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TMI BlogMinutes of the 33rd GST Council Meeting held on 20th and 24th February 2019X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2. 2. A list of Officers of the Centre, the States, GST Council Secretariat and the Goods and Services Tax Network (GSTN) who attended the Meeting through video conferencing on 20th February, 2019 is at Annexure 3 arid those who attended the physical meeting on 24th February, 2019 is at Annexure 4. 3. The following agenda items were discussed during the 33rd Meeting of the Council. 1. Confirmation of the Minutes of 32nd GST Council Meeting held on 10th January 2019 issued by the Central Government 2. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued by the Central Government 3. Decisions of the GST Implementation Committee (GIC) for information of the Council 4. Decisions/recommendations of the IT Grievance Redressal Committee for information of the Council 5. Recommendations of the GoM for boosting Real Estate Sector under GST regime 6. Draft notifications and Removal of Difficulty order giving effect to the decisions of 32nd GST Council Meeting regarding MSME (including small traders) 7. Any other agenda item with the permission of the Chairperson i. Interim report of GoM on Lottery 8. Date of the next meeting of the GST Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism to resolve the issues where serious difference of opinion arises among the Members was also discussed. He further cited Rule 15 of Chapter VI of the Rules of Procedures and Conduct of Business in GST Council which deals with 'Division' and stated that it was unfortunate that the decision was being taken based on the interim report of GoM on Lottery when many Members including him were unable to attend the meeting of the GoM on Lottery. He added that the meeting of the GoM was held inspite of his and Punjab Minister's request to the Convenor of the GoM to postpone the meeting by a few days. He informed that due to health reason and doctor's advice, he was unable to travel and the Hon'ble Punjab Minister was presenting his Budget on the day of the meeting of the GoM. He stated that due to the manner in which the decision was being taken, he wanted to give advance notice to seek a division on the proposal on lottery. He stated that as per the Rules of Procedure, if a division was to be made, it should be in a physical meeting. 4.3. Shri J. Syamala Rao, Chief Commissioner, State Tax (CCST), Andhra Pradesh stated that the Hon'ble Minister of his State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the issue should be discussed and decided in this meeting. 4.6. Shri Rajesh Agarwal, Hon'ble Minister from Uttar Pradesh wished the Hon'ble Chairperson good health and then stated that the issues of Lottery and Real Estate were discussed in the last meeting of the Council and both should be finalized in this meeting after discussion through video conference. Shri Anurag Goel, Commissioner, State Tax (CST), Assam stated that his Hon'ble Minister had instructed to convey that both the issues, namely Lottery and Real Estate, should be discussed through video conference and decided today. Shri C.P. Singh, Hon'ble Minister from Jharkhand stated that the issue of Real Estate was very important for his State and suggested that this should be discussed and decided today, so that action could be initiated from today itself. As regards the agenda on Lottery, he stated that his State did not have Lottery. 4.7. Shri Suresh Bhardwaj, Hon'ble Minister from Himachal Pradesh stated that Real Estate was a badly affected sector in his State and suggested that discussion on the issues relating to Real Estate sector should be held today through video conference so that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from Rajasthan stated that the GoM on Real Estate could not discuss the issues in detail and all members of the GoM were not present in its meeting. Hence, he did not agree with the findings of the GoM on Real Estate. He added that a meeting through video conference should only be for issues of urgent nature and this was not such an urgent issue. He further stated that States were not able to properly place their views through video conference and therefore suggested to defer this agenda item to be discussed during a physical meeting. 4.10. Shri Subodh Uniyal, Hon'ble Minister from Uttarakhand stated that he supported the recommendations of the GoM on Real Estate. He further added that his State did not have Lottery. Shri Wochamo Odyuo, Additional Commissioner, State Tax, Nagaland stated that they wanted the Agenda on Lottery to be discussed and decided today. Shri Somesh Kumar, Principal Secretary (Finance), Telangana stated that his State had a robust Real Estate sector and they wanted an early decision for this sector and it should be decided today. As regards lottery, he stated that his State did not have any lottery. Shri K.K. Sharma, Advisor to Governor (in-charge Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Chairperson thanked all the Members for their good wishes. He then stated that there were 4 to 5 formal Agenda items which could first be taken up and then the issue of real estate could be discussed. During the discussion, it could be ascertained as to what was the extent of the difference of opinion and the extent to which it needed to be reconciled. He added that there was an urgency to decide the issue of Real Estate as this related to every State and lakhs of flats were lying unsold due to taxation issues. He stated that faster these issues were resolved, the better it would be for the States too. He suggested that the formal Agenda items could be done first and then the extent of divide or consensus on this issue could be ascertained. 4.14. The Hon'ble Chief Minister of Puducherry stated that the issue of apportionment of IGST to Puducherry and Delhi for the last financial year (2017-2018) had still not been resolved. In the last meeting, the Hon'ble Chairperson had requested the Revenue Secretary to deal with this matter. The Revenue Secretary had met the Finance Secretaries of Delhi and Puducherry but no consensus could be reached. He stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say that only if C&AG stated that the method of devolution was wrong, then the Government of India would act. This issue should not be dependent on the C&AG report as in principle, both Delhi and Puducherry should have got the fund and the money due to the States should have been distributed to them. The Hon'ble Chief Minister of Puducherry stated that the money lying in the Consolidated Fund of India during that time should have been distributed between the Centre and the States. He added that they were yet to get the settlement amount for the month of December, 2018 and January, 2019. He further stated that for a procedural mistake of the Union Finance Ministry, C&AG could not say much for the money which was due to them. The mistake occurred due to transfer of the IGST amount to the Consolidated Fund of lndia. 4.17. The Hon'ble Chairperson stated that he would meet the Hon'ble Chief Minister of Puducherry and the Hon'ble Deputy Chief Minister of Delhi along with their officers and, if possible, the C&AG, on any convenient date, in order to explore how to address this issue. He stated that C&AG had made detailed comments on the procedure that was followed whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from GST. He further stated that the present tax rate of 18% on handmade soap was quite high. He added that handmade soap was manufactured by small scale industries and by labour in the unorganized sector and that it was used by poor people in rural areas. Hence handmade soap should also be exempted from GST. The Hon'ble Chairperson observed that these requests should be examined by the Fitment Committee.' 6. For Agenda item 1, the Council decided to adopt the Minutes of the 32nd Meeting of the GST Council with the following change: 6.1. To insert a new paragraph 36.2. in the Minutes and to incorporate the following therein: 'The Hon'ble Minister from Uttar Pradesh stated that Dry Singhara was used by Sadhu-Sant, Kalpvasis and general public during Kumbh and other religious ceremonies during fast. Hence the State of Uttar Pradesh had requested time and again to exempt Dry Singhara from GST. He further stated that the present tax rate of 18% on handmade soap was quite high. He added that handmade soap was manufactured by small scale industries and by labour in the unorganized sector and that it was used by poor people in rural areas. Hence handmade soap should als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of 2019 Under the UTGST Act 1 of 2019 Orders Under the CGST Act 1 of2019 8.1. The Notifications, Circulars and Orders issued by the States which are pari materia with above Notifications, 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 9. Introducing this Agenda item, the Secretary stated that the decisions of the GIC post the 32nd Meeting of the Council were circulated to all States and was part of this Agenda item. He further stated that the presentation on the decisions of GIC was also circulated to the States (attached as Annexure 5 to the Minutes) in advance of the Council Meeting, and no comments had been received from any States. He stated that the decisions of the GIC were placed before the Council for information. 10. For Agenda item 3, the Council took note of the decisions taken by the GIC between 10th January 2019 (date of 32nd GST Council meeting) and 12th February 2019. Agenda Item 4: Decisions/recommendations of the 4th Meeting of the IT Grievance Redressal Committee for information of the Council 11. Introducing this Agenda item, the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vetoed. 13.1. The Hon'ble Deputy Chief Minister of Gujarat stated that as the GoM had submitted its recommendation before the Council, it should not be kept pending without discussion. Thus, discussion on it should be conducted so that the difficulty faced by this sector could be brought out before the Council. The Hon'ble Deputy Chief Minister of Bihar, supported the view and expressed his agreement with all the recommendations of the GoM and added that the tax rate of 3% proposed by the GoM on affordable houses may be reduced to 1%. He further drew the attention of the Council to mixed use projects i.e. projects having both residential and commercial property. He stated that the residential complexes also had some commercial activities like Kirana shop, vegetable shop, Parlor etc. within the same complex which catered to the needs of residents and hence 10% commercial property should be allowed in a residential complex and such mixed properties should be given the same treatment as proposed for the residential property. He also stated that Bihar supported the GoM proposal of exemption from tax to development rights like TDR etc. 13.2. The Hon'ble Minister from Punjab st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of tax @18% on premium for long term lease for completed property would create an absurd situation where the GST on premium would be higher than the proposed tax of 5% on the property sold after completion. Thus, the sector would be having double taxation i.e. under the State law as well as GST law and hence long-term lease and TDR be kept out of the GST for all purposes, leaving it to States until Real Estate sector was brought under GST. He further stated that the proposed operational part did not suggest any mechanism of reversal of ITC (Input Tax Credit) in respect of completed property; valuation of unsold property; valuation of apartment after issue of completion certificate, as with the passage of time, the apartment may fetch higher value. Further, introducing composition without ITC would result in huge evasion by booking credit against projects that were taxable. He stated that in view of the aforesaid observations, and also the fact that many issues remained to be clarified in the proposal such as 80% sourcing from registered taxpayers, whether it would be done project-wise or registration-wise; how would this 80% be apportioned between commercial and residential pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of black money. In fact, the Real Estate Sector wanted to be out of GST. He suggested to take a strong decision and bring the entire Real Estate sector under GST. The Hon'ble Minister from Rajasthan stated that when recommendation had not been examined by the Fitment Committee and the Law Committee, it was not correct to discuss such a proposal. Shri Priyavrat Singh, Hon'ble Minister from Madhya Pradesh also proposed a physical Council meeting for comprehensive discussions as the present proposal did not address the Real Estate Sector issue peculiar to rural and semi urban area, issues of mixed projects having larger commercial area or smaller area. Further, he stated that if tax was to be lowered to 5% on bigger buildings, then how poorer people were benefitting. 13.7. Shri D. Jayakumar, Hon'ble Minister from Tamil Nadu supported the recommendation of the GoM to levy the tax@ 3% or less without ITC for affordable housing property and @ 5% on non-affordable residential property. He also stressed on the need to reduce tax on safety matches and on job work for engineering goods. Shri T. S. Singh Deo, Hon'ble Minister from Chhattisgarh, stated that he disapproved a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be authentic as the component of cash and ITC may not be reliable; instead it was considered appropriate to analyze data obtained from NBCC which was a Government of India undertaking and they would have no cash dealing in their transactions and similarly, the States could consider obtaining data from State PWD and that the data from NBCC and PWD would be realistic to evaluate cash component for payment of tax as proposed. 13.9. The Hon'ble Minister from West Bengal drew attention to the data of tax rate and the tax paid in cash on page no. 173 of the agenda note where it was reflected that effective tax rate on the sector was 8.8% whereas the tax paid in cash was only 1.7 %. He stated that this limited data was also required to be examined in detail and proposed to have the meeting not before Wednesday. The Hon'ble Minister from Punjab applauded the decision of Hon'ble Chairperson to hold the meeting at a short notice and suggested to have the meeting on Sunday or Wednesday. He stated that the Fitment Committee or any other committee may come with a supplementary agenda on the issues which were raised during this meeting. The Secretary suggested that the Fitment Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayers supplying only goods. He stated that for this, a suitable provision in Law would need to be made. In addition, there would be a need to incorporate a provision of reversal of input tax credit for those service providers who opted for the new composition scheme. He stated that these two issues would need to be discussed by the Law Committee and then brought before the GIC for approval. He requested the Council to permit GIC to approve the recommendations of the Law Committee on these two issues. The Council agreed to the same. 15.2. Shri Saswat Mishra, CST, Odisha stated that in the draft exemption notification for enhancing registration threshold to annual turnover of ₹ 40 lakh, it appeared that it was a compulsory provision in law and that taxpayers could not opt for registration and pay tax if their annual turnover was less than ₹ 40 lakh. He, therefore, suggested to add another clause providing that this provision would not apply to persons seeking registration under Section 25(3) of the CGST /SGST Act. The Secretary stated that the intention was always to give an option to taxpayers with annual turnover below ₹ 40 lakh to take GST registration. If there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Jammu & Kashmir should be extended till 28th February 2019. The Hon'ble Chairperson suggested that the request of the State of Jammu & Kashmir could be agreed to. The Council agreed to the same. 18.1. The Hon'ble Deputy Chief Minister of Bihar stated that he had received information from many States that since the evening of 19th February 2019, difficulty was being faced in filing FORM GSTR-3B Return for January, 2019 due to technical glitches. He suggested to extend the date of filing FORM GSTR-3B Return for January, 2019 for the entire country by 1 or 2 days if the glitch was not resolved in the next one hour or so. The Secretary informed that approximately only 25,000 returns had been filed during the last one hour and he requested CEO, GSTN to further elaborate on this issue. Shri Prakash Kumar, CEO, GSTN stated that from 11.30 AM today, there had been issues relating to 'Captcha' which had slowed the process of return filing which normally at this time, should be about one lakh in an hour. He stated that his team was working to resolve the glitch. However, he recommended that the date of filing FORM GSTR-3B Return for January 2019 could be extended by 2 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting ended with a vote of thanks to the Chair. Minutes of the Meeting of 24th February, 2019 22. The thirty third Meeting of the Council reconvened on 24th February 2019 at Vigyan Bhawan, New Delhi under the Chairpersonship of the Hon'ble Union Finance Minister Shri Arun Jaitley (hereinafter referred as the Chairperson). 23. The following agenda items were discussed during the reconvened 33rd Meeting of the Council: (a) Agenda item 5: Recommendations of the GoM for boosting Real Estate Sector under GST regime (b) Agenda item 7: Any other agenda item with the permission of the Chairperson (i) Interim report of GoM on Lottery 24. The Hon'ble Chairperson stated that the 33rd Meeting of the Council was adjourned on 20th February 2019 to meet physically on 24th February 2019 and he welcomed everyone to the reconvened 33rd Meeting of the Council. At the outset, he informed that due to the ongoing Budget sessions in different State Assemblies, alternative Ministers had been nominated by four States and he finally welcomed them and stated that the Council would be enriched by their experience. These Hon'ble Ministers are: Dr. Banwari Lal from Haryana, Shri Mahender Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash in the real estate sector in different categories of housing and the sectoral revenue data pertaining to 7 major zones where the Real Estate Sector was concentrated so as to come out with recommendations in relation to the issue under reference. After detailed discussions, the Committee concluded that: i. As regards the definition of 'Affordable Housing', it already existed in the Notification relating to GST rates giving references such as of low-cost house up to 60 sqm in the erstwhile scheme of JNNURM, single residential units and houses under construction under PMAY, etc. Among these, a credit linked subsidy scheme of RBI was also there which covered houses for economically weaker sections, low income group houses, MIG-I and MlG-II houses having covered area up to 30 sqm, 60 sqm, 160 sqm and 200 sqm respectively. All these four categories, inter alia, were presently covered under the category of affordable houses as part of GST Rate Notifications. ii. Thus, the definition of 'Affordable Housing', should, inter alia, include the existing schemes of the State and the Central Governments covered under GST Notification No. 11 of 2017-Central Tax (Rate) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be deemed that the purchase had been done from a non-registered person. RCM payment to be done on pro-rata basis, every month, with final adjustment at the end of the year. Fitment Committee was also of the view that alternatively, the proposal might be simplified by shifting tax liability on entire unregistered purchases on the developers under RCM at the merit rate of each purchase. (f) There would be certain details required to be worked out vis-a-vis transition from the old tax regime of ITC based taxation to the proposed scheme of taxation. Following principles would be adopted, while drafting the Notification: - i. ITC would be available only to the extent (calculated on pro-rata basis) of the value of the supply made out of the total value of supply for the project till the appointed date. ii. ITC taken less vis-a-vis the supply made would be quantified and could be used to adjust the future tax liability; whereas ITC taken in excess of supply made (calculated on pro-rata basis) would be recovered. iii. The ITC with respect to work in progress and inputs lying in stock would lapse. The lTC balance lying in the ledger after paying the liability relating to supplies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompletion Certificate" might not be required (lTC not available). (i) The date of implementation of this scheme could be 1st April 2019. (j) As regards whether the scheme should be optional or mandatory, the Fitment Committee felt that having multiple methods of taxation would create complication. (k) The Fitment Committee also considered regarding any legal challenge for taxing TDR and concluded that there were none. (l) On the question whether the Real Estate should be brought under GST, the Fitment Committee noted that it involved larger issue of taxation which would require change in the Act and also possibly the Constitution of India. The Hon'ble Chairperson stated that possibly a Committee could be constituted to consider the issue of taxation of Real Estate. 25.2. Starting the discussion on the subject, the Hon'ble Minister from Punjab stated that in the Council meeting held on 20.02.2019, he had stated that there were certain operational and procedural issues which had been missed out from the Agenda that was circulated for discussion and the proposal was sub-optimal. Further, he gave the example of British Gen. Montgomery of the Second World War perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction as well as completed property on the same footing. The issue related to policy decision, but States would not be impacted by it as they would get Stamp Duty. 25.4. The second issue, he explained, was that the proposed solution should be such that tax administration should be able to implement it in a transparent manner, instead of placing different tax liability for different people in different situations leaving scope for manipulation and evasion. In the proposal, tax was leviable not only in different manner but also there were provisions for apportionment of credit, reporting and reversal of credit, making the whole scheme complex. He explained further that in the proposed solution, complications had crept in inasmuch as there were three categories of properties, viz. purely residential property, purely commercial property and the residential property having 15% commercial property. Further, within each category, there would be two sub categories, one under-construction properties and the second, properties being sold after completion certificate. Thus, every credit that accrued in the business would have to be apportioned in these sub-categories. Ordinarily, in an indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers under old project to pay tax at old rate but for the new projects, there should be no option and the proposed tax rate should be compulsory. He further stated that most of the problems of the Real Estate sector would be resolved with solutions proposed by the Fitment Committee and the remaining unforeseen problems might be resolved as and when they arose. 25.6. The Hon'ble Deputy Chief Minister of Gujarat stated that the GoM had recommended tax rate of 5% for non-affordable category of housing whereas 3% rate or lesser for 'Affordable Housing'. Accordingly, his request was that the Council should address these two issues first, including the definition of 'Affordable Housing' and discuss the other issues subsequently. In his opinion, the whole sector had become stagnant due to the problems in construction sector and that when the customers had come to know that tax rate might be reduced, they had stopped buying. Thus, he requested that issues relating to tax rate on non-affordable and 'Affordable Housing' and definition of metropolitan cities be resolved expeditiously by the Council and discussion on other issues could be taken up later. Shri Mahend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the ground of simplicity along with equity in the economy. His suggestion to the Council was therefore, to consider two tax rates of 5% and 7% in non-affordable category as against the GoM recommendation of 5% for all houses above ₹ 45 lakh which could pass the test of simplicity but not of equity. 25.8. As regards the second issue regarding the definition of 'Affordable Housing', he stated that in the presentation of JS, TRU-ll, there was a shift from earlier recommendation of GoM based on 'either area or price' to a criterion which was based on 'area and price' . Thus, effectively to the definition of Affordable Housing in different Notifications, an additional criterion of financial limit was being proposed. Hence, the question to be considered by the Council was should there be two criteria, i.e. area based as well as financial limit based or fulfilment of any one of the criteria would be sufficient to qualify as 'Affordable Housing'. The Hon'ble Chairperson explained that a reference to carpet area in the definition would be definitive whereas a reference to price would be open to misuse inasmuch as a ₹ 70 lakh worth property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y misused by obtaining labour, sandstone, chips, etc. from unregistered dealers which were by themselves evasion prone. Similarly, if the Capital Goods were not to be included in 80-20 calculation, the tendency would be to lease them rather than to buy them so as not to bring them into books of account. The proposal that in case the inputs were procured from a non-existent dealer, recovery would be made, was also questionable as to whether the proposal was promoting hawala and rent seeking behavior of officers would also come into picture. Similarly, the proposal regarding lapse of lTC could be circumvented by adopting ways to utilize the JTC for other goods and services. Summing up his arguments, he urged the Council to necessarily discuss and consider the proposal (a) on rates keeping equity and simplicity in mind; (b) whether the word "and' to be introduced or not in the definition of 'Affordable Houses' and that if a cap price of ₹ 35 lakh to ₹ 45 lakh was inserted in addition to the area-based definition, it would create problems. 25.11. The Hon'ble Minister from Kerala stated that he agreed with the arguments put forth by the Hon'ble Minister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prone to misuse. The Hon'ble Minister from Kerala stated that apart from the things discussed so far, he also had a serious difference with the proposition that there should be a GoM for recommending as to whether to bring land into GST and did not support the same. In his opinion, the States were not left with any revenue generating resources after the introduction of GST and in absence of that, the States had to explore areas to generate additional revenue like increasing registration charges on motor vehicles. He thus opined that the Council should evaluate the experience of GST before bringing any new items under GST. After GST, some flexibility was required so that State could realise resources during emergency requirements. Further, as regards the condition of 80% procurement from the registered dealers and allowing 20% from non-registered dealers, the question was as to when capital goods were not to be included in the calculation, should this limit not be raised to 90%. In the proposal before the Council, the value chain was proposed to be broken in order to have a revenue neutral rate but by breaking the value chain, the capability of tax administration to collect the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure and governmental support, and hence the tax rate in tier-II/III cities should be lower as compared to metro areas where rate could be upto 8% to maintain an equilibrium. The transitional provisions seemed to be complicated and needed to be simplified. Further, regarding TDR, he stated that it needed to be discussed in detail since of late, States' rights were being taken away one by one by the Centre and if the States' rights associated with the taxation on land were also taken away, they would lose revenue from registration. Therefore, he favoured constitution of a GoM to discuss the transitional issues as well as issues relating to TDR/JDA, etc. 25.15. The Hon'ble Deputy Chief Minister of Delhi stated that the current meeting to address the crisis in Real Estates Sector exemplified to the general public as to how GST Council would deal with a crisis in any Sector of economy. He further stated that inventory in the Real estate Sector was rising and he felt that it should be brought under GST as this Sector absorbed a lot of black money. The role of black money in this sector started right from the stage of mining of raw materials like sand, sandstones, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prices. 25.17. The Hon'ble Minister from Chhattisgarh stated that he had submitted in the last meeting that tax rate of 3% without ITC in Affordable segment would push up prices and that 1% rate was closest to the revenue neutral rate. This seemed to be confirmed from the data as analyzed by the Fitment Committee. The Hon'ble Minister from West Bengal stated that the presented data also showed that for premium housing, the revenue neutral rate seemed 7% to 8%. The Hon'ble Deputy Chief Minister of Delhi stated that as per the prevailing situation, there were more than 5 lakh houses ready, but could not be sold and hence, there was no doubt that the Sector required a push. However, the Council was going for a long-term decision relating to demand generation in the Sector, thus, minimum grey areas should be left. The Hon'ble Chairperson expressed agreement and stated that leaving loopholes would affect revenue of both the Central and the State Governments. The Hon'ble Deputy Chief Minister of Gujarat stated that as the situation currently existed, either the GST or State taxes were levied and collected on raw materials. If under-construction buildings having Before U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to a grinding halt leading to unemployment. The medium and low segment builders were all suffering and were on the verge of closure whereas the big builders were surviving as they knew how to survive when the cash flow was low. He again pleaded that ancillary issues relating to taxation of TDR/JDA and transition issues, etc. be discussed later. Further, consideration of Agenda should not be linked to elections but should be considered as a requirement of the industry. The most important thing to be noticed by the Council Members in the proposal was that there was no interference with the taxation powers of the land and rather the Council could discuss when to bring the land under GST at a later date. In the end, he appealed that in the past also, the Council Members bad varying views but these were resolved with extensive discussion in the interest of public which should be done in the present situation too. 25.20. The Hon'ble Minister from Chhattisgarh expressed his displeasure at the short time of about 15 minutes being available to read the report of the Fitment Committee which officers took one whole day to decide. He further stated that the Council Members had also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wondered whether with this 3% tax, the Council wanted to tax the Government and take the money back instead of supporting the poor. Further, in his opinion, the criteria to define the 'Affordable Housing' should take into account both area and value. As far as land was concerned, he considered it to be totally non-negotiable and taxation of land should not be touched at all. 25.23. Shri Sudhir Mungantiwar, Hon'ble Minister from Maharashtra stated that he agreed with the proposal to tax Affordable houses at 1% and non-affordable houses at the rate of 5% without ITC. He proposed inclusion of Mumbai Metropolitan Region (MMR) on the lines of inclusion of NCR along with Delhi and also of Pune in the list of metros. He further added that in his State, old Housing societies were required to go for redevelopment as buildings had become old and dangerous to live in. Similarly, there was a slum redevelopment programme in various areas of Mumbai. He suggested that these two models should be considered by the Council for being taxed only on the construction cost. He appealed to the Council to decide on this matter also rather than leaving it to the next meeting. 25.24. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Income Tax Act considered the long-term lease as a deemed sale. 25.27. He further stated that as regards the treatment of long-term lease under Service Tax, tax on leasing of vacant land or agricultural land was exempted from Service Tax. Entry 97 of the Schedule III of the Constitution under which Service Tax Act was enacted, was interpreted to provide that if anything was not liable to tax out of any Entry in the List-II, then tax could be levied under Service Tax. The Judicial fora had upheld that for certain aspects regarding land, it could be treated as land while some other aspects could be treated as service and hence taxation under Service Tax got legitimized. However, strictly speaking, land being in List-If, tax should not have been levied on the services associated with the land. It was settled that if additional tax was imposed on any sector, the capacity to exploit the Sector got reduced. When this issue was discussed in the Council, the prime question before the Council was as to whether the activity associated with the land was goods or service. It was certainly not 'goods'. Entry in the GST law defining the same as "services" was made but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axation of commercial lease was concerned, the same was not being affected by the current proposal inasmuch as the leasing of land for construction of residential houses was getting taxed in both situations, i.e. prior to as well as after this proposal. The only difference that had come was that lTC was not available in the current proposal. 25.29. Shri Himanta Biswa Sarma, Hon'ble Minister from Assam stated that it was correct that the Council had approved to tax under-construction properties at the rate of 12% and 8% for non-affordable and 'Affordable Houses' respectively. Thus, the issue whether land was a State subject or not should have been discussed at the time when the proposal of taxation was introduced. Currently, the Council was considering the proposal to bring the tax rate down from 12% with lTC to 5% without ITC and 8% with lTC to 1% without ITC. If the consumer got benefitted from this reduction, then it should be done, and if not, the Council could consider lowering the rates further. Thus, discussion on GST vis-a-vis land was not the subject for consideration and if it had to be discussed academically for bringing land under GST, a Committee or GoM mig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be available. Secretary explained that PMA Y covered the houses up to 160 to 200 sqm which were proposed to be left out of the definition of ' Affordable Housing'. He further stated that in some 'Affordable Houses', both individual and the Government contributed, while in some cases, the whole house itself was constructed by the Government and in such cases, there should not be any tax. The Hon'ble Chairperson explained that the Hon'ble Minister from Chhattisgarh had proposed a tax rate of zero whereas in a situation where zero per cent tax rate was kept, the benefit of Input Tax Credit would not be available. The Hon'ble Minister from Chhattisgarh replied that in the current proposal of taxation, the benefit of Input Tax Credit was being denied altogether. The Hon'ble Chairperson explained that keeping the tax rate of 1% would make a difference because zero tax rate would lead to a situation where due to absence of returns in that sector, issues of traceability of raw materials, misuse of schemes, etc. would arise. Thus, the tax rate of 1% had been suggested to rule out such a possibility. 25.32. The Hon'ble Chief Minister of Puducherry sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction and whether value limit could be taken as ₹ 60 lakh in metro areas and include Mumbai Metropolitan Area and Delhi NCR in the definition. The Hon'ble Minister from Chhattisgarh requested that he would still request that there should be some Housing schemes which should be exempted from GST altogether such as houses up to the value of ₹ 30 lakh. The Hon'ble Chairperson stated that the Members in the Council had often discussed the issues at length and come to a conclusion by stepping back from their stated official position to arrive at a consensus in the interest of common people. He suggested to observe how the decision panned out and stated that the issue raised by the Hon'ble Minister from Chhattisgarh regarding a threshold below which there should be no tax for under construction property could be revisited at a later date, if so required. 25.35. The Hon'ble Chairperson further stated that apart from tax rates, 2-3 more issues remained to be decided like when computation of 80-20 to be done and also the date from which the new tax rate should be made applicable. He further stated that if the Council Members agreed, the date of implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the members would be busy with elections and there were some procedural issues to be sorted out relating to TDR, appointment and reversal of credit, Council might mandate the Fitment Committee and the Law Committee to meet jointly and prepare the Notifications and Circulars covering all aspects. States, who were not members of the Fitment Committee or the Law Committee might send their representative officers to join the meeting. By around 10th of March 2019, the Fitment and the Law Committee should prepare draft notifications and circulars detailing all the guidelines. The Hon'ble Chairperson also directed that the point raised by the Hon'ble Minister from Chhattisgarh be noted in the minutes regarding revisiting the tax rates on houses for poor/below poverty line houses in order to examine them whenever a review of the taxation of the Real Estate Sector was taken up. 25.38 The Hon'ble Minister from Kerala stated that the circulars and notifications drafted by the Fitment Committee and the Law Committee should be considered by the GoM on Real Estate before issuing the same. The Hon'ble Chairperson suggested that instead, GST Council might meet through video confere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ottery 27. The Hon'ble Chairperson invited Members to commence discussion on this Agenda item. The Hon'ble Minister from Kerala, starting the discussion, questioned as to why this issue needed to be taken up now. He observed that the outcome of discussion in Real Estate sector was much better in this meeting as compared to Video Conferencing due to the constructive participation of the Members. The question was why there should be a tearing hurry to take a decision on this issue as national economy was not getting affected due to lack of decision on this issue. He added that the Report of GoM on Lottery was an interim report. As a member, neither he nor the Hon'ble Minister from Punjab could attend the last meeting of the GoM. He suggested that the issue should be referred back to the GoM which should deliberate on this issue in greater detail. 27.1. The Hon'ble Minister from Kerala further stated that more bilateral level discussions were also needed on this issue. He stated that the State of Punjab was running lottery indirectly through middle men but the State was now considering to run the lottery directly. He was also in discussion with the State of Maharashtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a decision on this issue. He further stated that he would agree to defer the issue provided other similar issues like on-line gambling, casinos, etc. which were relevant for States like Goa and Sikkim also became part of the terms of reference of the GoM on Lottery as these too involved issues of multiple taxation. These should also be discussed in the GoM and then brought before the Council. 27.3. The Hon'ble Minister from Punjab stated that he could not attend the last meeting of the GoM due to his commitments regarding the Budget presentation in the State Assembly. He stated that there was an anomaly in the scheme of taxation of Lottery, namely, exemption from tax for inter-State supplies by a lottery distributor to a sub-distributor of another State and this anomaly needed to be corrected as it broke the destination principle. He added that this issue needed to be discussed in the GoM. 27.4. The Hon'ble Chief Minister of Puducherry stated that be agreed with the views expressed by the Hon'ble Minister from Kerala. He added that the issue of Lottery had been discussed in several meetings of the Council and some States were running it through agencies and some were also run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated that the Union Home Ministry had allowed lottery to be run through authorized representatives and they were running the lottery as per those guidelines. 27.7. The Hon'ble Chairperson enquired whether inter-State sale of lottery could be prohibited. The Hon'ble Minister from Kerala stated that prior to GST regime, in his State there was a tax on paper lottery under the Paper Lotteries Act and they had made stringent law by legislation under the Gambling Act because of which, for eight years, no outside lottery could be run in the State of Kerala. 27.8. The Hon'ble Minister from Assam stated that legally a State which was running its own lottery could not ban Lottery from other States and that market access would need to be allowed to the Lottery of other States as well. The Hon'ble Minister from Kerala stated that on this account they had taken recourse to Section 4 of the Gambling Act to stop the outside lotteries. The Hon'ble Chairperson enquired that if Kerala had a State monopoly over lottery and there was no outside lottery running, then what was the issue regarding the rate of tax on lottery of other States like Mizoram, Assam etc. The Hon'ble Min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was taxed at the rate of 12% and even though the sale of West Bengal run Lottery had grown, the revenue was miniscule as compared to revenue from the Lottery run by other States. The Hon'ble Chairperson observed that it appeared from page number 9 of the Agenda note that the revenue of West Bengal would go up if rate of tax for all Lotteries was made 28%. He wondered why the GST revenue of the North-Eastern States from Lottery was so little when their Lottery was selling so much. In this context, he stated that the data needed to be re-verified and it could also be discussed in the GoM. 27.12. The Hon'ble Chief Minister of Meghalaya stated that the spirit behind GST was one nation, one tax but on one item, namely, Lottery, there were two tax rates which was against the spirit of GST. He questioned why extra benefit should be given to the State-run Lotteries. The Hon'ble Chairperson observed that the North-Eastern States had to keep agents as they did not have enough governmental infrastructure to run lottery. The Hon'ble Deputy Chief Minister of Gujarat observed that in the context of one nation, one tax, there was a need to look at keeping one rate of tax on lot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttery in a State which was itself running Lottery would be a violation of Article 301 of the Constitution relating to freedom of trade and commerce. 27.15. The Hon'ble Minister from Assam reiterated that it was not tenable to fix the rate of lottery on the basis of who was running the Lottery. He stated that it was insulting for the North-Eastern States when there was reference to middlemen, etc. as they were running the lottery as per the law and after the scrutiny of the Courts of Law. He stated that what was being referred to as middlemen were actually the dealers and agents of the State and States should not be discriminated on the basis of the manner of running the Lottery. He also argued that if differential rate of tax for Lottery was to be kept, then the GoM should also consider keeping differential rate of tax for cement, paper, petroleum, etc. produced by a government run factory and those produced by privately run factories. He recalled that earlier too, when the decision regarding two rates of tax on Lottery was taken, he had protested against it, but had agreed to it to break the deadlock. He emphasized that any person appointed by a State to run the lottery should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference could be made to the Attorney General of India or the decisions of the Hon'ble High Court of Kolkata could be taken up to Hon'ble Supreme Court for review. The Hon'ble Chairperson stated that in his view, the issue was not about the legality; rather the North-Eastern States appointed agents due to lack of Governmental infrastructure to sell lottery across the country and the Hon'ble Minister from Kerala held a view that differential rate of tax was justified as one was earned by the State whereas the other was earned by the private parties. The Hon'ble Deputy Chief Minister of Gujarat suggested that the issue could be kept pending. He observed that the revenue came to the State in whatever manner the Lottery was organized. 27.20. The Hon'ble Chairperson suggested that the GoM could meet again and find a solution. The Council agreed to this suggestion. The Hon'ble Chairperson further stated that the meeting of GoM should be fixed after ascertaining the convenience of the Hon'ble members of the GoM, particularly those who held opposite view points. 28. For Agenda item 7(i), the Council agreed that the issue be considered further by the GoM on Lottery and its re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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