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TMI BlogMinutes of the 31st GST Council Meeting held on 22nd December 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... ndations of the lT Grievance Redressal Committee (ITGRC) for information of the Council 5. Review of Revenue position 6. Issues recommended by the Fitment Committee for the consideration of the GST Council 7. Issues recommended by the Law Committee for the consideration of the GST Council i. Extension of the due date for furnishing the statement in FORM GSTR-8 by electronic commerce operator for the months of October, November and December, 2018 ii. Extension of last date for allowing migration of taxpayers who received Provisional Identification Number (PID) till 31 st December, 2017 iii. FAQ on Banking, Insurance and Stock Brokers Sector iv. Amending SOP issued on TDS - Issues on furnishing of return in FORM GSTR- 7 by registered persons required to deduct tax at source under section 51 of the CGST Act for period during which the deductor was not registered v. Update on the implementation status of the issues referred to the Law Committee by the GST Council vi. Request for exemption from provisions relating to Tax Deduction at Source (TDS) in case of taxable supplies between Government Authority to another Government Authority or to PSU and vice vers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 in various States and Union Territories with Legislatures 11. Reconstitution of membership of the Law Committee, Fitment Committee and IT Committee for information of the Council 12. Any other agenda item with the permission of the Chairperson i. Notification to be issued to extend the due date for filing of returns in FORM GST ITC-04 for the period July 2017 to December 2018 ii. Ad hoc Exemptions Order(s) issued under Section 25(2) of Customs Act, 1962 to be placed before the GST Council for information iii. Proposals for boosting real estate sector under GST regime by providing a composition scheme for residential construction units iv. Proposal to increase the threshold exemption limit for supplier of Goods (manufacturers and traders) under GST from existing turnover of ₹ 20 lakh to ₹ 75 lakh and from ₹ 10 lakh to ₹ 20 lakh for Special Category States in a year v. Proposal for removal of differential rate of GST on lottery run by State Government and lottery authorized by the State Government 13. Date of the next meeting of the GST Council Page 2 of 85 Preliminary discussion 3. The Hon'ble Chairperson welcomed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sha recorded in line 6 of paragraph 14.9 of the Minutes (' ... in addition to 5% as entry tax ... ') as follows: ' ... in addition to 0.5% as entry tax ... '. The Council agreed to record the revised version of the Hon'ble Minister from Odisha in line 6 of paragraph 14.9 of the Minutes. 4.2. The Joint Secretary, GST Council, informed that during the Officers meeting held on 21 st December, 2018, the Commissioner of State Tax, Kerala had requested to correct a typographical error in the version of the Hon'ble Minister from Kerala recorded in line 3 of paragraph 14.15 of the Minutes (' ... and 18% of consumer products were imported from other (States ... ') with the following: ' ... and 80% of consumer products were imported from other States ... ' . The Council agreed to record the revised version of the Hon'ble Minister from Kerala in line 3 of paragraph 14.15 of the Minutes. 4.3. The Joint Secretary, GST Council, informed that another written communication had been received from the State of Jammu Kashmir informing that Shri B.B. Vyas, the then Advisor to the Hon'ble Governor (I/C Finance) of Jammu Kashmir had attended the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following note: 'The representative from Jammu Kashmir attended the Meeting on behalf of the Hon'ble Governor of Jammu Kashmir. The matter regarding exact status of the Advisor to the Governor in the GST Council was under consideration in consultation with the Union Ministry of Law' . The Council agreed to this suggestion 5. For Agenda item 1 , the Council decided to adopt the Minutes of the 30 th Meeting of the Council with the following changes: 5.1. In line 6 of paragraph 14.9 of the Minutes, to replace the existing version of the Hon'ble Minister from Odisha with the following:' ... in addition to 0.5% as entry tax ... '; 5.2. In line 3 of paragraph 14.15 of the Minutes, to replace the existing version of the Hon'ble Minister from Kerala with the following: ' ... and 80% of consumer products were imported from other States ... '; 5.3. To include the name of Shri B.B. Vyas, Advisor to Hon'ble Governor (I/C Finance) of Jammu Kashmir in Annexure 1 of the Minutes (which contains the names of the Hon'ble Ministers attending the Meeting) with the following note: 'The representative from Jammu Kashmir attended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y circulation among the GIC members. He stated that this Agenda item was discussed during the Officers meeting held on 21 st December, 2018 and there were no comments from the officers on the Agenda item. A presentation covering the issues is attached as Annexure 3 . The Secretary invited comments, if any, from the Members of the Council. There were no comments. 9. For Agenda item 3 , the Council took note of the decisions taken by the GIC during the period from 28 th September, 2018 to 13 th December, 2018. Agenda Item 4: Decisions/recommendations of the IT Grievance Redressal Committee (ITGRC) for information of the Council 10. The Secretary informed that under this Agenda item, decisions of the IT Grievance Redressal Committee (ITGRC) taken during its 3 rd meeting held on 26 th October, 2018 were placed before the Council for information. The Hon'ble Chairperson desired that the Council should be briefed regarding the decisions taken by the IT-GRC. Shri Upender Gupta, Commissioner (GST Policy Wing), CBIC, made a presentation on this subject (attached as Annexure 3). He informed that the TTGRC was responsible for resolving problems of taxpayers, who have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, no comments were offered. 11. For Agenda item 4 , the Council took note of the decisions taken during the 3 rd meeting of the lTGRC held on 26 th October, 2018. The Council further agreed that the issue regarding expanding the mandate of the ITGRC to cover non-technical glitch cases shall be discussed in the next meeting of the Law Committee where the Commissioner of State Tax, Tamil Nadu and any other Commissioner of State Tax wanting to attend the meeting shall be invited. Agenda Item 5: Review of Revenue position 12. The Secretary invited Shri Ritvik Pandey, Joint Secretary, Department of Revenue (DoR), to make a presentation on this Agenda item. The Joint Secretary, DoR gave a broad picture of the GST revenue from September, 2018 to November, 2018 and also the trend of return filing of GSTR-3B till due date and till date for the return period upto October, 2018. He also informed that a corrigendum had been issued and circulated in Volume-3 of the Detailed Agenda Notes making corrections in Table 4 of the Agenda item showing trend of GSTR-3B filing where the figures in the last two columns had got jumbled up inadvertently. On the revenue position, he state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would come down only when taxpayers utilised the input tax credit to pay CGST and SGST, which would lead to regular apportionment for IGST amount. He stated that now ad hoc settlement of IGST was being done even if the input tax credit was lying in the taxpayers' credit ledger. The Hon'ble Deputy Chief Minister of Delhi agreed that in the system being presently followed, all the States including Delhi and Puducherry were getting the due money (b but Delhi did not get the full amount due to it before March, 2018. The Secretary stated that there was only one ad hoc settlement during the last financial year and the net amount accounted in the Consolidated Fund of India had to be devolved to the States by 31 st March 2018. He explained that from the current year onwards, the situation would be different as ad hoc settlement was being done regularly. The Hon'ble Deputy Chief Minister of Delhi stated that earlier too, he had raised this issue several times in the Council. He stated that it was earlier decided that ₹ 1.60 lakh crore of IGST would not be kept in the Consolidated Fund of India but the same was suddenly taken in the pool of the Consolidated Fund of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i would not have suffered net loss. The Hon'ble Chairperson stated that the Hon'ble Deputy Chief Minister of Delhi raised a point that if ₹ 1.6 lakh crore had not been put in the Consolidated Fund of lndia, Delhi would have got a higher share of revenue. He suggested that a workable solution could be found out by discussion between the Revenue Secretary and the concerned Secretaries of Delhi and Puducherry. The Hon'ble Chief Minister of Puducherry stated that this amount could have been kept in a separate account as the two Union Territories could not be deprived of their rights. The Hon'ble Chairperson stated that it was done by virtue of the Constitutional provision. 12.6. Shri D. Jayakumar, Hon'ble Minister from Tamil Nadu, stated that on this issue, they had also written to the Hon'ble Prime Minister to settle the issue of ad hoc settlement. He added that their estimate was that they would get additional ₹ 3,000 crore for the previous year alone. Dr. T.V. Somanathan, Commissioner (State Tax), Tamil Nadu stated that the issue was not only for the Union Territories; 50% of the balance amount lying implicitly comprised SGST. If it had been se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooked at keeping in mind July, 2022 and not May 2019. 12.8. Dr. T.M. Thomas Isaac, Hon'ble Minister from Kerala, concurred with the points raised by the Hon'ble Minister from Punjab and stated that the revenue position should be thoroughly reviewed. He added that the complaint of the Hon'ble Chief Minister of Puducherry should be seriously deliberated and a Group of Minister (GoM) should be constituted to look into ad hoc distribution of IGST. He further stated that the overall revenue position of GST was below expectations, even more so for the Central Government, which raised a serious question regarding the so-called revenue neutral rate concept that one was supposed to have. He stated that the trend of overall revenue had been on the downward side and it crossed ₹ 1 trillion only two times since GST implementation. He added that in the last two months, the revenue trend had come down further. He stated that the revenue trend had been further affected due to slashing of the tax rates in the Council and the way of implementing it. He observed that as the Finance Minister of a State, he would not have found it appropriate to slash the rates as frequently as ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018. The Joint Secretary, DoR .stated that it could be inferred from the table that the high shortfall States were Puducherry, Himachal Pradesh, Uttarakhand, Bihar, Punjab etc. The previous Union Finance Secretary had visited the top six revenue shortfall States and had analysed the reasons for the shortfall. He observed that some of the big gainers of revenue were the North-Eastern States. Some of the larger States like Maharashtra, Tamil Nadu, Telangana and Andhra Pradesh were also doing better than the national average. The Hon'ble Chairperson observed that States like Haryana, Uttar Pradesh, Rajasthan, West Bengal and Sikkim had also improved their revenue performance during April, 2018 to November, 2018 as compared to that during August, 2017 to March, 2018. He observed that as compared to last year, the overall revenue performance was better this year but some States like Delhi had shown a poor performance this year compared to the last year. 12.11. The Hon'ble Deputy Chief Minister of Delhi stated that one of the reasons for revenue shortfall in his State was that during pre-GST era, sales from godowns were taxed at the first point of sale. However, in GST regime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uming States should have performed much better in revenue collection. Some manufacturing States were also consuming States. He added that the CBIC had country wide data and they should bring out an analytical report. He further stated that prior to GST, Service Tax collection was suboptimal due to paucity of staff in CBIC. The revenue collection from Services could be improved in the GST era and for this, they needed Service Tax collection data of the pre-GST period which should be shared by CBIC with the States. He added that revenue for consuming States would be based on IGST which in tum depended upon effectiveness of e-Way bill system and curbing of large-scale under-valuation of goods like marbles, garments, building material, etc. which would help to augment GST revenue. He informed that Kerala had earlier a floor price system which had gone and this was encouraging under-valuation as there was no such system in place. He suggested to review the rules of e-Way bill system regarding valuation and also address the problem of double run on the same e-Way bill. 12.15. The Hon'ble Chairperson stated that revenue from Service Tax post-GST was a disappointment but there were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing was extended by five days. He added that as seen from the trends, it could be seen that many States came in the range of 50% to 60%. He stated that Punjab, UT of Chandigarh, Uttar Pradesh Gujarat etc. had shown a high level of return filing whereas some Union Territories and the North-Eastern States had shown a low return filing rate as some of them did not have VAT before GST. 12.18. Shri Nitinbhai Patel, Hon'ble Deputy Chief Minister of Gujarat, raised a question as to why revenue collection in some States like Punjab was low even when return filing percentage was high in these States. The Hon'ble Minister from Punjab stated that they were also not able to clearly figure out the reason for this. The Hon'ble Chairperson stated that he had received feedback that in Punjab, bulk of the revenue even on the direct tax side, came from the public sector undertakings; the local trade and industry was contributing marginally to the direct tax collection. The Hon'ble Chairperson asked Shri V.K. Garg, Advisor (Financial Resources) to the Chief Minister, Punjab, to explain the reasons for Punjab's low revenue collection. 12.19. The Advisor (Financial Resourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on stock transfers. Thus, his estimate was that most of the States had a prevalent VAT rate of 18% at the higher end which had now become 9% (as SGST) and VAT rate of 6% (together with similar cascading) had become 2.5% or 6% SGST at the most. This had an impact on the revenue front. He stated that Punjab's primary problem was the mismatch between ratio of Punjab's share of GOP in the Country's GOP when compared 'with Punjab's GST revenue vis-a-vis country's total GST revenue. He added that share of Punjab in the country's GDP was 2.8% but its share of GST revenue was only 2.4%. This automatically neutralized all factors such as Purchase Tax. Since his State was getting lesser revenue than anticipated as per its share of GOP, this indicated some structural problems. One such problem could be in the Place of Supply (POS) Rules due to which some revenue of Punjab was going to other States. He gave an example of POS Rules for international travellers for which the place of supply was where the passenger embarks on the aircraft, which was mostly a metropolitan city. Similarly, in telecom sector, for prepaid electronic recharges done through Paytm, if addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would need to be in the range of 40% to 45% of the previous collection which was very high. The Hon'ble Minister from West Bengal stated that it was true that his State had performed better in revenue collection. This was partly due to large scale use of e-taxation prior to GST roll out which was also acknowledged by the Government of India. He stated that this had led to easier migration of middle and larger level VAT registrants and the number of new taxpayers had also climbed up rapidly. He added that a lot of work had also been done by officers for augmenting revenue. However, due to nonmatching of invoices, lot of false claims of input tax credit were being made and a holistic approach was needed to address this problem. He suggested that instead of ocularly looking at data and comparing them, there should be an analysis through statistical tools like chi square to analyse any statistical difference of collection figures between the two periods indicated in Table 3 of Agenda notes. 12.24. The Hon'ble Minister from West Bengal further observed that the Hon'ble Ministers from Punjab and Kerala had rightly observed that the GST rates were being varied without muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld conduct this analysis. Shri Jagdish Chander Sharma, Principal Secretary (E T), Himachal Pradesh stated that revenue gains for the consuming State like theirs was not as expected. He added that due to strong enforcement, they had collected about 21% more revenue from IGST and SGST during September-October 2018. His State had a better national average of e-way bill generation as compared to the registered taxpayers in the State. He expressed that in the next three months, with better enforcement, their revenue performance should improve. He also supported the formation of GoM for revenue analysis. I 12.27. The Hon'ble Minister from West Bengal stated that the analysis should consist of three things namely data mining like chi square test, causal modelling through regression analysis and examination of the structure under which it is happening i.e. the IT structure. He suggested that either a white paper should be published on GSTN or a GoM should be constituted to examine these issues. He added that about 300 crore invoices were supposed to be uploaded per month on GSTN portal and these were supposed to be matched but we had not been able to go to the stage of GSTR-2 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minister from West Bengal stated that post-refund revenue collection figures should be taken into account. 12.31. The Hon'ble Chairperson suggested that a GoM consisting of about seven members along with experts from the Central and State Governments and research organisations like NIPFP could be constituted to analyse the revenue collection and structural issues relating to revenue shortfall keeping in view the suggestions made by the Members. The Council agreed to this suggestion. 13. For Agenda item 5 , the Council took note of the presentation on the revenue collection for the months of September to November 2018. It also agreed to constitute a 7- Member Group of Ministers along with experts from Central and State Governments and research organisations like National Institute of Public Finance and Policy (NIPFP) to analyse revenue related issues and the structural reasons for shortfall keeping in view the suggestions made by the Members. Agenda Item 6: Issues recommended by the Fitment Committee for the consideration of the GST Council 14. Some preliminary remarks were made before substantive discussion on this Agenda item took place. The Hon'ble Ministe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of the Hon'ble Prime Minister could be dissected from various angles and it needed to be remembered that the Council was a Constitutional body. However, in deference to the suggestion of the Hon'ble Chairperson, the discussion could move on. 14.3. The Hon'ble Chief Minister of Puducherry stated that the Members should be allowed to make observations. The Hon'ble Minister from Assam stated that indirectly the Members were making avoidable observations on the views expressed outside the Council. He added that many things had been stated against GST and it would be advisable not to bring outside issues into the Council. The Hon'ble Minister from Goa added that all Members should think and work in a constructive spirit with a view of one Nation, one Tax. 14.4. After this preliminary discussion, the Secretary introduced the Agenda Item 6. The Hon'ble Minister from Punjab stated that the Agenda Item listed at S.No.4 of Annexure II regarding GST on licence fee charged for liquor licences stood withdrawn but he recalled that the issue regarding tax on liquor was discussed and decided during the Meeting of the Council held in Jammu Kashmir but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster from Kerala requested to take up the agenda item wise in a systematic manner. 14.7. The Secretary explained the contents of Agenda Item 6. He stated that Annexure I contained recommendations for making changes in GST rates or for issuance of clarification in relation to goods; Annexure H contained recommendations for making changes in GST rates or for issuance of clarification in relations to Services; Annexure III contained issues where no change had been proposed by the Fitment Committee in relation to goods; Annexure TV contained Issues where no change has been proposed by the Fitment Committee in relation to services and Annexure V contained issues relating to services referred to GST Council for decision. He added that issues covered in Annexure V were again discussed by the Fitment Committee on 21 st December, 2018 as there was near consensus in its last meeting on 15 th December, 2018 and after further discussion, the Fitment Committee had reached an agreement on these issues. 14.8. The Hon'ble Chief Minister of Puducherry enquired regarding the number of items that were presently in the tax slabs of 18% and 28%. Shri G.D. Lohani, Joint Secretary (TRUI), CBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in 2004, though the target year was 2005-06. Karnataka has also consistently been a revenue surplus State and its fiscal deficit had been 2.1% to 2.8% whereas many States had crossed the 3% mark. In terms of share of his State's GSDP, it was 17% in 2013-14 and today it stood at 18.7%. He stated that in 2014-15, the revenue growth was 13.91% and in 2015-16, it was 9.8%. He added that the State had now been suffering a consistent revenue shortfall of 21%- 22% below the protected revenue rate. He added that the revenue protection was below the previous VAT growth rate. In the pre-GST period, the VAT growth rate for various years was as follows: 19.43% (2006-07), 15.75% (2007-08), 5.25% (2008-09), 11.98% (2009-10), 27% (2010-11), 23.90% (2011-12), 13.70% (2012-13) and 14.98% (201 3-14). 14.10. The Hon'ble Minister from Karnataka further stated that when the State was solely responsible for its tax policy, its revenue growth was high and it was expected that in GST, there would be greater tax buoyancy whereas now the revenue growth stood at 7%-8% in nominal terms. The State had surrendered its sovereignty by implementation of GST on the understanding of higher revenue gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier meetings of the Council, rates of many items had been reduced. He suggested that the Council should postpone proposals for changes in tax rates. He further added that without due analysis, the change in the rates would either be based on some convention or populist decisions. In this regard, he drew attention to the proposal regarding reduction in the rate of tax on marbles, and stated that the differential between marble pieces and marble slabs would cause a problem. 14.13. The Hon'ble Deputy Chief Minister of Gujarat stated that at the beginning of the implementation of GST, it was decided to keep a rate slab of 28% and to review the same as per need and experience. The changes in tax rates could be considered based on representations received from customers, manufacturers, or other stakeholders. He added that now more than one year had passed since the implementation of GST and the impact of the rates on the revenue trend and on the people at large could be seen. He advised that the process of rate rationalisation should not be stopped and suggested that the proposals of the Fitment Committee should be discussed one by one and decision taken on each of them. He stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigated why revenue was d9wn and whether this revenue was going somewhere else. He stated that with the level of consumption and manufacturing capacity that lndia has, GST legislation was working well, which was also attested by the healthy revenue figmes. Forms and returns were being rationalised. In the long run, one should try to have one rate except for sin goods, as is prevalent in other countries. 14.16. Shri Rajesh Kumar Agarwal, Hon'ble Minister from Uttar Pradesh, stated that GST Council is a Constitutional body. The Fitment Committee had made its recommendations after due consideration and these should be accepted, particularly for items like fly ash. Shri Sushi! Kumar Modi, Hon'ble Deputy Chief Minister of Bihar, stated that he worked as Finance Minister during introduction of VAT in 2005 and at the time of implementation of VAT, compensation was only for three years, that too in a graded manner. However, the experience was that after two years, no State needed compensation. He observed that in GST too, the revenue shortfall had declined from 20% to 10%. The smaller States had done well in revenue collection. The manufacturing States, who were most fearful a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut ₹ 48,178 crore on an average of ₹ 6,000 crore per month, which amounted to about ₹ 72, 000 crore annually and if the same figure was extrapolated for this year, then it would amount to approximately ₹ 83 ,000 crore in the current year. He stated that the compensation paid this year so far in the first 6 months was ₹ 30,000 crore and for the whole year, it was expected to be ₹ 60,000 crore. This indicated that the revenue position was improving. 14.18. Shri C.P. Singh, Hon'ble Minister from Jharkhand, stated that he had been attending the Council Meetings since very beginning and many Members who, in the past, had suggested rate reduction were today expressing reservation to reduce the rates. He stated that this was understandable politically. On merits, there could be reservation for reducing the rate of tax on items such as billiards but there could be no objection to reduce the rate of tax on items like walking sticks, fly ash blocks, etc. He expressed his support for the proposals for tax reduction. He also suggested that the small print media should be exempted from tax while they should continue to pay tax on advertisements, ink bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems which was recommended by the Fitment Committee, then he was in support of it. He expressed his reservation on the practice of placing some Table Agenda directly in the Council. He did not support such Table Agendas and stated that it should always come through the Fitment Committee or the Law Committee. He further stated that the other option was that once the study was completed, action could be taken on the recommendations of the Fitment Committee. He stated that his first preference was to understand the issues after the study was conducted and then the Fitment Committee to make its recommendation. He suggested that in any situation, at least the decision regarding the Table Agendas should not be taken up by the Council. 14.21. The Hon'ble Minister from West Bengal further stated that input tax credit had been allowed on textiles but it was still not allowed for railway wagons. The tax on inputs for wagon making was at the rate of 18% whereas wagons were taxed at the rate of 5%, which led to accumulation of input tax credit. For textiles, refund of input tax credit had been correctly allowed and the same should also be considered for wagons. He stated that in its abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been pegged at 14% whereas initially discussions also took place to analyse and consider the average of the last three years of pre-GST revenue for safeguarding the revenue of the States. He stated that the assured 14% annual growth rate was a generous gesture by the Centre and it was very challenging to reach 14% growth rate year-on-year basis in the present conditions. He observed that the recommendations of the Fitment Committee were not very heavy and these were limited to small items like walking sticks, music books, etc. The principle being suggested to first do a study and then consider rate reduction need not be adopted as the Council was competent to take decisions. He stated that today a grim picture was being painted and it was being linked to 2022 and several Members who had earlier supported the rate reductions were opposing it today. He suggested that the recommendations of the Fitment Committee should be discussed one by one and the Council should reject those proposals for rate reduction where the revenue loss was high. Rejecting all the proposals would lead to loss of dynamism of the Council. As regards the Table Agenda, he stated that the proposal to raise the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been done slowly. He stated that amongst three categories of goods in the 28% rate segment, there was total consensus to maintain status quo of rate in regard to two important items which were important for revenue i.e. cement and auto parts and also on sin and luxury goods. As regards other items, one needed to see what could be done and what need not be done. He added that the revenue impact for the proposed rate reductions would be less than ₹ 500 crore per month. As regards the Table agenda, he stated that the Council should discuss to understand their implications even if it was not decided during this meeting. 14.27. After these discussions, the Secretary invited the Joint Secretary, TRU-1 to take up discussion on the items covered under different Annexures of the Agenda Note. The discussions that took place on specific issues is recorded herein below. Annexure I (Part 'A') Pulleys, Transmission shafts and cranks, gear boxes etc. (S.No. 1): 14.28. The proposal was to reduce the rate of tax on these goods from 28% to 18%. The Hon'ble Minister from Kerala inquired whether all auto parts would now be taxed at the rate of 18%. The Secretary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er from Karnataka inquired regarding the revenue implication due to rate reduction on television monitors. The Joint Secretary, TRU-I stated that the revenue implication estimated was about ₹ 1500 crore annually. He added that reduction in rate on this product was proposed as televisions of up to 68 cm size hardly existed. The Council agreed to reduce the rate of tax on monitors and televisions of size up to 32 inches from 28% to 18%. Power Banks of lithium ion battery (S.No.16): 14.32. The Joint Secretary, TRU-1 stated that it was proposed to reduce the rate of tax on this item from 28% to 18% to reduce litigation and to bring the rate at par with lithium ion battery. He stated that this item was also used in electric vehicles. The Hon'ble Minister from Karnataka inquired whether this rate would also be applied to electric vehicle batteries. The Joint Secretary, TRU-1 clarified 1tbat electric vehicle batteries of lithium ion were already taxed at the rate of 18%. The Council agreed to the proposal to reduce the rate of tax on Power Banks of lithium ion battery from 28% to 18%. Digital cameras and video camera recorders (S.No.17): 14.33. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be ₹ 161 crore annually. The Hon'ble Minister from Kerala stated that in future, the Fitment Committee must indicate revenue loss for any proposal of rate reduction as also the pre-GST rate. The Hon'ble Chairperson suggested that the recommendation of the Fitment Committee should have a, column regarding the amount of revenue involved in the proposed rate reduction as well as pre-GST rates. The Council agreed to this suggestion. 14.37. The Hon'ble Minister from Kerala stated that rubber wrappers to collect latex should be taxed at the rate of 5% as it was just a cup. The Hon'ble Chairperson suggested that this could be taken up in the Fitment Committee. He also added that any other suggestion for rate reduction should be given in writing. He also suggested that Council could agree to the proposals on rate reduction where there was consensus amongst officers of the fitment Committee. The Council agreed to this proposal. 14.38. The Council agreed to rate reduction of all the items listed at S.No. 1 to 22 of Part 'A' of Annexure I with the addition in Sl. No. 11 that exemption of GST on auction proceeds should also apply to gifts received by pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as by bakeries etc. and having two different slabs based on the selling price would lead to evasion of tax and would also have significant revenue implication. In this context, the Hon'ble Minister from Uttarakhand stated that earlier too, he had submitted that glucose biscuits were energy biscuits used by the poorer sections of society. He added that low priced biscuits having maximum selling price not exceeding ₹ 100 per kg. was used by these class of people and was an affordable means of nutrition and was sold in packs of ₹ 2, ₹ 3 and ₹ 5 each. Therefore, a reduced GST rate for biscuits having sale value up to ₹ 100 per kg. would be in the larger interest of the society. He added that such biscuits were earlier exempted from Central Excise. It was also relevant to note that GST rate on footwear, apparels and hotels was also based on price-based classification and a similar provision could be considered for the rate of tax on low priced biscuits (price not exceeding ₹ 100 per kg.). This could be taxed at the rate of 5%. He suggested that the recommendation of the Fitment Committee rejecting the proposal for reduction in the rate of bisc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o giving compensation to the local governments on the basis of GST rates. Commissioner (State Tax), Tamil Nadu informed that they levied local body taxes along with GST on entertainment. The Hon'ble Minister from Karnataka recalled that earlier, consensus in the Council was to dissuade the local bodies from levying local entertainment tax. The Hon'ble Minister from Kerala suggested that a corollary decision must be taken that all cinema tickets should be electronic tickets. He added that the local government had withdrawn from taxation and, therefore, no revenue was accruing from this account. He added that the State should be given right to issue electronic tickets. The Hon'ble Chairperson stated that there should be an enabling power to issue electronic tickets. The Hon'ble Minister from Kerala suggested to frame rules in this regard. The Hon'ble Chairperson suggested that the Council could agree that States are entitled to issue electronic tickets and that the Law Committee should formulate rules in this regard. The Council agreed to the rate reduction and to the suggestion made by the Hon'ble Chairperson. To exempt or reduce GST rate on transport of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants which would cover Members of Parliament, MLAs as well as government officials; (ii) All requests for reconsideration of rate of tax on goods and services to be sent in writing to the Fitment Committee/GST Council Secretariat; (iii) Fitment Committee to reconsider the rate of tax on low priced biscuits (price not exceeding ₹ 100 per kg.) and to examine the reduction in the rate of tax on rubber wrappers to collect latex to 5%; (iv) States are entitled to issue electronic tickets and that Law Committee to formulate rules in this regard; (v) The proposals of the Fitment Committee involving rate reduction shall have a column regarding the amount of revenue involved and also the combined pre-GST rate; (vi) On ENA, status quo to be continued till the Council took a decision on this issue, i.e. Extra Neutral Alcohol supplied for industrial purpose shall attract GST at the rate of 18%. Agenda Item 7: Issues recommended by the Law Committee for the consideration of the GST Council 16. Introducing this Agenda item, the Secretary informed that the issues under this Agenda item were discussed in detail in the Officers meeting held on 21 st December 2018 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the brick kiln (number of paye) irrespective of the turnover. In GST, a general option of composition is available to such manufacturers based on turnover rather than capacity. He stated that during the VAT period, the tax collection from brick manufacturers was ₹ 12 crore but in the GST period, it had declined sharply to ₹ 2.71 crore. 16.3. With regard to Agenda Item 7(v) (Issue No.8), the Hon'ble Minister from Uttarakhand in his written speech stated that there was considerable delay on the part of the Government in making payments due to paucity of funds and also the urgency in discharge of welfare commitments. There is a continuous complaint from works contractors providing services to the Government about the consistent delay in receiving their payments and it was affecting them adversely. He stated that it would be in the interest of these contractors to make the proposed amendment in order to avoid blockage of capital and to prevent them from becoming liable to pay late fee and interest. He, therefore, urged the Council to reconsider this issue. 16.4. After this preliminary discussion, Shri Upender Gupta, Commissioner (GST Policy Wing), CBIC made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate or anyone else. However, when there was conflicting ruling by AAARs of two or more States, there should be a right to appeal by Centre or State or anyone else to a Centralised Appellate Authority of Advance Ruling (CAAR). The Hon'ble Minister from West Bengal stated that there must be representation of the States in the Appellate body. The Hon'ble Chairperson stated that to constitute the CAAAR, the necessary procedural changes in the GST 'Laws should be prepared and recommended by the Law Committee and the same could be brought in the next Finance Bill. He added that the corresponding draft should be prepared for States also. 16.7. The Hon'ble Deputy Chief Minister of Gujarat stated that if two different rulings were given by AAR of two States, a time-limit should be prescribed to decide the appeal. The Hon'ble Chairperson stated that one should not have provisions to encourage further appeal. Appeal should only lie in cases of conflicting decisions of two or more AAARs. For hearing appeals in such cases of conflicting decisions of AAARs of different States, the centralised Appellate Authority for Advance Ruling (CAAAR) could have a part-time Chairman fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut tax credit at the time of purchase i.e. even before the tax was due to be paid by the supplier. The Hon'ble Deputy Chief Minister of Bihar stated that the present provision of filing quarterly return and making monthly payments existed during the VAT regime even for small taxpayers. He observed that it was easier to deposit tax monthly and it should not be an issue for the taxpayers to deposit the tax. 16.10. The Hon'ble Minister from Uttar Pradesh stated that agreeing to this proposal would -f benefit the medium and small enterprises. The Hon'ble Minister from Karnataka stated that already a very significant concession had been given to small taxpayers to file quarterly return and now a mid-course correction would destabilise the system. He added that, since a new return system was in pipeline, these taxpayers should continue to make monthly payments and multiple changes in the system should be avoided. The Hon'ble Minister from Kerala stated that if input tax credit was allowed without payment of tax, this could lead to loss of revenue as some taxpayers could vanish. The Hon'ble Minister from West Bengal also suggested that tax payment should be made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly is those supplies which are naturally bundled and therefore the tax would have to be charged based on the principal supply such as a hotel accommodation where breakfast was also provided within the same room rent. He added that the hospitals could be billing in two ways i.e. either they gave a breakup of individual consumables or medicines and charged separately for the health care services and the other like a composite supply. He suggested that the issue should be considered afresh and requested to drop this entire proposal pending further examination. The Hon'ble Chairperson suggested that this could be further discussed in the Law Committee. The Council agreed to this suggestion. (iv) Agenda Item 7(xxi): Reduction in amount of late fee leviable on account of delayed furnishing of FORM GSTR-1, FORM GSTR-3B FORM GSTR-4 for the months/quarters from July 2017 to September 2018 , 16.14. The Commissioner (GST Policy Wing), CBIC stated that two alternative proposals were discussed by the officers during the meeting on 21 st December 2018. The first alternative was that the late fee may be completely waived off for FORM GSTR-1, FORM GSTR-3B and FORM GSTR-4 for the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers, etc. were not professionals. They had to pay 18% tax and as they did not have much of input tax credit, this tax( incidence was passed on to the customers. All this led to evasion of tax. He added that there were only 49,000 registrants as service providers with annual turnover upto ₹ 1 crore. He stated that professionals in the services sector were completely becoming cash-centric and, in order to get them into the tax system, it was desirable to have a composition scheme on the lines available for the small traders. This composition scheme could be limited to a smaller annual turnover of ₹ 50 lakh and tax rate could be 5% or 12% given the fact that about 50% of the tax was normally paid through input tax credit. He added that those in favour of taxing such composition taxpayers at the rate of 12% had, instead, agreed to create a new rate of 9%. However, it would be better to continue with an existing rate, say 5%. 16.17. The Hon'ble Minister from West Bengal observed that the proposed annual turnover of ₹ 50 lakh was very low. The Hon'ble Chairperson inquired whether the limit of annual turnover should be increased to ₹ 1 crore. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nadu in his written speech stated that in respect of the proposal to allow composition levy for small service providers, keeping in view the high percentage of value addition for such taxpayers, he suggested that the Composition rate could be high, say 15%. 16.21. The Hon'ble Minister from Uttarakhand in the written speech circulated during the Council Meeting stated that in the interest of the petty contractors supplying to the Government, it was suggested that they must be given a provision to opt for composition as has been given to the restaurant services. This would make the procedure simpler. Earlier in the pre-GST regime also, there was a composition scheme for contractors to pay in lump sum in lieu of tax. He urged the Council to consider this provision. 16.22. The Hon'ble Minister from West Bengal stated that he was strongly in favour of a composition scheme for small service providers but the data regarding the revenue from such service providers was not clear and one should look at the numbers as to how many pure service suppliers would be covered, if their annual turnover was taken as ₹ 50 lakh and ₹ 1 crore. He stated that in-principle he agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efunds had been sanctioned, payments were getting delayed. Once refund was sanctioned, payment was needed to be made quickly. He pointed out that in income-tax, refund came to the taxpayer's account through the electronic system. The Hon'ble Minister from West Bengal stated that money should go to the taxpayer's account digitally. 16.25. The CEO, GSTN explained that refund of exports by the Customs was totally automated. Customs department checked the Shipping Bill and after its correctness was verified, the scroll went to PFMS for refund. The same process would be carried out under GST. He added that the refund sanction would be done by the respective tax authorities only and the GST refund system could be connected to PFMS. The processing of refund claim would be done by the officers and then the payment advice would go through GSTN to PFMS. The Hon'ble Deputy Chief Minister of Bihar stated that the proposed new system would be much better as the applicant would get refund payment from one authority. He suggested that the Council may agree to it. The Hon'ble Minister from West Bengal stated that in case of export refund, a physical paper was being dealt wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me issue in respect of a taxpayer having the same Permanent Account Number (PAN) and registered in two or more States (i.e. as distinct persons), an appeal shall lie to a separate part-time appellate body (CAAAR) consisting of a Chairman with a legal background and one officer each from the Central and the State Government' who has worked in the revenue department in the past; 17.4. For Agenda item 7(xv) , there will be no quarterly payment of tax for taxpayers with turnover upto ₹ 5 crore and, as approved earlier, they shall pay tax on monthly basis, and issue could be revisited, if required, when the new return filing system was in place; 17.5. For Agenda item 7(xvi) , the Law Committee to work on a formulation that wherever an exempted service was supplied which involved transfer of taxable goods to the service recipient, the service provider shall be liable to pay tax on such goods; 17.6. For Agenda item 7(xxi), to completely waive off the late fee for FORM GSTR-1, FORM GSTR-3B and FORM GSTR-4 for the months/quarters from July 2017 to September 2018 allowed to be furnished from 22 nd December, 2018 but latest by 31 st March 2019, but no refund of late f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat and Karnataka while views of the other States were awaited. 20.1. The Hon'ble Minister from Kerala enquired regarding the time frame by which the report of the GoM would be finalised. The Hon'ble Deputy Chief Minister of Bihar, Convenor of the GoM on Revenue Mobilisation, stated that they would hold another meeting during January, 2019 and submit a report of the GoM during the next meeting of the Council. 20.2. On the proposal of the State ofKerala to levy additional10% SGST in its own State for flood relief, the Hon'ble Minister from Tamil Nadu in the written 5peech circulated during the Council Meeting stated that he was, in principle, agreeable to the State-specific additional cess on the SGST of the particular State for the purpose of creating additional resource for funding for natural calamities and disasters through GST. He cautioned that such a cess or additional rate of tax should not be for an indefinite period and should be levied within the respective State and not be applicable on IGST payable on the goods when exported from that State. He added that system changes should not adversely affect the functioning of GSTN IT system in other States ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its Report shall be placed before the Council in its next meeting. Agenda Item 10: Status report of passage of SGST (Amendment) Bill, 2018 in various States and Union Territories with Legislatures 22. Introducing this Agenda item, the Secretary informed that the Council, in its 28 th Meeting held on 21 st July, 2018, had approved the proposal for amendments in the CGST Act, 2017, TGST Act, 2017, UTGST Act, 2017 and GST (Compensation to States) Act, 2017. While the Central Government and majority of the States had passed the Amendment Ac four States, namely Delhi, Meghalaya, Puducherry and Telangana had not yet a the SGST (Amendment) Act. During the Officers meeting held on 21 st December, 2018, it was informed that the Legislative Assemblies of Puducherry and Delhi had also passed the Amendment Bills on 18 th and 21 st December, 2018 respectively. The Amendment Bills were also expected to be passed shortly by the States of Meghalaya and Telangana. ln view of this, it was proposed to notify the Amendment Acts on 1 st February, 2019. The Council agreed to the proposal. 23. For Agenda item 10, the Council took note of the status of the passage of the SGST Amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 2018. Agenda Item 12(iii): Proposals for boosting real estate sector under GST regime by providing a composition scheme for residential construction units 30. The Secretary stated that in view of the difficulties faced by the real estate sector, it was proposed that GST at the rate of 5% could be prescribed without input tax credit for construction of residential complexes, buildings and civil structures for houses other than affordable housing projects. For houses in affordable housing projects also, GST rate of 5% could be prescribed without input tax credit. In the interest of revenue, certain safeguards were suggested, like 80% of inputs, capital goods and input services other than TDR (transfer of development rights) or similar rights shall be purchased from a GST registered supplier only and for purchases which are below 80% benchmark and are procured from unregistered persons, GST at the rate of 12% on reverse charge basis should be paid in cash by the registered person without any input tax credit. 30.1. The Hon'ble Chairperson stated that this Agenda item on real estate sector was placed before the Council in order to give boost to this sector. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for supplier of Goods (manufacturers and traders) under GST from existing turnover of ₹ 20 lakh to ₹ 75 lakh and from ₹ 10 lakh to ₹ 20 lakh for Special Category States in a year 32. Introducing this Agenda item, the Secretary stated that the present exemption limit for taking registration under GST was annual turnover of ₹ 20 lakh. However, this had caused compliance burden for small taxpayers. He added that in the pre-GST days, small manufacturers having annual turnover upto ₹ 1.5 crore were exempt from registration under Central Excise. For the smaller manufacturers, return filing had become burdensome. In view of this, it was proposed to increase the threshold exemption limit for suppliers of goods (manufacturers and traders) from the existing annual turnover of₹ 20 lakh to ₹ 75 lakh and from ₹ 10 lakh to ₹ 20 lakh for 'Special Category' States. 32.1. The Hon'ble Chairperson stated that this was an important issue and this could be considered in the GoM on MSME. The Council agreed to the same. 33. For Agenda item 12(iv) , the Council approved to refer this issue to the GoM on MSME for considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtant issues highlighted in the written speech are recorded herein below. 36.1. In the written speech of the Hon'ble Minister from Tamil Nadu, he suggested that taxpayers, who could not claim transitional credit due to issues other than IT glitches, namely clerical errors, entry of claim in the wrong table and so on, were filing writ petitions before the High Courts and getting directions to consider their representations. To resolve this problem, Tamil Nadu had proposed that the IT Grievance Redressal Committee itself could be mandated to deal with such non-IT glitch cases also. The IT Grievance Redressal Committee had resolved to bring a subject to the Council, but surprisingly this had not been done. He urged the Council to resolve this matter. He expressed agreement with most of the recommendations of the Law Committee, but on the proposal of single interface for disbursal of refund amounts, he stated that GSTN must devise a glitch-free module for refund. The State would prefer that the existing system of allowing claims of refund based on invoices which find place in FORM GSTR-2A should continue. He also suggested that the Hon'ble Chairperson should look into the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aggregate value of the consignment carried in a conveyance is more than ₹ 50,000. This provision was presently kept in abeyance. In the absence of this provision, transporters were taking multiple consignments of various dealers with each individual dealer's consignment being less than ₹ 50,000, but in aggregate it was far more, thus circumventing the spirit of law. He added that Uttarakhand has a very porous border near Hardwar / Bijnor / Muzaffarnagar / Saharanpur and also near Udhamsingh Nagar / Moradabad / Rampur / Bareilly. He stated that to check evasion, the State had earlier a system of trip- sheets, which covered every transaction/import irrespective of the value of goods. Now with no mandatory provision for online declaration for importing goods, if the consignment is of multiple persons with individual value less than ₹ 50,000, the capacity of the enforcement unit is drastically reduced. He also suggested that for goods, which are high in weight/quantity but low in cost, such as minor minerals, r iver bed material, soap stone and bricks, thee-Way bill should be based on weight/quantity rather than value. Agenda Item 13: Date of the next me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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