GSTN in respect of 27 technical issues with no financial implications were taken note of by the ITGRC. ITGRC took note of the data fixes carried out by GSTN in 765 cases involving an amount of Rs. 1289.60/- with respect to 3 technical issues where there were financial implications and the correct data was known. The data fixes carried out by the GSTN in case of two court directions impacting three cases were also taken note of by the ITGRC. In addition, data fix in 23 cases had been done between April to June 2024. There were 13 technical issues with no financial implication where data was known. ITGRC took note of the data fixes done in 9 issues, 4 issues were deferred for the next meeting. 10 technical issues with financial implication were also deferred for the next meeting. Further, an update on an issue recommended by the ITGRC in the previous ITGRC meeting, could also not be taken up due to paucity of time. One recommendation of the ITGRC was in cases where the taxpayers face a login error due to double quotes in the legal name. The ITGRC recommended that GSTN should take note of the limitation imposed by the current technology and recommended that special characters can be allowed in the system for the legal name of taxpayer. 6.3 The Secretary stated that recommendations of the ITGRC were also agreed to in the Officers Meeting held on 08th September, 2024. Decision: The GST Council approved the recommendations made by the ITGRC during its 21st meeting and took note of the data fixes carried out by GSTN. - Agenda Item 6: Performance Report of the Competition of India (CCI), State Level Screening Committee (SLSC) and DG (Anti-Profiteering) for 1st quarter of the F.Y.2024-25 along with Performance Report of Standing Committee (SC) for 3rd quarter and 4th quarter of F.Y. 2023-24 and 1st quarter of F.Y. 2024-25 for the information of the GST Council. 7.1 The Secretary presented the agenda pertaining to the Performance Report of the Competition of India (CCI), State Level Screening Committee (SLSC) and DG (Anti- Profiteering) for 1st quarter of the F.Y.2024-25 along with Performance Report of Standing Committee (SC) for 3rd quarter and 4th quarter of F.Y. 2023-24 and 1st quarter of F.Y. 2024-25 for the information of the GST Council 7.2 He informed that this agenda was taken note of in the Officers Meeting held on 8th September, 2024. Decision: The Council took note of the Performance Report of CCI, SLSC, DG (AP) and Standing Committee as presented in the agenda. Agenda Item 7: Issues recommended by Goods and Services Tax Network (GSTN) 8.1 The Secretary then introduced the agenda item relating to issues recommended by Goods and Services Tax Network (GSTN) and asked the CEO, GSTN to present the agenda. 8.2 CEO, GSTN stated that there are three developments which are in pipeline and important which are being placed before GST Council for information and approval. He stated that in GST, e-invoicing was initiated four years back for B2B transactions. B2C transactions are still not e-invoiced. So, a pilot project for B2C e-invoicing is proposed to be initiated. Second agenda item is regarding integration of UPI, Debit card and Credit card payments and the present status thereof. Third agenda item is regarding some important structural change in the return design of GST, which is partly implemented and partly in pipeline, which will lead to better error free filing of the GST returns. Also there are two ledgers which are being designed i.e. Reverse Charge ledger and ITC Reclaim ledger. Then there is an IMS (Invoice Management System) and GSTR-1 correction system which is called GSTR-1A. 8(a) B2C e-Invoicing Pilot Project 8.3 CEO, GSTN stated that B2B e-invoicing is in place but the difficult end of retail e-invoicing is retail and in retail, invoicing is often not done and even if done, it is not known whether the invoice has been reported to the GST authorities or not. GSTN has done some technology studies and building upon the learning of the B2B e-invoicing project, the pilot project of B2C e-invoicing is proposed. It would be implemented completely on a voluntary basis as a soft touch approach with retail trade will be needed. He stated that the project will be done in a few selected sectors and with those states which are willing to join this pilot project. It was also informed that fairly decent number of states have expressed interest in this pilot project during discussion in the officer s meeting. 8.4 Further, CEO, GSTN brought out the advantages of digitizing the retail transactions. First, it will help in controlling tax evasion. Second, it will be a green initiative as invoices are stored in a digital format and paper invoices are done away with. This will save many trees and would be environment friendly. He informed that it would be cost efficient also, as the paper invoice management and maintenance costs rupees 3 to 4 per invoice to the industry, whereas the cost of digital invoice comes to just a few paisa. 8.5 CEO, GSTN informed that they also intend to add a feature of verification of authenticity of the invoice. This would mean that when the retailer gets the invoice, he will get it on his mobile phone and within 48 hours, he will be able to check whether the supplier i.e. retail shopkeeper has reported this invoice. The system will be automatic and continuous. He stated that it will be a kind of public movement, where the citizens of the country will be able to see that the tax which they have paid with their total consideration to a retailer has actually been reported to the GST authorities or not. 8.6 CEO, GSTN stated that the proposal before the Hon ble Council is to accord in principle approval for initiating B2C e-Invoicing pilot project on a voluntary basis. He also requested the Council to direct the Law committee to recommend necessary amendments in the law to enable the same, which may require some change depending on which sectors and which states are willing to participate and also authorize GSTN Board to prepare and finalize the commercial model for this. It was proposed that in the initial stage, for the retailers who volunteer to take up B2C e-invoicing, GSTN will provide some support for digitizing and updating their ERP system. 8.7 The Secretary added that one of the advantages will also be that going forward if refunds to foreign tourists are operationalized, then for the customs officer at the airport it will become very easy to check whether the tax has actually been paid, if it is an e invoice. Further the Secretary stated that this agenda was discussed in the officers meeting and received large-scale support and enthusiasm for implementation. It is proposed to be introduced on voluntary basis and then going forward it can be made mandatory in sectors prone to tax evasion. 8.8 The Hon ble Member from West Bengal expressed willingness to take up the project in the restaurant sector. The Hon ble Member from Kerala stated that they are ready to take up the same on pilot basis. The Hon ble Member from Andhra Pradesh also expressed willingness and proposed that the sectors can be state specific so that they can take up those sectors which are priority for the state. The Hon ble Member from Delhi also volunteered for the project. The Secretary informed that in the first stage, the technology would be tested as to whether it is glitch-free and working smoothly. Once tested the spread would be expanded. The Hon ble Chairperson stated that the sector specific request as made by the Hon ble Member from Andhra Pradesh could be in the second stage after completion of the pilot. The Hon ble Members from Gujarat, Punjab, Uttar Pradesh and Madhya Pradesh also expressed their willingness to join the pilot project. Decision: The GST Council approved the agenda regarding Pilot project for B2C e- invoicing. 8(b) Integration of UPI, credit card and debit card payment option by Accounting Authorities. 8.9 The Secretary asked the CEO, GSTN to present the next agenda regarding UPI, credit card and debit card payment integration, which is for information and a request for the states to implement the same. 8.10 CEO, GSTN informed the Council of the present status of UPI, credit card and debit card payment integration and also requested to the remaining states to also integrate UPI, credit card and debit card payments. He stated that their treasury will need to take one more piece of information by API integration and that the States which are remaining to be integrated are all very capable. He also informed that after they had made this presentation in Officer s meeting, and that Arunachal Pradesh already integrated while most of the remaining states expressed their readiness to integrate within two weeks. Accordingly he requested other states also to take note and complete the process of integration for the entire country so that the taxpayers could use these three modes of payment and this would be a great facilitation measure for them. 8(c) Enhancement in the existing GST Return Architecture 8.11 The Secretary then prefaced the next agenda item regarding important structural changes in the return design of GST, by stating that there are two primary objectives of the presentation by CEO, GSTN on the new return architecture which has been built with the approval of the Council. He stated that there are a lot of mismatches between the returns GSTR 1 GSTR 3B on one hand and GSTR 2A GSTR 3B on the other hand. Further he stated that due to lot of mismatches, notices are being issued, and many of them have not resulted in any additional benefit or accrual of revenue because the taxpayers are actually able to explain the said mismatches. He further stated that the new change in return design will avoid these mismatches and in fact eliminate the mismatches and number of notices running into lakhs. It will also benefit the taxpayers by eliminating the inconvenience caused to the taxpayers. Further he stated that the second important benefit that will accrue is the reduction in tax evasion through fake billing and bogus firms. The system had been developed with the above objectives in mind. 8.12 Further, the Secretary requested the CEO GSTN to take the Council through the essential features of the system so that the knowledge and awareness amongst the taxpayers could be spread. He stated that if there are any suggestions from the Hon ble Members of the Council, the same can be taken on board in further improving the system. 8.13 CEO, GSTN stated that certain ledgers have been added for ITC mismatch. One of them is ITC Reclaim ledger. In respect of the ITC Reclaim ledger, he explained that if a taxpayer gets a credit of 100 rupees in a month and he is availing only 80 rupees, the system earlier was not tracking the balance 20 rupees. ITC Reclaim ledger now essentially leads to the system tracking of the credit that has not been availed in the month in which the ITC had accrued. And in future when the taxpayer reclaims the accrued ITC along with that month s credit, the system would show to him the past credit balance of 20 rupees plus this month s credit, which could be availed. Further he stated that at present the system is running in what is called a warning mode, which means, if the taxpayer wishes to take more credit than the sum of month s available credit and the credit available in the opening balance, it pops up a warning message to the taxpayer but allows him to avail the said excess credit. But sometime in the future, it presents an opportunity to lock the same and not allow erroneous return wherein excess ITC has been availed to be filed. 8.14 Further he stated that in the Reverse Charge Mechanism ledger, wherein the taxpayer himself pays the tax and then takes the credit, a similar mechanism is proposed for carrying forward the same in the ledger. He explained that currently, if a taxpayer s total tax payment is 100 rupees, but he utilizes 50 rupees of credit and decides to carry forward the remaining 50 rupees, this remaining 50 rupees was not being tracked in the system in the past. He stated that now it can be tracked in the system and if the taxpayer tries at a future date to take more credit than available, initially a warning message is being given. 8.15 CEO, GSTN stated that both the ledgers have an opening balance statement which is being made available to the trade so that taxpayers can give one time balance of the amount of credit they had failed to utilise in these ledgers for the past period, and also there would be a facility for one time amendment. He stated that thereafter these ledgers will start running and tracking the ITC credits. 8.16 Further he stated that at present the ITC statement which is presented to the taxpayer on 14th of every month has multiple sources from which the ITC credit comes and these credits come from individual invoices. He further stated that the system was not tracking as to what happens to the individual invoices. So, a new feature which is proposed to be added is to provide the recipients with Reject, Accept, No action and Pending options in a Invoice Management System Dashboard for individual invoices. He further informed that now the buyer will have to clearly state in relation to each of the invoices of his purchase as to what is his position whether he would be availing the credit or rolling it to the ITC Reclaim ledger or rejecting the transaction. 8.17 Further he stated that this is a optional facility. This has been designed as a voluntary IT facilitation measure for the recipients. If the taxpayer decides not to take any action then it will be deemed that all the invoices which have come to him in his ITC statement GSTR 2B are being accepted. So this will also allow for better matching and tracking of ITC. 8.18 He stated that this has been on the wish list of the tax administrations for a long while now, that the ITC gap is closed and ITC claim is completely in line with what is legitimately due. It is expected that mismatches would not occur and both sides gain in terms of taxpayer not getting notice and the tax administrations gaining additional revenue by closing the gap of ITC, which is being misused now as fake credit. 8.19 Further the CEO GSTN informed that GSTR Form 1A is a GSTR-1 correction Form, which has already been rolled out. He further stated that on 11th of the month, when the invoices are reported in GSTR- 1, it is auto filled as liability in GSTR-3B. Now an intermediate form GSTR 1A is provided, which is again a completely optional form, which can be ignored by the taxpayer if it is not needed by him. He further added that if taxpayer wishes to change his liability, which he had declared in GSTR1, before filing of GSTR 3B, then he can fill GSTR Form 1A. So, the taxpayer s liability will then change to GSTR-1 plus GSTR-1A, which would be auto populated in GSTR-3B. He further stated that this again will allow the authorities to ensure that the total liability which taxpayer mandatorily must file and pay in GSTR 3B is sum total of GSTR1 and 1A because taxpayer has been given the facility to file as well as correct the same, which means error correction mechanism has also been added in the system. He stated that the same has already been rolled out and in the first month reasonable number of taxpayers have used it. Many taxpayers have tested it but not filed the return. They have filled the data and tested whether their GSTR-3B is getting updated or not. 8.20 Further, he stated that no major glitches in this system have been reported and it is expected that in two to three months time, the system will mature. So, in two to three months time, the possibility of not allowing erroneous returns to be filed in GST system from the liability side could be looked at. 8.21 CEO, GSTN requested the GST Council to take note of the above developments of ITC Reclaim ledger, RCM ledger and Invoice Management System. Further he requested the GST Council to approve the timelines of opportunity given for declaration of opening balance and amendment thereof in ITC Reclaim ledger and RCM ledger and authorize the Law Committee to revise timelines if necessary. This should present an opportunity in due course of time to prevent erroneous claim of ITC and will reduce erroneous return filing. 8.22 The Secretary stated that they have witnessed lot of buoyancy over the last few years because of the introduction of the GSTN system. But the next wave of tax buoyancy will need us to take more technology related measures, two of which have been presented, one being e-invoicing and the other is the available opportunity in future for removing the gap between the credit and the liability etc. to make it more convenient for the tax payers to file their returns and at the same time to prevent fake billing. 8.23 The Secretary requested the Council to approve the timelines as suggested and also invited the Hon ble members of the Council for comments, if any to make their interventions. Decision: The GST Council i. Took note of the developments related to ITC Reclaim ledger, RCM ledger, IMS and FORM GSTR-1A. ii. Approved the timelines of opportunity given for declaration of opening balance (till 31.10.24) and amendment thereof (by 30.11.2024) in ITC re- claim ledger and RCM ledger. iii. Authorised the Law Committee to recommend any revision in time lines and any other supplementary decision needed for the roll-out of these functionalities if necessary. Agenda Item 8: The Secretary requested the Joint Secretary (TPRU), DoR to present the agenda items pertaining to Department of Revenue (DOR) consisting of five sub-items viz., review of revenue position, status update on Compensation Cess, IGST settlement, GSTAT and sharing of data. Agenda Item 8(a): Review of revenue position under Goods and Service Tax 9.1 Joint Secretary (TPRU), DOR presented the agenda and stated that it lists out the revenue for the last eight months and brought out that a good growth rate was seen in the GST collections for the past eight months. He informed that revenue has grown more than 10% in most of the months except for the month of June, 2024 when there was a minor dip. He further stated that the Special Drive against fake registration that was carried out between May-August, 2023 had yielded revenue in those months and that the ongoing Second drive on the fake registrations is also expected to yield good revenue in the coming months. He informed that the figures detailing revenue position with respect to States provide both pre-settlement and post settlement revenue of States. He mentioned that the average growth rate overall during April to August 2024 is 9% pre- settlement and 11% post settlement. He mentioned that States that are performing below the national average have may take steps to improve their performance. 9.2 The Secretary sought comments or interventions by the Hon ble Members, if any. There being no observations, he requested the Joint Secretary (TPRU), DOR to present the next agenda on Compensation Cess. The Council took note of the revenue position under GST. Agenda Item 8(b): Status update on Compensation Cess 9.3 Introducing the agenda item relating to Status update on Compensation Cess, the Secretary mentioned that the GST Council in its 52nd Meeting had decided that a status update on Compensation Cess be presented before the Council, which is being done now. 9.4 JS (TPRU), DoR presented the agenda. He stated that the data shows the actuals of Compensation Cess collected upto August, 2024 and that a projection has been made for the period from September, 2024 to March, 2025 based on the assumption that there will be 10% annual growth over last year s revenue. He presented the deductions that need to be made to this amount which includes compensation paid till August, 2024, back-to- back (B2B) loans, estimated compensation payable and interest projected on back-to- back loans. He informed that this shows a projected shortfall of approx. Rs. 1,31,000 crore in compensation account as on March, 2025. An amount of Rs.13,000 crore has been budgeted as the final compensation to States as some States have to give final AG figures. 9.5 He further stated that assuming that the revenue growth rate is 10% for 2025-26 then the surplus at the end of the year would be around Rs. 40,000 crores. He clarified that this calculation is only an estimate and that this can vary by a few thousand crores. This may roughly translate to 2.8 months of revenue in F.Y 2025-26. He stated that Compensation Cess therefore would need to be continued for sure till December, 2025 and may be some part of January, 2026 as well for enabling repayment of obligations under this account. A decision needs to be taken with respect to how the surplus of 2025- 26 can be utilized. Further, a decision needs to be taken for the period beyond 2025-26 as to in what manner and form the Compensation Cess may be recharacterized. The matter was deliberated in the Officers Meeting and that there was general agreement that the responsibility can be entrusted to the Fitment Committee for further deliberations and make suitable recommendations on how to restructure the Compensation Cess. 9.6 The Hon ble Member from Kerala stated that the issue related to Compensation Cess requires a lot of study and deliberation. He mentioned that last year it was reported that the Compensation Cess levy would be completed by the current year but now it is informed that it needs to be extended for another year. He added that this might even require some amendment in the Act through Parliament and State legislature. He added that the issue is not restricted to levy of Compensation Cess but that the future of Compensation Cess needs to be looked into from the perspective of experience gained from the implementation of the GST. He further mentioned that the revenue neutral rate has come down from 15.5% to less than 12% and that in 2017 around 200 items were falling in the bracket of 28% but now the rate has come down for many such items. He added that they had conducted a study about the impact of reduction in GST rates and that it was found that the benefit in reduction of rates was not passed down to the end consumer. He emphasized that the issue of reduction of revenue neutral rate is a matter of serious concern to the States as the States are facing severe financial crunch. He mentioned that if 14% growth was there from year to year then the State of Kerala would have got about Rs. 15,000-16,000 crores this year. He suggested that a Group of Ministers (GoM) needs to be constituted to analyze the Compensation Cess as it has major implications. 9.7 The Secretary clarified that it was never communicated that the Compensation Cess will not require to be levied after the present financial year (F.Y). It was communicated even in the earlier meetings that it will be continued beyond this F.Y. 9.8 The Hon ble Chairperson clarified that back-to-back loans were taken and the Compensation Cess period was extended based on previous calculations that the levy of Compensation Cess needs to be extended until March 2026. She added that what would have been indicated in one of the earlier meetings would be that maybe the B2B loans and the interest can be cleared before March, 2026. She further informed that the Council has already approved and authorised the collection of Compensation Cess until March, 2026 only to enable the repayment of B2B loans and the interest. She mentioned that the JS, TPRU (DOR) has now projected that the B2B loans and the interest can be hopefully repaid by December, 2025 or January, 2026. She clarified that the present discussion is about what needs to be done with respect to the cess collected post repayment of all obligations. She explained that Compensation Cess was originally collected to make compensation payments to States and that it was based on a protected revenue projection. Consequently, a decision needs to be made regarding whether the Cess should continue beyond March 2026. It was further clarified that if it is decided to extend the Cess, it will need to be rephrased by the Council, as it can no longer be called Compensation Cess. She further mentioned that as per the provisions of law the Compensation Cess was to be levied only till 2022 but the period for levy was extended to March, 2026 by way of notification based on an opinion taken from the Attorney General of India. The Hon ble Chairperson stated that the GST Council can decide as to whether the issue needs to be examined by the Fitment committee or by a Group of Ministers assisted by the Fitment Committee. 9.9 The Hon ble Member from Karnataka expressed gratitude to the Chairperson for tabling the agenda and for providing a detailed status update on the Compensation Cess, including the current position and projections for the foreseeable near future. He stated that this provides better clarity towards what lies ahead for the future. He mentioned that he would like to present before the Council the present situation of his State and a few other States. He stated that they are bound by the decisions they have made in the past and he is only trying to highlight the situation which Karnataka and maybe a few other States are in and how to resolve the same. He stated that before introduction of GST Karnataka s CAGR of own tax revenue was 13.7% for 5 years so, prior to GST the State was growing at 14%. He further stated that it has often been said 14% compensation was generous but the state s growth was nearly the same. Karnataka s contribution to overall GST has been good for the past years. He mentioned that two years ago the State s contribution was 8.91% of the total GST and for the year 2023-24 the rate of contribution has gone upto 9.54% as ascertained from the publicly available data on GSTN. He remarked that the State s contribution to total GST collection has gone up in the last few years. He added that when all India growth rate was 20.7% then the growth rate of Karnataka s tax collection was 28% and for last year the national growth rate was 14.9% whereas Karnataka s growth rate was 18.2%. He submitted that therefore, the growth rate of the State has been above the national growth rate in tax collection. 9.10 The Hon ble Member from Karnataka mentioned that the States contribution to national GST collection has also gone up and that the State was growing at a faster rate than the national average. He added that when the actual revenue of the State is forecast against the protected revenue i.e., 14% then it is seen that the actual revenue of the State has gone down by about Rs. 20,000 crores in FY 2023-24. He added that on an average the revenue of the State has come down when compared to the pre-GST vis- -vis post GST despite the fact that the average growth rate of the State and the State s contribution to overall GST have been going up. He stated that if 14% growth rate was continuing then the State would have been getting Rs. 95,000 crores but at present the State is only getting about Rs. 71,000 crores. He then elaborated that the State has tried to analyse this trend by comparing the State s revenue collection as against State s GSDP and it was seen that the State revenue against GSDP has dropped by 1% whereas State s collection against GSDP has remained same. He mentioned that the revenue accruing to the State against GSDP has dropped by 1% and that this has led to the conclusion that as GST is destination-based tax there is net outgo from the State. He mentioned that in 2022-23 the rate of SGST revenue grew by 27% but IGST revenue grew by 18% and therefore, the total revenue growth was about 22% and for the year 2023-24 the rate of SGST revenue grew by 18% and IGST revenue grew by 13% and therefore, the total revenue growth was about 16%. He added that for the present year at present the rate of SGST revenue is 12% and IGST revenue grew by 7% and therefore, the overall revenue growth is 9%. He remarked that it is observed that the State is getting less revenue despite the increase in collections. He further also clarified that this observation is not made against the principle of destination-based taxation under GST. He elaborated that the GST share of Karnataka in GSDP has also increased and that 2 years ago it was 4.8% it has gone up to 5.41% and this year it is at 5.81%. He remarked that the tax efficiency of the State is higher than the national average yet the net revenue accruing to the State is less in comparison. He mentioned that on account of destination principle a lot of revenue collected under IGST is going to other States. He also mentioned that another factor for this dip in revenue is that now as exports are zero rated a lot of refunds are happening whereas in the earlier VAT regime the CST collected was retained as there was no provision for refund or ITC and this used to result in increase in revenue. He mentioned that some of the larger producing States like Karnataka that do not have a large consumer base is ending up with a substantial loss. He suggested that the competent forum for addressing these issues would be the Finance Commission as they have the mandate to assess the fiscal needs and fiscal capacities of each State. He stated that based on this understanding this issue was taken up by the State with the Finance Commission when they visited Karnataka, but the response received from the Finance Commission was that this is a GST related issue, and that the solution lies with the GST Council. He further mentioned that post of the expiry of compensation period it is seen that the loss of revenue for Karnataka is 0.6% - 0.7% of GSDP. He added that Karnataka being a producer State has invested heavily on infrastructure- physical, social and human and most of these require periodic servicing for their maintenance. He then mentioned that the State plays a significant role in job creation and boosting export yet is incurring long term loss of revenue. He suggested that while discussing the future of Compensation Cess, these challenges faced by the State can also be taken up for consideration. Further, he proposed that a Group of Ministers, rather than the Fitment Committee, would be better suited to handle these issues, as the Committee might find them beyond its scope. 9.11 The Hon ble Member from Telangana said that as can be seen from the figures presented the revenue realised by the end of 2025-26 will exceed the amount required to discharge the loan amount and he submitted that such amount may be brought in the ambit of SGST equal to the Cess for the year 2025-26. He added that this will help the States to augment the revenue for meeting the developmental obligations. He also added that this would be a fair distribution as Cess was brought to augment the revenue of the States. He submitted that the matter may please be referred to GoM to study it in detail and give their recommendations. 9.12 The Hon ble Member from Punjab submitted that they agreed with the concerns expressed by Karnataka and Kerala and stated that their state s revenue was also affected by implementation of GST. He added that the revenue of Punjab has come down by Rs. 20,000 crores post GST when compared with the pre-GST revenue figures. He added that in view of this the issue of Compensation Cess may be examined in detail and it may be considered for extension as it will help augment the revenue of the States. 9.13 The Secretary stated that the growth rate of GST for the country post implementation of GST has been high vis- -vis the growth rate of taxes that got subsumed in the GST. He also mentioned that the data has been presented before the Parliament and was also made available in public domain. He added that the Centre is yet to do a State wise analysis of revenue and therefore, State specific data is not available, but if required, such a study can be undertaken. He also stated that any tax that is imposed and collected after end of compensation cess, will have to be distributed among the States as per accepted principles i.e. destination based taxation. He stated that a decision needs to be taken as to the form in which it will be continued i.e. whether it is to be levied as a cess or as a higher rate of tax and this would also necessitate legislative changes. He stated that the Council can take a decision as to whether the issue needs to be looked into by the Fitment Committee or a GoM. 9.14 The Hon ble Member from Uttar Pradesh remarked that the GST was rolled out with the consensus of all the Members of the Council. He stated that it is a matter of pride that a larger producing State like Karnataka is making great contribution to the country through its innovations but the financial situation of the State, as presented by its Member could be attributable to many factors and not just the implementation of GST. He added that the State needs to analyse the situation from an overall perspective to get a better picture. 9.15 The Hon ble Chairperson stated that the entire data provided by Karnataka can be looked into for better understanding and she also added that if any other State so desires, they can also provide the data for analysis. She mentioned that the observations made by the Hon ble Member from Karnataka did not account for the element of Covid and that the elements of Covid need to be included in the analysis otherwise it will yield only a partial picture. She added that the if GDSP calculation for past 5 years is being done without making provisions for the impact of Covid then it would be unfair to the efforts put in by the GST Council. She added that the GST Council is a constitutional body and is entrusted with the power to take all decisions in relation to GST. The only point where issues related to GST can be conflated to Finance Commission is when a decision needs to be taken with respect to devolution of the same. It is at this point that the Finance Commission comes in and provides the formula for devolution of taxes between Centre and State. She also added that the percentage share allocation to the States is not limited to indirect tax but also includes income tax excluding cess and surcharge. 9.16 The Hon ble Chairperson mentioned that at the time of launch of GST an Empowered Committee of Ministers headed by a Finance Minister from an opposition party (to the party in power in Centre) was formed to decide whether the GST should be a consumption based tax or origin based tax. She also added that at that time apprehensions were raised by the manufacturing States and that these were considered. She further stated that she agreed with the Hon ble Member from Karnataka that the matter will require political inputs and therefore, a GoM can be formed to look into the issue. She also added that the Centre need to be represented in the GoM and that Minister of State (Finance) can be the representative of the Centre in the proposed GoM. The GoM can look into all the data and analyse the situation post 2017 to ascertain the number of States that have grown post GST. She added that the huge disruptions that occurred on account of Covid cannot be ignored while calculating the average. She stated that the pre-GST growth rate for the years 2012-13 to 2015-16 was 8.3%, GDP growth rate was 11.5% and the tax buoyancy for the period was 0.72. For the period 2018-19 to 2022-23 the GST growth rate is 12.3%, GDP growth rate is 9.8% and the tax buoyancy is 1.25. She clarified that this growth rate was marked by disruptions on account of covid. She added that the Council is to be guided by facts and data, and this alone will help the Council in taking a considered view. She suggested that as extended period for levy of compensation cess is coming to an end the Council can consider forming a GoM and Members are welcome to join the GoM. Each State can provide its data which will be studied. She added that this would enable the Council to take a decision on the way forward when the extended period for levy of compensation cess comes to an end by March, 2026. 9.17 The Hon ble Member from Karnataka welcomed and agreed with the proposal made by the Hon ble Chairperson to form a GoM to look into the issue related to compensation cess. He further clarified that as a Member of the initial GST Council meetings he was part of the detailed deliberations in the Council as to the impact of GST but despite the challenges the proposal was agreed to in the larger interest of the nation. He further clarified that the statements and data provided by him are against the GSDP and that GSDP factors in the ups and downs of the economy. He stated that the GSDP is inclusive of the effect of Covid and that they are mindful of the impact caused by Covid. He further clarified that what the State wanted to impress on the Finance Commission was that GST has had an impact on the fiscal situation of the State and they wanted the Finance commission to take note of this effect on the State s fiscal capacity. He again submitted that Karnataka s GSDP growth rate for 2021-22 was 20.5% as against the national growth rate of 18.4% and for the year 2023-24 Karnataka s growth rate was 10.2% as against national growth rate of 8.9%. He also provided the figures with respect to GST collections and submitted that for 2021-22 Karnataka s growth rate was 27% as against the national growth rate of 27%. For the year 2022-23 Karnataka s growth rate was 28% as against the national growth rate of 21% and for the current year Karnataka s growth rate is 18% as against the national growth rate of 15%. He submitted that it can be seen from the figures that Karnataka has been consistently generating revenue and expanding the economy. He also submitted that Karnataka s contribution to national GST collection has also been rising and that for the year 2021-22 Karnataka s contribution to total GST collection was 8.74% and in 2023-24 this has increased to 9.5%. He reiterated that the State stands by the decisions taken in the Council and that the request is that the Council should consider these challenges while arriving at a considered decision on Compensation Cess. He submitted that the future of Compensation Cess be discussed having regard to the interest of States that have incurred revenue loss in long term and also added that these States can be identified from the data set. 9.18 The Secretary stated that the state of Karnataka has been doing well on GST as can be seen from its growth rate vis- -vis the national average. He stated that GST is collected where the goods are manufactured but it gets transferred to the States where it is consumed and therefore, the producing and consumer States share a symbiotic relation. He clarified that GST is a destination-based tax and the natural corollary of it is that the tax goes to the consuming States. He added that the State of Karnataka has also gained on employment and other taxes such as property taxes which are collected in the State. 9.19 The Hon ble Member from Karnataka reiterated the State s commitment to destination-based tax but added that their only submission is that their SOTR has dropped by around 0.7% as against the GSDP. He submitted that the State is proud that they are contributing to the nation building as a producing State but their only request is that the difficulties faced by the State may be taken into consideration while discussing the future of Compensation Cess. 9.20 The Hon ble Chairperson mentioned that the concern expressed by Karnataka has been taken note of and that if other large producing States like Maharashtra and Haryana were present, they might have also shared these concerns. She added that once the GoM is formed there can be in-depth discussion on this issue. 9.21 The Secretary stated that there is consensus among the Members for constituting a GoM on Compensation Cess with Minister of Finance (State) as the Convenor and he added that the composition of the GoM can be decided by the Hon ble Chairperson as has been the practice with respect to other GoMs. Decision: The GST Council approved the constitution of a GoM on restructuring Compensation Cess with Minister of Finance (State) as the Convenor and other Members as decided by the Hon ble Chairperson of the GST Council. Agenda Item 8(c): IGST Settlement 9.22 The Secretary requested the Joint Secretary (TPRU), DoR to present the agenda item relating to IGST settlement. 9.23 JS (TPRU), DoR stated that the negative balance in IGST account was discussed in the last Council meeting. He informed the Council that the negative balance in IGST account was Rs. 5,516 crores for the last Financial Year. In the current financial year negative balance was reported in IGST account in all months except for the months of June and August 2024. The cumulative negative balance in the IGST account is Rs. 14,218 crores. He stated that historically the practice was to apportion the positive balance between the Centre and the States in 50:50 ratio and also to recover whenever there was negative in the same ratio. He further mentioned that the positive balance was further apportioned to the states in the ratio of their subsumed revenue in the base year (FY 2015-16) and the negative balance was apportioned in the ratio of the respective month s IGST settlement. He stated that as the matter is being looked into afresh it is felt that the ratio should reflect the dynamics that have changed over the years. He added that the base year 2015-16 has lost its relevance and that the ratio needs to be relooked. He stated that there is a need to revise the method of apportionment and proposed that the actual IGST settlement ratio may be considered for apportionment of both positive and negative balance among the States. He further submitted that to bring an element of stability it is suggested that the last 3 years average IGST settlement be looked into. He also submitted that the negative balance of Rs. 14,218 crore is proposed to be shared between the Centre and the States. He further clarified that the negative balance of Rs. 7,109 crores will not be recovered in one step but is proposed to be recovered over 4 months starting from September 2024. He further mentioned that the positive or negative balance, if any in the month of September, 2024 would be apportioned in the month of October, 2024 and this practice will continue for the remaining months except for March, 2025. He stated that for March, 2025 the apportionment of positive or negative balance will have to be made in that month itself. He also added that this proposal will continue to apply for the future months. He further submitted that as directed by the Hon ble Chairperson in the last Council meeting DoR conducted a meeting with all States to explain the method of apportionment of IGST but there are still some unresolved issues. He informed the Council that this was discussed in the Officers meeting and it was proposed that a Committee of Officers under the Chairmanship of Additional Secretary, DoR will look into these issues and in case any legislative changes are required, then the same can be referred to the Law Committee. 9.24 The Hon ble Member from Uttar Pradesh stated that their only suggestion is that the formula used for apportionment of positive balance may also be used for the apportionment of negative balance and added that in the absence of this, the State of Uttar Pradesh will incur loss of revenue. He added that that it was earlier agreed that the positive balance would be apportioned to the State at 8.3% and therefore, he submitted that the recovery of negative balance can also be made at the same rate. 9.25 The Hon ble Member from Punjab stated there is no clarity with respect to the exact reason for the negative balance in revenue and he added that there is also no data on its impact on the States. He therefore proposed that either a GoM or a Committee of officers be made to look into these issues and that this exercise needs to be done prior to initiating the process of recovery. He added that the Committee can consist of officials of both Centre and State and they can analyse the complete data and find out the cause for the shortfall. 9.26 The Hon ble Member from Bihar stated that their suggestion is similar to that made by the Hon ble Member from Uttar Pradesh i.e. the formula used for apportionment of positive balance may also be used for the apportionment of negative balance. 9.27 The Hon ble Member from West Bengal stated that the new formula proposed for apportionment needs to be studied in detail and she added that this will have revenue implications for importing States like West Bengal. She added that they agree with the proposal made by Hon ble Member from Punjab that a Committee of Officers be formed to look into this issue. She also mentioned that another aspect they would like to bring to the notice of the Council is that excess advance settlement made up to June, 2022 has reduced the amount of compensation received by the State. She added that the recovery of negative balance would reduce the revenue of the State and therefore, it was proposed that the States may be compensated to the extent of compensation that was less received. 9.28 The Hon ble Member from Telangana stated that for earlier periods the IGST settlement was done at 4.03% based on the revenue figures of 2015-16 and that now the present proposal is to make the recovery at 5.07%. He therefore submitted that the same formula used for apportionment of positive balance may also be used for the apportionment of negative balance. He further stated that the matter needs to be examined in detail and therefore, the proposal is that the matter may be referred to a Committee of Officers. 9.29 The Hon ble Member from Kerala stated that previously also the State has raised apprehensions about the settlement of IGST and he added that the negative balance in the IGST account shows that there are systemic issues in the IGST settlement. He stated that the reason for these issues need to be identified and analysed on priority. He mentioned that Kerala being a consumer State is affected by incorrect return filing and other issues in supply rules and that this is resulting in short settlement. He stated that proposal to make recovery of the negative balance should be held in abeyance until these pending issues are resolved. 9.30 The Secretary stated that in the Officers meeting there was general agreement with respect to the formula that is to be used prospectively. He further mentioned that the issue raised by Uttar Pradesh and Telangana is that the apportionment of positive and negative balances are made at different ratios and he stated that this issue has been addressed in the revised methodology proposed by JS (TPRU), DOR. He mentioned that the Committee under the Chairmanship of Additional Secretary, DoR can look into these issues related to the past but going forward from 01.04.2024 the proposed new formula can be used for apportionment of positive and negative balances. 9.31 The officer from Tamil Nadu stated that in the Officers Meeting they had requested that Committee under the Chairmanship of Additional Secretary, DoR can look into these issues. He added that they have identified certain forms/statements where information is not made available and that once this information is made available they are hopeful of cleaning up the future process wherein they will be able to attribute positive/negative balance in IGST to a particular State. They further requested that the proposal for recovery of negative balance may please be kept in abeyance till such time. 9.32 The Hon ble Chairperson mentioned that a Committee of Officers can be constituted for considering both the past recovery related issues and the future apportionment. She added that the negative balance is already showing on the Centre s balance and that this has put the system in a limbo. She invited the Members to be part of the Committee of Officers and suggested that they can work out a solution in one months time i.e. by the end of October, 2024. She stated that the report can be placed before the GST Council in its next meeting scheduled for November, 2024. 9.33 The Hon ble Member from Karnataka requested that provision may please be made for an online tutorial on IGST settlement for the Members for their own better understanding of the process and that the participation can be made on voluntary basis. The Hon ble Chairperson agreed to the request and requested the Secretary to do the needful. Decision: The GST Council approved the constitution of a Committee of Officers under the chairmanship of Additional Secretary, Department of Revenue for looking into issues in IGST settlement and recommend ways to improve the settlement process including legislative amendments, system changes and the formula for apportionment of positive and negative balance in IGST account. The Committee of Officers to finalize the report by end of October, 2024 and present it in the next GST Council meeting. Agenda Item 8 (d): GST Appellate Tribunal Issues for approval 9.34 The Secretary took up the agenda item relating to the GST Appellate Tribunal and requested the Joint Secretary (TPRU), DoR to present the agenda. Joint Secretary (TPRU), DoR presented the Agenda to the Council. He mentioned that the Finance (No. 2) Act, 2024, notified on August 16, 2024, introduced several amendments to the CGST Act, 2017, including changes to sections 109 and 171. These amendments involve granting the Principal Bench of GSTAT the authority to examine anti-profiteering measures under GST. He sought the GST Council s approval to notify the provisions of sections 109 and 171 of the CGST Act, with immediate effect. He informed the Council that following this, a formal notification will be issued to assign anti-profiteering matters to the Principal Bench at the earliest by 1st of October 2024. He added that the notification for the said has already been approved by the GST Council in its earlier meeting. 9.35 JS (TPRU), DOR further informed that certain changes have been requested by the States i.e. Kerala, Uttar Pradesh and Punjab in respect of location of the State Bench of GSTAT and that these changes have been incorporated in the draft notification as circulated in the agenda note. Joint Secretary further informed that the jurisdiction for each of the State Benches is required to be notified and that a draft has been circulated along with the agenda note and since then updates from Gujarat, Tamil Nadu, and Haryana have also been received regarding their updated jurisdictions. He informed that these updates will be incorporated, though there are still some minor corrections being discussed with the states. He informed the Council that five days have been given to the States for communicating any corrections in the names of the districts to be updated in the notification. He further requested that going forward the Council may empower the GST Implementation Committee (GIC) to handle jurisdiction- related issues, as they may arise frequently, and this empowerment would allow for timely decisions without needing to wait for the Council meetings. Decision: GST Council approved the draft notification as presented in the agenda regarding the location of State Benches of GSTAT and their jurisdiction and permitted DoR to make corrections in the names of the districts as may be communicated by the States within 5 days. The Council further delegated to the GST Implementation Committee to decide on issues related to jurisdiction, upon request of the States. The same may be brought to Council for information and post-facto ratification. Agenda Item 8 (e): Sharing of personally Identifiable Information of Taxpayers with other Ministries/Departments. 9.36 Joint Secretary (TPRU), DOR informed that several requests have been received from various agencies and ministries to share specific information containing personally identifiable data. He informed the Council that these requests were discussed in the GST Implementation Committee (GIC), but a decision could not be made and as a result, the matter was brought before the GST Council. He further stated that during the officers meeting, there was consensus that these requests could be approved. He further informed that there are additional data-sharing requests from states like Tamil Nadu and proposed that the GST Implementation Committee (GIC) be authorized to approve these requests on a case-by-case basis, adhering to the safeguards as detailed in the agenda note. He informed that the current requests are from the Ministry of Labour and Employment, Gujarat Infrastructure Development Board (GIDB), National Industrial Corridor Development Corporation Limited (NICDC), Directorate General of Commercial Intelligence Statistics, Ministry of Commerce Industry, and the IMF project on GST Rate Sensitivity. He recommended to the Council that these requests be approved considering that the purpose of these requests would fall within the exceptions carved out in section 158(3) of the CGST Act. Decision: The GST Council approved the data sharing agenda as presented and going forward empowered GIC to approve other similar requests on a case-by-case basis adhering to the safeguards detailed in the agenda note. Agenda Item 9: Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act, 1962 to be placed before the GST Council for information The Secretary informed the Council that two Ad-hoc exemption orders had been issued since last meeting of the GST Council. The First Order No. 4 of 2024 dated 27/06/2024 pertained to exemption from Customs duty on import of reading eye glasses by M/s Supreme Task India donated by Restoring Vision, USA and the second Order No. 05 of 2024 dated 23/07/2024 was regarding exemption from Customs duty on re-importation of one unit of Liebherr Heavy Lift Crawler Crane (Model: LR 1350/1, Sl. No. 074113) by Bharat Heavy Electricals Limited (BHEL). He stated that the two orders were placed before the Council for information. The Council took note of the ad-hoc exemption orders issued. 10. The Secretary then thanked the Hon ble Chairperson, Hon ble Members of the Council and the participating officers for their discussion on the agenda for the meeting and the decisions taken.