9911796707
TMI BlogMinutes of the 14th GST Council Meeting held on 18 and 19 May 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... the IGST Act, 2017 4. Notification of the Common Goods and Services Electronic Portal for facilitating various taxpayer operations under Section 146 of the CGST Act, 2017 5. Constitution of Project Management Team, Standing Committees and Sectoral Working Groups for smooth roll-out of GST 6. Nomination of Additional Secretary, GST Council to the Board of GSTN 7. Approval of mechanism to split the MDR (Merchant Discount Rate) charges between the Centre and the States 8. Approval of amendments to the following Draft GST Rules and related Forms: i. Registration ii. Return iii. Payment iv. Refund v. Invoice, Debit/Credit Note vi. Input Tax Credit vii. Valuation viii. Transitional Provisions ix. Composition 9. Approval of the Fitment of goods and services into the various rate slabs 10. Any other agenda item with the permission of the Chairperson 11. Date of the next meeting of the GST Council 3.1. The Hon'ble Chairperson welcomed all the Members to the Council Meeting. He conveyed the sad news that Shri Anil Madhav Dave, the Union Minister for Environment had passed away on 18 May, 2017. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fact that only 58% of the CGST revenue shall remain in the onsolidated Fund of India and that the remaining 42% shall be devolved to the States. He stated that if any Value Added Tax (VAT) exemption was given to such units, the State concerned could reimburse this tax amount collected as State Goods and Services Tax (SGST). The Hon'ble Minister from Assam stated that earlier, despite devolution, the Central Government gave hundred per cent exemption. The Hon'ble Chairperson stated that the situation was different as presently the units enjoyed hundred per cent tax exemption but in the GST regime, the units under the area-based exemption would pay tax and since the Central Government could retain only 58% of the CGST collected, it would reimburse only this amount to the eligible units. 4.2 The Hon'ble Minister from Uttarakhand stated that his State could not give reimbursement of the remaining 42% of the CGST as GST was a destination based tax and they would not be able to retain any tax for the goods manufactured in their State but supplied outside the State. He recalled that under the Industrial Policy of 20 1 0, industries in his State had been assured exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 56) of the CGST Act and the SGST Acts and the same would be made applicable under the IGST Act under corresponding circumstances. He suggested that the Council could agree to this suggestion and approve rates of simple interest per annum at the upper prescribed ceilings under the various Sections. The Council agreed to this suggestion. 7. For agenda item 2 , the Council approved the following rates of simple interest per annum for the delayed payment of tax by the taxpayer and the delayed refund by the Government to the taxpayer: - SI. No. Section Rate of Simple Interest per annum approved by the Council 1 Section 50 (1) of the CGST Ac t/ SGST Acts and under corr e spondin g circum s t a nce s in the IGST Act (Section 20) 18% 2 Section 50 (3) of the CGST Act and th e SGST Acts a nd under corresponding circumstances in the IGS T Act ( Section 20) 24% 3 Section 5 4 (12) of the CGST Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and Services Electronic Portal for facilitating various taxpayer operations under Section 146 of the CGST Act, 2017: 9.1 . Introducing this agend a item , the Secretary stated that in the GST regime, the GST Act and Rules would be common in all States and the Centre and that it was envisaged that certain front end processes of the taxpayers, namel y, registration , furnishing of return and payment of tax would be done on a Common Goods a nd Services Tax Electronic Portal for the Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act , the State Goods and Services Tax (SGST) Act and the Union Territor y Goods and Services Tax (UTGST) Act . He stated that Section 146 of the CGST and the SGST A cts provided that Th e Government may, on the recommendations of the Council, notify the Common Good s and Services Tax Electronic Portal for fa c ilit a ting r eg i s tration , pa y m e nt of tax , furnishing of r e turn s , c om p utation and se ttlem e nt o f int eg rat e d t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee shall have two Convenors, one each from the Centre and State . Each Committee would be expected to identify steps to be taken in their area of responsibility and to provide a blue-print for step wise action to be undertaken with t a rget dates . This would lead to uniformit y and clarity regarding action s to be taken by the respectiv e revenu e administrations and the expected time-lines for the same. The Convenors of the Committee shall be the Nodal officers to give inputs to the Project Management Team on issues relating to their area of responsibility . The decisions could be taken by the individual Standing Committees to the extent possible , and where necessary, at the level of the PMT. PMT might place issues of importance before the Revenue Secretary or GST Council for decision, where necessary. 10.2. He stated that the following eight Standing Committees were proposed to be constituted with defined areas of responsibilit y : - (i) Law and Rules Committee (ii) IT Committee (iii) Single Interface Committee (iv) Fitment Committee (v) Publicity and Outreach Committee (vi) Capacity Building and Facilitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived from different sectors of the economy , there was a need to constitute Sectoral Groups, consisting of a team of officers from the Centre and the States to examine the issues raised by the stakeholders of such sectors. He stated that recommendations of these teams shall be submitted to the PMT for further necessary action on them. He stated that for some of these sectors , Guidance Notes might also be required to be issued, including in regional languages. He stated that the Sectoral Groups could be constituted for the following sectors: - (i) Banking , Financial and Insurance Sector (ii) Telecommunication (iii) Exports including EOUs and SEZs (iv) IT/ITES (v) Transport and Logistics (vi) Textiles (vii) MSMEs, includingjob work (viii) Oil and Gas (upstream and downstream) (ix) Gems and Jewellery (x) Services received and provided by the Government (xi) Food Processing Sector (xii) E-commerce (xiii) Big Infrastructure (Airport, Sea port- including MRO) (xiv) Travel and Tourism (xv) Handicrafts (Exports) (xvi) Media and Entertainment (xvii) Drugs and Pharmaceuticals 10 . 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery from the Hon'ble Deputy Chief Minister of Delhi regarding the l egal status of these Committees , the Secretary stated that this entire scheme was in the nature of an administrative arrangement and was not part of the law. He proposed that the Council might approve the proposal for creation ofthe three - tier coordination mechanism for implementation of GST and to further authorize the Chairperson , GST Council to constitute the Project Management Team , Standing Committees and Sectoral Working Groups. The Council approved this proposal. 10 . 7. Some States expressed an interest to be put in certain Committees , as for example, the Hon'ble Minister from Punjab requested representation of his State in the Textile Committee and the Hon ble Minister from Uttarakhand requested representation of his State in the Travel and Tourism Committee. The Hon'ble Chairperson stated that all States desirous of becoming members of various Committees should give the name of the officers in writing to the Council. The Hon'ble Minister from Kerala stated that the decisions of the PMT should be circulated to the Council. The Council agreed to this suggesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposal. 11.2. For agenda item 6 , the Council approv e d the nomination of Additional Secretary, GST Council as ex-officio Director on the Board of GSTN in place of the erstwhile Member Secretar y, Empowered Committee of State Finance Ministers (EC). Agenda Item 7: Approval of mechanism to split the Merchant Discount Rate (MDR) charges between the Centre and the States: 12.1. Introducing this agenda item , the Secretary stated that to incentivize the use of digital economy, the Government o f India had decided to bear the applicable Merchant Discount Rate (MDR) charges of pa y ment of Government dues (taxes , non-taxes and other pa y ments) up to ₹ 1 Lakh made by Indian citizens using debit cards (under the Office Memoranda dated 14 . 12.2016 and 15.12.2016 issued by the office of the Controller General of Accounts , Department of Expenditure, Ministry of Finance) . He further stated that under the GST regime , it had been provided that taxpa y ers would be able to make payments of CGS T, SGST , IGST and the GST compensation cess by a single transaction, through a single challan. He stated that a decision needed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deferred for the time being and after ascertaining the likely financial implication of this decision , a fresh agenda item could be introduced on a later date. The Council agreed to this suggestion. 12.3 . For agenda item 7, the Council approved to defer the agenda item for consideration and to consider it on a later date after ascertaining the likely financial implications of this proposal . Agenda item 8: Approval of amendments to the following Draft GST Rules and related Forms: (i) Registration; (ii) Return; (iii) Payment; (iv) Refund; (v) Invoice, Debit / Credit Note; (vi) Input Tax Credit; (vii) Valuation; (viii) Transitional Provisions; and (ix) Composition: 13.1. Introducing this agenda item, the Secretary recalled that the Council had approved nine GST Rules during its 13th Meeting held on 31 March, 2017 and that these were put in the public domain and sent to the States. He informed that before the 14th Council meeting, the Law Committee could finalise seven GST Rules and the connected Forms , which were circulated as Volume-2A and Volume-2Bof the Agenda Note respectively. He informed that the GST Rules on Return and Transitional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was to do the matching line item-wise but now it was decided that matching would be done on total value and that if more details were required line item-wise , the same would be available on the System. Shri 1 . Syamala Rao, CCT , Andhra Pradesh, stated that if commodity-wise invoice matching was not done , it would be difficult to track supply from the manufacturer in the retail chain. Shri Upender Gupta, Commissioner (GST Policy Wing), CBEC, stated that HSN was not being captured at the invoice level and that only a summary of HSN Code was being taken in the return . He further suggested that this could be discussed in greater detail when GST Rules on Return were taken up for discussion. The Hon'ble Minister from Kerala requested to circulate a note on the scheme of matching of returns under GST. The Hon'ble Minister from Kerala raised another issue as to what mechanism was there to ensure that a vehicle transporting taxable goods interstate was carrying invoice. Commissioner (GST Policy Wing), CBEC , stated that a separate e-way bill Rules would address this issue and that when goods were handed over to the transporter, an e - way bill would be ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided that every person to whom a temporary registration had been granted shall submit an application for registration within 90 days and enquired as to what would the legal effect if no such application for registration was filed, Second, he raised the question that Rule 11 provided for display of the Certificate of Registration and enquired as to what would be the legal effect if the Certificate of Registration was not displayed. The third issue raised by him was the desirability of a provision in Rule 13 wherein it was provided that in some cases registration could not be cancelled for a period of one year from the effective date Of registration. The fourth issue raised by him was in respect of the process of physical verification provided under Rule 18. The Commissioner (GST Policy Wing), CBEC, clarified these issues. On the first question, he stated that this would be an enforcement issue and would be dealt accordingly. On the second question, he stated that if the Registration Certificate was not displayed, the Section in GST Law relating to general penalty would apply, On the third question, he stated that the requirement Of one-year validity period Of a registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchaser on the invoice should be reduced from ₹ 50,000 as otherwise smaller States like Meghalaya would lose revenue. The Hon'ble Minister from Bihar stated that different States had different issues and all could not be addressed in the GST Law. He observed that pe ople from Bihar bought blankets from outside the State and Bihar would not get any tax from this transaction if invoice did not have the address of the purchaser on record. The Hon'ble Minister from Meghalaya stated that the Special Category States needed to be treated differently. The Hon'ble Minister from Uttarakhand supported the proposal to reduce the monetary ceiling for the Special Category States. The Hon'ble Minister from Himachal Pradesh stated that the Rule should provide that if a consumer from a Special Category State bought any goods outside his State, the monetary limit of the transaction for recording the address on record shall be ₹ 25,000. The Secretary observed that this would considerably increase the compliance burden and pointed out that the States had already been assured 14% growth rate for compensation. The Hon'ble Chairperson stated that North-Eastern State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in an invoice where the buyer insists on it. Agenda Item 9: Approval of the Fitment of goods and services into the various rate slabs: 15.1 . Introducing this agenda item, the Secretary stated that in the 4th Council Meeting (held on 3-4 November, 2016) , the Council had laid down a set of guiding principles in respect of bands of rates of GST and GST Compensation mechanism and that officers of the Fitment Committee consisting of the Central Government and ten State Governments met three times (for a total of six days) and finalised its recommendations on rates on the basis of these guiding principles. He stated that the Committee had recommended the rates after taking into account the present tax incidence on account of Central Excise, Service Tax and VAT (including cascading on account of these taxes) as well as embedded taxes and the incidence of CST, Octroi , Entry Tax, etc. He added that in certain cases, the Committee had recommended lower / higher GST rates, vis-a-vis the present tax incidence (including embedded taxes) taking into consideration: (a) the current economic and social realities; (b) ensuring moderate tax incidence on items of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (f)) whereas the sale of similar goods is supply of goods]. He further stated that keeping these principles in mind, the Committee had recommended the goods and services that would fall into different rates, namely, Nil, 5%, 12%, 18%,28%, as also the Compensation Cess rates and the IGST exemptions. 15.4. The Secretary stated that the five Annexures indicating the GST rates for goods (including the goods covered under the Addendum to the GST Rate Schedule for Goods, circulated before the Council Meeting) covered about 1211 items at 4-digit HSN classification (total items at 8-digit being about 11,000) and out of these, about 88 items were largely in the exempt List (constituting 7% of the total goods at the 4-digit level), about 173 items were in the 5% List (constituting 14% of the total goods at the 4-digit level), about 200 items were in the 12% List (constituting 17% of the total goods at the 4- digit level), about 521 items were in the 18% List (constituting 43% of the total goods at the 4-digit level) and about 229 items were in the 28% List (constituting 19% of the total goods at the 4-digit level). He further stated that about 81 % of items at 4-digit level would largel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that India would move into fiscal consolidation path in the next two years and with the increasing social responsibility of the Governments, the revenue deficit should not go up. He stated that this could also have serious impact on the revenues of the Central Government. He expressed an apprehension that with lowering of rates on intermediates, capital goods and items of common use, the situation might not remain revenue neutral and requested more details regarding revenue implications on these goods to better understand the macro picture. The Secretary stated that it would be very difficult to do an exact projection of revenue. He observed that under Central Excise, manufacturers were exempt for turnover upto ₹ 1.5 crore and as there would be no such exemption under GST, more revenue would accrue on this account. He also pointed out that the turnover limit on which VAT was levied was different in different States. He further stated that there could be additional revenue collection through better compliance by use of lnformation Technology (IT), e-way bill system, etc. He stated that as the present rate structure was loaded against the revenue neutral rate (RNR), on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be additional buoyancy gains due to increased compliance under income tax. He further stated that the Central Government had to be more watchful about revenue as States were protected for five years due to the provision of compensation at the assured rate of growth of 14%. The Hon'ble Minister from Jammu Kashmir stated that a long-term view to be kept in mind while discussing the rates of GST was that in the next three to five years, the country should move towards a single rate of GST, and therefore, it would be desirable to tax most of the goods at the rate of 12% or 18%. 15.7. The Hon'ble Minister from Kerala stated that reducing the rates of tax should be avoided as already cartelisation had started in sectors like cement where prices had been increased. He suggested that action should be taken under the anti-profiteering provision of the law. The Hon'ble Chairperson stated that the officers should suggest ways to operationalise the anti-profiteering provision of the law. The Hon'ble Minister from Haryana stated that the success of GST would depend upon its acceptability by the public and in order to assure them, it was important to highlight reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers for discussion: - Annexure I (List of goods at nil CST rate): (i) 'Jari booti ': The Hon'ble Minister from Uttarakhand stated that jari booti was presently kept in Annexure II (5% List) and that it should be put in the nil rate category as 67% of jari booti came from the forests of Uttarakhand. The Secretary stated that jari booti was used as herbal medicine, and therefore, it should be taxed. He stated that the Forest Development Corporation would sell jari booti to companies like Dabur which would take input tax credit (ITC) and use it for payment of tax on its final products. The Hon'ble Minister from Uttarakhand stated that there was no VAT onjari booti in his State. The Hon'ble Minister from Chhattisgarh stated that his State charged 5% VAT on jari booti. The Hon'ble Deputy Minister of Gujarat stated that in his State, jari booti was collected by tribal people and given to the Forest Development Corporation which auctioned it and 5% VAT was chargeable on them. After discussion, it was agreed that jari booti need not be brought under the Nil rate of GST. (ii) ' Suji' : The Hon'ble Minister from Uttarakhand state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x it at the rate of 5% as proposed in the agenda notes. (viii) Low priced Biscuits: The Hon'ble Minister from Uttarakhand suggested that the low priced biscuits which were mostly used by the poorer sections of the society should be kept in the exempt List. The Secretary stated that value based rate of taxation led to suppression of value and loss of revenue. He suggested that the rate of tax should not be varied on the basis of value of biscuits. After discussion, the Council agreed to discuss this issue separately when they took up discussion on the rate of tax for biscuits. (ix) Silk yarn, cotton yarn in hank : The Hon ble Minister from Assam suggested that silk yarn should be kept in the exempted category. The Hon'ble Minister from Karnataka stated that there would be no revenue implication in exempting silk yarn as silk fabrics would be taxed. The Hon'ble Minister from Uttar Pradesh suggested that cotton yarn in hank should be kept in the exempt category. The Hon'ble Chairperson observed that reducing taxes on a large number of products would adversely affect the revenue and that the Governments needed to strike a balance between revenue generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom VAT and imposing GST on them would create problems. The Hon'ble Minister from Goa supported the proposal to exempt handicrafts. The Hon'ble Minister from Manipur supported the proposal to exempt handloom as this was supplied by highly un-organised sector. The CEA stated that exemption from GST to goods which were important in a local area created distortion in the economy and it would be preferable to find a local solution such as Direct Benefit Transfer (DBT). The Secretary suggested that the goods falling in the entire textile chain as well as the handicrafts could be discussed separately. The Council agreed to this suggestion. (xiv) Fish net and fish net fabric: The Hon'ble Minister from Andhra Pradesh stated that these goods were used by fishermen, and therefore, should be kept in the exempt category. The Hon'ble Chief Minister of Puducherry and the Hon'ble Minister from Goa supported this proposal. The Hon'ble Minister from Tamil Nadu stated that India had a long coast line and lakhs of fishermen were dependent on fishing for their livelihood and keeping this in mind, Tamil Nadu had presently exempted fish net from VAT. He stated that as ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o products. The Secretary pointed out that these products were mostly used by rich people in bungalows. After discussion, the Council agreed that these products should be taxed at the originally recommended rate of 18%. (xvii) Sugar: The Hon'ble Minister from Andhra Pradesh suggested that sugar should be kept in the exempt category as sugar factories were in doldrums and this also affected the farmers. The Hon'ble Deputy Chief Minister of Delhi and the Hon'ble Minister from Tarriil Nadu supported the proposal.The Secretary stated that the existing incidence of Central Excise duty alone on sugar was more than 6% and it was proposed to be kept at the rate of 5%. He stated that putting sugar in the exempted category would lead to huge loss of revenue. After discussion, the Council agreed not to change the recommended tax rate for sugar at 5%. (xviii) Tamarind: The Hon'ble Minister from Telangana suggested that tamarind should be kept under the exempt category. The Secretary clarified that fresh tamarind was already in the exempt category. (xix) Fertilizers: The Hon'ble Minister from Andhra Pradesh suggested that the fertilizers sold by Primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be passed through by keeping a low tax of 5%. The Council agreed to this suggestion. (xxiii) Indigenous hand-made musical instruments: The Hon'ble Minister from Uttar Pradesh suggested that these goods should be kept under the exempt category. The Secretary stated that the GST rate for these products was discussed during the meeting of officers of the Centre and the States on 17 May, 2017 in Srinagar and it was agreed at the officers' level that instead of the proposed rate of 12%, these could be kept under the exempt category. He stated that this item was covered in the addendum to the GST rate schedule for goods circulated during the Council meeting on 18 May 2017 (Annexure-4 of the Minutes). The Council agreed to this proposed change. (xxiv) 'Puja samagri' including 'Hawan samagri' : The Hon'ble Minister from Uttar Pradesh suggested that these should be kept under the exempt category. The Secretary suggested that the Fitment Committee should first define the term 'puja samagri' and then it might be exempted. The Council agreed to this suggestion. (xxv) Footwear : The Hon'ble Minister from Uttar Pradesh suggested that l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e kept at Nil rate whereas natural honey put up in unit container and bearing a registered brand name might be taxed at 5%. The Council agreed to this suggestion. (xxviii) Chemical contraceptives: The Hon'ble Deputy Chief Minister of Delhi suggested that chemical contraceptives should be exempted from tax. The Secretary stated that the GST rate for this product was discussed during the meeting of officers of the Centre and the States on 17 May, 2017 in Srinagar and it was agreed at the officers' level that instead of the proposed rate of 5%, it could be kept under the exempt category. He stated that this item was covered in the addendum to the GST rate schedule for goods circulated during the Council meeting on 18 May 2017 (Annexure-4 of the Minutes). The Council agreed to this proposed change. (xxix) Wheel-chair for physically handicapped persons: The Hon'ble Deputy Chief Minister of Delhi suggested that wheel-chairs should be kept in the exempt category. The Secretary stated that this product should be kept at 5% so that the input tax credit on taxes paid on the inputs could pass through The Council agreed to this suggestion. (xxx) Sale by CSD Cant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Deputy Chief Minister of Gujarat suggested that the generic medicines should be taxed at Nil rate of GST. The Hon'ble Deputy Chief Minister of Delhi suggested that other than those medicines which were exempt, all others should be taxed at the rate of 5%. The Secretary stated that there were 255 drugs or medicines and diagnostic kits that were kept at 5% rate, which included life-saving and cancer related drugs while all other drugs were proposed to be taxed at the rate of 12%. He stated that as there was tax on intermediate chemicals, the cancer drug industry would not like the final products to be exempted. As regards the proposal to exempt generic medicines, he stated that it would be very difficult to monitor and distinguish the supply of generic and branded medicines, and therefore, both were kept in the 12% rate slab. The Council agreed to keep the rates of tax on drugs as recommended in the agenda notes. (xxxiii) Kerosene PDS : The Hon'ble Minister from Maharashtra suggested that PDS kerosene should be kept under the exempt category. After discussion, it was agreed that it should continue to be in the 5% rate category. (xxxiv) Electricity : The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carve out could be considered for dried, unprocessed areca nut to be taxed at 5% which should not be called betel nut. Accordingly, it was proposed that dried areca nuts, whether or not shelled or peeled, might be kept at 5%. The Council agreed to this proposal. Annexure II (List of goods at 5% GST rate): (xxxviiia) Dry fruits: The Hon'ble Deputy Chief Minister of Delhi suggested that dry fruits should be kept in the 5% List instead of the presently proposed rate of 12%. The Secretary stated that dry fruits . were consumed by better-off sections of the society, and therefore, it could be taxed at the rate of 12%. The Council agreed to this suggestion. (xxxix) Natural Resin ('lisa'): The Hon'ble Minister from Uttarakhand suggested that resin should be taxed at the rate of 5% instead of the proposed rate of 18% as this was collected by the poorer sections of the society. After discussion, the Council agreed to this suggestion and decided to put :natural gums, resins, etc. in the 5% rate category. (xl) Tendu leaves : The Hon'ble Minister from Madhya Pradesh suggested that this should be taxed at the rate of 28% and not at 5%. The Secret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate as other namkeen which was proposed to be taxed at the rate of 18%. The Hon'ble Chairperson stated that the packed namkeen was sold by big brand owners and they should be taxed whereas the smaller suppliers would come within the exemption limit of ₹ 20 lakh. The Hon ble Deputy Chief Minister of Gujarat very strongly recommended that the tax rate for khakhra should not be the same as for other namkeens. The Secretary stated that namkeens attracted Central Excise duty of 5% and in most States, VAT of 5%, and therefore, the rate of all namkeens, including khakhra, could be kept at 12% instead of the recommended rate of 18%. The Council agreed to this suggestion. (xlv) Clay bricks: The Hon'ble Minister from Uttar Pradesh stated that clay bricks should be kept under a compounding scheme as it was very difficult to keep track regarding the quantum of bricks supplied by the brick kilns. He stated that in the alternative, clay bricks should be kept at a higher rate. The Secretary stated that it would not be advisable to have a separate compounding scheme for clay bricks or to keep them at a higher rate. He stated that tax evasion could be addressed through other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Chhattisgarh stated that plywood and particle board should be kept in the 12% List instead of the presently proposed tax rate of 28%. The Hon'ble Deputy Chief Minister of Del hi stated that if one wanted to prevent wood to be cut, then boards based on bagasse and fibre should be encouraged. The Secretary explained that only specified boards including bagasse based boards and boards made from agricultural residue were proposed to be taxed at the rate of 12% but other wood based boards and plywood were proposed to be taxed at the rate of 28%. He added that all building materials were proposed to be taxed at the rate of 28%. The Hon'ble Minister from Haryana stated that his State was a major manufacturer of ply boards and expressed an apprehension that if tax rate was increased, it would lead to more evasion of taxes. The Hon'ble Minister from Uttarakhand stated that plywood made of eucalyptus being not in the category of an agricultural crop, should also attract tax at the rate of 12%. He added that most of the units in the ply board sector fell under micro and small enterprises with a turnover of less than ₹ 4 crore and were exempt from Central Excise duty upt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suggested to increase the rate of tax on mobile phone from 12% to 18%. The Hon'ble Minister from Kerala suggested that mobile phone should be taxed at the rate of 18%. The Secretary stated that the present combined incidence of tax on mobile phone was around 14% and therefore, it was put in the rate slab of 12%. He stated that this product was also very important for the Digital India Programme. The Hon'ble Deputy Chief Minister of Delhi stated that there was already a large grey market for mobile phones, and therefore, tax on it should not be too high. The Hon'ble Chairperson observed that this product was now being substantially manufactured in India. The Council agreed to keep the rate of tax on mobile phone at 12%. (Ii) Coconut water: The Hon ble Chief Minister of Puducherry stated that tender coconut water should not be taxed at the rate of 12%. Shri Alok Shukla, Joint Secretary (TRU-I), CBEC, clarified that only packaged tender coconut water was proposed to be taxed at the rate of 12%. The Secretary suggested that tender coconut water, put up in unit container and bearing a registered brand name, might be kept at 5% while other tender coconut water being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Puducherry suggested to raise its rate from 18% to 28%. After discussion, the Council agreed to keep the tax rate at 18%, since it was an evasion prone item. (lviii) Insecticide and rodenticide: The Hon'ble Chief Minister of Puducherry suggested that these products should be taxed at the rate of 5%. The Secretary stated that such a rate structure would lead to a lot of input tax credit overhang and would lead to large amount of refund claims. The Council agreed to keep the rate of these products at 18%. (lix) Helmet: The Hon'ble Chief Minister of Puducherry suggested that the rate of tax for helmet should be reduced to 5% as it was very important for road safety. The Secretary stated that as per the combined incidence of tax, this product should be in the 28% rate slab, but as the inputs for this product would be taxed at the rate of 18%, the rate of tax on helmet was already proposed to be kept at 18%. The Council agreed to keep the rate of tax for helmet at 18%. (lx) Information Technology (IT) products: The Hon'ble Minister from Karnataka stated that IT products were facing global competition and NASSCOM had suggested that the IT industry would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, branded products packed in unit containers should be taxed at the rate of 5%. The Hon'ble Chief Minister of Puducherry stated that branded cereals like packed basmati rice should be levied to tax. The Secretary stated that the Fitment Committee had discussed whether food grains and cereals packed in unit containers and branded should be taxed at the rate of 5% instead of keeping them at Nil rate. He suggested that these goods could be taxed at the rate of5%. The Hon'ble Minister from Haryana stated -.. that in order to encourage investment in food sector, it would be desirable to exempt them. The Hon ble Deputy Chief Minister of Gujarat stated that those cereals which were kept at Nil rate of tax should remain so irrespective of the fact that they were sold in a packed and branded state. The Hon'ble Minister from Bihar stated that a lot of money was being spent on advertisement of branded cereals, and therefore, they should be subject to tax. The Hon'ble Minister from Punjab also supported the suggestion to levy tax on packed and branded cereals. The Hon'ble Deputy Chief Minister of Delhi stated that even retailers in small shops packed cereals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 12% while retaining the proposed rate of 18% for x-ray films for other use. (Ixvi) Stent for heart surgery: The Hon'ble Deputy Chief Minister of Gujarat suggested that stent for heart surgery should be taxed at the rate of 5%. The Secretary clarified that coronary stent falling under Chapter 90 was already proposed to be taxed at the rate of 5%. The Council approved this proposal. (lxvii) Bio-diesel : The Hon'ble Deputy Chief Minister of Gujarat stated that bio-diesel should be taxed at the lower rate. After discussion, the Council agreed to keep the rate of tax on bio-diesel at 18%. (lxviii) Food served in anganwadis: The Hon'ble Deputy Chief Minister of Gujarat raised a question whether food served in anganwadis like upma, sheera, etc. would get covered as preparations for infant use. He stated that rate of tax for food served in anganwadis should be exempt. The Secretary stated that this would be difficult to administer and would create classification disputes. He further added that in any case, if these items were served fresh, there would be no tax on them. The Council agreed not to have a separate tax exemption for food served in anganwadis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Minister from Rajasthan stated that there were different grades of marble from high to the low end and it was used by all sections of the society. After discussion, the Council agreed to keep the rate of tax on marble and granite slabs at 28%. (lxxiv) Motorcycles: The Hon'ble Chief Minister of Puducherry stated that motorcycles were used by poorer and mid-income sections of the society, and therefore, they should be taxed at a lower rate. The Secretary stated that the combined rate of taxation on motorcycles was approximately 31%, and therefore, it was proposed to be taxed at the rate of 28%. The Council agreed to keep the rate of tax on motorcycles at 28%. (lxxv) Hybrid and Electrically operated cars: The Hon'ble Minister from Karnataka stated that the rate of tax on these cars should be lower so that they could become affordable. He added that the world over, hybrid cars were taxed at low rates. The Joint Secretary (TRU-I), CBEC, stated that electrically operated cars were already proposed to be taxed at the rate of 12%. The Secretary stated that the GST rate for hybrid cars be at the rate of 28%. The Council agreed to this. (lxxvi) Carria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax and that a price based rate structure could be adopted. The Secretary stated that due to the past experience of misuse of price based taxation system, certain objective criteria had been adopted for taxation of various categories of cars. The Hon'ble Minister from Haryana stated that some manufacturers might maintain the length of car applicable for lower rate of tax but sell it at a high value and that this would lead to loss of revenue. The Secretary stated that it was not advisable to change the criteria of taxation at this stage and suggested to adopt the criteria as used for excise classification and as recommended by the Fitment Committee. The Council agreed to this proposal. 16.3. The CEA suggested that the rate structure for cess could be rationalised by using certain objective criteria. The Secretary stated that rationalisation could be done at a later date as at this stage, the existing rates of taxes needed to be maintained. 16.4. The Secretary drew attention to page 114 of Volume-3 of the detailed agenda notes where Fitment Committee had recommended to impose cess on high-end motor bikes, say of engine capacity above 500 cc, aircrafts for personal u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of the proposed 5%; (iv) Low Priced Biscuits: Council to discuss it separately along with the rate of tax on biscuits; (v) Silk yarn, cotton yarn in hank : Council to discuss separately the goods falling in the entire textile chain; (vi) Sewing thread: Council to discuss separately the goods falling in the entire textile chain; (vii) Chikan : not to provide any special dispensation for chikan; (viii) Handloom and handicrafts: Council to discuss separately the goods falling in the entire textile chain and the handicrafts; (ix) Fish net and fish net fabric: to be charged at the rate of 12%; (x) Cotton fabrics, cotton textiles and man-made fabrics: Council to discuss separately the goods falling in the entire textile chain; (xi) 'Puja samagri': Fitment Committee to first define the term 'puja samagri' and then to exempt it; (xii) Footwear: Council to discuss separately the tax rate on footwear; (xiii) Sale by CSD Canteen: Council to discuss it separately; (xiv) Power driven agricultural implements: Council to discuss it again; (xv) Electricity: Council to examine this issue furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... X and Annexures XIII and XIV relating to services contained in the detailed Agenda Notes for agenda item 9. Annexure VI (List A-l): 19.1. The Secretary stated that in List A-I of Annexure VI, it was proposed to continue with 54 exemptions under GST that were available under the Service Tax. He stated that one additional exemption was proposed in respect of services provided by GSTN to the Government. The Hon ble Minister from Chhattisgarh suggested that the Local Self Government should also be exempt from GST. The Hon'ble Minister from Punjab raised an apprehension that security services provided to the Chief Ministers and the Governors would become taxable. The Hon'ble Deputy Chief Minister of Gujarat expressed an apprehension that functions of local bodies like giving domicile certificates, caste certificates, etc. would also become taxable. The Secretary clarified that these services were already exempt. 19.2. Shri V.K. Garg, Advisor (GST), Punjab, stated that GST was leviable on a supply made by a person for a consideration in the course or furtherance of business and that services given by an employer to his employee was also subject to GST. He fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would also be shared with the States. 19.3. The Hon'ble Minister from Jammu Kashmir raised an issue as to what was the broad policy objective for charging tax on Government services. The Secretary stated that tax was charged on big items like giving right-of-way for laying pipeline or sale of spectrum. The Advisor (GST), Punjab, stated that a distinction should be made between the Constitutional power to levy a tax (like entry 51 and 56 of List II of Schedule 7 of the Constitution) and other taxes. The Hon'ble Deputy Chief Minister of Gujarat supported the levy of tax on the fee for giving liquor licence as this would be distributed to all the States. The Hon'ble Minister from Assam stated that no exemption should be given for tax on fee for liquor licence as this would send a wrong signal to the public. The Hon'ble Minister from Goa also supported this view. The Hon'ble Minister from Punjab stated that his State had already lost ₹ 2,300 crore due to abolition of purchase tax and it stood to lose another ₹ 1,000 crore due to tax on licence fee for liquor. The Hon'ble Chairperson stated that this loss could be offset by increasing the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready leviable on license fee for liquor with effect from 1 April, 2016. The Council agreed to continue this tax on licence fee for liquor in the GST regime also and not to exempt it. 19.5. The Hon'ble Minister from Madhya Pradesh stated that an exemption should also be given for services provided for religious pilgrimage such as Kailash Mansarovar Yatra. The Secretary clarified that it was already exempt. Shri R.K. Tiwari, Additional Chief Secretary, Uttar Pradesh, suggested that services given by State bodies like State Co-operative Banks should also be exempted from tax. The Secretary stated that in the Addendum to the agenda notes for Agenda Item 9 circulated on 18 May, 2017, there was an entry to exempt services by way of collection of contribution under any scheme of the State Governments and under this, the States could list out their specific schemes for exemption from GST which could be brought before the Council. Annexure VI (List A-2): 20.1. The Secretary explained that List A-2 of Annexure VI contained proposals to continue Service Tax exemptions in GST with modifications as recommended by the Fitment Committee. Starting the discussion on List A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raphic film (SI.No.9). He stated that this exemption was needed to promote regional films, parallel cinema, one-day events, etc. and suggested that entry at Sl.No.9 should be modified to permit exemption to such films so that viewership of films with a social message could be encouraged. He further stated that one-day events like marathon race etc. was a way of life in the country and these should be encouraged. The Secretary stated that as the Entertainment Tax, Luxury Tax and Service Tax were getting subsumed, the Fitment Committee suggested to fix a tax rate on the basis of these taxes. He stated that if States wanted to promote a particular film, they could give reimbursement of SGST portion of the tax. The Hon'ble Deputy Chief Minister of Delhi stated that theatre and cultural activity was a different dimension of society and could not be treated the same as consumption of alcohol in a restaurant. He observed that in a place like Mandi House, which had a seating capacity of 200, even 50 tickets were sold with difficulty, and therefore, it needed to be encouraged. The Hon'ble Chairperson stated that though Delhi had world-class stadia, it had very few big events. The Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Addendum circulated on 18 May, 2017, Annexure VI (List B): 22.1. The Secretary explained that List B of Annexure VI contained those items on which service tax exemption was recommended to be withdrawn or modified by the Fitment Committee but which needed to be reviewed by the Council. The Hon'ble Deputy Chief Minister of Delhi raised a question regarding rationale for levying tax on selling of space for advertisements in print media (SI.No.1 of List B). The Secretary explained that the selling of space for advertisement in the electronic media attracted Service Tax of 18% with ITC and the same was proposed to be continued in GST. He stated that presently, selling of space for advertisements in print media was exempt, but it was now proposed to impose a tax of 5% so that the ITC chain could be completed because GST of 5% was proposed to be levied on news print. He stated that 90% of the country's newsprint was imported and the Indian manufacturers wanted a low rate of tax in order to avoid embedded tax on newsprint manufactured in India. He further stated that 50% of advertisement came from businesses and they would get credit for this tax. He added that 6 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala and a few other States. The Hon'ble Deputy Chief Minister of Del hi stated that patients did not go to hospital for luxury but for treatment and no tax should be levied for their stay in hospital. The Hon'ble Chairperson stated that taxation in education and health sectors should be avoided and even if some States were charging luxury tax for hospital rooms, rate of 18% appeared excessive. The Secretary stated that the rate could be reduced further but a lower rate could lead to credit accumulation and demands for refund. He, therefore, proposed that tax on room charges in hospitals could be exempt. The Council agreed to this proposal. 22.4. After further deliberation, the Council approved the proposals contained in List B of Annexure VI and also agreed to delete the proviso to SI.No.2 which provided for not extending exemption from tax for renting of rooms in a clinical establishment during the course of providing health care services where room charges were ₹ 2,000 or more per day. Annexure VII: 23. The Secretary explained that this Annexure contained services which were proposed to be taxed at the rate of 5%. He stated that there was no tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diesel and earlier the tax on transport sector came to 4.5%, which was now being made 5%. The Secretary stated that increasing the rate of tax at a level much higher than the present rate would be disruptive for the economy and suggested to continue with the proposed rate. The Council agreed to the proposal and approved the proposal to levy 5% GST on all services covered under Annexure VII. Annexure VIII: 24.1. The Secretary stated that Annexure VIII contained the services which were proposed to be taxed at the rate of 12%. He explained the scheme of taxation for restaurants and stated that a composition rate of 5% was available for restaurants with turnover between ₹ 20 lakh and ₹ 50 lakh and airconditioned or non-air-conditioned restaurants would attract a tax rate of 12% with full ITC and restaurants with liquor licence (whether or not air-conditioned) would be taxed at the rate of 18%. The Hon'ble Minister from Maharashtra stated that in his State, the Composition scheme was available to the restaurants at the rate of 5% where turnover was less than ₹ 3 crore and at the rate of 8% where turnover was more than ₹ 3 crore. He suggested the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), one-third of the total consideration amount could be taken as the value of land for abatement purpose. He stated that full ITC on works contract would encourage purchase of building materials from registered suppliers but no refund of input tax credit overflow would be permitted. He stated that presently the approximate combined incidence of tax was around 9% -10% but the headline rate of tax would now become 12% with the benefit of II'C. He added that the overflow of input tax credit in this sector would not be refunded. He state~ that building materials would be mostly in the rate slab of 12% and due to benefit of lTC, the prices of flats should become cheaper. He stated that consumer education would be required on this subject. 24.3. The Hon'ble Minister from Telangana stated that two different schemes of taxation in construction sector could lead to confusion and suggested that sale of finished flats should also get ITC as otherwise there was a risk of builder selling finished flats as flats under construction. The Hon ble Deputy Chief Minister ofGujarat stated that this possibility had become remote after the enactment of the Real Estate (Development and Regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding etc. services, where lump sum amount was already paid on full consideration under the Maharashtra Value Added Tax Act. He stated that the Government of Maharashtra proposed to grant exemption from levy of tax for such construction services where the full amount in lieu of tax was already deposited in the Government treasury along with the return for the tax period preceding the appointed day. The Hon'ble Minister from Maharashtra sought a recommendation from the Council for grant of exemption under Section 11 of the SGST Act from levy of State GST on such construction services. The Hon'ble Deputy Chief Minister of Gujarat also expressed apprehension that if Courts gave adverse judgments regarding the proposed abatement for land value, it could create problems. The Secretary stated that taking land value as per ready reckoner would create complications as flats would be of different sizes and common areas would also need to be allocated. He stated that if an option was given for abatement on the basis of ready reckoner of the land value, this would lead to exercise of discretion and could affect revenue. After discussion, the Council agreed to the proposal on the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... try into cinema halls. He suggested that services by way of admission or access to circus, Indian classical dance including folk dance, theatrical performance and drama could be charged to GST at the rate of 18% and the rest of the entries under SI.No.l of Annexure X could be taxed at the rate of28%. The Council agreed to this proposal. 26.2. The Hon'ble Minister from Assam raised an issue as to at what rate tax on dish TV, cable TV etc. would be charged. The Secretary clarified that it would be charged at the rate of 18% under S; No. 6 of Annexure IX (all other services not specified in any exemption notification). The Hon'ble Minister from Rajasthan suggested that limit of hotel room rent for tax at the rate of 12% should be between ₹ 1,000 to ₹ 3,000 per day and that for tax at the rate of 18%, it should be between ₹ 3,000 to ₹ 5,000 per day. The Hon'ble Minister from Rajasthan stated that a separate rate of tax should be fixed for heritage hotels which were set up in remote villages and tribal areas where the cost of raw material was much higher and which provided job to the local people. The Secretary stated that value based criteria woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes, the classification of goods and the Rules for Interpretation thereof as given in the First Schedule to the icustoms Tariff Act, 1975 be relied upon. The Council agreed to this proposal. 29.2. The Secretary drew attention to an Addendum to Agenda Notes circulated by the GST Council Secretariat on 16 May, 2017 wherein it was mentioned that a new Chapter 99 was proposed to be added to the First Schedule to the Customs Tariff Act, 1975 which would provide 6-digit classification of services based on the United Nations Central Product Classification (UN CPC). He stated that the 5- digit classification of UN CPC (excluding '99') had been adapted to meet the Indian requirements. He informed that a Committee of officers in CBEC was constituted to recommend a scheme of classification of services for GST. The Committee had proposed a scheme of classification based on National Product Classification for Services Sector (NPCSS) developed by NSO, which in turn was based on the UN CPC. He explained that NPCSS was based on UN's 5-digit Central Product Classification (UN-CPC). Broadly, NPCSS classification followed the following formulation: 99+5 digitized UN-CPC code + 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were recommended for withdrawal/modification by the Fitment Committee with the following further modifications: (a) To fully exempt tax on renting of rooms in a clinical establishment during the course of providing healthcare services whereas earlier it was proposed to limit this exemption only for room charges of less than ₹ 2,000 per day; (v) Annexure VII: The Council approved the proposal to levy tax at the rate of 5% on the 11 listed services; (vi) Annexure VIII : The Council approved the proposal to levy tax at the rate of 12% on the 7 listed services with the following modifications: (a) restaurants having facility of air-conditioning or central heating at any time during the year (whether serving liquor or not) to be levied to tax at the rate of 18% and restaurants not having facility of air-conditioning or central heating at any time during the year and not having license to serve liquor to be taxed at the rate of 12%, , restaurants not having facility of air-conditioning or central heating at any time during the year and having license to serve liquor to be taxed at the rate of 18%; (vii) Annexure IX : The Council approved the proposal to levy ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
