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TMI BlogMinutes of the 36th GST Council Meeting held on 27 July, 2019X X X X Extracts X X X X X X X X Extracts X X X X ..... f the GST Council. (i) Changes in GST rate on electric vehicles and related supplies. 5. Any other agenda item with the permission of the Chairperson. 6. Date of the next meeting of the GST Council. Preliminary discussion 3. Shri Satpal Maharaj, Hon ble Minister from Uttarakhand, Shri Niranjan Pujari, Hon ble Minister from Odisha, Thiru D. Jayakumar, Hon ble Minister from Tamil Nadu, Dr. Amit Mitra, Hon ble Minister from West Bengal, Shri Mauvin Godinho, Hon ble Minister from Goa, Shri T.S. Singh Deo, Hon ble Minister from Chhattisgarh, Shri Manpreet Singh Badal, Hon ble Minister from Punjab and Shri K.K. Sharma, Advisor to Governor, Jammu Kashmir greeted the Chairperson and Shri Anurag Singh Thakur, Minister of State (Finance), Government of India. The Chairperson also reciprocated the same. Shri Sushil Kumar Modi, Hon ble Deputy Chief Minister of Bihar also congratulated the Chairperson for presenting a good Budget and stated that due to an urgent meeting on floods in Bihar, he might be excused early. The Chairperson assured that she would try to conclude the meeting in time. After the preliminary discussions, the Hon ble Chairperson requested Dr. Ajay Bhus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing taxed on face value . He had also stated in the mail that at page 30, for the last line of the paragraph 27.25 being read as the only proposal was that this matter should be referred to the Fitment Committee or the Law Committee so that the methodology and the tax on the only bet amount could be decided ; might be read as the only proposal was that this matter could be referred to the Fitment Committee or the Law Committee so that the methodology and the tax on net amount or Gross Gaining Revenue (GGR) could be decided. The Council agreed to the suggestion. 4.1. The Hon ble Finance Minister from West Bengal stated that he was unable to attend the last meeting of the Council and hence apologised for the same. He congratulated the Chairperson since he had met her for the first time after she became Union Finance Minister, a very important position. He stated that as regards the Minutes of the last meetings. Shri H. K. Dwivedi ACS, Finance, Government of West Bengal had stated some contra views, which were recorded very accurately on both occasions. He thanked the Council Secretariat and the Secretary for the same. The Chairperson and the Secretary also thanked the Hon ble m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circulars and notifications were interalia related to extension of dates of various returns, procedure for export of jewellery, manner of utilization of Input Tax Credit, Place of Supply Rules etc. He further added that on 22 nd July 2019, after the agenda was circulated, another circular was issued which was 109 of 2019 on 22 nd July 2019 regarding issues related to Resident Welfare Association (RWA), might also be added for ratification by the Council. A presentation (attached as Annexure 3 to the Minutes of the meeting) on it was mailed to all the States. The Secretary proposed that the Council might grant deemed ratification to the Notifications, Circulars and Orders. The Council agreed to the proposal. 7. For Agenda item 2 , the council approved the deemed ratification of the Notifications, Circulars and Orders issued after 12 th June 2019 and till 19 th July, 2019, under the GST laws by the Central Government, which are available on www.cbic.gov.in Act/Rules Type Notification/Circular/Order Nos CGST Act/CGST Rules Central Tax 25 to 34 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary, TRU-lI (JS, TRU-ll) to respond on the issue raised. JS, TRU-Il stated that he would need a written brief on the issue raised by Odisha which would be examined and responded to. 8.2. The Secretary stated that the circular was issued only after the GIC had approved and at the moment, the same could not be stayed. However, a written communication might be sent to the Council s Secretariat on the issue which could he examined and if required, the circular would be suitably amended. At the moment, the Circular having already been issued, was placed before Council for information. The JS, TRU-Il also stated that if a formal letter could be sent by Odisha, they would examine and respond on the issue. Shri Ashok Meena, Finance Secretary, Odisha stated that he would send a note indicating the difference between the Circular and the Statute, which might be discussed, and final view be taken thereafter. 9. For Agenda item 3 , the Council took note of the decision taken by the GIC between 11 th May, 2019 and 19 th July, 2019. Agenda Item 4: Issues recommended by the Fitment Committee for the consideration of the GST Council: Agenda Item 4 (i): Changes in GST rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a non-starter, since incentives were required for fairly long period so as to bring certainty for investor, in any case, Council could review the rates at any time, if need so arose. 10.2. The Hon ble Minister from Tamil Nadu stated that they supported the proposal for reduction of tax to 5% on electric vehicles with a sunset clause that the tax incentive by way of reduction of GST rate to 5% on electric vehicles might be given up to 31.03.2022. He also supported reduction of tax to 12% with regard to electric chargers from 18% and exemption from GST on hiring of electric buses by local authorities. He further stated that future incentive might be considered after taking into consideration the revenue implication and compensation issue. 10.3. Shri Manish Sisodia, Hon ble Deputy Chief Minister of Delhi stated that all the three proposals were very progressive as well as much needed for Delhi in view of the pollution and supported all the three proposals. However, he suggested that electric chargers should be placed at the rate of 5% instead of 12% as it was an accessory of the electric vehicles. He further stated that although it was a progressive thought, hut the reduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equested the Council to re-think and recommend tax rate on electric-chargers as 5% only along with electric vehicles. Thereafter, he stated that Bihar was in favour of extending the due dates for CMP 02 and CMP 08 as proposed in the agenda. 10.5. The Secretary stated that since Deputy Chief Minister of Delhi and Deputy Chief Minister of Bihar had suggested that tax rate on electric vehicle chargers should also be 5%, he requested iS, TRU-1 to apprise the Council as to why the Fitment Committee had not recommended to reduce the rate of electric vehicle chargers also to 5% in lieu of 12%. JS, TRU-l stated that the Fitment Committee discussed it and proposed the rate of 12% on charger on two counts. One, electric vehicles as on date attracted GST at the rate of 12% while charger attracted GST at the rate of 18%. As such, charger was on a different footing than electric vehicle in as much as charger/charging station was not sold to consumers directly but were items of business to business sale. Taking these aspects into account, the Fitment Committee had recommended that chargers should be kept at 12%. 10.6. Shri Manu Srivastav, Principal Secretary, Finance, Madhya Pradesh stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , petrol etc. in GST. Thus, in his opinion, the suggestion of Hon ble Deputy Chief Minister of Delhi was not of putting time limit on incentives to electric vehicles, but that the incentive should be reviewed when Council decided about GST on bio fuels such as petrol/ diesel. Hence, the suggestion on time limit was aimed at linking both the aspects together in order to have a holistic decision i.e. whether to start levy of GST on diesel and petrol from 1 July 2022 or not or whether the Council would postpone the decision for another 5 years. Thus, it should not be misunderstood as a limitation being put to incentive. Further, the Council should go ahead instead of thinking of foregoing revenue of ₹ 60 crore as even if sales of electric vehicles increased five times in three years, it would only forgo annual tax of ₹ 300 crore from overall realization of GST revenue of Rs. one lakh crore a month. Hence, instead of the amount, the encouragement to the industry should be kept in mind. 10.9. The Hon ble Deputy Chief Minister of Delhi clarified that he had stated that although it was a progressive step to increase the market of electric vehicles, but the Council should k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y written a letter to the Chairperson detailing the perspective. He stated that reducing GST rate for electric vehicles was a commendable decision but Council should also think of the main industry which was in serious doldrums at the moment. Their automobile manufacturers were already showing a decrease in their production i.e. Mahindra s production had fallen by 15%, Tata s by 8%, Maruti s by 27% etc. Thus, the Council had also to see the internal combustion engine-based automobile industry which employed approximately 3.7 crore people with an investment of about ₹ 1.7 lakh crore. The Council, while deciding should make sure that the transition to electric vehicles happened in a steady, systematic and sustainable manner. The Hon ble members of the Council might be aware that in USA only 21% sale of vehicles were electric today while in UK it was also close to that number. Thus, most of the developed countries were still not fully geared to shift to electric vehicles in terms of sale. India had 25-billion-dollars automobile industry, i.e. one of the largest; Hence, the Council had to address this issue holistically. He stated that the agenda had been brought before the Counc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, which accounted for 7% of GDP of India was not being neglected. However, a chance was also being given to the traditional industry to be compliant with the required environmental quality. Finally, he reiterated his proposal that the Council should i) reduce taxes on electric vehicles from 12% to 5% so that encouraged by this, there should be boost in investment; ii) encourage the BS VI compliant vehicles by reducing the GST rate; iii) encourage the hybrid vehicles with the intention to provide a package with an intention to reduce pollution. He thereafter stated that as far as the electric chargers were concerned, Fitment Committee had examined t but did not propose steeper cut perhaps taking into account the ITC factor. However, he would be happy to go with the decision of the Council after due deliberation on ITC on it. 10.16. The Chairperson responded to the Hon ble Minister from West Bengal that his point was well taken that the traditional industry contributed to (lie investment and National GDP significantly and should not be ignored. However, a fundamental question was, that would it not be sending a contradictory message if support was given simultaneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased use of fossil fuel to produce electricity. He also concurred with the view of the Hon ble Deputy Chief Minister of Delhi about VAT revenue losses on account of lesser sales of petrol products. Further, the choice of places for electric vehicle hub and charging infrastructure would actually favour the consuming States. He therefore, suggested that since there would be distortions, he requested the Chairperson to confine the concession to the electric vehicles till the year 2022 or to extend the compensation for another few years beyond 2022. 10.19. He further stated that as far as protection of environment was concerned, there would be similar demand from the competing industries. In addition, he drew attention of the Council to the fact that 12% GST rate was charged on daily basic needs such as pickle, drinking water, jam etc. and it was not equitable to recommend a concessional rate of GST at 5% to electric vehicles where the electric cars would cost 20 lakh each. Further, as far as chargers were concerned, when their parts continued to be taxed at 18%, there would be no point to tax chargers at 5%. Hence Punjab was not in favour of the proposal as the means were as import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. In response, he drew attention of the Council to the fact that after 2015 CentraI Electricity Authority had not given permission to new thermal plants for operation and now significant electricity was being produced from renewable sources. Hence, the apprehension of the Hon ble Minister from West Bengal did not seem to be true. Further, in response to the remarks of Hon ble Chief Minister of Delhi, about future revenue losses on account of petrol and diesel and automobile industry, he suggested that first of all, it was far ahead in future and that Electricity Duty might be imposed by the States to compensate the revenue losses in future. 10.22. Shri Somesh Kurnar, Principal Secretary, Telangana stated that the Hon ble Finance Minister of Telangana could not attend the meeting hut the Government of Telangana favoured all the three proposals. However, lie highlighted the concern before the Council that it might lead to inverted tax structure and care should be taken to avoid giving any refund on account of it. He also felt that incentive might be limited to a period of three years, after which matter could be reviewed, as the limited period incentive would create a feeling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sthan also welcomed the decision and stated that when the State Government came to power in 2009 in Rajasthan, VAT on electric vehicles was exempted from 9 th March 2010 which was earlier taxed at 12.5%, for which he was congratulated by the Chairperson. However, he raised apprehensions about the revenue of the State in future due to the Council s decision of lowering GST on many items in the past. Further, approximately 50% of the State s revenue was contributed by GST and continuous reduction of taxes due to exempting one or the other items affected it badly leading to alarming situation after 2022. Therefore, this should be discussed in the Council in the forthcoming meeting including the extension of compensation for few more years, as was highlighted by the States of Punjab arid Delhi. He also stated that he had written a letter regarding coaching centres to the Hon ble Chairperson and requested that the rate of 18% on coaching services being very high should be brought down or exempted. 10.26. The Hon ble Chairperson stated that his above statement seemed contradictory to his worries regarding revenue reduction. He was asking for reduction in tax rates on coaching centres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only support jobs and investment but also to honour those who had invested in Bharat Stage VI vehicles. The Government was not dis-incentivising all of them, but that did not mean that the Government should not go ahead with a futuristic step, as had been rightfully pointed out during the discussion that the production of electricity in the country was gradually shifting from fossil fuel or coal-based plant to renewable energy-based plants. The Hon ble Chairperson also stated that while the concerns of West Bengal and that of Punjab were understood, the Council was looking at promoting electric vehicles, which would be less polluting, than continuing without a thought for the future. She further stated that the concern raised about Bharat Stage VI vehicles, where lot of industries had invested, were well taken and she appealed to the Hon ble Ministers from Punjab and West Bengal to understand that Council was not forgetful or unmindful of those who were still producing Bharat Stage VI vehicles and acknowledged their contribution such as investment made by them, jobs provided by them and their contribution to the GDP. However, as a futuristic step, the Council would like to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ric chargers at 5% and exemption of hiring of electric buses by local authorities to be effective from 1 st August, 2019. 11. For Agenda item 4 , the Council approved the following: i. The GST rate on all electric vehicles be reduced from 12% to 5%. ii. The GST rate on charger or charging stations for electric vehicles be reduced from 18% to 5%. iii. Hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities be exempted from GST. iv. These changes shall become effective from 1 st August, 2019. Agenda Item 5: An other agenda item with the permission of the Chairperson. Agenda Item 5(1): Extension of the last date for filling of FORM GST CMP-02 and FORM GST CMP-08 12. The Secretary introduced the agenda item and requested Principal Commissioner, (GST Policy Wing), CBIC to appraise the Council about the same. The Principal Commissioner, (GST Policy Wing), CRIC mentioned that the additional agenda note for extending the dates for filing FORM GST CMP-02 and FORM GST CMP-08 was circulated to the States. In view of details stated hi the agenda note and in order to provide sufficient time to the taxpayers, it was propos ..... 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