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TMI BlogMinutes of the 22nd GST Council Meeting held on 6 October 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... GST) and Compensation paid to States for the period July - August, 2017 5. Report and Recommendations of the Committee on Exports 6. Issues for consideration for relief to small taxpayers i. Proposal for increasing the aggregate annual turnover threshold under Composition scheme from ₹ 75 lakh (₹ 50 lakh in Special Category States except Uttarakhand and Jammu & Kashmir) to Rs. one crore; and not taxing the exempt supplies made by a composition dealer ii. Proposal for quarterly filing of returns along with quarterly payment of taxes by taxpayers having annual turnover up to ₹ 1.5 crore iii. Proposal for suspension of application of provisions of sub-section (4) of section 9 till 31 March, 2018 iv. Proposal for deciding the date for the operationalization of provisions of nationwide e-Way bill 7. Issues recommended by the Fitment Committee for consideration of the GST Council i. GST Rate in respect of government works contract services having high labour content ii Definition of Governmental Authority and GST on Government Grants iii Rate of tax on car leasing, sale of leased cars, sale of old and used cars and reverse charge mechanism on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges in GST rates on certain goods and exemption from IGST in certain cases iv. Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure-exemption thereon v. Additional relief to Small Tax Payers- Composition Scheme vi. GST on development charges collected by Gift City Company Limited for allotment of land on long term lease (of 30 years or more) to developers for development of commercial and residential spaces vii. Additional relief to Small Tax Payers - GTA to unregistered persons 14. Date of the next meeting of the GST Council 3. The Hon'ble Chairperson welcomed the Members of the Council. He stated that originally this Meeting was proposed to be held through video conferencing but as various letters and suggestions were received from States and other stake holders, a regular Meeting was being held . He commenced discussion on the agenda items. Discussion on agenda items: Agenda item I: Confirmation of the Minutes of the 21st GST Council meeting held on 9 September, 2017 4. The Hon'ble Chairperson requested the Chairman, CBEC to inform regarding corrections suggested in the draft Minutes of the 21st Meeting of the Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly of the issue of works contract even when these two issues have been discussed in relation to works contract also'. The Council agreed to add the version proposed by the State of Gujarat. 4.5. The AS, GSTC informed that the State of Gujarat had requested to replace the first sentence of paragraph 5.22 of the Minutes with the following: 'CCT Gujarat stated that if a Government corporation or authority or board was allotted grants by the State government (for example grant allocated to construct a jail or police line, etc.), such transaction should not attract GST at the rate of 18%'. The Council agreed to add the version proposed by the State of Gujarat. 4.6. The AS, GSTC informed that the State of Odisha had suggested to replace the version of the Hon'ble Minister from Odisha recorded in paragraph 33.2 (ii) of the Minutes ('The Hon'ble Minister from Odisha stated that fly ash was a very important commodity and that tax on it should be Nil') with the following: 'Fly Ash caused environmental pollution. There was no consideration for fly ash. 1f it was kept in taxable category, e-way bill would be required for movement/transportation and this would cause harassment. He suggested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed not to make amendments in paragraphs 33(vi) and 34.1(iv) of the Minutes. 4.10. The Hon'ble Minister from Punjab drew attention to the Council's decision recorded in paragraph 7.1 of the Minutes that the issue of Form 'C' under the Central Sales Tax (CST) Act shall be examined further in light of the court decision and requested that this issue should be examined urgently and issue necessary clarification as another judgment had been delivered by the Hon'ble Mumbai High Court on this issue. Shri Udai Singh Kumawat, Joint Secretary, Department of Revenue, (DOR) informed that an amendment proposed in Section 8(3) of the CST Act was presently being examined by the Union Law Ministry and the same would be issued shortly. 5. In view of above discussion, for agenda item 1, the Council decided to adopt the Minutes of the 21st Meeting of the Council with the changes as recorded below: 5.1. To suitably add the following version in paragraph 5.3 of the Minutes: 'Dr. P.D. Vaghela, CCI', Gujarat, stated that the report of CCTs on CST may be considered by the Council which has recommended that issuance of Form 'C' should be left to the wisdom of the States as no State would like to hurt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to fill in licence details. He said that this was necessary to make the software compatible with the GST law as Section 22(2) of the CGST Act, 2017 prescribed that holding of licence was pre-requisite for filing registration application. He also requested the Council to authorise GSTN to carry out the needful modification.' 5.7. To amend the version of the Hon'ble Minister from Punjab recorded in paragraph 31.2 of the Minutes with the following: 'He suggested that similar goods should attract same rate and in one chapter there should not be more than three rates and that...' Agenda item 2: Decisions of the GST Implementation Committee (GIC) for information of the Council 6. The Chairman, CBEC invited Shri Upender Gupta. Commissioner, (GST Policy), CBEC, to make a presentation on the decisions taken by the GST Implementation Committee (GIC) since the 21 Meeting of the Council held on 9 September, 2017. The presentation made by the Commissioner (OST Policy), CBEC is at Annexure 3 of the Minutes. 6.1. In his presentation, the Commissioner (GST Policy), CBEC informed that between the 21st and the 22st Meeting of the Council, GIC took some decisions by circulation due to urgency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed that return filing was getting stabilised and about 13 lakh Returns were filed on 20 September 2017, and in one hour, more than one lakh Return had been filed. He informed that the GoM had also decided that technical team from Infosys should be deployed in each State and that Infosys had already deployed some people but in the next two weeks, this deployment would be beefed up by deploying more technical persons. He added that the GoM had also asked Infosys to deploy separate team for development of Backend Applications for Model 2 States (27 in number) for which Infosys was developing the backend facility of the tax administration. 8.1. The Hon'ble Chairperson desired to have a briefing about the main IT related problems being faced by the taxpayers and how these were being addressed. Shri Prakash Kumar, Chief Executive Officer (CEO), GSTN made a presentation on this issue which is attached as Annexure 4. 8.2. In the presentation, the CEO, GSTN, gave an update on the number of Registrations, Returns, Invoices, daily collection statistics and daily filing status of GSTR-3B. He informed that as on 4 October 2017, 25.96 lakh new registrations had been approved. As on 5 Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arated values) format: (a) Enrolment Report-Daily incremental is being shared after sharing of complete data dump ; (b) New Registration Report - Daily incremental is being shared after sharing of complete data dump; (e) Return Filer- Daily incremental is being shared after sharing of complete data dump; (d) Dealers complete Address list- Complete data dump (one time) shared for both, migrated as well as newly registered ones; (e) GSTR 3B filer-Complete data dump (one time); (iii) Sharing of data with Model 1 States -the root cause for difference in data reported and records (registration form, returns etc.) pulled by CBEC/Model I States has been found and corrective action taken; (iv) Enabling tax payers stuck at submit stage to edit the same and file GSTR-3B (2.2 lakh taxpayers); (v) Amendment of core and non-core items of Registration form rolled-out on the portal; (vi) Tran-1 Filing (Negative Credit issue) resolved for future use. Cases done in past are being dealt with separately by data fix; (vii) Suo moto Registration rolled-out on the portal having following functionalities: (a) ID creation, (b) Create Challan and (c) Making Payment; (viii) Opt-out from Composition scheme r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised, fine and penalty should be deferred. The Hon'ble Minister from Odisha stated that there should be a one-time measure not to impose fine and penalty. The Hon'ble Chairperson observed that if fine and penalty was deferred for the next six months, then no one would file Returns. He observed that the sanctity of dates for filing Returns should be maintained. The Hon'ble Deputy Chief Minister of Bihar suggested that this issue could be decided at a later date. 8.6. The Secretary informed that late fee was waived for July, 2017 Return but no late fee waiver was announced for August Return as it could discourage filing of Returns leading to loss of revenue. He observed that the amount of late fee leviable was not very high. The Hon'ble Chief Minister of Goa stated that those taxpayers who paid tax in July, 2017 but could not file their Returns due to glitches in the System should not be penalised for late filing of the Returns for the month of August, 2017. The Secretary observed that filing of GSTR-3B was necessary for fund settlement, and therefore, this could not be postponed indefinitely. He suggested that an additional 10 days' time could be given for filing Return by those re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... num, composition threshold, etc. The Hon'ble Minister from Karnataka stated that before taking decision on revising the dates for filing Returns, one should wait for one cycle of GST Return filing to be completed. He observed that once offline utility was fully operational in the next two weeks, the time spent by a taxpayer on the System for filing Return could come down from 40 minutes to 5-10 minutes and the throughput of the System would go up substantially. The Secretary stated that some modification in timelines for filing Returns by small taxpayers was already in the agenda of this Meeting [Agenda item 6(ii)]. 8.9. The Hon'ble Deputy Chief Minister of Delhi raised three issues. First, he suggested that GSTN should also look at the capacity of the income tax IT System for accepting the number of Returns every hour and the load of Return filing that it can withstand on the last day of the Return filing. Second, he observed that there was no service level agreement with GSTN for delivery of services in a time bound manner and an action plan for not following the agreed upon timelines. Third, he observed that Infosys was a vendor of GSTN and Ministers should deal with GSTN and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be released to Arunachal Pradesh as the State had not yet reported the revenue collection in the month of August, 2017. He stated that revenue figures for the State of Rajasthan were also being further verified as the revenue collection figure reported by the State was very low. 10.1. The Hon'ble Minister from Assam stated that in order to ensure full transparency, the Department of Revenue of the Government of India should share the calculation sheet for compensation to the States. The Hon'ble Minister from Rajasthan stated that compensation for his State should not have been withheld on account of variation in the figures of revenue as the law was very clear in this regard. He observed that the Department of Revenue could ask reasons for variation but there was clear and categorical protection of law for not stopping compensation. The Joint Secretary, Department of Revenue, informed that the officers from Rajasthan had informed that they would clarify the issue shortly. The Secretary stated that as the difference in the revenue figure was high, there was a risk of giving extra compensation of about ₹ 500 crore and hence compensation was withheld for a few days awaiting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available in the Cess fund was a floating fund which could be used as per the requirements of compensation. The Hon'ble Minister from West Bengal stated in his written comments that the downturn in revenue and reduction in the number of Returns filed for the month of August. 2017 as compared to the month of July, 2017 showed that there were serious procedural issues and shortcomings in the GSTN framework plaguing the implementation of GST, thereby adversely affecting the small and medium enterprises and this precarious situation required serious correction. 10.4. The CEA stated that there should be transparency in respect of compensation and each State should know the compensation given to other States including those States which had surplus revenue. The Secretary pointed out that the Hon'ble Minister from Assam had already made a similar demand. He added that revenue of the first two months would not show a reliable trend. The Hon'ble Minister from Punjab requested to share data of tax collection and compensation of other States to enable States to benchmark with each other. The Hon'ble Chairperson suggested that a chart showing revenue figure of each State and its compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r should be resolved at the earliest. 11. For agenda item 4, the Council took note of the GST collection for August and September, 2017. The Council also agreed that a chart showing revenue figure of each State and its compensation requirement (including the calculation for the same) shall be prepared on bi-monthly basis and shared with all the States while disbursing the compensation amount to the States. Agenda item 5: Report and Recommendations of the Committee on Exports 12. The Chairman, CBEC, invited Shri Sandeep M. Bhatnagar, Director General, Directorate General of Export Promotion (DGEP), CBEC and Member Secretary of the Committee on Exports to brief the Council on the report and the recommendations of the Committee. DG, DGEP, made a presentation on the report of the Committee on Exports, which is attached as Annexure 5. He informed that the Committee and its Sub-groups met six times between 19 September, 2017 and 29 September, 2017. He further informed that there was wide scale consultations within and outside the Government which included the Commerce Secretary, CEA, GSTN, Controller General of Accounts (CGA), Principal Chief Controller of Accounts (Pr. CCA), CBEC an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd supplies to SEZs under Bond/LUT had to be dealt with by jurisdictional Central/State GST officers. With concurrence of all stakeholders, the Committee had decided certain timelines for dealing with such refund claims. Thus, by 6 October 2017, the GSTN and the DG Systems, CBEC would finalize modalities for CBEC to receive all GSTR-1 and all GSTR-3B; by 10 October 2017, GSTN would make available on the website a new utility form RFD 01A for· refund claimant which would contain a request to debit the credit ledgers for ITC refund being claimed; and by 30 October 2017, GSTN would make available facility in a new form RFD 01B for GST officers to order re-credit of the amount of refund rejected. He informed that Pr. CCA, CGA, CAG, Budget' Division in the Department of Economic Affairs, Department of Revenue and State accounting authorities were finalizing the accounting procedure and settlement of funds. He added that GIC was looking into the cross empowerment of State/Central GST officers for grant of refunds and developing a Standard Operating Procedure (SOP) for the grant of refunds manually till such time the Systems related issues were resolved. 12.3. DO, DOEP, furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of refunds. He explained that the credit in e-Wallet could be used for payment of IGST on imports thus ensuring that there was no additional burden of working capital. As regards payment of GST on domestic purchases, he explained that thee-Wallet system would permit transfer of balances from the exporter's account to his supplier's account so that GST could be paid by the supplier on the basis of the amount transferred in his e-Wallet by the exporter. He reiterated that balance in e-Wallet would be allowed only to pay taxes. He observed that the working capital requirement in the eco-system would get reduced by the amount of the notional credit given in the e-Wallets. 12.4. DG, DGEP, further informed that another cause of increased transaction cost identified by the Committee was the requirement of bond/letter of undertaking (LUT) for all exports and bank guarantee in certain cases. He stated that the Committee's recommendation was to dispense with the requirement of a bond as well as a bank guarantee and prescribe only a LUT and that this recommendation was endorsed by the GIC and implemented vide Notification No.37/2017-Central Tax dated 04.10.2017. 12.5. DG, DGEP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk. On the issue of working capital blockage to exporters, he suggested that presently Option-1 (allowing tax payment through Advance Authorisation/EPCG/EOU schemes) could be implemented and Option-2 (e-Wallet) could be implemented by April, 2018. The Hon'ble Minister from Jammu & Kashmir stated that Option-1 damaged the basic structure of GST of not giving exemptions which also applied for duty exemption schemes for North-Eastern States. He stated that the basic structure of GST should not be tampered with due to operational difficulties which was largely due to delay in the delivery by the IT vendor. He also expressed an apprehension that the vendor would take a long time to develop the system of e-Wallet. He cautioned that if a regime of exemptions was introduced, the GST architecture might collapse. The Hon'ble Minister from Karnataka stated that problems of exporters were critical and solution must be found but the proposed solutions were not the answer to the problems of exporters. He supported the view of the Hon'ble Minister from Jammu & Kashmir and observed that enough compromise had already been made with the original intent of GST and further compromises shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the exporters. DG, DGEP explained that the issue was discussed with the various export associations and their preference was to have an upfront exemption but once they were explained the GST design, they agreed that 1% tax on supplies to merchant exporters was the best solution. Shri Khalid A. Anwar, Senior Joint Commissioner, Commercial Taxes, West Bengal, stated that the Hon'ble Minister from West Bengal had desired him to convey that exports were in a very bad shape and the Export Promotion Councils had reported that exports had come down drastically. He stated that as e-Wallet would take some time to develop, Option-1 proposing an upfront exemption should be considered. He stated that merchant exporters also enjoyed similar exemption through Form 'H' under VAT and they should not be discriminated against by charging tax at the rate of 1% on supplies made to them. The Hon'ble Deputy Chief Minister of Bihar observed that the officers from the States of Gujarat, Maharashtra, Karnataka, Uttar Pradesh, West Bengal and Tamil Nadu were members of the Export Committee and the recommendations of the Committee were unanimous. He stated that the fundamental question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He observed that the industry in Jammu & Kashmir was in crisis due to removal of area based exemption scheme and they would demand its restoration if exemption for exports was permitted. He added that no refund had been given to the industries in Jammu & Kashmir for the last three months and till now he had been explaining to them that it was a systemic reform, and now they would again demand upfront exemption. He observed that e-Wallet was virtual currency and the proposed solution was sectoral in nature and so not desirable. He also expressed worry about the technology to be used for e-Wallet after the experience with the current vender. The Deputy Chief Minister of Gujarat desired to know as to how much money was blocked due to pending refunds on exports. The CEO, GSTN stated that this amount would have to be culled out from the GSTR-3B returns. The Secretary stated that GSTN might not have full data because GSTR-1 had been uploaded only till the month of July 2017. 12.13. The Hon'ble Minister from Assam stated that exporters fell into a different category as they were not required to pay GST on consumption based principle. He, therefore, supported the proposal to give t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it lost its market due to certain reasons, it was not able to regain it. He suggested that the old system of exemption should be retained for some time. The Hon'ble Minister from Odisha supported the suggestion of the Hon'ble Chief Minister of Goa. The Hon'ble Minister from Chhattisgarh stated that export was exempt from tax as GST was a consumption based tax. He stated that the Committee had given unanimous recommendation and the Council should accept Option-1 as an interim measure and move to Option-2 later. The Hon'ble Minister from West Bengal stated in his written comments that till e-Wallet was introduced, he favoured the time-tested model of exemption like Section 5(3) of the Central Sales Tax Act for not only merchant exporters, but also for manufacturing exporters and EOUs. He further stated that the concern was whether, even after treating the supplies of domestic suppliers to exporters as deemed exports, they would become eligible for provisional refund under Section 54(6) which is meant for zero rated supplies. In his opinion, no discrimination should be made between 'exports' and 'deemed exports'. 12.15. The Hon'ble Minister from K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andey, Principal Secretary (Finance), Odisha stated that the system of e-Wallet should be legally examined as this system involved creating money to pay tax. The Hon'ble Chairperson stated that this issue could be looked at by officers who were not associated with drafting of the original Law. He stated that a new Committee of officers should review the law and propose changes in the CGST/SGST Acts and the IGST Act taking into account various feedbacks and these proposals could be brought before the Council. The Secretary stated that during the Budget session of the Parliament, changes in the Law could be introduced and for this a new Law Review Committee of officers could be constituted in which the old members of the Law Committee could be called for consultation but decisions should be taken by the new Law Review Committee. He added that the existing Law Committee could continue to look into day-to-day operational issues of the GST law and rules. The Hon'ble Chairperson observed that the Law Committee of officers should also look at the technology issues fore-Wallet. 12.17. The Hon'ble Minister from Jammu & Kashmir reiterated that if exemption mechanism was to be ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accumulated input tax credit on export of goods/services and those supplied to SEZs under Bond/LUT, the following timelines were approved: (a) The GSTN and the DG Systems, CBEC shall finalize modalities for CBEC System to receive GSTR-1 and GSTR-3B from the GSTN by 6 October 2017; (b) by 10 October 2017, the GSTN would make available on the website a new utility Form RFD 01A for refund claimant which would contain a request to debit the credit ledgers for lTC refund being claimed; (c) by 30 October 2017, the GSTN would make available facility in a new Form RFD 01B for GST officers to order re-credit of the amount of refund rejected; (d) these refunds would be dealt with by jurisdictional Central/State GST officers. (iii) To grant exemption from IGST, Cess, etc. under Section 6 of the IGST Act, 2017 read with Section 25 of the Customs Act, 1962 to import of goods for exporters availing the schemes of Advance Authorisation/Export Promotion Capital Goods/100% Export Oriented Units up to 31 March 2018 and to continue the existing monitoring schemes for exports. (iv) To notify domestic supplies of goods made to exporters as deemed exports under Section 147 of the CGST/SGST Acts, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Agenda Item 6(i): Proposal for increasing the aggregate annual turnover threshold under Composition scheme from ₹ 75 lakh (₹ 50 lakh in Special Category States except Uttarakhand and Jammu & Kashmir) to ₹ 1 crore; and not taxing the exempt supplies made by a Composition dealer 15. The Commissioner (GST Policy), CBEC stated that it was proposed to increase the aggregate annual turnover threshold under Composition scheme from the existing ₹ 75 lakh to ₹ 1 crore. He stated that the limit for the Special Category States could also be discussed by the Council. The facility of availing such increased limit could be extended to both the migrated as well as the new tax-payers and would become valid from the first day of the subsequent month in which the option to migrate to the Composition scheme was exercised. He added that the increase in the turnover threshold would make it possible for greater number of taxpayers to come within the Composition fold and avail its facility of easy compliance and that this was extremely important for the MSME sector. He stated that as per the data circulated during the 9th Meeting of the Council (held on 16 January, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed large scale dissatisfaction with procedures under GST amongst Micro, Small and Medium Enterprises (MSMEs). He stated that MSMEs and cottage industry had suffered setback after introduction of GST and that while they accounted for large scale employment, barely 5% of total revenue came from them. He stated that there was a need for balance between 5% revenue and employment scenario. In this light, he supported the proposal for increasing the threshold turnover for Composition taxpayers from ₹ 75 lakh per annum to Rs. one crore per annum and to also exclude the exempt supplies from the calculation of the turnover of the Composition dealer. The Hon'ble Chief Minister of Goa, the Hon'ble Ministers from Jammu & Kashmir, Kerala, Odisha, Punjab, Haryana, Madhya Pradesh, Karnataka and Telangana, and the Senior Joint Commissioner (Commercial Taxes), West Bengal supported the proposal to increase the turnover threshold of Composition taxpayers from ₹ 75 lakh to Rs. one crore per annum. The Hon'ble Minister from Karnataka added that the Composition rate was not a lower tax rate but only a mechanism to ease compliance. He observed that the challenge was how to make t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also expressed an apprehension that taxpayers would find it difficult to segregate their turnover into taxable and exempt categories and that this would lead to Inspector Raj. He suggested that tax for Composition dealers could be reduced to less than one per cent. The Hon'ble Minister from Assam stated that the fear of arbitrage and return of Inspector Raj was exaggerated. He added that it was not proper to always vilify Inspectors as the Government was paying them salary and they also did good work in expanding the taxpayer base and collecting more revenue. He supported the proposal to exclude the value of exempted goods from the total turnover value for the Composition taxpayers. The Hon'ble Minister from Kerala stated that it would have been desirable to extend the limit of Composition turnover to ₹ 1.5 crore if the law so permitted, but in its absence, it would be better to exclude the exempt turnover, so that the limit of Composition turnover de facto became ₹ 1.5 crore. The Hon'ble Minister from Jammu & Kashmir expressed his reservation on this proposal as it changed the whole scheme of Composition. He warned that if these proposals were implemented, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commercial Taxes), Manipur, Ms. Dipa Basnet, Secretary (Commercial Taxes), Sikkim and the Principal Secretary (Finance), Tripura also expressed to increase the turnover threshold for Composition taxpayers from ₹ 50 lakh to ₹ 75 lakh in their respective States. The Hon'ble Chairperson suggested that the Council may agree with the proposal to increase the aggregate annual turnover threshold for eligibility for Composition scheme from ₹ 75 lakh to Rs. one crore for normal States and for the two Special Category States, namely Jammu & Kashmir and Uttarakhand. The Council agreed to the suggestion. He further suggested to increase the aggregate annual turnover threshold under Composition scheme for Special Category States other than Jammu & Kashmir and Uttarakhand from ₹ 50 lakh to ₹ 75 lakh. He also suggested that the issue regarding excluding the turnover of exempted goods from the total turnover threshold for levying tax under the Composition Scheme could be examined by a Group of Ministers to be constituted by him and they could submit their recommendation in two weeks. The Council agreed to these suggestions. 15.8. The Hon'ble Deputy Chief Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition taxpayers to make inter-State outward supplies. The Hon'ble Minister from Assam stated that the North Eastern States would lose revenue if benefit of Composition scheme was extended to inter-State supply of goods as these States mostly got goods from the neighbouring bigger States like West Bengal and there was hardly any reverse supply from the North-Eastern States to the bigger neighbouring States. He stated that if such a provision was introduced in the law, there should be a provision for its review after five years once the scheme of compensation to the States for loss of revenue came to an end. 15.10. Shri Ritvik Pandey, CCT, Karnataka stated that for supplies made by a normal tax payer, under destination principle, the tax travels to the consuming State when input tax credit is utilised by the seller. For Composition tax payers, as tax was not on supplies but on turnover, no input tax credit was available and therefore taxes paid by Composition taxpayers would get trapped in the origin State. The Hon'ble Chairperson observed that the destination State would also gain tax for supplies made by Composition taxpayers located there and therefore the gains and los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b pointed out that the definition of aggregate turnover in Section 2(6) of the CGST/SGST Acts included all taxable supplies but excluded CGST, SGST, etc. He stated that this exclusion did not cover the earlier tax like VAT and as a result, the aggregate turnover of Composition taxpayers in the first year would be inclusive of VAT and as a result, their de facto turnover for benefit of Composition scheme in the first year would continue to be ₹ 75 lakh (even when it is increased to Rs. one crore) in the first year. He suggested to clarify this issue. 15.13. The Hon'ble Deputy Chief Minister of Bihar stated that entities in the MSME (Micro Small and Medium Enterprises) sector availing the Composition scheme also made supplies to registered entities and there should be a provision that the registered buyers should be able to take input tax credit of the purchases made from Composition taxpayers. He suggested that purchases from Composition taxpayers in MSME sector should be allowed 2% input tax credit and they should have a simplified one-page return like the Sara/ Form of Income Tax·. He suggested that a Committee could be formed to simplify the forms and to seek mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it would not be possible to reconcile GST with MRP. He stated that MRP belonged to the pre-GST regime and that the margin of distributors etc. was taken into account while fixing the MRP. He observed that GST applied at every level of the retail chain and the perception problem was because a tax of, say 18%, was being charged on MRP. He suggested that the system of MRP should be abolished in the GST regime. He added that another concern of the taxpayers was the fear of retrospective inquiry regarding their turnover in the pre-GST period and suggested that the Council should clarify that retrospective tax inquiry relating to returns filed during -the pre-GST period shall not be initiated by the Central or State tax administration merely on the basis of returns filed during the GST period. The Hon'ble Chairperson supported this suggestion. The Council agreed to this suggestion. 15.16. The Hon'ble Chief Minister of Goa raised another issue regarding HSN Code. He stated that HSN Code was very confusing for traders due to multiple rate slabs and suggested that the traders should be exempted from the requirement of declaring HSN Code and that this should be declared only by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, tax should be charged at the rate of 18% if the bill was raised from the air-conditioned part of the restaurant and 12% if the bill was raised from the non-air-conditioned part of the restaurant. He stated that this change would generate a lot of good will for GST amongst the consumers. The Hon'ble Minister from Goa stated that this meeting should send a message that the Council cared for the common people. The Hon'ble Ministers from Tamil Nadu and Odisha supported the proposal made by the Hon'ble Ministers from Kerala and Goa. The Hon'ble Chairperson suggested that the proposed Group of Ministers tasked to look into the Composition issue~ could also examine the rate of tax on restaurants. He stated that a uniform rate of tax of 12% with input tax credit could cause revenue loss because aerated drinks attracted tax at the rate of 43% and this could lead to greater compensation requirement for the States. The Hon'ble Minister from Goa stated that input tax credit could be denied to the restaurant but the rate of tax should be kept at 12% to give due deference to public perception. The Hon'ble Chairperson stated that revenue was as important as public perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual turnover of up to ₹ 1.5 crore in the previous year) as announced earlier; (v) Dates for August and September, 2017 Return filing may be announced after seeing experience from July cycle; (vi) Quarterly returns for small taxpayers may start from quarter starting October, 2017; (vii) Last date for filing of GSTR-4 for the first quarter may be 15 November, 2017; (viii) Last date for filing of GSTR-6 for July, August and September, 2017 may also be 15 November, 2017. He stated that this would help GSTN and all other partners to make necessary changes in software. He added that GSTN had informed that FORM GSTR-4 and GSTR-6 would be available by 03 November, 2017 and 23 October, 2017 respectively. 16.2. The Hon'ble Minister from Chhattisgarh supported this proposal and suggested to further enhance the value of turnover of taxpayers eligible to file quarterly return. The Hon'ble Deputy Chief Minister of Delhi supported the proposal of quarterly return for small taxpayers. However, he observed that as these taxpayers were also supplying to each other, this provision could lead to complication and suggested that quarterly return should be introduced for all taxpayers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minister of Puducherry stated that the small taxpayers were finding the return filing to be highly cumbersome and they were forced to employ a person permanently to submit return. He supported the proposal of filing quarterly return by small taxpayers but suggested that payment of tax should be done on monthly basis so that the small taxpayer did not keep the tax collected from the buyer with himself for three months. The Hon'ble Minister from Telangana supported the proposal. The Hon'ble Minister from Madhya Pradesh supported the proposal of fi ling quarterly return for taxpayers with turnover up to ₹ 1.5 crore per annum and suggested that this could be implemented from 1 October, 2017. The Senior Joint Commissioner (Commercial Taxes), West Bengal supported the proposal of filing quarterly return for taxpayers with turnover up to Rs.l.5 crore per annum by using the enabling provision under Section 148 of the CGST/SGST Acts, 2017. 16.4. The Hon'ble Deputy Chief Minister of Delhi stated that this proposal would make the working of input tax credit more complex as big taxpayers would not be able to take credit of the taxes paid on purchases from small taxpayers. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stated that the Law Committee could examine this suggestion. The Council agreed to this suggestion. Agenda item 6(iii): Proposal for suspension of application of provisions of sub-section (4) of section 9 till 31 March, 2018 17. The Commissioner (GST Policy), CBEC stated that this agenda item proposed suspension of application of provisions of sub-section ( 4) of Section 9 till 31 March, 2018. He added that in the meeting of the officers held on 5 October 2017, it was felt that this would also be required for section 5(4) of the IGST Act. He explained that the provision had virtually eliminated the exemption limit provided to the small taxpayers and increased compliance for larger taxpayers. He added that establishments making small quantity of taxable supplies but substantial quantity of exempt supplies (e.g. educational and religious institutions) were adversely affected. He stated that the provision of exempting purchases up to ₹ 5,000 per day from the purview of this Section was also proving to be difficult to implement as many entities had several business locations in one State. He also explained that the Union Law Ministry had suggested to prescribe an end date for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain in many cases in the services sector. He gave an example of an unregistered person providing free software to a registered recipient on the condition that the recipient would not share it with anyone else. This amounted to agreeing to not doing something which was also a supply of service by the unregistered person to the registered person making the latter liable to tax under reverse charge mechanism. He stated that because of such uncertainties, large taxpayers were shy of making purchases from smaller taxpayers. The Senior Joint Commissioner (Commercial Taxes), West Bengal recalled that originally, the reverse charge mechanism under Section 9(4) of the CGST/SGST Acts, 2017 was meant only for Composition taxpayers buying from unregistered persons but the Council took a considered decision to apply it to all taxable persons. He pointed out that when small taxpayers raised objection, daily purchases up to ₹ 5,000 from one or more unregistered persons by a registered person had been exempted from this provision. He suggested to raise this limit to ₹ 10,000 to provide more cushion to the small and medium enterprises instead of removing the provision of reverse ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdware, those States could start implementation that already had the requisite hardware. The Hon'ble Chief Minister of Puducherry stated that e-Way bill should be implemented at the earliest possible. The Commissioner (Commercial Taxes), Manipur also stated that the e-Way bill should be implemented at an early date. The Hon'ble Minister from Madhya Pradesh stated that e-Way bill should be implemented after the software was developed. The Hon'ble Minister from Punjab suggested that the e-Way bill should be implemented from 1 April, 2018 on goods which are prone to evasion. The Senior Joint Commissioner (Commercial Taxes), West Bengal, stated that e-Way bill system should not be introduced until the existing glitches in the System relating to registration, return and payment were successfully addressed. The Hon'ble Minister from Odisha stated that e-Way bill system should be studied properly before its implementation. The Hon'ble Minister from Haryana stated that e-Way bill system should be introduced as soon as possible and that his State was suffering tax evasion in its absence. 18.2. The Hon'ble Minister from Karnataka stated that in their experience, e-Wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tem from one State, and then scale it up to 4-5 States by 1 November, 2017. 18.4. The Hon'ble Chairperson suggested that e-Way bill system could be rolled out from 1 January, 2018 in a staggered manner in State after State and could be implemented across the country from 1 April, 2018. The Council agreed to this suggestion. 19. For agenda item 6, the Council took the following decisions: (i) To increase the aggregate annual turnover threshold for eligibility under the Composition scheme from ₹ 75 lakh to Rs. one crore for normal States and for two Special Category States, namely Jammu & Kashmir and Uttarakhand; (ii) To increase the aggregate annual turnover threshold for eligibility under the Composition scheme from ₹ 50 lakh to ₹ 75 1akh for Special Category States other than Jammu & Kashmir and Uttarakhand; (iii) A Group of Ministers to be constituted by the Hon'ble Chairperson to examine the following issues and submit its recommendations in two weeks: (a) whether to exclude the turnover of exempted goods from the total turnover threshold for levying tax under the Composition Schemes; (b) whether Composition scheme can be extended to taxpayers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the scheme shall be reviewed by the new Law Review Committee constituted to review the changes required in the Jaw; (viii) To roll out e-Way bill system from 1 January, 2018 in a staggered manner in State after State and to implement it across the country from 1 April, 2018; (ix) To make similar changes in SGST Act and UTGST Act, wherever required. Agenda item 7: Issues recommended by the Fitment Committee for consideration of the GST Council Agenda item 7(i): GST Rate in respect of government works contract services having high labour content 20. Introducing this agenda item, Shri Amitabh Kumar, Joint Secretary (TRU-ll), CBEC, stated that some States had requested to levy tax at the rate of 5% on those works contracts which had predominantly labour component and the material component was less than 25%. He stated that the details of various kinds of works provided by the Government of Telangana were examined and it showed that there were broadly eight categories of works contract services having varying content of labour and materials. While in the category of Irrigation and CAD (Command Area Development) i.e. canal works, the effective GST rate seemed to have gone down v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing the material component to 33% would lead to a situation of refund. The Secretary stated that this issue had been carefully considered by the Fitment Committee and the Council should go by its recommendation. 20.2. After discussion, the Council agreed that the rate of tax in case of works contract services involving predominantly earth works (that is, constituting more than 75% of the value of the works contract) supplied to the Central Government, State Governments, Iocal authority or a governmental authority shall be reduced to 5%. In view of decision in respect of agenda item 7(ii), this reduced rate on works contract service would also apply to Government Entity. Agenda item 7(ii): Definition of Governmental Authority and GST on Government Grants 21. Introducing this agenda item, Joint Secretary (TRU-ll), CBEC, recalled that in the 21st Meeting of the Council (held on 9 September, 2017), the State of Gujarat had pointed out that the existing definition of Governmental Authority was limited to those authorities which have been entrusted with the functions of municipality under Article 243 W of the Constitution and that reference to authorities entrusted with the functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.06.2017. and corresponding IGST, UTGST and SGST notifications accordingly. 21.2. He stated that an incidental amendment connected with reduction in GST rate on specified works contract services was required to be carried out in paragraph 2 of notification No. 11/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications. He explained that the said paragraph provides that " In case of supply of service specified in column (3) of the entry at item (i) against serial no. 3 of the Table above involving transfer of property in land or undivided share of land, as the case may be, the value of supply of service and goods portion in such supply shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as the case may be, and the value of land or undivided share of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged for such supply." The said paragraph referred to only the service specified at item (i) against serial no. 3 of the Table of the said notification as at the time of issue of the said notification, only the service specified therein involved tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat Municipal Finance Board (GMFB) etc. Government provided budgetary grants to these entities which in tum carried out allotted functions using these grants and it could be argued that the transfer was not solely a transfer of money as Government was expecting the entity to perform certain activities on its behalf, particularly keeping in view the fact that business was defined in very broad terms in Section 2(17) of the CGST/SGST Acts. He stated that the recommendations of the Law Committee could be accepted with certain modifications as highlighted in bold letters below: (a) Grants given by Central Government, State Government or a local authority to a "Government Entity" may be exempt under GST. "Government Entity" may be defined as an authority or a board or any other body including a society, trust, corporation which is, - (i) set up by an Act of Parliament or State Legislature, or (ii) established by any government, with ninety per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government or a local authority". 21.5. He stated that it was further proposed that the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol, to carry out any function entrusted to a municipality under Article 243 W of the Constitution or to a Panchayat under Article 243 G of the Constitution. (ii) The same definition to be also included in the notification No.11/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications which, as amended by notification No. 20/2017-CT dated 22.08.2017, prescribes GST rate of 12% on certain works contract services provided to Governmental Authority. (iii) Entry at Sl. No.5 of notification No. 12/2017-CT (Rate) dated 28.06.2017 may be amended along the lines of entry at Sl. No. 4 to include services provided by Central Government, State Government, Union Territory and local authority in addition to those provided by governmental authority. Corresponding IGST, UTGST and SGST notifications may also be amended. (iv) Provision in paragraph 2 of notification No. 11 /2017-CT dated 28.06.2017 may be made applicable to services specified against serial no. 3 at item (i), item (iv) [sub-item (b), sub-item (c), sub-item (d)], item (v), [sub-item (b), sub-item (c) and sub-item (d)] and item (vi) [sub-item (c)] in column (3) of the Table of the said notification and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst consideration received from Central Government, State Government, Union Territory, or local authority, in the form of grants.' The Hon'ble Minister from Karnataka stated that his State had set up SPVs which might not be covered under exemption. The Joint Secretary (TRU-ll), CBEC, explained that this would be covered under the definition of 'Government Entity'. The Hon'ble Minister from Jharkhand stated that where a works contract had been entered in April, 2017 (i.e. before GST) but the bill was raised in October, 2017 (i.e. after GST), the contractor was not in a position to pay tax at the new rate of 12% when his profit was only around 9%. The Secretary stated that such contracts would need to be renegotiated taking into account the new tax liability and that a Committee of officers could be constituted for the same. The Hon'ble Minister from Punjab suggested to exempt on-going works contract from the new rate of tax. The Secretary stated that big projects like Sardar Sarovar Dam Project was being built through an SPY and would need to pay tax at the rate of 12% and continuing with old tax rate would lead to loss of revenue. The Hon'ble Deputy Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er as compared to bigger cars (greater than 1500 cc). He stated that as per this proposal, leasing for small cars (LPG/CNG/Petrol) would attract tax at the rate of 18.85% as against the present 29% and the combined pre-GST incidence of VAT and Service Tax at the rate of 17% ( 14.5% + 2.5%). He added that leasing of diesel cars (below 1500 cc) would attract tax at the rate of 20.15% as against the present 31% and cars with engine capacity of more than 1500 cc would attract tax at the rate of 31.2% as against the present 48%. He stated that it was also proposed that the vehicles covered by such leases (i.e. leases of vehicles purchased and leased prior to I July, 2017 and registered as commercial vehicles prior to that date or within 15 days of leasing), when disposed of/sold shall also be taxed at 65% of the applicable GST plus Cess rate. 22. I. He further stated that the Fitment Committee proposed that the rate of tax should be extended to old private car leasing (leased prior to 1 July 2017) apart from commercial leased vehicles with a sunset clause of 3 years from the appointed date (i.e, 1 July 2017) for availing the reduced rate of tax. He stated that another recommendation wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes. The Hon'ble Minister from Karnataka suggested that Central Excise credit could be extended for such lease agreement. The Joint Secretary (TRU-ll), CBEC, stated that the time period for availing the credit of Central Excise Duty had lapsed. After further discussion, the Council approved the proposal made at paragraph 22.2 above. Agenda item 7(iv): GST on renting of motor cab and transport of passengers by motor cab services 23. Introducing this agenda item, the Joint Secretary (TRU-1), CBEC, stated that presently under Notification No.ll /2017-Central Tax(Rate) dated 28 June, 2017, the rate of tax for transport of passengers by motor cab, where the cost of fuel was included in the consideration charged for the services from the recipient, was 5% without input tax credit (lTC) of goods and services and 12% with full lTC. Similarly, for renting of motor cab where the cost of fuel is included in the consideration charged from the service recipient, the rate of tax was 5% without ITC and 12% with ITC. He stated that several representations had been received to apply these GST rates not only for transport of passengers by motor cab or for renting of motor cabs but also for ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned to carry passengers; (ii) To allow input tax credit for input service in the same line of business i.e. from another service provider of transporting passengers in any motor vehicle or renting a motor vehicle, at the rate of tax of 5%; (iii) To allow input tax credit for renting any motor vehicle or transport of passengers by motor vehicles to a person who supplied either of the service - renting of any motor vehicle or transport of passengers by motor vehicles. Agenda item 7(v): Reduction in rate of tax on some Job Work Services 24. Introducing this agenda item, the Joint Secretary (TRU-ll), CBEC, stated that representations had been received from various quarters to reduce the rate of tax on job work in certain services or to rationalise the rates of tax for different types of job work in the same sector like printing industry. 24.1. He stated that there was a proposal to reduce the rate of tax on job work services on imitation jewellery, on the ground of maintaining parity in rates in respect of goods and job work services. He pointed out that the imitation jewellery industry was labour intensive in nature (employed about 27 lakh work force where 60% were women) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same rate of tax on job work services in relation to any goods as that on the (same) goods concerned, was discussed but was not found acceptable because this would lead to large scale classification disputes in job work services and potential differential in rate of tax on job work services for intermediate goods and final goods thus leading to problem of lobbying. He stated that the following rates were proposed by the Fitment Committee: (i) To prescribe a rate of 5% on job work services in relation to food and food products falling under Chapters1 to 22 of the HS Code; (ii) To prescribe a rate of 5% on job work services in relation to products falling under Chapter 23 of the HS code except for dog and cat food put up for retail sale (Chapter Heading 2309 1000); (iii) To reduce the rate of tax on job work services in relation to manufacturing of umbrellas from 18% to 12% as the rate of tax on umbrella was 12%; and (iv) To reduce the rate of tax on job work services in relation to manufacturing of clay bricks falling under Chapter 6900 0010 from 18% to 5% as the rate of tax on sand and clay bricks (CTH 6901 0010) was 5%. 24.4. He stated that the Fitment Committee d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 12% (Heading 9988); (c) GST rate on services by way of printing on job work basis or on goods belonging to others in relation to printing of goods falling under Chapter 48 and 49, other than those covered by (a) and (b) above, may continue at 18% (Heading 9988); (d) GST rate on services by way of printing in relation to printing of all goods falling under Chapter 48 and 49, which attract GST at the rate of 5% or Nil, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer may be prescribed at 12% [(Heading 9989), item (i) may be amended accordingly]. [It would not result in ITC overflow as most of the paper, paperboard attracts GST at the rate of 12%. It would also not result in any tax disadvantage to the printer because a recipient of such supply having in-house printing would have also suffered incidence of 12% on paper and paperboard]; (e) GST rate on services by way of printing of all goods falling under chapter 48 and 49 which attract GST at the rate of 12%, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, may also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there were 23 processes involved in making of carpets, namely, spinning, weaving, washing and finishing activities, which were done by job workers and they were mostly poor, unorganized, illiterate and home based and it would not be possible for them to comply with GST law. Therefore, hand-made carpet exporters would not be able to claim refund of GST paid on inputs and services which would lead to increased cost and make Indian products globally uncompetitive. He pointed out that the entire textile sector had been exempt from Excise Duty when input tax credit was not availed and under GST, all textiles, whether hand-made or machine-made, were charged to tax at the rate of 5% or 12%. The job works services in relation to textile items attracted 5% tax while it was exempted under Service Tax regime and this 5% GST on jobwork was being agitated by the hand-made carpet industry on the ground of increased cost of the final products thus making the Indian carpets uncompetitive in global market. He stated that the Fitment Committee had considered these aspects and recommended to continue with the existing rate of 5% tax on job work services for making of carpets, as applicable to all tex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through pipeline from 18% to 12% with input tax credit and to give an option to tax the same at the rate of 5% without input tax credit. He further pointed out that input tax credit on pipeline was not admissible under GST law as it amounted to immovable property under Section 17 of the CGST/SGST Acts, 2017. In view of the above, he proposed the following: (i) GST be levied at the rate of 12% on works contract services and associated services in respect of E&P (Exploration and Production Companies) in respect of offshore works in the area beyond 12 nautical miles; (ii) GST be levied at the rate of 12% with lTC OR 5% without ITC for transportation of natural gas through pipeline. 25.4. The CCT, Karnataka suggested that the option of 5% rate of tax might not be given. The Secretary stated that as there was no GST on output, to prevent cascading, this option was required to be given. The CCT, Karnataka stated that pre-GST also, there was cascading in this sector. Shri P.K. Jain, DG (Audit), CBEC, stated that the rate of tax for transport service by road was 5%, and through pipeline, it was 18% and the Government policy was that more and more transportation should be encouraged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 15.05.2017 shall be deemed to be a registered brand for the purposes of levy of 5% GST, irrespective of whether or not such brand is subsequently deregistered; (ii) A brand registered as on 15.05.2017 under the Copyright Act, 1957 shall also be treated as a registered brand for the purposes of levy of 5% GST; (iii) A brand registered as on 15.05.2017 under any Jaw for the time being in force in any other country shall also be deemed to be a registered brand for the purposes of levy of 5% GST; and (iv) A mark or name in respect of which actionable claim is available shall be deemed to be a registered brand name for the purposes of levy of 5% GST. 27.1. He stated that accordingly, Notifications No. 27/20 17-Central Tax (Rate), 28/2017- Central Tax (Rate), 27/2017-Integrated Tax (Rate), 28/2017-Integrated Tax (Rate), 27/2017- Union Territory Tax (Rate), 28/2017-Union Territory Tax (Rate) and similar notifications under SGST Acts were issued on 22 September, 2017 giving effect to the recommendations of the Council. 27 .2. He also stated that the said amending notifications also provided that 5% rate of tax would not apply if the person concerned voluntarily foregoes any actionable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of such goods in unit containers are two different persons and in such cases, it would be necessary to provide that the affidavit (as mentioned in paragraph 27.3 above) is filed by the person having actionable claim or enforceable right on such brand name and he shall state the following in the affidavit: (a) He is voluntarily foregoing his actionable claim or enforceable right on such brand name, and (b) He has authorised the person (undertaking packing of such goods in unit containers bearing said brand name) to print on such unit containers in indelible ink, both in English and the local language, that in respect of such brand name, he (the person owning the brand name) is voluntarily foregoing the actionable claim or enforceable right on such brand name. 27.7. He requested the Council to approve the above proposal. The Council accordingly approved the proposal. Agenda Item 7(ix): Changes in GST rates on certain goods/clarifications to be issued 28. Introducing this agenda item, the Joint Secretary (TRU-1), CBEC, stated that during the 21st Meeting of the Council held on 9 September, 2017, the Council had requested the Fitment Committee to examine two issues - nutritious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Central Government or any State Government at the rate of 5% subject to the condition as mentioned in the paragraph 28.1. 28.3. All goods falling under heading 6802 (other than those of marble and granite or those which attract 12% GST)(SI. No. 2): The Fitment Committee had recommended that tax on all goods falling under Heading 6802 (except those of marble and granite or those which attract 12% GST) should be reduced from 28% to 18%. However, Statues, statuettes, pedestals; high or low reliefs, crosses, figures of animals, bowls, vases, cups, cachou boxes, writing sets, ashtrays, paper weights, artificial fruit and foliage, etc.; other ornamental goods essentially of stone, falling under 6802, should continue to attract 12% GST. 28.4. The Hon'ble Minister from West Bengal stated in his written comments that the rate of tax on all goods falling under Chapter Heading 6802 should be reduced from 28% to 18%. The Hon'ble Minister from Chhattisgarh stated that the proposed rate of tax of 18% was too high and due to this, mining work in his State had stopped leading to large scale unemployment. The Hon'ble Minister from Rajasthan stated that the tax rate of 18% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained for the manufacture of Linear Alkyl Benzene (LAB). 28.7. Staple pin (SI. No. 10): Shri P.K. Mohanty, Consultant (GST), CBEC, suggested to rationalise tax on all items falling under Chapter Heading 8305 and to subject them to a uniform rate of tax of 18%. The Council agreed to this suggestion. 28.8. Parts of (a) fixed speed diesel engine of power not exceeding 15 HP, and (b) submersible pumps: The Hon'ble Deputy Chief Minister of Gujarat stated that a view needed to be taken regarding the rate of tax on these items. The Secretary stated that these items were covered under Agenda item 13(iii) circulated in the morning and could be discussed when that agenda item came up for discussion. 28.9. Real zari (not listed): The CCT, Gujarat suggested to reduce the rate of tax on real zari (of silver) from 12% to 5% as the rate of tax on saree was 5%. The Council agreed to this proposal. 28.1 0. The Hon'ble Minister from Jammu & Kashmir suggested that the list of goods attracting tax at the rate of28% should be trimmed as much as possible. The Hon'ble Minister from Tamil Nadu stated that the request of his State for reduction in rate of about 50 items is under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243 W of the Constitution or to a Panchayat under Article 243 G of the Constitution. 29.3. The definition of Governmental Authority at paragraph 29.2 above to be also included in the notification No.1/2017-CT dated 28.06.2017 and corresponding IGST, UTGST and SGST notifications which, as amended by notification No. 20/2017-CT dated 22.08.2017, prescribes GST rate of 12% on certain works contract services provided to Governmental Authority. 29.4. Entry at Sl. No. 5 of notification No. 12/2017-CT (Rate) dated 28.06.2017 to be amended along the lines of entry at Sl. No. 4 to include services provided by Central Government, State Government, Union Territory and local authority in addition to those provided by governmental authority. Corresponding IGST, UTGST and SGST notifications to be also amended. 29.5. Provision in paragraph 2 of Notification No. 11/2017-CT dated 28.06.2017 to be made applicable to services specified against serial no. 3 at item (i), item (iv) [sub-item (b), sub-item (c), sub-item (d)], item (v), [sub-item (b), sub-item (c) and sub-item (d)] and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leased prior to I July 20 17), when disposed of/sold shall also be taxed at 65% of the applicable GST plus Cess rate. This reduced rate shall be applicable for a period of 3 years with effect from 1 July 2017. 29.11. Sale/supply of vehicles by a registered person, who had procured the vehicle prior to I July 2017 and has not availed input tax credit of Central Excise duty, VAT or any other taxes paid on such vehicles, to be taxed at 65% of the applicable GST plus Cess rate. This reduced rate shall be applicable for a period of3 years with effect from 1 July 2017; 29.12. Sale by way of auction etc. of used vehicles, seized and confiscated goods, scrap etc. by Central Government, State Government, Union Territory or a local authority, to any person, shall be subjected to GST under reverse charge under section 9(3) of the CGST/SGST Act and Section 5(3) of the IGST Act. (iv) GST on renting of motor cab and transport of passengers by motor cab services · 29.13. To apply rate of tax of 5% without input tax credit and 12% with input tax credit as presently applied for transport of passengers by motor cab or for renting of motor cab to service provided by using any other motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced from 18% to 12% (Heading 9989). 29.25. Rate of tax on services by way of printing of all goods falling under chapter 48 and 49 which attract tax at the rate of 12%, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer shall be reduced from 18% to 12%. 29.26. Rate of tax on services by way of printing of all goods falling under chapter 48 and 49 which attract tax at the rate of 18% or above, where only content is supplied by the publisher and the physical inputs including paper used for printing belong to the printer, shall continue to be at 18%. 29.27. To issue a clarification that the supply of books, pamphlets, brochures, envelopes, cartons, boxes etc. printed with logo, design, name, address or other content supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply. Principal supply has been defmed in Section 2(90) of the CGST Act as supply of goods or services which constitutes the predominant element of a composite supply and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade therein while implementing the decision of the Council taken during its 21st Meeting held on 9 September 20 17 relating to rate of tax on cereals, pulses and flours etc. put up in unit container and bearing a registered brand name. 29.32. Where the person having actionable claim or enforceable right on a brand name and the person undertaking packing of such goods in unit containers are two different persons, it shall be necessary for the person having actionable claim or enforceable right on such brand name to file an affidavit (as mentioned in paragraph 27.3 above) stating the following: (a) He is voluntarily foregoing his actionable claim or enforceable right on such brand name, and (b) He has authorised the person (undertaking packing of such goods in unit containers bearing said brand name) to print on such unit containers in indelible ink, both in English and the local language, that in respect of such brand name, he (the person owning the brand name) is voluntarily foregoing the actionable claim or enforceable right on such brand name. (ix) Changes in GST rates on certain goods/clarifications to be issued 29.33. The Council approved the proposals regarding change in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplies to an unregistered recipient include both taxable as well as exempt goods or services. He stated that another recommendation of the Law Committee was that keeping in view the large number of invoices issued by banking and insurance companies, sub-rule (2) of Rule 54 of CGST Rules, 2017 could be amended to provide for issuance of a consolidated invoice or another document for supply of services in a particular month. He stated that another proposal was to amend instructions for filing return in FORM GSTR-4 so as to provide that serial No.4 A of Table 4 shall not be furnished for July 2017 to December 2017. 31.1. The Hon'ble Minister from West Bengal in his written comments supported the proposal to allow issuance of 'invoice cum bill of supply' in order to facilitate the taxpayer to issue only one invoice instead of two. The Hon'ble Deputy Chief Minister of Delhi stated that the first proposal (relating to companies showing cumulative value of items liable to tax at a particular rate when goods and services are supplied to an unregistered person) should not be implemented as it would create problem for audit. The Commissioner (GST Policy), CBEC stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ran; (vi) Articles made of shola. 32.1. The CCT, Gujarat stated that some more items, namely Terracotta figurines of the Gora Dev (tribal horse God); Plaques, inset with mirrors; Handmade blocks for fabric printing should also be added to the list. The Secretary stated that these additional items should first be discussed in the Fitment Committee. The Council approved the proposal made under this Agenda item. Agenda item 8(iv): Clarification regarding the due dates for the generation of FORM GSTR-2A and FORM GSTR-1A for the month of July, 2017 33. The Commissioner (GST Policy), CBEC stated that under Notification No.30/20 17 dated 11 September, 2017, dates for filing FORM GSTR-1, FORM GSTR-2 and FORM GSTR-3 for the month of July were extended and the queries were received regarding due date for generation of FORM GSTR-2A and FORM GSTR-IA in light of the said extension of date. He stated that it was proposed to issue a circular clarifying that ·(i) the due date with respect to FORM GSTR-2A stands automatically extended since the due dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. The details filed in FORM GSTR-1 will be made available t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items in Notifications No. 32/2017-Central Tax and No. 8/2017-Integrated Tax 34.6. To add the following additional items in the Notifications No. 32/20 17-Central Tax dated 15.09.2017 and No. 08/2017-lntegrated Tax dated 14.09.2017: (i) Handmade shawls, stoles and scarves (to be added to Sl. No. 9 of the table in the notification, along with addition of Chapter 61 ); (ii) Chain stitch; (iii) Crewel, namda, gabba; (iv) Wicker willow products; (v) Toran; (vi) Articles made of shola. iv. Clarification regarding the due dates for the generation of FORM GSTR-2A and FORM GSTR-lA for the month of July, 2017 34.7. A circular to be issued by the Central Government and the State Governments clarifying the following: (i) the due date with respect to FORM GSTR-2A stands automatically extended since the due dates for furnishing the details in FORM GSTR-1 and FORM GSTR-2 have been extended. The details filed in FORM GSTR-1 will be made available to the recipient in FORM GSTR-2A not later than 11 October, 20 17 while they are required to furnish the details of their inward supplies in FORM GSTR-2 not later than 31 October 2017; (ii) the due date for finalizing of FORM GSTR-lA also stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover details of migrated taxpayers, removing from it the data of turnover of taxpayers with centralised registration, etc. would take time and for such period, a taxpayer should be given the freedom to approach any tax administration for claiming refund. The Secretary stated that this could be permitted subject to a declaration being given by the applicant that the same refund claim has not been claimed from the other administration having jurisdiction over the applicant. The Council agreed to this suggestion. 36. For agenda item 9, the Council approved the following: (i) To issue notifications by the Central Government and the State Governments, cross empowering officers of the Central and State Governments to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the Central tax and the State tax. Similar notification to be issued under the IGST Act by the Central Government; (ii) Until the division of taxpayers is effected between the Central and State administration, an officer of the Central and the State Government was authorised to process any refund claim filed by an applicant under his jurisdiction subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Government for their ratification. The Council ratified these notifications and Order No. 3 dated 21.09.2017 as mentioned above on deemed basis. 38. For agenda item 10, the Council ratified Notification Nos. 1 to 37 for Central Tax and Notifications Nos. 1 to 30 for Central Tax (Rate); Notification Nos. 1 to 8 for Integrated Tax and Notification Nos. 1 to 31 for Integrated Tax (Rate); Notification Nos. 1 to 3 for Union Territory Tax and Notification Nos. 1 to 30 for Union Territory Tax (Rate); Notification No. 1 for Compensation Cess Notification and Notification Nos. 1 to 5 for Compensation Cess (Rate) and Order No. 3 dated 21.09.2017 issued by the Central Government on deemed basis. Agenda item 11: Procedure for implementing GIC decisions of urgent nature requiring immediate implementation 39. The Additional Secretary, GST Council explained that the GST Implementation Committee (GIC) was formed pursuant to the decision of the Council in its 14'h Meeting held on 18-19 May 2017 and in the 17th Meeting held on 18 June 2017. The Council approved the proposal to delegate its powers to GIC on urgent matters. He stated that a working procedure for the functioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edural issues. In cases involving important and urgent procedural issues, approval accorded by the GIC shall be implemented with the approval of the Hon'ble Union Finance Minister and the Chairperson of the GST Council and it shall be circulated to the States for information and the decisions taken by the GIC would be put up for information of the Council in its next Meeting. However, procedure as originally approved by the Council in its 17th Meeting held on 18 June 2017 shall apply for normal GIC matters. Further, as decided by the Council in its 21st Meeting held on 9 September 2017, recommendations of the GIC, involving substantive policy issues, shall be placed before the Council for approval before implementation. Agenda item 12: Issues carried forward from the 21st GST Council Meeting: - Agenda item 12(i): Approach Paper on principles for Fitment post-implementation of GST 41. The Secretary stated that the Approach Paper along with the comments of the States and responses to the same had been approved by the Fitment Committee and was placed before the Council for approval. He suggested that the Council could approve the Approach Paper along with the comments of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft notification and that a total of 12 States viz., Andhra Pradesh, Delhi, Goa, Himachal Pradesh, Maharashtra, Odisha, Rajasthan, Telangana, Tripura, Uttar Pradesh, Uttarakhand and West Bengal sent requests for changes in their list of Acts under which taxes had been subsumed. He further mentioned that the proposed agenda was prepared as per Sections 173 and 174 of the SGST Acts of the concerned States and on the basis of inputs received from the States and was placed before the Council for approval. He further mentioned that a corrigendum to the agenda had been circulated wherein the United Provinces Sales of Motor Spirit Diesel and Alcohol Taxation Act, 1939 which was mentioned in the Uttar Pradesh SGST Act as taxes being subsumed but was left out inadvertently, was also proposed to be included in the list of Acts to be subsumed. 44.1. The Principal Secretary (Finance), Odisha stated that in addition to the Acts listed in serial no. 21 of the draft notification, one more Act needed to be added in the list of subsumed Acts for Odisha, namely, clause (e) of sub-section (i) of section 131 of Odisha Municipal Act, 1950 relating to Advertisement Tax. He requested to add the same to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovinces Sales of Motor Spirit Diesel and Alcohol Taxation Act, 1939 of Uttar Pradesh. Agenda· item 13: Any other agenda item with the permission of the Chairperson 46. After taking the approval of the Hon'ble Chairperson, some additional agenda items along with detailed agenda notes were circulated in hard copy and by email to the Members before the commencement of the Council Meeting. These are discussed in the subsequent paragraphs. Agenda item 13(i): Exemption from obtaining registration for persons making interState supply of services whose aggregate turnover is below the threshold limit 47. The Commissioner (GST Policy), CBEC stated that the GST Law provided for a threshold limit of ₹ 20 lakh for registration to give relief to small taxpayers. However, under Section 24, clause (i), registration was made mandatory for persons making inter-State supply irrespective of the turnover. He stated that due to this, small service providers such as persons teaching occasionally as a guest faculty in different institutions of the country, services of mutual fund agents, etc. had come under the ambit of GST. Keeping in view the difficulties of the small taxpayers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of tax on certain goods and exemption from IGST on imports of bona fide gifts up to a value limit of ₹ 3000 through post or air and made recommendations to the Council. The record of discussion in respect of the issues raised in the Council is recorded as below: A. Changes in GST rates on certain goods: Serial No.1: IGST exemption on import of gold by nominated agencies (para 4.41 of the FTP) 50. The Secretary informed that the Ministry of Commerce had recommended for exemption from IGST on import of gold by nominated agencies. He stated that small exporters found it difficult to get gold for jewellery as nominated agencies needed to do a lot of paper work for exporters and they did not want to go through such hassles. He suggested to exempt IGST on gold imports made by 36 banks and 6 public sector undertakings mentioned as nominated agencies in Paragraph 4.41 of the Foreign Trade Policy but to exclude from its ambit nominated agencies like the Star Trading Houses which are also mentioned as Nominated Agencies under Paragraph 4.41 of the Foreign Trade Policy. He stated that with such an exemption, banks would not pay IGST at the time of import and the demand of IGST wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28% to 5% for Plastic scrap, Paper scrap (Waste paper), Rubber scrap and Glass scrap. The Hon'ble Minister from Kerala stated that the municipalities were paying ₹ 10,000 to ₹ 20,000 per load for removing e-waste such as computers, etc. generated in schools, colleges, etc. and that this should also not be taxed. The Joint Secretary (TRU-1), CBEC, stated that municipal waste, sewage sludge and clinical waste were already exempt from tax and that the Council could take a view regarding rate of tax fore-waste. The Hon'ble Minister from Kerala suggested to tax it at the rate of 5%. The Council agreed to this suggestion. Serial No.4: Clarification regarding Unstitched Salwar suits 53. The Joint Secretary (TRU-1), CBEC, stated that fabrics are classified under Chapters 50 to 55 and attract tax at the rate of 5% with no refund of unutilised input tax credit. Mere cutting and packing of fabrics into pieces of different lengths from bundles and thans would not change the nature of these goods and such pieces of fabrics would continue to be classified under respective chapter headings as fabrics and attract 5% tax. He stated that the proposal was to clarify that unstit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts, products of Dabur/ Patanjali, etc. would also attract reduced rate oftax of 5%. The Finance Secretary, Odisha stated that there was a very large market for over the counter Ayurvedic products and tax rate of 5% only on unbranded Ayurvedic medicines was reasonable. The Council agreed to the proposal. The Joint Secretary (TRU-1), CBEC, stated that tax on unbranded namkeen was proposed to be reduced from 12% to 5%. The Council agreed to the proposal to reduce the rate of tax from 12% to 5% on unbranded Ayurvedic, Unani, Siddha, Homeopathy medicines and unbranded namkeens. Serial No.8: To shift the time of supply on advances received against supply of goods to be made by a dealer whose aggregate turnover in a financial year does not exceed ₹ 1.5 crore to issuance of invoice or actual supply of goods if invoice is not issued within stipulated time 57. The Commissioner (GST Policy), CBEC introduced this agenda item and stated that this was essentially proposed to ease the compliance burden on small taxpayers. The Hon'ble Minister from Jammu & Kashmir observed that for advances received by small taxpayers with turnover of less than ₹ 1.5 crore, there should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 20,000 should be considered even at the risk of some misuse. He stated that genuine transactions should not be punished and that the limit of ₹ 5,000 was very low. The Hon'ble Minister from Kerala enquired as to what was the total amount of tax collected on imported gifts. The Joint Secretary (TRU-I), CBEC stated that field level data was not available as such imports were not yet computerised. He further added that a value limit of ₹ 20,000 would be very high and even mobile phones, high end shoes, etc. would get imported as gifts. The Hon'ble Minister from Andhra Pradesh supported the proposal to increase the threshold to₹ 5,000 per parcel. The Council agreed to exempt IGST on import of bonafide gifts up to a value of₹ 5,000 per parcel. Agenda item 13(iv): Issue of Annuity being given in Place of Toll Charges to Developers of Public Infrastructure - exemption thereon 61. Introducing this Agenda item, the Joint Secretary (TRU-Il), CBEC stated that while toll is a payment made by the users of road to concessionaires for usage of roads, annuity is an amount paid by the National Highways Authority of India (NHAI) to concessionaires for con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. He added that in the absence of such an exemption, Composition Scheme would be completely unavailable to manufacturers and dealers who were earning interest from deposits, etc. It was suggested that such dispensation could be provided for all exempt services and need not be restricted to interest or discount only. The Council agreed to the proposal. It was also decided by the Council to issue a removal of difficulty order under Section 172 of the CGST/SGST/UTGST Acts to the effect that if a person supplies goods and/or services referred to in clause (b) of paragraph 6 of Schedule II of the said Acts and also supplies any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, the said person shall not be ineligible for the Composition scheme under Section 10 and in computing his aggregate turnover in order to determine his eligibility for Composition scheme, value of supply of any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account. Age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 64. Introducing this Agenda item, the Joint Secretary (TRU-ll), CBEC, stated that services provided by a GTA attracted tax at the rate of 5% without input tax credit under Reverse Charge Mechanism or 12% with input tax credit under forward charge. He stated that for specified categories of persons, tax on services provided by a GTA operating under 5% GST rate scheme was payable by the recipient of the service under Reverse Charge Mechanism. However, when a GT A provided service to an unregistered person other than the specified recipients, the GTA is required to pay tax at the rate of 5% under forward charge. He informed that it had come to light that GTAs were not willing to provide services to an unregistered person in order to avoid taking registration. He stated that in order to remove hardship being faced by small unregistered businesses, it was proposed that services provided by a GTA to an unregistered person including an unregistered casual taxable person, other than to the following recipients, may be exempted, namely: (a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 65.5. To issue an Order under Section 172 of the CGST/SGST/UTGST Acts to the effect that if a person supplies goods and/or services referred to in clause (b) of paragraph 6 of Schedule II of the said Acts and also supplies any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, the said person shall not be ineligible for the Composition scheme under Section 10 and that in computing his aggregate turnover in order to determine his eligibility for Composition scheme, value of supply of any exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account. (vi) GST on development charges collected by Gift City Company Limited for allotment of land on long term lease (of 30 years or more) to developers for development of commercial and residential spaces 65.6. To exempt from tax upfront, amount (called as premium, salami, development charges or by any other name) payable in respect of service, by way of granting of long term lease (30 years or mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard operating procedure should be put in place before actual implementation of this recommendation. On the subject of increasing the annual turnover threshold under Composition Scheme from ₹ 75 lakh to Rs. one crore; to treat exempt supplies of the aggregate turnover under the Composition Scheme as Nil rated; to allow filing of returns quarterly in respect of taxpayers having turnover up to ₹ 1.5 crore and to temporarily suspend the provision of reverse charge levy under section 9( 4), he stated that while Tamil Nadu always championed the cause of small taxpayers, the legal basis of the proposal should be studied by the Law Committee and discussed by GIC before a final view is taken by the Council. He also expressed his apprehension that suspension of reverse charge mechanism would encourage taxpayers to purchase from unregistered sources thereby impacting revenue collection. He added that to curb tax evasion, there was a need to operationalise nation-wide e-way bill. He said that his government supported most of the proposals of the Fitment Committee but it had reservation in respect of the proposal of car leasing. He added that levy of GST at the rate of 65% of GST pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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