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TMI BlogMinutes of the 23rd GST Council Meeting held on 10 November 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, circulars and orders issued by the Central Government 4. Decisions of the GST Implementation Committee (GIC) for information of the Council 5. Modification of Rules on Anti-Profiteering 6. Issues recommended by the Fitment Committee for consideration of the GST Council i. Changes in GST/IGST rates on Goods (Annexures I, II, III, IV) ii. Dual levy of IGST on the royalty paid for import of pictures on a tangible media where the rights have been granted for a temporary period (Temporary transfer or permitting the use or enjoyment of any intellectual property right) iii. GST rate on job work in relation to manufacture of handicrafts iv. Amendment in Notification No. 21/2017-CT(R) dated 22.8.2017 regarding Public Distribution System (PDS) and Fair Price Shops (FPS) v. Alignment of the entry at item (vi) of Sl. No.3 of Notification No. 11 /2017- CT(R) with the entries at items (ii), (iii), (iv) and (v) of Sl.No.3 vi. GST on Tour Operator services, request for allowing input tax credit of services in the same line of business at the existing rate of 5% without input tax credit vii. Clarification regarding warehousing of agricultural produce in GST regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il 3. The Hon'ble Chairperson welcomed the Members of the Council. He thanked the Government of Assam and Dr. Himanta Biswa Sarma, Hon'ble Finance Minister of Assam for excellent arrangements made for the Meeting and the warm hospitality extended to the delegates. 4. Before commencement of discussion on the agenda items, the Hon'ble Minister from Kerala made a suggestion that the Council could start the meeting by first taking up the Agenda item 6 (Issues recommended by the Fitment Committee) in order to have sufficient time to discuss this important subject. The Hon'ble Minister from Punjab stated that the Agenda notes should be sent at least seven days in advance. He further added that the Minutes could be circulated within 10 days of the conclusion of the Meeting and comments could be obtained within next 10 days so that this Agenda item need not be discussed. Dr. Hasmukh Adhia, the Finance and Revenue Secretary to the Government of India and the Secretary to the Council (hereinafter referred to as the secretary) stated that as per the Conduct of Business Regulations of the Council, the notice for the meeting of the Council has to be sent at least seven day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that since July, 2017, the progress was slow and there was a need to work at a faster pace and take decisions as quickly as possible. The Hon'ble Minister from Assam suggested to discuss the issues Agenda item-wise. The Hon'ble Minister from West Bengal suggested to avoid long presentations and to circulate presentations in advance. After these preliminary discussions, the Hon'ble Chairperson took up discussion on Agenda items. Discussion on agenda items Agenda item 1: Confirmation of the Minutes of the 22 nd GST Council meeting held on 6 October, 2017 6. The Secretary invited any comments on the Minutes of the 22 nd Council Meeting (hereinafter referred to as the Minutes). No Hon'ble Member made any comments on the Minutes and hence the Council approved the Minutes. 7. In view of the above, for agenda item 1 , the Council decided to adopt the Minutes of the 22 nd Meeting of the Council without any change. Agenda item 2: Analysis of revenue collected in the months of August, September and October 2017 under Goods and Services Tax, including the revenue accruing to Centre and States through settlement of funds 8. The Secretary infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptured in the tax returns. He stated that for this, goods imported by dealers from other States on the basis of data from Form 'C' in pre-GST regime needed to be compared with IGST used for payment of SGST/CGST after introduction of GST to assess if there is any under reporting of goods imported. 8.3. The Hon'ble Minister from Jammu Kashmir stated that small States like Puducherry, Goa, Jammu Kashmir, Sikkim and Arunachal Pradesh were not expected to lose revenue and the figures showing loss of revenue for such States were counter-intuitive. The Hon'ble Minister from Kerala stated that mostly the big producer-States also had large consumption base. The Hon'ble Minister from Punjab stated that among the general category States, Punjab had the third largest shortfall (39% of revenue), which was very worrisome. He stated that the States with big metro cities had done well in revenue collection. He suggested that the Chief Economic Advisor (CEA) could do a deeper study after more figures were available. He added that his main worry was that if revenue gain did not occur, then there was a problem after the five-year compensation period was over. He stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he GSTN had been advised to share data with the States. The Hon'ble Minister from West Bengal stated that the Model-2 States were not getting MIS and because of this, no analysis was possible. The Hon'ble Minister from Goa stated that his State had 41% revenue shortfall but the period was too short to do any meaningful analysis. He observed that for Goa, the tourist season was starting from this month and would last till March, 2018 and he expected the revenue situation to improve during this period. He cautioned against too much of pessimism with regard to revenue collection. He supported the observation of the Hon'ble Deputy Chief Minister of Bihar regarding the need to take quick decisions and observed that sentiments of the small persons in the market who were affected by GST needed to be taken into account. He observed that as revenue position was reasonably good, the proposals of tax reduction could be taken up for consideration and these could relate to small traders and small consumers. 8.6. The Joint Secretary, DOR, stated that the shortfall in revenue had gone down from 28% in August 2017 to 17% in October 2017, which was a major improvement. The Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat and Maharashtra was high but it was not high when seen in terms of their total revenue collection which showed that a large component of goods imported were used for re-exporting manufactured goods to other States. 8.10. The Hon'ble Minister from Punjab sought a response regarding their demand for compensation. The Secretary stated that the earlier certification given by the Government of Punjab was incorrect, and therefore, the actual amount was not released. The Hon'ble Minister from Punjab stated that a clarification in this regard had been sent 25 days back. 8.11. The Hon'ble Minister from Tamil Nadu stated that though revenue showed buoyancy in his State during August, September and October, 2017, while reconciling the details of collection provided by GSTN with their State Treasury data, it was noticed that the details did not tally as there was delay in reconciliation among banks, RBI and GSTN. He urged that the delay in reconciliation should be avoided. He further stated that as regards the revenue accruing to his State through settlement of funds, at present TGST was being settled every month based on the data from four components of IGST captured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10/10/2017-GST dated 18 October, 2017 relating to movement of goods including jewellery from the place of business of the supplier for supply on approval basis (that is, allowing goods to be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on delivery challan along with the e-Way bill and the invoice to be issued at the time of delivery of goods) was creating problems in respect of movement of jewellery and gold. He observed that very large stocks of jewellery were being moved without any document and they were not getting reflected in returns, leading to large scale evasion of tax. He stated that his State would send a detailed note on this issue. The Secretary stated that the Law Committee of officers could look into this issue. The Council agreed to this suggestion. 12.2. The Hon'ble Minister from West Bengal stated that the GIC decision to amend rule 86 CGST /SGST Rules to provide for order of utilisation of input tax credit between IGST, CGST and SGST had not been implemented. He stated that without this sequence, the taxpayers could use any sequence for utilising the input tax credit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pe1formance of the NAA, the power of termination of the services of the Chairman and the Technical Members of the NAA could be exercised by the Chairperson of the Council in his capacity as the Union Finance Minister. He stated that, keeping this in view, certain amendments to Rules 124(4) and 124(5) of the CGST Rules were proposed, which read as follows: In principal rules, in Rule 124, - i. in sub-rule ( 4 ), the second proviso shall be substituted, namely: - Provided further that the Central Government with the approval of the Chairperson of the Council may terminate the appointment of the Chairman at any time. ii. in sub-rule (5), the second proviso shall be substituted, namely: - Provided further that the Central Government with the approval of the Chairperson of the Council may terminate the appointment of the Technical Member at any time. 14.1. The Secretary added that this issue was discussed during the meeting of the officers held on 9 November, 2017 in Guwahati and the changes were agreed upon and suggested that the Council could also agree to the same. The Council agreed to the proposed modification of Rules on Anti-Profiteering. 15. For Agend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment. He added that there was one more Annexure IV in the Agenda Notes, which listed out goods on which the Hon ble Chief Minister of Karnataka had recommended Nil rate of GST on various hand-made products, produced and marketed by producer co-operative societies and their federations. The Hon'ble Chief Minister of Karnataka had inter alia stated that this would benefit a large segment of rural population and would give a boost to rural employment and sustainability. Joint Secretary (TRU-1), CBEC informed that goods covered under all these Annexures were discussed during the meeting of the Fitment Committee on 30 and 31 October 2017 and the recommendations in respect of Annexure I, II and Ill were placed for consideration before the Council. He added that the Fitment Committee could not reach consensus in respect of goods covered under Annexure IV. Discussion on Annexure 1: (Goods proposed to be retained at 28%) 17. Starting discussion on goods covered under Annexure I of this Agenda Item, the Hon'ble Deputy Chief Minister of Delhi stated that during the last few meetings of the Council, goods were getting incrementally removed from the slab of 28%. He stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %. He further suggested that as common people smoked bidi, it should not be taxed at the rate of 28%. He stated that practical taxation demanded goods used by common people should be taxed at the rate of 18%. The Hon'ble Minister from Meghalaya supported the suggestions of the Hon'ble Ministers of West Bengal and Punjab. He stated that other than sin goods and goods of high luxury, all others should be taxed at the rate of 18%. He observed that this would also simplify billing by shopkeepers and departmental stores by reducing multiplicity of rates. 17.2. The Hon'ble Minister from Tamil Nadu welcomed the proposal of the Fitment Committee to reduce the rate of goods, presently attracting 28% tax rate, to 18%, except for items contained in Annexure 1 of the Agenda Note. He expressed his appreciation for proposal to reduce the rate of tax on wet grinder with stone to 12% and on Idli dosa batter, chutney power and kadali mittai (groundnut sweets) to 5%. He also expressed happiness at the proposal to exempt tax on meat and fish other than those put up in unit container and bearing a registered brand name; and to bring down the rate of tax on fishing net, twine and hook to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alanced approach should be maintained. 17.4. The Secretary stated that the categories of goods on which 28% rate of tax was proposed to be continued included those: (i) on which cess was charged such as tobacco and cars; (ii) white goods, like washing machine, dish washers, television, air conditioner which have huge revenue implication and which are mostly produced by large manufacturing units; (iii) on building materials, such as cement, paints, granite and marble tiles, ceramic and vitrified tiles, etc. He further stated that items like cement were mostly produced by large manufacturers and it earlier also attracted a combined tax incidence of 29% and, was therefore, rightly kept in the 28% rate slab. He added that most of the marble units enjoyed Central Excise exemption as their turnover was below ₹ 1.5 crore and they operated on 2% CST (Central Sales Tax). For such commodities, revenue implication on account of rate reduction could not be worked out and that the Council could take a decision regarding their tax rate. He further added that paints and varnishes were not made by MSMEs and, therefore, they should continue to be taxed at the rate of 28%. The Hon'ble M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on these was to be brought down to 18%, then, on principles of equity, the rates of tax in other slabs should also be reduced proportionately. He expressed his support for reducing the rate of tax on intermediate goods from 28% to 18%. 17.6. The Hon'ble Chief Minister of Puducherry stated that the approach that goods like cement, which was not manufactured by MSME, should not be put in the lower tax slab was not correct. He suggested that the approach should be to reduce tax on goods of mass consumption and on those goods which people required by way of necessity. He recalled that during the debate on the Constitution amendment relating to GST in the Parliament, it was proposed to cap the GST rate at 18% and observed that 28% rate slab should not be there for all items presently appearing in Annexure I. He stated that item at Sr.No.30 of Annexure I (Air-conditioning machines) would also cover air coolers which was used by poorer people. The Joint Secretary (TRU-1), CBEC clarified that air coolers would not be covered under HS Code 8415. The Hon'ble Chief Minister of Puducherry stated that items like small tiles and paints were used by each section of society for thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual turnover of ₹ 20 crore but also claimed exemption of ₹ 1.5 crore under Central Excise. He observed that high rates of Central Excise duty led to such anomaly which encouraged the taxpayer to 'manage' with the tax administration. He observed that taxing marble and granite at the rate of 28% would encourage evasion but if it was reduced to 18%, more revenue would be realised. He added that a very high degree of profiteering was going on in the marble and granite sector. He observed that if ceramic tiles were to be taxed at the rate of 18%, marble and granite should also be taxed at the rate of 18%. He further added that buses operating on bio-diesel were easily classifiable and definable under HSN and they should attract a lower rate of tax. He stated that while this would not have large revenue implication, it had implication for the future in checking environmental pollution. 17.9. The Hon'ble Minister from Uttar Pradesh stated that if the rate of tax was reduced with consumer in mind, then it was important to check whether prices for consumers were going down for items presently attracting tax at the rate of 18%. He also wondered whether the new t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded that even the European Union had slabs of tax between 19% and 25%. He stated that while rate of tax on items of mass consumption should be reduced, the goods kept in the 28% rate slab should not be frozen and suggestions should still be taken from States for further removing the items kept in the 28% rate slab. He observed that in a State like Bihar, air-conditioner was used by a miniscule number of people. He further added that the proposed rate of tax on cement was the sum total of the earlier VAT and Central Excise rates. He observed that even earlier, only 227 items were in the rate slab of 28% but the general perception created was that 28% rate of tax was applied on a large number of goods. He suggested to accept the recommendations of the Fitment Committee and to consider further suggestions from States for reduction of tax. He added that a big message would go to the public at large if the proposal contained in the agenda note for moving goods from 28% rate slab to 18% rate slab was accepted by the Council. 17.12. The Hon'ble Minister from Jharkhand stated that regular shaving items should not be taxed at the rate of 28%. He also expressed reservation regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there should be lesser number of tax rates but advised that movement in this direction should be gradual and that the Fitment Committee could examine items such as re-used tyres with proper revenue analysis. He stated that the Fitment Committee's proposal could be accepted with the understanding that further rationalisation could be done in future. 17.14. The Hon'ble Minister from Uttar Pradesh stated that his State had 50 khandsari sugar units which mostly worked in small scale sector. He suggested to exempt khandsari sugar from tax as it was a product of Gur which was exempted and sugar attracted tax rate of 5 %. The Hon'ble Chairperson suggested that the rate of tax on khandsari sugar and gur should be kept at par and should be exempted. The Council agreed to this proposal. 17.15. The Hon'ble Deputy Chief Minister of Delhi wondered how an assessment was made that the government could afford to lose revenue of ₹ 16,000 crore and why not ₹ 20,000 crore. He suggested to reduce rate of tax on battery operated cars and hybrid cars. The Hon'ble Minister from Punjab recalled that the income-tax collection had gone up after reduction of income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x rate on these was being brought down to '18%. The Hon'ble Chief Minister of Puducherry stated that sanitary wares were proposed to be taxed at the rate of 28% whereas these goods were taxed at a much lower rate in other countries, like 10% in Australia, 15% in Canada, 17% in China, 8% in Japan, 10% in South Korea and 7.5% in USA. The Hon'ble Chairperson responded that the rate of tax on sanitary items was proposed to be brought down to 18%. The Hon'ble Chief Minister of Puducherry stated that it needed consideration as to why MSMEs were closing down. 17.17. The CEA stated that the Fitment Committee had followed an approach of pragmatic incrementalism which had served the Council well but given the present state of economy, it was worth the risk to deviate from this approach and limit 28% tax rate only for sin and luxury goods. He stated that this could be a risky step but it would definitely improve the climate of compliance. The Hon'ble Minister from Kerala stated that reduction of rate should also be looked at for handicrafts and hand-made items. The Hon'ble Minister from Assam cautioned that if the Central revenue went down, it would also affect devo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slab of 18%, as optically, some of them should not be in the 28% rate slab. He stated that as the revenue position improved in the next three months, further reduction in the list of goods presently in the 28% rate slab could be looked at. The Hon'ble Minister from Assam supported the proposal and stated that after this pruning, barely 30 to 40 items would remain in the 28% rate slab. The Hon'ble Minister from Karnataka also supported the proposal of the Hon'ble Chairperson. 17. 19. The Hon'ble Minister from Punjab requested to address the issue of agricultural items and the Hon'ble Deputy Chief Minister of Delhi requested to address the issue of hybrid cars. The Hon'ble Chairperson stated that tax was earlier reduced on hybrid cars but this had not led to decline in prices and, therefore, one needed to move cautiously on this item. The Hon'ble Minister from Jammu Kashmir raised a question as to why item at Sr. No.33 of Annexure I had such a specific entry on washing machine. The Secretary explained that the entry was part of the international Harmonised System of Nomenclature which was also used for imported goods. He added that there were detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 crore. He added that rate reduction was not proposed at this stage for other items covered in Sr. Nos. 22 and 23 (new and old tyres), 26, 27, 28, 29 ( internal combustion engines and their parts), 34, 35 (transmission shafts, electric accumulators, etc.), 39 (electrical ignition or starting equipment), 40 (electric instantaneous or storage water heaters), 50 (parts and accessories of motor vehicles) and 52 (motorcycles) as the total revenue implication would be more than ₹ 10,000 crore. 17.21. The Hon'ble Minister from Goa supported the proposal and observed that this would be a very good progress and the rate of tax on other goods should not be reduced. The Hon'ble Minister from Jammu Kashmir suggested that rate of tax on goods covered under Sr. No.42 (monitors and projectors, not incorporating television reception apparatus; reception apparatus for television etc.) should also be taken to 18% slab. The Hon'ble Minister from Karnataka again requested to reduce the rate of tax on bio-diesel buses as revenue implication would not be high. He recalled that earlier the Hon'ble Minister from Maharashtra had also made a similar request. The Hon'ble Chair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Secretary for rate reduction (recorded in paragraph 17.20 above) on additional goods covered under Annexure I could be approved by the Council. The Council agreed to this suggestion. Discussion on Annexure ll: Rationalisation of GST rates on goods (based on recommendations of the Sub-Group of Fitment Committee) 19. The Secretary stated that Annexure II of the Agenda item 6(i) covered proposals in relation to those goods where there were different rates of tax under the same Chapter. He stated that a Sub-Group of the Fitment Committee on Rate Rationalisation had examined the rate of tax Chapter-wise and suggested rationalisation of rates, wherever required. He invited Shri P.K. Mohanty, Consultant (GST), CBEC, to give some examples of classification related rationalisation. The Consultant (GST), CBEC, stated that it was desirable to keep same rate of tax on similar category of goods but there were certain anomalies in this regard which were attempted to be corrected in Annexure II. He gave certain examples in this regard like: (i) dried vegetables and dried meat were exempt from tax but dried fish was taxable at the rate of 5%; ( ii) spectacles and glasses for spectacl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was an item of local importance and small artisans of the State were engaged in this field. Therefore, these items may be exempted. The Secretary stated that clay idols were already exempted and it would not be desirable to exempt stone statues of deities. 19.4. The Hon'ble Minister from Karnataka expressed his support for the proposals contained in Annexure II. He observed that keeping in view the fact that rate of tax on several value-added products in the food sector (like idli batter, seasonings, curry powder and curry mixes) had been reduced, rate of tax on pickles should also be brought down from 12% to 5%. He added that pickles were earlier made at home but now these were mostly bought from the market and there was not much input tax credit on pickles. He added that revenue implication of this rate reduction would not be very high. The Hon'ble Minister from Goa stated that all pickles were made in cottage industry, and therefore, tax on the same should be reduced. 19.5. The Hon'ble Minister from Karnataka further stated that when the rate oftax on pasta and macaroni was brought down from 18% to 12%, rate of tax on upma mix and bisibela bhat mix should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducherry supported this proposal. The Hon'ble Chairperson stated that too much of rate difference could lead to classification problem and unintended effects such as a diet coke becoming cheaper than normal coke. In view of this, he suggested not to further reduce tax on diabetic food. 19.10. The Hon'ble Chief Minister of Puducherry stated that idli and dosa batter should not be taxed at the rate of 5% and should be exempted from tax. The Secretary stated that if these were exempted, then no input tax credit would be available to idli and dosa batter manufacturers while branded rice might be used for making such items. The Hon'ble Chief Minister of Puducheny stated that idli and dosa batter was largely used by middle and poorer sections of society and enquired regarding the tax implication for exempting these items. The Secretary stated that small suppliers of idli and dosa batter having an annual turnover of less than ₹ 20 lakh would not be taxed in any case and the bigger producers would be able to take input tax credit. He added that if idli and dosa batter were exempted, their price would increase because, then, no input tax credit could be taken on the br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minister from Uttar Pradesh suggested that rate of tax on cane should also be reduced along with that on bamboo. The Hon'ble Ministers from West Bengal and Assam also supported this proposal. The Hon'ble Chairperson stated that all bamboo products were kept at the rate of 12% except furniture. The Hon'ble Minister from West Bengal stated that furniture should be taxed at the rate of 5%. The Hon'ble Chairperson observed that it was desirable that furniture as a class should be taxed at the same rate or else it would lead to confusion when furniture had a mix of cane and wood. The Hon'ble Minister from West Bengal stated that normally, wood and bamboo or cane furniture was not available in the same lot as the USP (unique selling proposition) of cane or bamboo furniture would be that it was made wholly of bamboo or cane. The Hon'ble Chairperson suggested that furniture wholly made of bamboo or cane or rattan could be taxed at the rate of 12% instead of the current rate of 18%. The Council agreed to this suggestion. 21.2. The Hon'ble Minister from Uttar Pradesh suggested that the rate of tax on paper plates made out of old paper should also be reduced. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese issues. The Council agreed to this suggestion. 21.5. The Hon'ble Minister from Haryana stated that the rate of tax on parts of agricultural implements was brought down from 18% to 12% and suggested to include springs used in cultivator and tiller in this category and tax them at the rate of 12%. He stated that these were used exclusively as parts of agricultural implements and could be classified under Chapter Heading 8430 which attracted tax at the rate of 12%. The Joint Secretary (TRU-I), CBEC, stated that parts were classifiable along with machinery and they attracted the same rate. He clarified that classification of items could not be shifted under the HSN. The Hon'ble Minister from Haryana reiterated that spring had a very specific use, and it could be included as an agricultural part and taxed at the rate of 12%. The Secretary suggested that the Fitment Committee could look into this issue. The Council agreed to this suggestion. 22. After further discussion, the Council approved the proposals contained in Annexure III. Annexure IV: List of handmade goods and certain services forwarded by the Hon'ble Chief Minister of Karnataka 23. The Secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down. He stated that there was a need to quickly find a mechanism by which tax would not be charged upfront. He warned that if this issue was not addressed quickly, an important part of the national heritage could be lost very soon. He further stated that revenue from handmade carpets was not very high and a decision needed to be taken quickly so that this season was not lost for the carpet weavers. He suggested that one way to address this issue could be to treat movement of carpets from Kashmir to Delhi for sale as a supply for long term exhibition or goods taken on approval basis. The Secretary stated that already a notification had been issued that if goods were taken on approval basis, no IGST was chargeable until the customer placed an order. The Hon'ble Minister from Jammu Kashmir stated that this proposal did not help as the suppliers of Jammu Kashmir had a place of business in Delhi, and therefore, movement from Jammu Kashmir became a taxable supply. The Secretary observed that handmade carpet was a luxury item and thus very expensive, and therefore, customers could afford to pay tax. The Hon'ble Minister from Jammu Kashmir stated that due to global slump, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its way of manufacture and cultural heritage linkages and to look into specific issues of handicraft items and suggest possible solutions. He suggested that some States like Jammu Kashmir, Odisha, Tamil Nadu and some States from North-East could be made members of this Committee. The Council agreed to this suggestion. The Hon'ble Chairperson further stated that regarding the problem relating to handmade carpets, the State of Jammu Kashmir could suggest a solution which could be taken up for decision in the GIC. 23.4. The Hon'ble Minister from Karnataka welcomed the rationalisation of rate structure on goods and also suggested to have a look at rationalisation of rate of tax in the services sector as the rate of service tax in the services sector had gone up from 15% to 18%. The Secretary suggested that the Fitment Committee could examine this aspect. The Council agreed to this suggestion. 24. ln respect of agenda item 6(i), the Council took the following decisions: (i) To keep the goods listed in Annexure I of the agenda note to agenda item 6 (i) in the 28% rate slab except the goods covered under Sr. No. 2, 3, 4, 5, 16, 17, 18, 19, 20, 21, 24,25 which shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 5(1) of the IGST Act. He informed that Shri V.K. Garg, Advisor (Finance), Punjab had stated that this was a structural issue and would be relevant in all cases where something was defined as goods under the Customs Act and as service under the GST law, such as for ocean transport, franchisee, etc. and suggested to address it structurally as a single issue by following the global practice. The Secretary suggested that this Agenda item could be postponed and the Fitment Committee could re-examine it. 26. The Council agreed to postpone this agenda item and the Fitment Committee to reexamine the proposal. Agenda item 6(iii): GST rate on job work in relation to manufacture of handicrafts 27. The Secretary stated that under this Agenda item, it was proposed that the rate of tax on services provided by way of job work in relation to manufacture of those handicraft goods in respect of which a casual taxable person has been exempted from obtaining GST registration could be prescribed at 5% with full input tax credit and that the expression 'handicraft goods' may be given the same meaning as given in the Notification No.32/2017- CT dated 15 September, 2017, as amende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rains, kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in the form of commission or margin. ' 29.1. He informed that this Agenda item was discussed during the officers' meeting held on 9 November, 2017 and they agreed to the same. He suggested that the Council could agree to the proposal. The Council agreed to the proposal. 30. For Agenda item 6 (iv) , the Council approved the proposal to amend the Notification No.12/2017-CT(R) dated 28 June, 2017 and corresponding lGST, SGST and UTSGT notifications so as to remove entries against Serial No. 11A in the Table and to change entry in Column (3) of Serial No. 11B to read, 'Services provided by Fair Price Shops to Central Government/State Governments or Union Territories by way of sale of food grains, kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in the form of commission or margin' subject to vetting by the Union Law Ministry. Agenda item 6(v): Alignment of the entry at item (vi) of Sl. No.3 of notification No. 11/2017-CT(R) with the entries at items (ii), (iii), (iv) and (v) of SI.No.3 31. Introducing this Agenda item, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 9 November, 2017 in Guwahati and there were differing viewpoints. For instance, Shri R.K. Tiwari, Additional Chief Secretary, Uttar Pradesh, had suggested to keep only two rates of tax - 5% without input tax credit and 18% with input tax credit. The Advisor (Finance), Punjab had pointed out that tax on tour operators had been levied since 1998 and the tax was levied only on his part of service. He had further informed that once accommodation came under Service Tax in 2012, the tax at the rate of 5% was erroneous and suggested to levy tax at the rate of 18% with input tax credit. He had also pointed out that earlier there was only abatement on the value of services rendered but the tax rate was always 15%. The Secretary stated that in view of differing viewpoints, it was agreed to defer this Agenda item so that it could be re-examined by the Fitment Committee. He suggested that the Council could agree to this suggestion. The Council agreed to the suggestion. 34. For Agenda item 6(vi) , the Council agreed to defer consideration of this agenda item and the Fitment Committee to re-examine the proposal. Agenda item 6(vii): Clarification regarding warehousing of Agricultural pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11 /2017-CT(R) and 12/2017-CT(R) both dated 28 June, 2017 and corresponding notifications issued under JGST and UTGST Acts. 35.2. The Secretary informed that this proposal was also discussed during the meeting of the officers held on 9 November, 2017 in Guwahati wherein Shri Sanjeev Kaushal, Additional Chief Secretary, Haryana, and Dr. C. Chandramouli, Additional Chief Secretary (Commercial Taxes), Tamil Nadu, had suggested that processed spices, processed dry fruits and processed cashew nuts should also fall outside the definition of agricultural produce. He further informed that the Additional Chief Secretary (CT), Tamil Nadu, had suggested to remove the word ' etc.' from the proposed clarification, but CCT, Gujarat, had suggested to retain this word so that other similar products could also get covered in this definition. He recommended that the Council could agree to the proposal in the Agenda item and also add dry fruits and spices in the proposed clarification. The Council agreed to the suggestion. 36. For Agenda item 6(vii), the Council approved the proposal to issue a clarificatory circular that processed products such as processed tea (i.e. black tea, green ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnology software) would attract tax at the rate of 12% (irrespective of whether transfer of Intellectual Property is a supply of goods or services) and temporary or permanent transfer of Intellectual Property in respect of Information Technology software would attract 18% GST (irrespective of whether permanent transfer of Intellectual Property in respect of supply of Information Technology software is a supply of goods or services). This amendment was proposed as a dispute/litigation avoidance measure. The Secretary stated that this Agenda item was discussed during the officers' meeting held on 9 November, 2017 in Guwahati and agreed upon. He suggested that the Council could also agree to this proposal. The Council agreed to the proposal. 38. For Agenda item 6(viii), the Council approved the following: (i) permanent transfer of Intellectual Property right in respect of goods other than Information Technology software shall be taxed at the rate of 12%; and (ii) permanent transfer of Intellectual Property right in respect of Information Technology software shall be taxed at the rate of 18%. Agenda item 6(ix): Inter-State transfer of aircraft engines, parts and accessories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment. It was further proposed to exempt from tax general insurance policy where total premium was paid by employees or by students of colleges/private schools. 41.1. The Secretary stated that with regard to the above, it was proposed to clarify that services provided to the Central Government, State Government, Union Territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union Territory are exempt from GST under serial no. 40 of Notification No 12/2017- Central Tax (Rate). Further, service provided by the State Government by way of general insurance (managed by government) to employees of the State Government/ Police Personnel, employees of electricity department or students are exempt vide entry 6 of Notification No. 12/2017-Central Tax (Rate) which exempts Services by Central Government, State Government, Union Territory or local authority to individuals. 41.2. The Secretary stated that another proposal under this Agenda item was that services by way of admission to protected monuments could be exempted from tax by adding services by way of admission to monuments to the list of exempted services at Sr. No. 79, hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty/Assistant Commissioner and Superintendents would lie with the Additional Commissioner (Appeals). He said that it was proposed to insert a new Rule 109(A)(1) in the CGST Rules to specify the appellate authority as detailed above. He added in view of the opinion of the Union Law Ministry, it was proposed to insert a separate Rule 109(A)(2) relating to appeals to be filed by the Department. The proposed draft rules are as below:- 109A. Appointment of Appellate Authority- (1) Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act may appeal to- (a) the Commissioner (Appeals) where such decision or order is passed by the Additional/Joint Commissioner (b) the Additional Commissioner (Appeals) where such decision or order is passed by the Deputy/Assistant Commissioner or Superintendent within three months from the date on which the said decision or order is communicated to such person. (2) An officer directed under sub-section (2) of section 107 to appeal against any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules 2017: Notwithstanding anything contained in this chapter, in respect of any process or procedure prescribed herein, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate, in such Forms as appended to these rules. 45.1. A format of GST RFD-01A and RFD-01B was also part of the Agenda Note. He added that a similar notification would be issued by the State Governments. He informed that this was approved when the Agenda item was discussed during the officers' meeting held on 9 November 2017 in Guwahati and suggested that the Council could also approve the same. The Council approved the proposal. 45.2. The Secretary stated that the second proposal under this Agenda item was to add an explanation at the end of Rule 42 and 43 of the CGST Rules 2017 that- For the purposes of this rule, it is hereby clarified that the supply of services having place of supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) the State Governments to insert similar rules in Chapter 1 0 (Refund) and Chapter 12 (Advance Ruling) of the SGST Rules 2017 and the formats of GST RFD-OIA and RFD-01B as contained in the Agenda Note; (iv) to add the following explanation at the end of Rule 42 and 43 of the CGST Rules 201 7- For the purposes of this rule, it is hereby clarified that the supply of services having place of supply in Nepal or Bhutan against which payment is received in Indian Rupees, in accordance with Reserve Bank of India guidel ines, shall be treated as taxable supply . Agenda item 7(iii): Centralized UIN for Foreign Diplomatic Missions I UN Organizations 47. Introducing this agenda item, the Secretary stated that proposal was aimed at providing minimal compliance and easy refund to Foreign Diplomatic Missions and UN Organizations having a Unique ldentity Number (UIN). He explained that refund of taxes would not be available to foreign diplomatic missions/UN organisations in a State where it was not registered but it had paid CGST and SGST such as for staying in a hotel. He stated that many diplomats/embassy officers travel extensively throughout the country for many projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e UIN holder in his FORM GSTR-11 with FORM GSTR-1 may be done away with for the time being until filing of FORM GSTR-1 stabilises, and instead refund may be given to Foreign Diplomatic Missions/UN Organizations against all the invoices containing their UINs which have been declared by them in their FORM GSTR-11 , subject to verification; (iii) Refund of CGST/SGST/UTGST/IGST may be given by the Central Government and the refund amount may be settled through the settlement mechanism; (iv) To implement the above in principle decision, GIC to approve the changes in the CGST/SGST/ UTGST Rules, as recommended by the Law Committee. Agenda item 7(iv): Reversal of Late Fee paid by registered persons who failed to furnish the return in FORM GSTR 3B for August and September 2017 within due date 49. Introducing this Agenda item, the Secretary stated that a large number of taxpayers were unable to file their FORM GSTR-3B within due date for July, August, September, 2017 due to system glitches and a waiver of late fee had already been granted for these three months. However, those taxpayers who have already paid late fee, it needed to be re-credited to their electronic ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ples were proposed for distribution of IGST for advertisements supplied through various media: S No. Media of Advertisement Guiding Principle 1 Newspapers Amount actually paid for placing an advertisement in a particular State - Information through Release order 2 Publications Same principle as above 3 Printed material Proposed distribution breakup of the leaflets at the time of placing the Release order so that the statewise breakup is known at the time of printing 4 Outdoor - Hoardings (than those on trains of Indian Railways) Other Amount actually paid to every State 5 Hoardings on Trains Length of track in every State 6 Personal media (such as utility bills etc.) Amount actually paid to every State 7 Advertising on Railway tickets Ratio of total railway stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formulation, but as radio involved big revenue, the method of distribution of IGST for advertisements through radio should be reconsidered. The Secretary suggested that the Council could agree to the guiding principles for apportionment of IGST among States for various media other than radio. The Council agreed to the same. 52. For Agenda item 7(v), the Council approved the guiding principles for distribution of IGST for advertisements supplied through various media by the Directorate of Advertising and Visual Publicity (DA VP) listed in paragraph 51 above except for Radio which needed further consideration. Agenda item 7 (vi): To restrict the maximum amount of late fee payable to the extent of output tax liability in a return by exercising powers under Section 128 of the CGST Act, 2017 53. Introducing this agenda item, the Secretary stated that representations had been received that in some cases, late fee payable for delayed filing of Return exceeded the principal amount of tax and interest by a very large amount and this was deterring the small and medium business from filing Returns. He stated that the Law Committee had recommended that the maximum amount of late fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates for subsequent months to be notified later 15.11.2017 31.12.2017 6. TRAN-1 and Revision of TRAN-I Declaration of transitional stock/ITC and its revision 30.11.2017 31.12.2017 The Secretary stated that this Agenda item was discussed during the officers' meeting held on 9 November, 2017 and agreed upon. He suggested that the Council could also agree to these proposals. The Council agreed to the same. 56. For Agenda item 8(i) , the Council approved the extension of due date for various returns proposed at paragraph 55 above. Agenda item 8(ii): Amendment to sub-rule (2) of Rule 54 of CGST Rules, 2017 57. The Secretary stated that in Rule 54(2) of the CGST Rules, it was provided that where the supplier of a taxable service was an insurer or a banking company or a financial institution, he shall issue a consolidated tax invoice. In this regard request was received that since the recipient of supplies wanted to claim the corresponding input tax credit on each individual supply instead of taking credit on the aggregate value in a consolidated m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oM met twice on 15.10.2017 and 29.10.2017 and had wide ranging consultations with the office bearers of the Organizations and Associations of MSMEs, namely India SME Forum, Laghu Udyog Bharti, Federation of Indian Micro, Small Medium Enterprises (FISME), Integration of Association of Micro, Small and Medium Enterprises of India (I am SME of India), The Coimbatore District Small Industries Association (CODISSIA), Federation of Association of Small Industries of India (FASll) and National Restaurants Association of India. 65.1. The JS, GSTC further stated that after taking note of written inputs received from the States on the composition scheme and detailed deliberation with the officers, who were invited in the GoM as Special lnvitees, the GoM had made their recommendation on each of the ToR. 65.2. The JS, GSTC, informed that the ToR-1 mandated to examine as to whether turnover of exempted goods can be excluded from the total turnover threshold for levying tax under the Composition Scheme and the recommendations of the GoM were as follows: i. Annual turnover eligibility for composition scheme under the CGST/SGST law should be increased to ₹ 2 crore from the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay 0.5% on total turnover. The Hon'ble Minister from West Bengal stated that if the proposal was to provide option to the traders, he had no objection to the same. 65.4. The Hon'ble Minister from Goa stated that he was broadly in agreement with the recommendations of the GoM and was confident that the enhancement of annual turnover eligibility to ₹ 1.5 crore and allowing inter-State outward supply of goods under Composition scheme would give a fillip to taxpayers in the MSME sector. He stated that there should be clarity on whether composition taxpayers would be allowed to buy from unregistered dealers or from other composition taxpayers. He stated that in case the composition taxpayers were allowed to effect purchase from unregistered dealers, it could create arbitrage vis-a-vis registered taxpayers and it could also discourage more taxpayers from coming into the regular tax net. He, therefore, suggested that there should be a restriction for composition taxpayers to buy from unregistered dealers and if they were allowed to buy from unregistered dealers, the composition taxpayers should be made to pay tax under reverse charge mechanism without the benefit of inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, he suggested to make separate composition schemes for B2B and B2C suppliers; B2C suppliers under composition scheme could be taxed at the rate of 1% without input tax credit and without inter-State supplies, whereas B2B suppliers could be taxed at the rate of 2% or any other rate, as may be decided, with permission to avail input tax credit and to make inter-State supplies. 65.7. The Secretary sought a clarification from Shri Ritvik Pandey, Finance Secretary, Karnataka (hereinafter referred to as FS, Karnataka) as to whether there could be a composition scheme for B2B suppliers. FS, Karnataka explained the composition scheme by way of an example of a copper wire manufacturer selling the copper wire to a fan manufacturer. He stated that blockage of input tax credit existed at all level, as copper wire manufacturer purchased tax paid copper and did not get input tax credit on his inputs and these taxes were embedded at his level and not passed on to the fan manufacturer in the form of credit. Consequently, the amount of tax paid on copper would be embedded in the price of the fan sold to the consumers, even if input tax credit of 1% tax on copper wire sold by a composition cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Minister from West Bengal stressed that composition scheme should be simple. It should have simple forms and tax rate should be l% without input tax credit. He advised not to compromise on the basic structure of GST and stated that taxpayers would make a choice to opt for composition scheme based on their margins. The Hon'ble Deputy Chief Minister of Delhi stated that allowing segregation of taxable and non-taxable goods would make the system complex as they would need to maintain two accounts, whereas core issue in composition was of simplicity. The Secretary explained that this would pose no difficulty as composition taxpayers had to maintain some account for their turnover and when they wished to draw benefit from a scheme, they would need to comply by keeping separate account of exempted goods. The Hon'ble Minister from Assam observed that though the Council was discussing Inspector raj, but the trader had no issue with them. He stated that all Associations had accepted and expressed no difficulty in dealing with inspectors. 65.9. The Chief Economic Advisor stated that the heart of the issue was that when a composition dealer sold to a buyer, who needed input tax c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 5 lakh and to also allow job work services and sought views on these recommendations. The CCT, Madhya Pradesh, stated that they had no difficulty in allowing supply of services by a composition taxpayer up to a certain value but the difficulty he was expressing was in respect of purchase from unregistered dealers in the absence of .reverse charge mechanism. The Hon'ble Deputy Chief Minister of Delhi expressed similar views as they were also not allowing composition dealers to purchase from unregistered dealers. 65. 13. The Hon'ble Minister from Punjab sought a clarification that proposal to allow supply of services as well as job work service would attract payment of normal tax or otherwise, as law did not permit such supply of services under Composition scheme. The Secretary observed that the composition rate of 1% could also possibly apply to supply of services by composition taxpayers. The FS, Karnataka explained that this proposal was to cover such composition dealers who undertook supply of services along with goods (such as sale of cooler along with annual maintenance contract), which presently made them ineligible for the composition scheme. He stated that by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10(2) of the CGST Act and SGST Acts. ii. As small States have strong reservations on this issue, this provision may be reviewed once the scheme of compensation to States on account of revenue loss lapses after 5 years. 65.16. Initiating the discussion on the above recommendations, the Hon'ble Deputy Chief Minister of Manipur stated that they had three major concerns in respect of this recommendation of allowing inter-State supplies to composition taxpayers. First was that allowing inter-State supplies to composition taxpayers would have serious impact on their revenue, second was that it would pose serious tax compliance issues and third was that it would impact the consumer. He further added that allowing inter-State supplies was against the spirit of GST and would have cascading effect. He stated that IGST portion from the composition suppliers could be totally lost to the consuming States and compensation was not a sufficient assurance. He stated that the buyer in the composition scheme could hide the purchases from the State, which would hinder the tax compliance and if this was compounded over five years, the economy of the State would be ruined. He added that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when taxpayer in Punjab would supply to Haryana and vice-versa. If such supplies were not allowed, there would be illicit trade and would throttle initiative. He expressed that the quantum of damage to the economy, if any, on account of GOM's recommendation, would be very minimal as only 1-2% revenue was paid by the composition taxpayers. He suggested to design the composition scheme in the manner proposed by the Hon'ble Minster from Jammu Kashmir. The Hon'ble Deputy Chief Minister of Bihar supported these views and stated that more restriction led to malpractice by finding ways to avoid such restrictions. He recalled that the Hon'ble Deputy Chief Minister of Delhi had also raised the issue that traders from Delhi were unable to sell to Gurugram. He stated that he had raised this issue in the earlier meeting too and emphasised that a way must be found to permit outward inter-State supplies to composition taxpayers. 65.18. The Hon'ble Minister from Jammu Kashmir observed that almost 60% of their revenue came from outside the State. The Hon'ble Chairperson raised a question how to address the concerns of the small consuming States when such a sharp divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that this proposal would also adversely affect the revenue of his State and it was against the basic concept of GST. The Secretary (Commercial Tax), Sikkim, stated that such a provision, even for one year, could lead to severe loss of livelihood. The Hon'ble Chairperson observed that in view of sharp division on this issue, no consensus could be reached. Shri Tuhin Kanta Pandey, Principal Secretary (Finance), Odisha, stated that one way to help SMEs could be to make IGST return filing simpler. In view of these discussions, the Council decided not to make any recommendation. 65.20. In respect of recommendations on ToR-3 which mandated to examine as to Whether Input Tax Credit can be made available to registered persons receiving inward supplies from Composition Dealers, the Council, in view of discussion above as well as divergent views among the members of GoM, did not make any recommendation on ToR-3. 65.21. The JS, GSTC further presented and explained the recommendations on the ToR-4, which mandated to examine the Tax Structure of different categories of Restaurants, with a view to their possible rationalization/reduction, which are as follows: i. There should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te problem, as room tariff was dynamic, depending upon the season and accordingly tax rate would fluctuate. He added that Goa had many five-star hotels and middle class and above presently went to these restaurants, but tax at the rate of 18% would discourage them to visit such restaurants. He added that Goa had shacks on the beaches and people would go there. The Hon'ble Minister from Jammu Kashmir also stated that for restaurants, it would be good to have a single tax rate of 12% with input tax credit irrespective of being AC or non-AC. He added that restaurants in hotels should also be charged to tax at the rate of 12% with input tax credit and hotels under composition scheme could be charged to tax at the rate of 5%. He stated that his discussion with the representatives of the restaurants indicated that they all wanted to avail input tax credit and imposing a rate of 5% without input tax credit would make them unhappy. 65.23 . The Hon'ble Chairperson stated that the organized chains of restaurants were factoring the input tax credit and transferring its benefits to the consumers, but standalone restaurants had not transferred the benefits of input tax credit to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax credit. The Hon'ble Deputy Chief Minister of Bihar suggested that a different rate of tax should be kept for restaurants in 5-Star hotels. The Hon'ble Minister from Goa also supported this proposal. The Hon'ble Minister from Jammu Kashmir suggested that the rate of tax for restaurants in 5-Star hotels could be 18% with input tax credit. 65.25. Shri Rajiv Jalota, CCT, Maharashtra, gave a brief overview of tax structure on restaurants in his State. He stated that they had a composition scheme with tax rate of 5% and 8% depending upon the turnover and another scheme with input tax credit where the tax rate was 13.5%. He stated that as per the calculations, more than 90% of restaurants had opted for 8% rate of tax but they did not charge the same to the customers. He stated that these restaurants also paid Service Tax and received input tax credit on rentals etc. He suggested to keep two tax rates for restaurants under composition scheme, namely 5% for smaller restaurants and 8-9% for larger restaurants. The Secretary stated that a change in law would be required for charging tax on restaurants at a rate higher that 5% under the composition scheme. He suggested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restaurants. Shri Somesh Kumar, Principal Secretary, Telangana, stated that composition scheme for restaurants should be removed as there were several complaints of restaurants under composition scheme charging tax from customers. The Secretary suggested to retain the composition scheme for restaurants as it allowed other benefits like quarterly filing of returns, maintaining simplified records in terms of only turnover details, etc. 65.28. The Hon'ble Chairperson proposed a tax rate of 18% with input tax credit on the outdoor catering. The Hon'ble Chief Minister of Puducherry observed that a tax rate of 18% on outdoor catering was too high. The Hon'ble Chairperson observed that historically, this was the prevailing rate of tax on outdoor catering. The Hon'ble Deputy Chief Minister of Delhi stated that a tax rate of 18% on outdoor catering could lead to tax evasion. He cautioned that having such big difference of tax rate between restaurant and outdoor catering, would lead to the practice of issuing bill from the restaurant for the outdoor catering and that they had similar experience in case of differential tax rate on liquor. The Principal Secretary, Finance, O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es should be inclusive of GST and break up of GST should be shown in the invoice by back calculation. 65.31. Initiating the discussion, the Secretary stated that the matter relating to payment of penalty for late fi ling of Nil return was discussed in the officers' meeting held on 9 November 2017 in Guwahati and the consensus among the officers was that Nil return should be a very simple, one step process and penalty ought to be very low for late filing of Nil return. He, however, explained that filing of return by Nil filer was also important, as otherwise the compliance level would go down substantially and for this reason, some penalty must be levied. He stated that the decision in the officers' meeting was to levy late fee of ₹ 10 per day (each under CGST and SGST Act) for Nil return filers and ₹ 25 per day (each under CGST and SGST Act) for normal tax payers instead of the present ₹ 50 per day (each under CGST and SGST Act) subject to a maximum ceiling of ₹ 5000 under each Act. This could apply from October 2017. The Hon'ble Deputy Chief Minister of Bihar expressed his agreement to this decision. The Council also agreed to this suggestion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for showing only MRP, but it was a right of the consumer to know the tax paid in the form of CGST and SGST. He also agreed that Law Review Committee should examine this and give its recommendation. The Council agreed to this proposal. 65.34. The Hon'ble Deputy Chief Minister of Delhi mentioned that there were some more recommendations by the GoM. The Secretary informed that many of these recommendations that included simplification of return and invoice matching had already been discussed in the officers' meeting and a Committee on Return Filing would examine them. The Hon'ble Deputy Chief Minister of Bihar mentioned that the issue of simplification of HSN code should also be looked into by the Committee. The Council agreed to this suggestion. 66. For agenda item 9 , the Council approved the following: i. To levy a uniform rate of tax at the rate of 1% under composition scheme for manufacturers and traders. The turnover for traders shall be counted only for supply of taxable goods. No change for composition scheme for restaurant. ii. Supply of services by Composition taxpayer up to ₹ 5 lakh per annum shall be allowed by exempting the same. iii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Group of Ministers (GoM) stated that GoM was not satisfied with the performance of lnfosys in the last three meetings so far. The lnfosys had breached committed timelines such as they were to provide resident engineers for each State, to be stationed there for one year. The Infosys had provided only 8 or 9 engineers whereas they had to provide engineers to all States by 31.10.2017 and thus breached their commitment. He stated that though some progress had been seen in implementation of changes/forms, it was not optimum. He then invited Shri Prakash Kumar, CEO, GSTN to make a presentation. 67.1. The CEO, GSTN made a brief presentation which is attached as Annexure 6. He briefly informed about the services made available so far, including inter alia, relating to registration, payment of tax, transitional credit forms, refund mechanisms for exporters, etc. He informed that through the portal, so far, 2.37 crore returns had been filed, one crore payment transactions had occurred, 64 lakh taxpayers had migrated from old system and 30.36 lakh new registrations had been done. He further informed that following major issues had been highlighted by GoM. a. Data sharing issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irperson Agenda item 12(i): Exemption from obtaining registration for persons making supply of 'services' through an e-commerce operator and whose aggregate turnover is below the threshold limit 71. Introducing this agenda item, the Secretary explained that while suppliers of taxable services (both intra and inter-State) with annual turnover of less than ₹ 20 lakh were exempted from registration under the GST Law, registration had to be obtained compulsorily when such supply was made through e-commerce operator (in terms of Section 24 (ix) of the CGST/SGST Acts), irrespective of the annual value of turnover. He stated that the proposal before the Council was to exempt a supplier of services providing services through ecommerce platform from obtaining registration compulsorily under Section 24 (ix) of the CGST and SGST Acts provided his aggregate annual all-India turnover did not exceed ₹ 20 lakh except when he opted for voluntary registration. He further added that the annual turnover limit of ₹ 20 lakh would not be applicable for ' Special Category States' other than the State of Jammu Kashmir and that for other than the State of Jamm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose changes in the CGST/SGST Acts and the IGST Act to the Law Review Committee. The Committee consisted of the following members: i. Shri Gautam Ray, Retd. Chief Commissioner, CBEC and Member, Drawback Committee- Convener ii. Shri Arghya Sen Gupta, Research Director, Vidhi Centre for Legal Policy; iii. Shri Vinod Jain, Chartered Accountant, Vinod Kumar Associates, New Delhi; iv. Shri Om Prakash Mittal, President, Laghu Udyog Bharati, New Delhi; v. Shri Ajay Sahay, DG CEO, Federation of lndian Exports Organization; vi. Shri Praveen Khandelwal, National Secretary General, Confederation of All india Traders. 73.2. He stated that the 'Advisory Group of the Law Review Committee' was to give its recommendations by 30 November, 2017 and the 'Law Review Committee' had to submit its final recommendations by 31 December, 2017. These recommendations would be placed before the Council for consideration. The Council took note of the information. 74. For Agenda Item 12 (ii) , the Council took note of the information regarding the constitution of the 'Law Review Committee' and the 'Advisory Group of the Law Review Committee '. Agenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over below and above ₹ 1.5 crore could be decided subsequently. GSTR-1 would be delinked from GSTR-2A . He stated that rolling GSTR-2A would be available for taxpayers for view. The Secretary stated that this arrangement till March 2018 would ensure that if a taxpayer arbitrarily claimed very high input tax credit in GSTR-3B , it could be checked through the GSTR-1 filing, and such mismatch could be verified during audit. He added that a Committee on Return Filing was proposed to be formed under the convenorship of Chairman, GSTN, to look into issues and requirements of filing various types of returns in GST regime in the current financial year and suggest modifications in returns, if any, including related changes in laws, rules and formats applicable from the next financial year. He stated that the members of this Committee were proposed to be Chief Commissioner of Commercial Tax (CCCT), Andhra Pradesh; Commissioners of Commercial Taxes (CCTs) of Gujarat, Punjab and Karnataka; Commissioner (GST Policy), CBEC; Commissioner (Central Excise), CBEC; Joint Secretary, Department of Revenue; CEO, GSTN and other members as may be co-opted. 75.2. Hon'ble Deputy Chief Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro rated supply, whether making Nil rated supply, etc. and the relevant columns should show up and be filled up only if the answer to these questions were in the affirmative. The Hon'ble Minister from West Bengal stated that even a small taxpayer had to indicate each supply made to his buyers instead of giving an aggregate value which was the practice earlier. He suggested to dispense with the requirement of uploading each invoice involving B2B sale. 75.5. The Hon'ble Chief Minister of Puducherry stated that small traders were finding it very difficult to file GSTR-1, 2 and 3. He observed that connectivity with the common portal was also taking a lot of time and the small traders needed to employ a person to file their returns. He stressed the need to address this problem. The Hon'ble Minister from Karnataka stated that the proposal of the Hon'ble Deputy Chief Minister of Bihar to extend the facility of quarterly returns for taxpayers with annual turnover up to ₹ 5 crore could be considered only after getting an assurance from GSTN that they could implement this change. The Hon'ble Minister from Uttar Pradesh also supported the proposal to extend the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018. The Council agreed to this suggestion. He observed that the Committee on Return Filing should consult all stakeholders including the Advisory Group of Law Review Committee and large taxpayers. 75.7. The Hon'ble Deputy Chief Minister of Bihar suggested that the annual turnover limit for taxpayers filing quarterly Returns should be increased from ₹ 1.5 crore to ₹ 5 crore as this would benefit a larger number of taxpayers. The Secretary stated that this year, it would pose no problem as revenue was coming monthly but this increased turnover limit would create an expectation next year for similar facility for taxpayers up to annual turnover of ₹ 5 crore. He said that such a facility would lead to loss of tax revenue from an additional 4% taxpayers, leading to 11% less revenue collection in a month and this could create problem for compensation. The Hon'ble Ministers from Assam and Goa supported the proposal to give the facility of quarterly return filing for taxpayers up to annual turnover of ₹ 5 crore. The Hon'ble Minister from Goa stated that the issue could be revisited next year and there could also be more buoyancy in tax collection next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 and no automatic input tax credit reversal on account of any mismatch between GSTR-1 and GSTR-2 till March 2018; vi) Rolling GSTR-2A to be available to taxpayers for view till March 2018; v) To constitute a Committee on Return Filing under the convenorship of Chairman, GSTN to look into issues and requirements of filing various types of returns in GST regime in the current financial year and suggest modifications in returns, if any, including related changes in laws, rules and formats applicable from the next financial year and the Committee shall consist of Chief Commissioner of Commercial Tax (CCCT), Andhra Pradesh; Commissioners of Commercial Taxes (CCTs) of Gujarat, Punjab and Karnataka; Commissioner (GST Policy), CBEC; Commissioner (Central Excise), CBEC; Joint Secretary, Department of Revenue; CEO, GSTN and other members as may be co-opted. Other Issues: 77. The Hon'ble Minister from Tamil Nadu circulated a written speech during the meeting of the Council in which his view points on different Agenda items were communicated. The same are recorded suitably as part of record of discussion in the relevant Agenda items. 78. The Government of Arunachal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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