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TMI BlogMinutes of the 30th GST Council Meeting held on 28th September 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... e for information of the Council 5. Review of Revenue position 6. Analysis of Revenue Gap of select States and Union Territory of Puducherry for information of the Council 7. Status report on Anti-profiteering measures under GST for information of the Council 8. Proposal of State of Kerala for imposition of Cess on SGST for rehabilitation and flood affected works 9. Proposal of State of Punjab to address difficulties arising out of recent amendment to rule 96 of the CGST/SGST Rules relating to exports. 10. IGST exemption to imported goods supplied for relief and rehabilitation of people affected by floods in the State of Kerala for information of the Council 11. Any other agenda item with the permission of the Chairperson i. Addendum to Agenda Item 6 (Analysis of Revenue Gap of select States and Union Territory of Puducherry for information of the Council)- Report on Bihar ii. Minutes of 10th Meeting of Group of Ministers (GoM) on IT Challenges in GST Implementation for information of the Council and discussion on GSTN issues 12. Date of the next meeting of the GST Council 3. The Hon'ble Chairperson welcomed all the Hon'ble Ministers and the officers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, circulars and orders were also deemed to have been ratified. Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of the GST Council 8. The Secretary stated that the GST Implementation Committee (GIC) took certain decisions between 21st July, 2018 (when the 28th Council Meeting was held) and 17th September, 2018 (before the 30th Council Meeting scheduled on 28th September, 2018). He stated that due to urgency, certain decisions were also taken by obtaining approval of the GIC by circulation amongst the GIC Members. He stated that this Agenda item was also discussed during the Officers meeting held on 27th September, 2018 and there were no comments from the officers on the subject (presentation covering the issues is attached as Annexure 3 to the Minutes). He invited comments, if any, from the Hon'ble Members of the Council. 8.1. Shri Manpreet Singh Badal, Hon'ble Minister from Punjab stated that the role of GIC was to mostly issue clarifications on procedural issues and it should avoid approving amendment to Rules with retrospective effect. He stated that the notification regarding Rule 96 (10) and such other decisions involving retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Cess for the month of July, 2018 was ₹ 96,483 crore and for August, 2018, it had come down to ₹ 93,960 crore. He stated that approximately ₹ 49,000 crore was being collected in terms of IGST Revenue out of which, normally, every month ₹ 35,000 crore went to settlement and about ₹ 5,000 crore went as refund leaving a balance of approximately ₹ 10, 000 crore. He stated that in accordance with the decision of the Council, the practice of provisional settlement of the IGST amount lying in balance would continue in the current year, which would help to bring down the revenue shortfall. As could be seen from the Agenda notes, the average revenue shortfall for the country as a whole during the period August, 2017 and March, 2018 was 16% and it had reduced to 13% during the period April, 2018 to August, 2018. He noted that except one State, no State's shortfall had increased during this period. He added that 6 States, namely, Mizoram, Arunachal Pradesh, Manipur, Nagaland, Sikkim and Andhra Pradesh had gained more in terms of revenue than the amount to be protected. He noted that the State of Mizoram had gained 50% more than the protected revenue am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For Jammu & Kashmir and Himachal Pradesh, the average growth rate of VAT revenue was about 11%, which would lead to a gap of about 3%. Bihar had a higher than the assured 14% growth rate (about 18%). This was due to certain specific reasons, namely increase in VAT rate by one per cent preparatory to introduction of Prohibition in the State during 2016- 17. He further stated that there were certain State specific reasons for revenue shortfall. For instance, Punjab got about ₹ 3,000 crore revenue from tax on food grains by way of Purchase Tax and Infrastructure Development Fee, and this constituted 27% of their subsumed revenue in 2015-16. He stated that he had given certain suggestions to augment revenue, such as to increase tax collection in services sector and to promote certain industries. He stated that the industry base of Punjab was low, as indicated by the fact that as against average 8% share of CST in the total subsumed revenue of all States in 2015-16, Punjab's share of CST in its total subsumed revenue for 2015-16 was 3.9%. He suggested that Punjab should try to set up more industries and devise policies to give boost to services sector, such as tourism, Inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about 18%. Due to this higher revenue base, the shortfall of GST collection for Bihar was initially very high (38%) as compared to the national average·(16%), but in the current year, it had narrowed to 20%, as against the national average of 13%. He further stated that once the lGST settlement went up, revenue accruing to consuming States would increase, which would benefit not only Bihar but also States like Odisha and Chhattisgarh. He added that during VAT, one of the big sources of revenue for Bihar was Entry Tax to the tune of ₹ 1,100 crore, for which no input tax credit had been availed. He observed that Bihar's revenue would improve over a period of time. 14.6. The Secretary also highlighted-some common reasons for low revenue growth in these States. He observed that in the States that he visited except Punjab and Himachal Pradesh, the ~ percentage of return filing was lower as compared to the national average and e-Way bill compliance was also not up to the mark vis-a-vis the national average. He added that some States like Bihar and Punjab had given concessions for intra-State e-Way bills and withdrawal of such concessions given during the initial roll o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether these observations in the agenda note could be passed on to the 15111 Finance Commission, which has been mandated to look at, inter alia, these factors for finalising the devolution of resources. He requested the Hon'ble Chairperson to bring this to the notice of the 15th Finance Commission. The Hon'ble Chairperson stated that sometime back he read a study of different States and how they were rated in terms of their performance on various social and other indicators. He added that the five States namely Kerala, Punjab, Sikkim, Delhi and Himachal Pradesh were right on top based on these indicators. As Punjab ranked high on various indicators, the question was why there was high non-compliance of tax. 14.9. Shri Shashi Bhusan Behera, Hon'ble Minister from Odisha, stated that as a consuming State, they had a revenue shortfall of 24% as against the national average of 13%. He stated that improvement in return filing had narrowed the gap in revenue shortfall. He added that there was also revenue loss to the tune of ₹ 500-600 crore due to loss of tax revenue from consumer goods like food grains, atta, maida, etc. which was taxed at the rate of 5% during the VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.11. Shri Suresh Bhardwaj, Hon'ble Minister from Himachal Pradesh, thanked the Secretary for his analysis of the revenue situation in his State. He stated that for the period April, 2018 to August, 2018, they had a revenue gap of 36% despite performing higher than the national average in return filing. He stated that they were taking steps, as suggested in the Report of the Secretary. He added that since Himachal Pradesh was not a consuming State, the goods manufactured in Himachal Pradesh were largely going out and so was the revenue. He further stated that some of the measures suggested in the Report, like boosting tourism, building retail outlets and convention centres were long term measures. He added that increasing tourism was also their priority and they were trying to find new tourist destinations and would try to also increase retail sales in these destinations. However, as these were long term measures, he suggested that a team from the office of the Chief Economic Advisor should be sent to Himachal Pradesh to suggest how to get the revenue due in the short term. He added that during VAT regime, they gained in terms of revenue by encouraging setting up of industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porting State and for the period August, 2017 - August, 2018, the total revenue accrued to the State was ₹ 4,028 crore, of which the SGST component was ₹ 3,888 crore and IGST settlement was ₹ 140 crore. The IGST settlement was approximately 3% of the State's total revenue which was low as compared to other major revenue shortfall States. He observed that Puducherry accounted for 42%, Jammu & Kashmir 53% and Himachal Pradesh 49% of their revenue by way of IGST settlement. He stated that a comparative analysis for pre-GST regime and GST regime collections indicated that the revenue collected during April to July, 2017 was ₹ 9,290 crore whereas after GST implementation, for the period April to July 2018, they had collected revenue of ₹ 16,543 crore, which showed that they had collected adequate amount but not getting the proportionate gains in terms of IGST settlement and their revenue shortfall was still high. He added that their return filing percentage was 69.5% in July, 2018 and they accounted for 11% of the country's e-Way bill verification. Hence, they were doing well on the parameters of return filing and e-Way bill but they were still not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of returns, there should also be option with the tax administration to block the facility of issuing e-Way bills when misuse of the e -Way bill was seen. He added that the revenue shortfall of his State was only 5% but they were not getting equivalent compensation. Shri Ritvik Pandey, Joint Secretary, Department of Revenue (DoR), explained that the State of Uttar Pradesh had been demanding that the arrears of VAT that they had collected should be kept aside for calculation of compensation whereas it was earlier decided that compensation would be calculated after taking into account all collections of State taxes including arrears of VAT. 14.1 7. Capt. Abhimanyu, Hon'ble Minister from Haryana, stated that, as could be seen from page 133 of the Agenda notes, Tamil Nadu and Andhra Pradesh were not performing very well in return filing but they were doing well in revenue collection. Therefore, return filing performance might not be directly linked to revenue generation. He stated that, as suggested by Punjab, deeper analysis of the reasons for revenue shortfall was needed. He appreciated the report of the Secretary in analysing the revenue position of high shortfall States and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 14%. He stated that either of the two would be a better approach rather than giving the provisional JGST amount on the basis of guaranteed 14% growth rate, which was related to VAT period. 15. For Agenda item 6, the Council: (i) took note of the report of the Secretary on the revenue gap analysis of the States of Jammu & Kashmir, Punjab, Himachal Pradesh, Bihar and the UT of Puducherry; and (ii) approved that the Law Committee shall frame a proposal to deny the facility of generation of e-Way bills to taxpayers who had not filed returns for two consecutive tax periods. Agenda Item 7: Status report on Anti-profiteering measures under GST for information of the Council 16. The Secretary invited Shri B.N. Sharma, Chairman of the National Anti Profiteering Authority (NAA) to give an overview of the action taken so far by the NAA. The Chairman, NAA, stated that from 1st December, 2017, they had issued 9 orders, out of which profiteering was proved in 3 cases and not proved in 6 cases. He informed that investigations of cases were pending with other layers of the hierarchy of the NAA, namely 140 cases were pending with the Standing Committee and 290 cases with the Directorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The Secretary stated that even if an anti-profiteering complaint was received in a plain paper, the instruction was that the officer concerned would sit with the complainant and help him to fill up the prescribed form. However, the Law Committee could also examine if any further simplification could be done in the application relating to complaint against profiteering. 17. For Agenda item 7, the Council: i (i) took note of the work done till date by the National Anti-Profiteering Authority; and (ii) approved that the Law Committee shall examine further simplification of the application form for filing anti-profiteering complaints. Agenda Item 8: Proposal of State of Kerala for imposition of Cess on SGST for rehabilitation and flood affected works 18. The Hon'ble Chairperson invited the Hon'ble Minister·from Kerala to speak on this Agenda item. The Hon'ble Minister from Kerala stated that the recent floods in his State was a calamity that could also happen in any other State. The FRBM (Fiscal Responsibility and Budget Management) Act placed ·a limit on the expenditure of the State vis-a-vis its revenue receipts, and therefore, flexibility' was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tember 2018 in Bengaluru. It had then transpired that about six months' time would be required to change the GST software are Invoice module and challan module, GSTR-1 and GSTR-3B etc. would need to be changed in order to distinguish the current Compensation Cess and the proposed levy. He stated that it might be difficult for GSTN to make such a drastic change in the software. He pointed out that Article 279A (4) (f) of the Constitution permitted levy of any rate or special rate for a specified period to raise additional resources during any natural calamity or disaster. He raised a question as to why the people of Kerala should pay additional tax who were already in distress. This burden should be shared by the whole country. He suggested two -options: First to raise the rate of cess by amending Section 8 of the Compensation Act i.e. raising the rate of cess on existing commodities and secondly by bringing other luxury items, under its ambit. He suggested that the incremental amount so collected could be deposited in a separate Fund. He stated that earlier, the issue of relief to cane growers of Uttar Pradesh was discussed in the context of levy of a sugar cess. He stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commodities which attracted Cess and not for all the commodities. He wondered whether one could also increase some percentage of Cess already being levied on certain commodities to create a separate Fund for calamities or disasters. He stated that they supported the proposal in principle and expressed his solidarity with the State of Kerala in its hour of crisis and stated that it should be helped in every possible way. However, he wondered whether, in the absence of opinion of AG, any cess could be imposed. 18.5. The Hon'ble Minister from Tamil Nadu stated that the Hon'ble Chairperson had mentioned regarding the Constitutional provision for levy of additional tax by the Centre and the State on the recommendation of the Council during natural calamity or disaster and that too temporarily. He supported the proposal of the Kerala Government to impose cess in the State of Kerala. However, he did not support the proposal of the Hon'ble Deputy Chief Minister of Bihar to create a separate disaster Fund at national level by imposing a levy of Cess on all States. He further added that there was already a separate Disaster Fund at national level and any State in times of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period during any natural calamity or disaster. This provision was preferable compared to the option of cess. He suggested to have a separate IT system for Kerala by allowing increase of 1% tax on SGST component in the State of Kerala. He observed that for supply made from Kerala, the cost would be passed on to the consumers of other States which would make the supply from Kerala less attractive, but this was the case even in the earlier regime. The ACS, Uttar Pradesh, stated that the issue of sugar cess had been referred to a GoM and this issue should also be referred to the same GoM. 18.10. The Hon'ble Minister from Uttarakhand stated that his State suffered a calamity in the year 2013-14 which was also declared as a national calamity and more than 12,000 lives were lost and additional funds were received from the Central Government. He observed that Article 279A (4) (f) permitted to impose tax for a brief period in the case of natural calamity. He stated that his State often suffered such calamities. He further stated that during the period January-September, 2018, due to climatic factors, 1805 roads were destroyed, 1577 waterbased projects were affected, 5064 electricity r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Tamil Nadu and the Hon'ble Deputy Chief Minister of Delhi, was that the State of Kerala may be allowed to levy a special cess. The second issue, which was supported by the Hon'ble Deputy Chief Minister of Bihar and some other States, was that the State of Kerala had already suffered and whether a further special tax should be imposed on the people of Kerala. The third issue was raised by the Hon'ble Minister from Punjab that trade might shift from Kerala due to increase in taxation if the special tax was levied only in Kerala and this could have a spiral effect on increasing the suffering of the people of Kerala. The fourth issue was raised by the Hon'ble Minister of Tamil Nadu that the funding to States in times of natural calamity was already available under SDRF (State Disaster Response Fund) and NDRF. The Central team assesses and then grants the NDRF fund. The fifth issue was that under Article 279A, the States and the Centre had surrendered their sovereignty and the question was whether States fully lost their right to impose additional tax or did they possess this right to be exercised with the approval of the Council. 18.14. The Hon'ble Chairperson fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Members. He supported the proposal to have a small Group of Ministers to take a considered view on this issue and bring it to the next Council meeting. The Hon'ble Chairperson stated that rescue and relief in Kerala was almost over and it was in a state of rehabilitation which could take several months and the funding would keep coming from various sources. So, the funding through GST route would be an addition and a little delay would not make much of a difference. He observed that the coastal States, Hill States and North-eastern States often faced calamity. He added that keeping this in view, he suggested to constitute a Seven-Member GoM instead of traditional five-member GoM, where ) representation could be from the coastal States, Hill States and North-eastern States plus some other States having senior Ministers. The Hon'ble Minister from Kerala agreed to this suggestion. The Hon'ble Minister from Andhra Pradesh observed that if cess was imposed on sin products including tobacco, then fanners growing tobacco would be in distress and the GoM should also look into this issue. After deliberation, the Council agreed to constitute a Seven-Member GoM for which names w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Advance Authorization (Annual requirement), Special Advance Authorization and Advance Authorization (Export of prohibited goods). If reference to Notification No.79/2017-Customs was removed completely, as proposed in the original Agenda notes, it would make all those exporters eligible to pay lGST and claim refund on goods exp01ted where inputs were imported without payment of IGST under any of the above-mentioned schemes. In view of this, he stated that the Agenda note was proposed to be modified to make only those exporters eligible to claim refund of IGST paid on exported goods who are importing capital goods under the EPCG Scheme. He informed that this issue was discussed in the Officers meeting held on 27th September 2018 and the proposed amendment was approved, keeping in view the fact that excluding the entire Notification No.79/2017-Customs would also exclude capital goods imported under EPCG Scheme and used in manufacture of goods exported, whereas the intention was to only block IGST refund for exporters who had imported inputs under Advance Authorization Scheme. He further explained that such exporters could make exports under the LUT route and claim refund of unu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part IT, Section 3, Sub-section (i) ,vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Authorisation or notification No. 40/2017-Central Tax (Rate), dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),vide number G.S.R 1320 (E), dated the 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate), dated the 23rd October, 2017 published in the Gazette of India, Extraordinary, Part n, Section 3, Sub-section (i), vide number G.S.R 1321 (E), dated the CY 23rd October, 2017 has been availed; or (b) availed the benefit under notification No. 78/2017-Customs, dated the 13th October 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-secf (i), vide number G.S.R 1272(f), dated the 13th October, 2017 or notification No. 79/2017- Customs, dated the 13th October, 2017 publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th September, 2018 and all had agreed to this amendment. The Hon'ble Minister from Punjab thanked the Secretary for a very quick response to his letter. The Council agreed to the changes as proposed above. 21. For Agenda item 9, the Council agreed to amend Rule 96(10) of CGST Rules and Rule 89(4B) of CGST Rules, as indicated in para 20.5 above. The exact wording of the amendment shall be finalised in consultation with the Legislative Department, Union Law Ministry. Pari materia changes would also be carried out in the SGST Rules. Further, the Council also agreed to rescind that part of Notification No 39/2018 - Central Tax dated 04.09.2018 which relates to amendment of Rule 96(10) of the CGST Rules, 2017 and the State notifications corresponding to this Central notification. Agenda Item 10: IGST exemption to imported goods supplied for relief and rehabilitation of people affected by floods in the State of Kerala for information of the Council 22. Introducing this Agenda item, the Secretary stated that it was a formal item, placing before the Council, Notification No. 59/2018 - Customs dated 21st August 2018 issued to exempt basic Customs duty and IGST for the consignments i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was 31st December 2018 but it appeared that lnfosys would not be able to develop this software by 15th November, 2018. He stated that the Council would need to consider whether the date for filing the annual return for normal taxpayers and composition taxpayers should be extended. He further informed that during the meeting of the GoM, it was also explored whether the Form GSTR-9C could be uploaded in pdf form but it transpired that it would then have to be processed manually and system-based validation would not be possible. He observed that the Council would need to decide whether the date should be extended now or it should be discussed in the Council at a later date. 26.1. The Secretary stated that the GSTN should ensure that the preparation of software was expedited. He observed that the annual return contained several data elements which would facilitate final settlement of IGST. He suggested that the GSTN should engage with the Law Committee to expedite the issue. 26.2. The Hon'ble Minister from Kerala stated that he had been emphasising on furnishing of annual return during the last four meetings of the' Council as scrutiny and enforcement actions were dependant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. The Secretary stated that this problem had been raised from many quarters. He suggested that one solution could be for the Government to take a policy decision to expedite payments to Government contractors. Second option could be to examine the possibility of raising quarterly bill or raising the invoice only when Government was ready to make payment. He observed that the same provision of law relating to works contract was in force during the Service Tax regime. He added that the Law Committee could also look into all the possibilities to see whether small contractors could be given some relief. The Council agreed to this suggestion. 29. For other issues, the Council approved the following:- i) To circulate FAQs on TCS and SOP for TDS to all States; and ii) Law Committee to examine the problem of small contractors executing works contract for the Government due to time of supply provisions under GST. Agenda Item 12: Date of the next meeting of the GST Council 30. The Hon'ble Chairperson stated that 5 States were going to polls and the Council could possibly meet· after the polling was over. The Hon'ble Deputy Chief Minister of Delhi stated that the Counc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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