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TMI BlogMinutes of the 40th GST Council Meeting held on 12th June, 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... r extending the time limit for revocation of cancellation of registration iii. Notification of provisions of the Finance Act, 2020 amending various sections of the CGST Act and the IGST Act iv. Reduction of late fees and rate of interest for small taxpayers (taxpayers with aggregate turnover up to ₹ 5 crore) for the tax period May, 2020, June, 2020 and July, 2020 v. Reduction in rate of interest for delay in payment of GST for remaining part of Financial Year 2020-21 vi. Reduction in late fees for FORM GSTR-3B for months from July, 2017 to January, 2020 - One time amnesty to clean up pendency in return filing in GST regime 4. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued by the Central Government 5. Decisions of the GST Implementation Committee (GIC) for information of the Council 6. Decisions/Recommendations of the IT Grievance Redressal Committee for information of the Council 7. Creation of State and Area Benches of the Goods and Services Tax Appellate Tribunal (GSTAT) for the State of Uttar Pradesh 8. Quarterly Report of the National Anti-Profiteering Authority (NAA) for the quarter January to March 2020 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which should not be allowed and this matter be take up as an Agenda Item in the next Council meeting) with the following version: The Hon ble Deputy Chief Minister of Gujarat requested that there is need for amendment in the Central Sales Tax Act, 1956. Letter containing detailed note for amendment in the relevant section of the CST Act is already sent to the Govt. of India. Wrong use of C-Forms is causing loss of CST revenue to many states. Other states have also agreed to prevent wrong use of C-FORM and therefore, the Central Government should bring amendment immediately. If need be, the matter may be discussed in the Council meeting. iii. The State of Puducherry suggested that in paragraph 13.9, the statement (Commissioner, State tax, Puducherry mentioned that this was debated in the Officer s Meeting on 13.03.2020 and this debate is resulting in delaying the decision and cases are piling up) with the following version: Chief Commissioner, State tax, Gujarat mentioned that this was debated in the Officer s Meeting on 13.03.2020 and this debate is resulting in delaying the decision and cases are piling up. 4.1 The Hon ble Minister, Commercial Tax from Chhattisgarh reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph 13.5, to add after the sentence (He informed that in fact, based on an analysis done, below ₹ 5 crore limit, the additional tax recovered from each tax payer was ₹ 13,000 per tax payer whereas the compliance cost was appx. ₹ 50,000) Tamil Nadu had supported and welcomed the ameliorative measures taken for ease of doing business by enhancing the turnover limit upto ₹ 5 crore for filing annual returns in Form GSTR-9 and reconciliation statement in Form GSTR-9C. iii. In paragraph 13.9, to add after the sentence (There can also be a senior lawyer who can be designated as a judicial member) Tamil Nadu expressed strong reservations against the proposed amendments to sections 109 and 110 of the CGST Act with reference to the appointment of technical members in the GST Tribunals. These amendments seek to replace two technical members by one, leaving the option to choose a Central Technical member or State Technical Member to the Government of India. Tamil Nadu was of the view that the National Bench of the Appellate Tribunal and its Regional Benches may consist of Judicial Member and a Technical Member (Central) and in State Bench of the Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate action against the casinos in the State of Goa till it was decided whether GST was required to be levied on the full amount or on the gross gaming revenue as has always been done in the pre GST era. This was for the reason that casinos in Goa were on the verge of closure. That they were a very important source of revenue for the State and that Law and Fitment Committees had decided the issue and that the issue could be brought directly to the GST Council. On being informed by the Joint Secretary, GST Council Secretariat that this issue was minuted in the 38 th GST Council meeting, the Hon ble Chairperson instructed that an addendum to this effect in respect of the same may be issued. 4.6 The Hon ble Member from Madhya Pradesh stated that they were grateful that the State had been given ₹ 1,386 crore as compensation and the borrowing limit had also been raised from 3% to 5% of Gross State Domestic Product (GSDP). He, however, requested that conditionalities attached to the raising of the borrowing limit may be relaxed. He further stated that lie was looking after the departments of Home and Health and during his meeting with industrialists he had learnt that medical eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue loss arising from the lock-down consequent to the Corona crisis. The Hon ble Deputy Chief Minister of Bihar requested to take up the issues Agenda wise as procedural issues do not take much time to discuss. The Hon ble member from Jharkhand expressed his gratitude to Hon ble Chairperson for having released compensation for the period till February 2020. However, they were in dire need for compensation for the subsequent months of March May 2020. He further stated that he supported the Hon ble Member from West Bengal and Puducherry and that compensation and revenue should be discussed. 4.9. The Secretary requested that before the Council take up Agenda Item 2, the minutes may be confirmed. 5. For Agenda item 1 , the Council approved the Minutes of the 39 th GST Council meeting with the following changes: 5.1. To correct the name of the Hon ble Minister in paragraph 4.23 of the Minutes from Shri K.P. Singh Deo to Shri T.S. Singh Deo . 5.2. To add the following paragraph after paragraph 6 of the Minutes, 6A, The Hon ble Minister from Goa reminded the Hon ble Chairperson that the draft Minutes of the 39 th GST Council meeting did not reflect that it was agreed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supply of food grains. He urged the Hon ble Chairperson to kindly issue guidelines to condone the delay in filing the disclaimer affidavit and not to raise demands on that ground. He also suggested that the distinction between branded and unbranded food grains should be completely done away with as most taxpayers have switched to unbranded category by filing affidavits and consequently the loss to exchequer on account of removal of the distinction will not be much. He also urged the Hon ble Chairperson to kindly consider the remaining representations forwarded to the Council or the grounds of rationalization of tax, items of essential use by common man, items for the benefit of farmers and fishermen, items made by small artisans and items relating to religious sentiments at the earliest. 5.6. To replace the sentence The Hon ble Member from Odisha further stated that the 18% GST on job work will not impact the price of liquor because this depends upon the relationship between the brand owner and the contract bottling unit in paragraph 11.8 of the Minutes with The Hon ble Member from Odisha further stated that the 18% GST on service of job work will not impact the price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Council to the broad numbers. He firstly drew attention to Table 1 of the Agenda Note where the various components of GST have been shown for the yea₹ 2017-18, 2018-19, 2019-20 and for the two months of April and May 2020-21. He highlighted that in the last financial year the total GST collections were ₹ 12,22,1 16 crore as against which ₹ 94,323 erore gross revenue have been collected in the first two months of the current fiscal. Then, he explained the collections under IGST and its apportionment/settlement as shown in Table 2 of the Agenda Note. It was explained that the amount collected under IGST in the first two months of the current fiscal was about ₹ 52,732 crore of which ₹ 11,334 was refunded. Of the remaining, ₹ 22,766 crore was apportioned/settled between the Centre and all the States/UTs through the normal settlement route due to return filing. It was witnessed in the past few months there was no need to do any ad hoc settlement because of change in the rules of cross utilization of lGST credit. But in the months of April 20-May 20 a net balance of ₹ 18,632 crore was present mainly because the returns were deferred e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire extent of ₹ 1.76 lakh crore. Once it is reversed, the total IGST of ₹ 1.76 lakh crore will have to be divided into two halves of ₹ 88,000 crore each between the Centre and States/UTs. Since the CGST portion is central revenue, 42% of this will be devolved to the States. Remaining ₹ 88,000 crore shall be apportioned to the States and consequently the compensation which was released in 2017-18 would become excess and a part of it, depending on recalculations, has to be reversed. Because there are four legs to these transactions, some of them are releases to States and some of them are reversal of releases to States done previously and it has to and fro releases of funds, this transaction was broken into two parts. One having no net cash outgo and other will have cash outgo. It needs to be appreciated that while the amount pertaining to a, b and c above are settlements between both Consolidated Funds of Centre and States the reversal compensation at d above will be credited to the Compensation Fund. It will not go to the Consolidated Fund of India because it was released from Compensation Fund. As a result, the transaction has been split up into two p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 5 while the State-wise details have been shown in Table 6. He highlighted that the return filing (GSTR-3B) till due date for the months of March 2020 and April 2020 were only 6% and 8% respectively mainly because of the deferral and COVID benefits given. 6.4 Thereafter, the Hon ble Chairperson invited comments from the Hon ble Members of the Council. The Hon ble Deputy Chief Minister of Delhi stated that he was glad that the issue which concerned the Union Territories of Delhi and Puducherry the most i.e. apportionment of balance IGST lying in 2017-18 had finally been discussed in paragraph 6 of the Agenda Note. He stated that, on behalf of Delhi Puducherry, this issue has been raised repeatedly, even in personal meetings with the Hon ble Union Finance Minister and in the GST Council as well. Both the UTs with legislatures were the prime losers in the devolution because they were not covered by the Finance Commission grant and, therefore, did not get any money as a result of adoption of this mode of settlement. He stated that the Agenda laid down the process involved in the reversal of IGST balance of ₹ 1.76 lakh crore during 2017-18. While the Government of India had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the devolution of the Finance Commission they did not get what was due to them on account of settlement from IGST since the fund was transferred into the Consolidated Fund of India. Several rounds of meetings were held in this regard. One such meeting was held in the presence of Hon ble Union Finance Minister and it was agreed that this issue will be resolved. Puducherry and Delhi are considered to be States under the GST Act. Therefore, both are entitled to compensation like other States. Sometimes, the apportionment will also be done. Looking into the situation, after considering the compensation that has been made, if any moneys are due to Puducherry and Delhi, it may be given. In case, the payments were excess, definetely they would have to reverse. Therefore, a final call has to be taken on this. 6.6 The Hon ble Minister from Tamil Nadu stated that he wished to bring the long pending issue of IGST settlement for the year 2017-18 to kind attention of the Council. The Group of Ministers constituted for the purpose of examining the issue of IGST settlement had convened a meeting on 18.01.2020. No decision had yet been taken to release the pending accumulated lGST for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a balance of ₹ 5,000 crore at the end of April 2020. During the month of May 2020, another ₹ 7,000 to 8,000 crore would have been collected in the compensation fund. So the total balance would be around ₹ 12,000 crore Since every State needs revenue during the epidemic, he requested that ₹ 12,000 crore can be given to the States immediately as compensation for month of March 2020. Referring to the statement of Hon ble Minister from West Bengal, he stated that out of ₹ 88,000 crore of CGST revenue, the States would get 42% out of which is around ₹ 36,000 crore. Already ₹ 33,000 crore was disbursed which means that only ₹ 3,000 crore remain. The Hon ble Deputy Chief Minister then underscored the fact that out of the 92 lakh odd dealers during 2017-18 about 46 lath odd dealers had filed their annual returns. Regarding the reconciliation statement out of 12,42,000, already 10,00,00 have filed their reconciliation statements. He urged for detailed scrutiny of the big tax payers among the 46 lakh dealers who tiled their returns. He requested that instead of ad hoe settlement, even for 2017-18 it will be better if the Council goes for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reversal. Therefore, which State stands to get IGST apportioned and which have to do the reversal has to be calculated properly and opinion of States have to be taken on these calculations. These details can be worked out by the department and may be submitted to the GoM. The exact position of each State should be made known. States which have got more devolution would get less compensation while some States have got more compensation. This will have a direct effect on the finances of the States. He requested that this matter may be referred to a GoM which can have the detailed calculations. The reversal of money should not he conducted in one go or in a harsh manner. The GoM should also discuss how the reversal should take place keeping in view the COVID situation and State finances. Ultimately, the capacity of the State to reverse is important and whatever is due to the States, the formula of 50:50 for State and Centre and devolution of 42% from Central pool to States should be strictly followed. Once all the figures are clear, the States will be in a better position to look into the matter and therefore should not be rushed through. 6.12. The Hon ble Minister from Punja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le all States desire compensation, the compensation was supposed to be given only for five years, there was debate whether this time period should be further extended. He knew that ultimately, the States would have to stand on their own feet and compensation would become something of the past. He urged that what is due to the States should be given quickly. He made an important point that Goa depended on mining and tourism. Mining has been closed down and also tourism has totally collapsed. There are no sources of money. Goa have not received any compensation since March (it is about ₹ 743 crore, had they received that amount, they would have been in a better position), Goa now is landing into a debt trap. To prevent this he requested that smaller States are to be looked at differently; ultimately, funds are going to be devolved. The Hon ble Union Finance Minister was kind enough to give it as per the requisite formula, irrespective of whether they are big, medium or small. If there was a formula wherein it involves only a few hundred crores, if devolved earlier, the smaller States will not land into debt traps which will be difficult to get out because of the very reason tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Member from Gujarat for amendment of the CST Act to prevent the wrong use of C Forms. 6.18. The Hon ble Member from Himachal Pradesh expressed his gratitude to Hon ble Chairperson for release of ₹ 612 crore for the period December 2019 to February 2020. As the revenue of Himachal Pradesh is basically dependent on tourism and mining, both of which were suffering due to the pandemic, he requested that the amount of ₹ 216 crore compensation for the month of March may be released. 6.19 The Hon ble Member from West Bengal stated that he would like to correct his earlier figures since he was looking through the tables once again. Out of ₹ 1.76 lakh crore, 42% devolution translates to ₹ 73,920 crores which the States have got. He requested that for better understanding it was necessary that the officials concerned presented a matrix to the Council showing all the details of this transaction. States did get 42% because of the devolution which was ₹ 73,920, now the question is by what matrix this devolution happened since there may be some corrections that may be required and requested that some light may be thrown on the remaining quantum which need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Otherwise, ways and means have to be found out. All States are dependent on revenue collection for purpose of augmenting revenue and expenditure. Smaller States are more dependent on the same. Further, UTs with legislature like Puducherry and Delhi do not get 41% of revenue share and only 26% and therefore they have been more affected. As mentioned by Hon ble Minister from Goa that tourism was a focal area which is lost and inflow of people has been contained for the purpose of avoiding the spread of COVID- 19. The businesses are going down, the two and half months of Iockdown paralyzed the economy of the State. Ile once again requested that ways and means have to be found out to distribute compensation to the States timely He further highlighted that as the return filing has been deferred, the apportionment of IGST could not be done and that is also one reason why they are unable to claim compensation. Therefore, GST Council needs to think and come up with a solution for this. 6.21 The Hon ble Chairperson then asked Joint Secretary, Department of Revenue to respond to the queries/observations of the Hon ble Members. Joint Secretary, Department of Revenue, stated that he would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 2020, the net collection would be around ₹ 5,000 crores. So, as per his information after taking into account the collection under this head in the month of May 2020 there would be a balance amount of ₹ 10,000 in this kitty. Hon ble Dy. CM of Delhi enquired as to what was the position regarding Delhi since Delhi and Puducherry were outside the Finance Commission devolution and the adjustments did not happen. Joint Secretary, Department of Revenue replied that as Hon ble Dy.CM of Delhi stated that they got a compensation of ₹ 326 crores, the adjustment on behalf of Delhi resulted in transfer of fund to compensation fund and ₹ 3,400 crores that Delhi was supposed to get will be transferred in the next leg of the transaction since it is a cash transaction. Hon ble Dy. CM of Delhi requested that since they are short of funds, this process may be expedited. The Secretary to the Council stated GoM under the Chairmanship of Dy.CM of Bihar would be requested to expedite this and as few Hon ble Ministers requested, the full matrix of devolution to States, the formulae utilized, the amount of credit and debit transactions that should happen as per the four legs me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower than the 14% increase that was envisaged at the time of inception of GST and the Council needs to discuss how to finance compensation. He highlighted that the compensation system worked like a contra-cyclical economic grant. i.e., when revenue collections sink, the expenditure need not be cut since there is the guaranteed level of revenue. If the stand is that the States have to be compensated only from what is collected in the compensation cess then current financial year will end with only about 10% - 15% of the compensation due being paid and therefore Council has to decide how this has to be financed. The proposal before the GST Council months before the passage of GST law was that the Council should borrow and pay. He, therefore, urged that GST Council should borrow to pay compensation to the States and recoup the money by extending the period of compensation cess. He requested that this may be discussed and a decision taken since this is very important. Every Finance Minister has stressed the dire situation of State finances. The condition is going to accentuate in the coming months and therefore, this issue must be placed on the table and be discussed. 7. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allow filing of application for revocation of cancellation till 30.09.2020 for all the cancellation orders that were passed up to 12.06.2020. 8.6 The Hon ble Minister from Tamil Nadu stated that he welcomed the proposal for extension for revocation of cancellation till 30 th September 2020. 8.7. Taking up the next Agenda Item 3(iii) relating to notification of provisions of the Finance Act, 2020 amending various sections of the CGST Act and the IGST Act, JS, TRU-Il stated that for the amendments made in CGST Act, pari materia amendments needed to be made in SGST Acts too. Most important of them is in relation to power to issue Removal of Difficulties order which is valid for 3 years from the appointed day i.e. till 30.06.2020 and after 30.06.2020, these powers will come to an end. He stated that therefore, the proposal was to notify Sections 130 and 134 of Finance Act 2020 to come into force on 30.06.2020 so that powers will be available for 5 years i.e. till 30.06.2022. Power was needed for five years as it was also co-terminus with the period for which Centre had to pay compensation. He further stated that Sections 118, 125, 129 of the Finance Act, 2020 may also be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... July) is breached stated that in light of the situation emerging out of Covid-19 compliance relief as detailed below had been given to all taxpayers for the returns of February, March and April 2020 tax periods Late fee waiver and 15 days interest waiver with lower rate of interest @9% beyond that for taxpayers having turnover ₹ 5 Cr, if returns filed up to 24 th June 2020. Late fee waiver and NIL interest for taxpayers having turnover ₹ 5 Cr., if returns filed by the specified dates (staggered up to 6 th July 2020). He highlighted the issue as per the relief granted as above that, where the return is no filed by specified date(s), for the entire compliance delay, interest at 18% will be charge with late fee and the waiver of 15 day interest and late fee shall not be available. H requested that view may please be taken as to whether to allow some soft landing to these taxpayers who are not able to avail the relief granted as per the conditions of the package. He put forth the following options pertaining to the issue: A. Allow the scheme to continue the way it was decided, without allowing any further soft landing. B. Extend the reduced rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Feb. Mar and April month are required to pay interest at 18% as per the announcement made that time. Current proposal is: First, whether to stick by decision as taken in March (as mentioned in option A above). Second, to give relaxation by changing interest @9% instead of 18% till the taxpayers file their return (as in option B) Third, charge interest @9% + no late fees (option C) Fourth, whether to do this only for small taxpayers or for big taxpayers too He further said that as stated by Hon ble Deputy CM, Delhi their revenue was under strain. We have only got ₹ 94,000 crores as GST revenue for the months of April May. Usually we used to get more than ₹ 1 Lakh crore in each month. Therefore, we need to take a balanced view considering all the factors. 8.16. Hon ble Finance Minister, West Bengal stated that return filing proposal is a good one as now internet is working though not perfectly but working. Some offices have also opened. So the first question is, should they be asked to file returns for past months, he thought it was quite reasonable as it will kick start the process. Second was the interest rate they should pay? Proposal was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest rate will serve as disincentive for deliberately delaying filing of return beyond July. 8.19. Hon ble Minister from Karnataka, stated that the proposal to reduce interest rate from 18% to 9% was most welcome and as per options available, Option B seemed to be most appropriate because this deals with the post-Iockdown period and for the taxpayers having turnover of ₹ 5 crore and below. Big taxpayers had already been given sufficient time as stated by Finance Secretary. Therefore, the Option B was most appropriate. 8.20. Hon ble Deputy CM, Haryana said that they had three points to make. First, giving more time during lock-down was fine but giving more time now was not appropriate as banks were giving loan at same interest rate. Second, relaxation should be given only to the small taxpayers not to the big taxpayers as, if we start giving relaxation to big taxpayers also then there will be a major revenue loss. Third, on penalty he was of the opinion that it should be reduced because such epidemic was unforeseen and it was the right time for the Council to take call on reduction of penalties for late filers. 8.21. Hon ble Minister from Goa, said that during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might get lock-down in June end. Exponential curve was taking place as had been the case in other countries. As they didn t know what will be the situation from July to September, it was too pre-mature to take decision for that period. Rate of Interest at 9% for small taxpayers from July onwards also appeared very stringent to him but he was willing to go along with the decision subject to a review, that they should take a review of the decision sometime in July before applicable rates after September are decided. He accepted proposal from July onwards and suggested withholding of any final decision on applicable rates post September subject to a review of the economic situation prevailing at that time. 8.26. Finance Secretary suggested that we could record it as a decision but we will review the matter in June end or July and if we find that the situation has changed then we will modify it accordingly to which the Council agreed. Summarising the decision, he stated that till September rate of interest be charged at 9% and beyond that 18%, however this will be reviewed in July and if the situation worsens further, then they could further extend benefit of 9%. 8.27. The Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of Option A i.e. to extend relief package only for small taxpayers. He also said that for the months of June and July, 2020 proposed GSTR-3B return filing dates are very close for small taxpayers. For the month of June the proposed dates are 23 rd September and 25 th September and for the month of July the proposed dates are 27 th September and 29th September respectively. He suggested that there should be a gap of atleast 7 days between the proposed return filing dates for the month of June and July. 8.31. Hon ble Minister from Goa said that they would also like to go with Option A. As everybody is expecting COVID-19 to be at its peak in June and July so it was the only feasible option. 8.32. Finance Secretary stated that as everyone consented we will go with Option A for the months of May, June and July and as suggested by Hon ble Deputy CM of Bihar, the due dates will be sufficiently staggered. 8.33. The Agenda Item 3(v) relating to the reduction in rate of interest on delayed filing of return to 9% for the entire Fiscal year 2020-21 was not taken up as decision on reduced rates had already been taken covering period up to September 2020 and subject to review ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te fee from ₹ 10000 (₹ 5000 each for CGST SGST) at present to ₹ 500/- (₹ 250 each for CGST SGST) per return. Such reduction would apply only if the returns are filled between 01.07.2020 to 30.09.2020. Hon ble Chairperson asked for the views of the Council on the said proposal. 8.36. Hon ble Minister from Goa stated that we should go ahead with the proposal. He added that it was not an amnesty but what he would rather call deserved relief . He stated that it would help us get revenue and increased compliances. 8.37. Hon ble Minister from Uttarakhand enquired whether the people who have deposited their tax in time, will get the refund of the late fees paid. 8.38. Finance Secretary clarified that this proposal is about relaxations which is brought in tax administration sometimes as a one-time measure. Only when the taxpayer files all return from July 2017 to January 2020, he will be allowed to file subsequent returns. It s a kind of temporary relief given to the taxpayers to help them clear their backlog. He emphasised that the scheme has following 3 benefits: 1. All taxpayers will come into the system. 2. Return filing will pick- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application for revocation of cancellation till 30.09.2020 for cancellation orders that were passed up to 12.06.2020. iii. (A) Approved the following provisions of the Finance Act, 2020 pertaining to amendments in the CGST Act and the lGST Act, to be brought into force with effect from 30.06.2020: S. No. Finance Act 2020 section CGST/ IGST Act 2017 section Purpose of Amendment and reason for carrying out the amendment 1. 118 2(114) of CGST To provide for merger of UTs of Daman and Diu and Dadra and Nagar Haveli - Already operational 2. 125 109 of CGST To provide for conversion of the State of Jammu and Kashmir into Union territories of Ladakh and Jammu and Kashmir- Already operational 3. 129 168 of CGST To provide for allowing jurisdictional Commissioners to allow job work movement beyond time limit in desired instances-Already operational but held up due to this provision not in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il. JS, TRU II introducing the Agenda briefed the Council that the Agenda is regarding deemed ratification of Notifications, Circulars and Orders in relation to decisions already taken by GST Council and if deemed fit may be ratified and approved by Council. He stated that in the 39 th GST Council meeting held on 14-3-2020, the Council had ratified all the notifications, circulars and orders issued before 8-3-2020. He thereafter made a presentation (Annexure 3) listing out all the notifications, rate and non-rate of CGST, TGST, lGST and Compensation Cess circulars and Removal of Difficulty orders issued since 8-3-2020 till 10-06-2020, under the GST Laws by the Central Government available on www.cbic.gov.in 10.2 Hon ble Minister from Odisha sought permission of the Hon ble Chairperson to make a submission that this agenda item was placed as a Table Agenda in the last GST Council meeting held on 14-3-2020. He requested that such critical matters be discussed threadbare and not taken up as Table Agenda. 10.3 The Finance Secretary sought clarity on the Agenda that the Hon ble Minister was pointing to as the Agenda Item 4 being discussed then was not a Table Agenda. 10.4 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 th GST Council Meeting. 13. For Agenda Item 5 , the Council took note of the decisions of the GST Implementation Committee between 15.03.2020 and 26.05.2020 Agenda Item 6: Decisions/recommendations of the 11 th and 12 th IT Grievance Redressal Committee for information of the Council 14. After the 39 th GST Council meeting, two meetings of the ITGRC were held viz. the ITGRC 18 th March 2020 and the 12 th ITGRC on 26 th May 2020 to resolve grievance of the taxpayers arising out of technical and non-technical issues. Minutes of the 11 th ITGRC Meeting were attached as Annexure 1 (page no 150 to 311) to the Volume-1 of Detailed Agenda and Minutes of the 12 th ITGRC Meeting were attached as Annexure A (page no 18 to 48) to the Volume-2 of Detailed Agenda. The gist of the proceedings of the 11 th and 12 th ITGRC, as per Agenda Item was as follows: 11 th ITCRC Meeting 18 th March 2020 14.1. The 11 th meeting of the IT grievance Redressal Committee (IT-GRC) was held in Kalpvriksha, North Block, New Delhi on 18 th March 2020 to resolve grievance of the taxpayers arising out of technical and non-technical problems. There were a total of 04 agenda Ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not found suitable 04 cases of Subcategory A2 to take decision as per extended scope of ITGRC as laid down by 32 nd GST Council decision. 14.6. Recommendation for Agenda 4: a. The Committee agreed and directed that cases shall not be referred to ITGRC wherever an appeal against the order of Court at appropriate judicial forum is decided to be filed. b. The Committee agreed and directed that if the order of High Court to allow filing of TRAN-1/2 etc has been accepted by the jurisdictional Competent Authority of the Centre/ State Tax, then such cases shall not be referred to ITGRC. c. In cases pertaining to Central Tax taxpayers, if it is decided by the jurisdictional Central Tax Commissionerate with the approval of the Chief Commissioner concerned to accept the said order of Hon ble High Court / Supreme Court as per prescribed procedure, then the same needs to be communicated in writing to GSTN by the concerned Central Tax Commissionrate with the approval of the Chief Commissionerate for implementation of the order of the Hon ble Court. Similarly, in case of State Tax taxpayers, if the jurisdictional State Tax authorities decide to accept the said order of Hon ble Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TRAN-1/TRAN-2 have not been recommended, pertaining to Category B (Subcategories B1, B2, B3, B4, B5 and B6) in the absence of any evidence of technical/system errors in these cases. 14.9. The decisions/recommendations as per attached Minutes of the 11 th and 12 th ITGRC were placed for information of the Council. 15. For Agenda item 6 , the Council took note of the decisions/recommendations of the 11 th and 12 th Meeting of the IT Grievance Redressal Committee. Agenda Item 7: Creation of the State and Area Benches of the Goods and Services Tax Appellate Tribunal (GSTAT) for the State of Uttar Pradesh 16. The Secretary introduced the agenda and stated that the Chapter XVIII of the CGST Act 2017 provides for the Appeal and Review Mechanism for dispute resolution under the GST regime. The proposal of States and UTs for creation of State and Area Benches of Goods and Services Tax Appellate Tribunal was considered in the 35 th , 37 th , 38 th and 39 th meeting of the GST Council. 16.1. He further stated that in the 39th GST Council meeting the Council approved the proposal for creating State Bench of Goods and Services Tax Appellate Tribunal for the State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2020 addressed to Chief Commissioners/CCTs of various zones/states to take necessary action on the complaints which are getting time-barred to ensure that the applications of consumers can be timely addressed. (ii) D.O. letter dated 19.02.2020 addressed to Principal Secretary (Finance), Government of Punjab for appointment of Screening Committee on Anti- profiteering in Punjab for quick disposal of pending complaints and proactive approach in dealing with implementation of anti-profiteering provisions in GST law. (iii) D.O. letters dated 17.03.2020 addressed to Director General, DGAP regarding smooth functioning of State Level Screening Committee and implementation of the Authority s Orders. 18.1. In the wake of corona pandemic outbreak and subsequent Iockdown in Delhi, the hearings scheduled from 23.03 .2020 to 31.03.2020 could not be held. 18.2. The complaints received by the Authority during the Quarter are as follows and the same were forwarded to the respective Screening Committee/ Standing Committee where allegation of profiteering was there: - NAA Portal : 37 - E-Mail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness amongst the trade. 20.3. It was requested that the remaining CBIC Zones and States /UTs constitute GRC at Zonal or State/UT level, as the case may be, and copy of orders of constitution of GRC may be sent on priority to the GST Council Secretariat. 20.4. It is also informed that GSTN has created a specific portal for uploading the grievances received in these meetings, for the purpose of escalating the same to the appropriate authority. The CBIC Zones /States/UTs are requested to take Login credentials from GSTN for the aforesaid Portal. 20.5. In view of the COVID-19 instead of conducting physical meeting of GRC, it was advised that video conference option may be utilized for conducting such GRC meetings. 21. For Agenda item 9 , the Council took note of the latest status of the Constitution of Grievance Redressal Committee at CBIC Zonal/State level for Redressal of grievance of taxpayers on GST related issues. Agenda Item 9A: Inverted Rate Structure in GST- Correction of inverted rates, on certain key sectors 22. Finance Secretary requested JS (TRU-I) Sh. G.D. Lohani, to take up Agenda Item 9A on inverted duty structure 22.1. JS (TRU-T) initiated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go up to fabric but the issue has wider ramification for the small standalone units which may take yarn and make fabric out of it or may take fabric and make garment out of it. The accumulated ITC from capital goods hurt everybody in the domestic market and since no refund was given for the same, it was a bottleneck for investment in this sector. Investment decisions were being affected by non-refund of ITC on capital goods and the sector was not able to utilise entire ITC on the capital goods. 22.4. JS, TRU I highlighting the adverse impact of inversion stated that it led to incentivizing imports as they didn t suffer inversion. Quoting an example, he stated that fabric being imported into the country attracts 5% GST and there was no baggage of ITC on previous supply chain because all taxes were refunded in the country of export. The same fabric in India suffers from the ITC because of the higher taxes on fabric, fibres and chemicals. As a result, whenever there are inverted duty rates, the imports get undue benefits over the domestic manufacturer. He added that with all these kinds of issues in the sector the problem of misclassification of rates, etc., also arise. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issues for domestic manufacturer No undue advantage to imports Litigations and other hardships are avoided Growth of textile sector and encouragement to investment, as also represented by the Textile Ministry. Countering the possibility of an argument that, if rates are increased from 5% to 12%, this may impact the price to the final consumer ( e.g., implication of GST rate on garments of value less than ₹ 1000 if raised from 5% to 12%) he clarified that fact was that, if we take out cost of taking refund, ITC on capital goods and services which gets blocked on account of refund not given on capital goods and services and the compliance effort, net impact on unit price (and thus impact to the consumer) would only be only marginal while otherwise benefiting the domestic industry immensely 22.7. The Finance Secretary informed that textiles was one such item; there were two other items in the Agenda i.e. footwear and fertilisers which could be taken up once a decision on this was made. 22.8. The Hon ble Finance Minister West Bengal stated that in principle, inverted duty structure was an anomaly that all had been trying to grapple with. He submitted that he d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong message to public as in these Corona times they were increasing the tax rates and people will not understand the nitty gritty of ITC and tax rates will be visible on bill. He stated that the Council could discuss this along with footwear and fertiliser after 4-6 months. He added that proposal was good and could be adopted with minor changes but certainly not now. 22.11. Hon ble Deputy CM Gujarat said that they supported West Bengal and Bihar. He stated that on one hand Centre was announcing package of ₹ 20 lakh crore, various States were also giving packages, in Gujarat they had announced ₹ 14 thousand crore package and also giving several other reliefs for return filing and on other hand, increasing rates on textiles looks very inappropriate. He urged that the matter be postponed for a significant period as nobody knew when Corona would be controlled and the period of its impact, how economic recovery would happen, how employment and state income would increase was not clear. He opined that in such a situation the proposal should be kept on hold. 22.12. Hon ble Deputy CM Haryana stated that it was not the right time, as they were looking for upliftment of SS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re demanding tax for delayed filing of disclaimer affidavit before the jurisdictional Commissioner for voluntarily foregoing the actionable claim or the enforceable rights on their brand name. The intention of issuing such notification for filing disclaimer affidavit was to grant exemption on the supply of food grains having unregistered brand name. However, the delay in filing such affidavit should not be a ground for levy and collection of tax on the supply of food grains. He urged the Hon ble Chairperson to kindly issue guidelines to condone the delay in filing the disclaimer affidavit and not to raise demands on that ground. He also suggested to completely do away with distinction between branded and unbranded food grains as most taxpayers had switched to unbranded category by filing affidavits. Doing so therefore will not have any significant impact on revenues. He further urged the Hon ble Chairperson to kindly consider the remaining representations forwarded to the Council on the ground of rationalization of tax, items of essential use by common man, items for the benefit of farmers and fishermen, items made by small artisans and items relating to religious sentiments at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond is that the compensation requirement is also increasing. The law (Goods and Services Tax (Compensation to States) Act, 2017) provides that the compensation to States will be provided from the Compensation Fund. The law also envisages that in case compensation fund is inadequate to compensate the States, it is the GST Council that has to take the decision as to what is required to be done. In normal times, GST Council perhaps could have taken a decision to rationalize rates on certain items. Other rationalization measures like levying compensation cess on more items could also have been undertaken in normal times. However, at this point of Lime, it has to be decided on how exactly more money could be brought into the compensation fund. Another factor is that the whole concept of compensation cess was to help the States transition into GST regime. The underlying presumption was during the transition, certain disturbances will take place. It was not very clear on how the revenue will grow, how the rate structure will play out, how IGST on interstate trade will get collected etc. Keeping these in mind along with the spirit of GST regime, the compensation provision was brought in. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this. Tamil Nadu, till the very end held out against GST. Some other States also had reservations. It was because of this promise that everyone agreed to transition into GST regime. Therefore, this measure had to be undertaken. In fact, there should be a more detailed discussion at a later time where the Council can look at the whole architecture to an extent, rates, inverted duty structure etc. He had a fear that the current rate is not Revenue Neutral. So the rates would have to relooked at in the future. The Council also has to look into whether the compensation period has to be extended from five year to six or seven years. Already a number of Ministers have raised the issue in the Council. He thought that if the Council is looking at the whole architecture of GST, he would say in the present circumstances, the rate split must be changed from 50:50 to 60:40 (60 for the States and 40 for Centre). Perhaps, a little more flexibility of SGST rates may also be looked into. He did not want to raise the issues now but sometime later when things become normal. For the time being, there is no other solution other than GST fund borrowing and extending the compensation period by another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cut due to low tax collections. He was sure that lot of hard labor must have gone into achieving this. The Council can continuously discuss from where the compensation revenues can be managed, whether the Council has the power to raise a loan and if the Council does not have the power to raise the loan, what are the options. Just now the Council had decided to defer a decision to augment Revenue Collection proposal knowing very well that by deferring such decision, the compensation requirement of States will go up. He fully agreed with the Hon ble Minister from Uttar Pradesh that bold decisions have to be taken. In the beginning of the meeting it was said that any mistake committed like inverted duty on textile should not be corrected at this point of time. But then again they are now asking for compensation. Is it not contradictory? The issue is that people of many States like Assam do not like to hear that State Government was raising loan beyond a point. If Council raises loans, RBI might calculate the loan amount against States accounts. Although GST Council is a body corporate, the loan raised will be assigned against every State. Raising loan for compensation is a huge decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Minister said that She reiterated the commitment made by the then chairperson of the GST Council that in case there are no adequate resources for giving compensation to the States, marker borrowing may be resorted to She also stated that as suggested by Dy CM of Bihar, after the Parliament session is over, may be if everyone so desire, she will work on whether the GST Council itself can borrow, the legality of such a borrowing and she will convene a meeting of all the State Finance Ministers to discuss contingencies in terms of compensation cess requirements; who would stand guarantee in case of market borrowing to fund the compensation requirements of the States, what impact FRBM Act and ways to counter the negative effects of Corona Virus pandemic on the economy . Firstly, he requested that the Hon ble Union Finance Minister can fix a day after 10 to 15 days from the 40 th GST Council Meeting to discuss the sole issue of compensation cess. States will also be ready to give their view points. So for four-five hours, a separate meeting can be conducted. Secondly, as Finance Minister of Assam had mentioned, FRBM limits on State borrowings has been relaxed from 3% to 5% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the purchaser and not on the farmer. Under RCM, Kaju (cashew), Tendu leaves, silk yam, cotton etc. are present. The Council could not take decision on the subject on Mentha-oil in this regard. He requested that such decisions may be taken which can bring some revenues just by simplification of taxes, where additional taxes are not imposed, correcting anomalies and ambiguities. He impressed upon the Council again that lot of discussion has already taken place regarding Brick Kiins and Pan Masala. He had raised this issue in the Council multiple times. Earlier their revenue was ₹ 500 crore, now, after GST, they collect only ₹ 75 crore. He stated that there is a dire urgency to take decisions on these issues as well. Decisions that will enable inflow of additional revenues without putting burden on anyone should be taken immediately. That is why he pointed out that anomalies should be corrected. Fie stated that he may be forgiven for pointing this out but majority of the States which have presented their views in the Council did not have any difficulty in raising the price of diesel. Diesel is the necessity of a common farmer. It is required for transportation, agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raordinary measures can be undertaken like possibilities of raising a loan from the market should be explored. He praised the way the Hon ble Union Finance Minister in the previous Council meeting had perfectly summarized her position regarding this issue. He thought that the Council should fulfill its responsibility and not shirk it off labeling the pandemic as an act of god. This is very important for the coming future. 26.6. Hon ble Minister from Goa stated that the discussions have gone as back in time by talking about the architecture of GST that had been adopted. He was surprised time and again various aspects of GST implementation were discussed except act of God. Now that force majeure has come in and whatever losses of revenue have occurred in the last two months cannot be attributed to the functioning/working of GST itself. At one point of time, 14% growth was envisaged and he wanted to remind all the Ministers present that it was always a decision by consensus. The decisions were arrived with the involvement of Centre and with the full involvement of every State in this country. Now, when there is a talk on architecture and opinion is presented that something is wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure and strong application of mind and that is why need a fuller session to discuss this particular subject. He strongly believed that all the State Finance Ministers combined with the Centre have the capacity to surmount this particular problem. There is a shortfall in revenue and it is also happening with other stronger economies in the world. At least we are progressing well and we are on the right path. I-le requested the Hon ble Union Finance Minister for some time to have a full session to discuss. He did not think that a decision needs to be taken right now and he complimented Hon ble Union Finance Minister for getting this issue on the table and at least making the States aware and allowing the States to apply their mind and come up with fresh ideas. 26.7. Hon ble Minister from Karnataka stated that many ministers have deliberated on the subject. One thing that everyone should remember is that there is no magic in economy. Results come through efforts. This is an extraordinary situation and therefore we have to think extraordinary. Nobody had envisaged such a situation that has come now and we are dealing with it. Let us deal with it firmly with a resolute mind and move ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip of the Hon ble Union Finance Minister, we need to come up with an extraordinary solution to deal with the extraordinary situation. 26.8. Hon ble Minister from Telangana stated that States are under a lot of stress. At this juncture if a State like Telangana did not get GST compensation, it will be difficult to maintain the State. A progressing State like Telangana will be the big loser. As per the 15 th Finance Commission report, they are not getting any Revenue Deficit Grant. On the other hand, devolution for the State also has gone down. Supporting the argument of the Hon ble Dy. CM of Delhi, at this junction, his sincere request is that the Hon ble Union Finance Minister had to support the States. How to find a solution to this can be deliberated. Just like Dy.CM of Bihar stated, a full day discussion on this topic needed to be done. His request on behalf of State of Telangana was that, either loan has to be raised or FRBM norms may be relaxed by 1% just like Hon ble Minister for Karnataka suggested. Somehow GST compensation needed to be paid. They had already factored in GST compensation in their budgets. On one hand, already a lot of income of the State has reduced. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the State of Uttar Pradesh There would not be any additional burden due to this and therefore it has to be brought within the ambit of RCM. Brick Kiln Pan Masala issues have been deferred for a long time. He impressed upon the Chairperson that these issues need to be considered and requested that since Uttar Pradesh is facing hardship due to shortage of funds. They have lot of liabilities to face. All States have been demanding compensation. He stated that decisions resulting in increase of revenue may not be deferred. The Hon ble Chairperson responded that their points are valid and will be looked into. 26.11. Hon ble Union Finance Minister concluded this issue by stating that a separate exclusive meeting would be held. Firstly, as a first step towards that, States which want to share their view points, should share their thoughts in the next ten days. Secondly, as suggested by Hon ble Minister from West Bengal, Revenue Secretary as the Secretary to the Council should do all the due diligence on the mode with which this can be accomplished, get all the opinion, compile and share with the States within the next ten days. Two weeks post that, in mid-July, taking all the M ..... 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