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TMI BlogMinutes of the 16th GST Council Meeting held on 11th June 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... ouncil Meeting. Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 15th GST Council Meeting held on 3 June, 2017: 4. The Hon'ble Chairperson invited comments of the Hon'ble Members on the draft Minutes of the 15th Meeting of the Council (hereinafter referred to as 'Minutes') held on 3 June, 2017 before its confirmation. 4.1.1. The Secretary informed that a written request had been received from the Commissioner of Commercial Tax (CCT), Odisha, to replace the version of the Hon'ble Minister from Odisha recorded in the following paragraphs of the Minutes: (i) In paragraph 9.8.8, to replace the version recorded in the Minutes ('the Hon'ble Minister from Odisha suggested that handloom should be charged to Nil rate of tax …….. that the products of handloom were used by common people') with the following version: 'Handloom fabrics and handicraft goods were exempt in Odhisha. Livelihood of more than 3.5 lakh artisan families depended on it. Handloom product were not only in demand outside the State, but were also used by the common people. He stated that he was in favour of exempting handloom fabrics and sarees.' The council agree to record thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out that in paragraph 9.10.4 of the Minutes, the statement attributed to the Hon'ble Minister from Madhya Pradesh regarding expressing a preference for taxing gold at the rate of 5% was actually made by the CCT, Madhya Pradesh, and suggested to make a suitable modification in the paragraph to this effect. The Council agreed to this suggestion. 4.1.4. The Hon'ble Minister from Punjab stated that in paragraph 4.4.1 with reference to the discussion on licence fee for liquor in the GST regime, it was recorded that 'the ACS, Haryana, stated that the decision of the Hon'ble Chairperson was that for the transition phase some decision would be taken so that the States did not lose financially'. He observed that the Hon'ble Chairperson had also agreed to the suggestion of the ACS, Haryana, and this should be recorded in the Minutes. The Council agreed to this suggestion and to record the following: 'The Hon'ble Chairperson observed that the officers of the Central Government and the State Governments should sit together and take a view on the issue'. 5. In view of the above discussion, for Agenda item 1, the Council decided to adopt the Minutes of the 15th Meeting of the Council with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were put in the public domain for comments of the stakeholders. He stated that based on the comments received, the Law Committee of Officers had suggested certain changes to the Rules. He added that two additional changes were proposed during the meeting of officers of the Central Government and the State Governments held on 11 June, 2017 and these were circulated in writing to the Hon'ble Members of the Council just before the start of the Meeting. He invited Shri Upender Gupta, Commissioner (GST Policy Wing), CBEC, to brief the Council about the changes proposed. The Commissioner (GST Policy Wing), CBEC, stated that four important changes had been proposed by the Law Committee and two changes were proposed today during the officers' meeting which were as follows: (i) Sub-rule rule (2) of Rule provided that accounts and records shall be maintained separately for each activity like manufacturing, trading and provision of services. The trade had represented that this would be very cumbersome and the relevant rule was proposed to be amended which would permit a taxpayer to maintain a combined record for all his economic activities. (ii) Sub-rule (5) of Rule 1 provided that a taxpay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on Accounts and Records including the changes made therein. 7. For agenda item 2, the Council approved the GST Rules on Accounts and Records and the related Form along with the amendments proposed by the Law Committee of Officers and during the officers' meeting held just prior to the Council meeting on 11 June 2017 as enumerated at 7aragraph 6 above. Agenda Item 3: Rate adjustments, if any, based on representations received from Trade and Industry: Discussion on GST rates for goods: 8.1. Introducing the above agenda item, the Secretary recalled that during the 15th Meeting of the Council (held on 3 June, 2017), it was decided that all representations regarding reduction in rates were to be submitted within a day or two of the conclusion of the 15th Council Meeting, and these were to be considered by the Fitment Committee and its recommendations were to be placed before the Council in its next Meeting. He informed that the Fitment Committee met on 7-8 June, 2017 and examined the representations received from the Central Government and/or State Governments, subsequent to the declaration of the GST rates as approved by the Council in its 14th Meeting (held in Srinagar on 18-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and restaurants should be increased to ₹ 1 Crore. The Hon'ble Minister from Telangana supported this proposal. The Secretary stated that the Composition scheme might not be attractive to relatively bigger units as they could not avail the input tax credit on their purchases and their buyers could not get input tax credit on sales made by them. The Hon'ble Minister from Chhattisgarh stated that the traders had the choice not to opt for the Composition scheme. The Secretary invited comments from the officers as well. The Hon'ble Chairperson stated that discussion on this subject should also cover the revenue aspect. 8.4. Shri R.K. Tiwari, Additional Chief Secretary (ACS), Uttar Pradesh, stated that his State had a large number of SMEs falling within the annual turnover of ₹ 1 crore and if all of them opted for Composition scheme, they would suffer a very large-scale revenue loss to the tune of about ₹ 5.000 crore. The Hon'ble Deputy Chief Minister of Gujarat stated that his State also had a very large number of SMEs. He proposed to increase the turnover limit for Composition scheme to ₹ 75 lakh so that loss of revenue to the Government was comparatively l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from local marble to imported marble. The Hon'ble Minister from Uttarakhand suggested to keep the turnover limit of Composition scheme at ₹ 1.5 crore and to reduce the rate of tax to 1% as otherwise the SME sector would collapse. The Hon'ble Chairperson enquired regarding the revenue impact of this suggestion. The Hon'ble Minister from Uttarakhand stated that if the rate was kept low, the turnover of these units should increase and more revenue would come to the State. The Hon'ble Minister from West Bengal stated that there was a need to strike a balance between safeguarding revenue for the States and to protecting the interest of SMEs. He expressed his support for the proposal made by the Hon'ble Minister from Chhattisgarh. He observed that manufacturers with turnover below ₹ 1.5 crore did not pay any Central Excise duty but units with turnover above ₹ 10 lakh were paying VAT, and hence there was justification to levy some tax on them. He suggested that the turnover limit for Composition scheme could be kept at ₹ 75 lakh. He observed that if the scheme of Composition was extended to units having annual turnover upto ₹ 1 crore, the rate of tax under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnover of ₹ 15,000, he would cross the threshold of ₹ 20 lakh and would start paying tax. He observed that 28% tax rate for hotels with room rent above ₹ 5000 per night would affect the business of hotels and suggested that hotels with rent between ₹ 5,000 and ₹ 10,000 per night should be charged at the rate of 18% and hotels with room room rent above ₹ 10,000 per night should be charged at the rate of 28%. The Principal Secretary, Telangana, stated that the main problem was in calculating the incidence of tax. He informed that the granite industry was willing to pay tax at the rate of 14.5% but for units with turnover below ₹ 1.5 crore, the tax rate of 28% was very high. He suggested that to calculate the tax incidence for units with turnover below ₹ 1.5 crore, only the tax incidence of VAT should be taken into account and as a general principle, such units should be charged tax at one slab lower than the presently proposed rate. The Hon'ble Minister from Kerala stated that the revenue of the consuming State should also be protected and the proposed reduction in the rate of ax would adversely affect the revenue of the consuming Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n opportunity to the units to split their books of account. He further stated that if the Composition limit was increased to ₹ 1 crore, their State would suffer a loss of revenue of about ₹ 7,000 to ₹ 10,000 crore. He suggested that if the turnover limit under the Composition scheme was proposed to be increased to ₹ 1 crore, the Composition rate for manufacturing units should be fixed at the rate ranging from 7% to 10% to make the rate revenue neutral. 8.11. The Hon'ble Deputy Chief Minister of Delhi pointed Out that for manufacturers of goods like electrical fittings, footwear and toys, there was strong competition from goods imported from China. Even a slight increase in the rate of tax would make them uncompetitive vis-à-vis the imported goods leading to closure of SMEs in Delhi which in turn would lead to loss of jobs and decline in consumption and people might even move out of Delhi. The Hon'ble Deputy Chief Minister of Gujarat stated that imports from China would also attract IGST, and therefore, they would not become cheaper. The Hon'ble Chairperson enquired whether the proposal was to increase the Composition limit only for manufacturers or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He further mentioned that if one calculated the tax incidence on this sector on a Compounding basis pre-GST, a 3O% value added estimation with 14.5% VAT rate of products made by taxpayers of this sector (as had been mentioned by the Principal Secretary from Uttar Pradesh) translated to 4.35%. If embedded Central Excise duty on the products were added to the tune of about 4%-5% even on a conservative estimate, the tax incidence on this category of tax payers on a compounding basis pre-GST came to 8%-9%. He further mentioned that against this, the Council had already approved a Compounding rate of 2% on taxpayers with turnover below ₹ 50 lakh. Any further increase in threshold for compounding along with the fact that compounding option encouraged taxpayers to split up their units, as the Hon'ble Deputy Chief Minister of Gujarat mentioned, could have serious adverse revenue implications. 8.14. The Hon'ble Minister from Chhattisgarh stated that in order to increase employment in the States. 10 year Sales Tax holiday for large industries was part of the industrial policy of almost all States. Under the GST regime too, to encourage industrial investment, many States were planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herry suggested that data could be collected from all States and also sounded a note of caution that increasing the turnover limit could lead to traders splitting their units to remain within the threshold limit. The Hon'ble Minister from West Bengal stated that a turnover limit of ₹ 1 crore annually for Composition scheme appeared acceptable though as per their rough calculation, ¡t could lead to loss of revenue of about 3%--4%. He observed that the Composition scheme was voluntary arid many taxpayers in his State chose not to opt for this scheme. As regards rates of tax, lie suggested that traders could be taxed at the rate of 1%-2% and manufacturers at the rate of 3%-4%. The Hon'ble Chairperson stated that rough calculation indicated that products in the 28% rate slab would, in terms of revenue, break even if the Composition rate was fixed at 5% and products in the 18% rate slab would break even, if the Composition rate was fixed at 3%. The Hon'ble Minister from West Bengal stated that this could be a sensible approach but it could lead to complications in the tax regime. 8.16. The Hon'ble Chairperson observed that as rates were prescribed in the law (Section 10 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit Transfer (DBT) route. The Hon'ble Minister from West Bengal observed that if the annual turnover limit for Composition was kept at ₹ 1 crore, then a negative list of manufacturing sectors could be kept but if the turnover threshold was ₹ 75 lakh, the revenue loss would not be very high and the Council could take a decision regarding keeping a negative list of manufacturing sectors. The Hon'ble Minister from Telangana once again suggested to keep the turnover threshold for the Composition scheme at ₹ 1 crore. The Hon'ble Chairperson suggested that since the rates under the Composition scheme could not be changed, the annual turnover threshold could be kept at ₹ 75 lakh for all taxpayers eligible for the scheme and to have a list of manufacturers who shall be ineligible for Composition scheme. The Council agreed to these proposals. 8.16A. The Hon'ble Minister from Tamil Nadu circulated a written speech during the meeting. He thanked the Council for having agreed to the request of Tamil Nadu regarding the rates of tax on footear; palmyra jaggery; glass for corrective spectacles and cashew nut. He also commended the decision to levy tax on Textiles at a un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady recommended to be taxed at a lower rate of 18%. The Council agreed not to change the already approved rate of tax for pasta and macaroni at the rate of 18%. (ii) Cakes: The Hon'ble Minister from Goa stated that when mithai was to be taxed at the rate of 5%, cakes should also be taxed at the rate of 5% as it was made at every home in Goa. Shri Anurag Goel, CCT, Assam, stated that cakes made at home would be Nil rated and if the tax rate was reduced, the benefit would go to the bakery industry which was not warranted. The Council agreed not to change the already approved rate of tax of 18% for cakes. (iii) Fishnet: The Hon'ble Minister from Goa stated that when tyre cord fabric was proposed to be taxed at the rate of 5%, there was no justification to tax fishnet at the rate of 18%. He further stated that the tax rate of 18% on fishnet would lead to increase in the cost of fish by ₹ 30 to ₹ 50 per kg. The Secretary stated that the raw material for fishnet was polyester which was to be taxed at the rate of 18% and if fishnet was taxed at 5%, large scale refund would arise due to duty inversion. The Hon'ble Minister from Goa stated that they did not want input tax cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a uniform rate of 28% could be kept on these goods. The Council agreed not to change the already approved rate of tax for these goods at the rate of 28%. (vii) Other Dry Fruits and Nuts (SI. No. 8 of the List): The Hon'ble Minister from Uttar Pradesh stated that since cashew nut was being taxed at the rate of 5%, singhada and makhana should not be taxed at the rate of 12%. He further stated that as it was consumed by people during fasting, it was exempt from VAT and proposed that it should also be exempted under GST. The Secretary raised a question whether these goods would fall in the category of dry fruits and the ACS, Uttar Pradesh, clarified that they would fall in this category. Joint Secretary (TRU-l), CBEC clarified that fresh singhada (chestnut) was classifiable under HS 0802 and was at 0% rate of tax whereas dried singhada (chestnut) was to be taxed at the rate of 12%, as in the case of other dry fruits (other than cashew and raisins). Similarly, makhana fresh was at 0% whereas makhana dried was at 12%. After discussion, the Council agreed not to make any change in the tax rate of 12% for these products. (viii) MasaIa powder (SI. No. 19 of the List): The Hon'ble Ministe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI. No. 33 of the List): Hon'ble Deputy Chief Minister of Delhi suggested that ayurvedic medicines should be taxed at a lower rate of 5%. The Secretary stated that the current incidence of tax on ayurvedic medicines was about 13%, and therefore, it would be reasonable to tax them at 12%, as proposed in the agenda notes. The Council agreed to this proposal. (xii) Granite Slabs (SI. No. 29 of the List): The Hon'ble Minister from Telangana stated that presently there was only 2% CST (Central Sales Tax) on granite slabs and levying 28% tax on them was too high. He stated that lakhs of people were employed in this sector and the cost of slabs varied from ₹ 16 per square feet to ₹ 80 per square feet. He suggested to reduce the rate of tax on granite slabs. He further stated that the present incidence of tax on granite slabs was only about 16.32%. and therefore, it should be taxed at the rate of 12%. The Hon'ble Minister from Karnataka stated that it was ironic that on a luxury consumption item like granite slab, there was no Central Excise duty. He added that there could be evasion of tax if the rate of tax was kept at 28%. The Secretary stated that evasion was earlier possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the rate of 5%. The Secretary stated that all machines were in the tax slab of 18%. The Secretary stated that for bio gas tax was proposed to be lower at 5% instead of the earlier approved rate of 12% as the current incidence of tax was about 8.6%. The Council agreed to the proposed rate of 5% for bio gas. (xv) Marble slabs (SI. No. 30 of the List): The Hon'ble Minister from Rajasthan stated that there was no Central Excise duty on marble and granite for manufacturers up to an annual turnover of ₹ 1.5 crore and that a tax rate of 28% would make the domestic products very costly. The Secretary stated that imported marble would also be charged to IGST at the rate of 28% and in addition, Customs Duty was also leviable. The Hon'ble Minister from Telangana stated that the current incidence of tax on granite slabs was about 16.32% and enquired why it was proposed to be taxed at the rate of 28%. The Joint Secretary (TRU-l), CBEC, stated that the rate of tax on granite and marble tiles was 28%, and therefore, the intermediate products i.e. the granite and marble slabs were also kept in the tax bracket of 28%. He further clarified that the issue was deliberated during the 14th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stated that if tax was lowered, the producers of these goods would become eligible to claim refund on the input tax credit on paper leviable to tax at the rate of 12%. The Hon'ble Deputy Chief Minister of Delhi stated that since books were kept at Nil rate, there was no justification to levy tax on children's picture, drawing or coloring books. He added that today young parents from all strata of society gave such books to their children. The Secretary informed that even the producers of books had requested to levy tax on them as they suffered an embedded tax of 8% to 9% but this suggestion was not acted upon as levying tax on books would have caused public uproar as it was connected to the freedom of speech. The Hon'ble Deputy Chief Minister of Delhi stated that text books and picture books did not have much difference. The Hon'ble Deputy Chief Minister of Gujarat stated that in his State, books were given free to about 1 crore children, After discussion, the Council agreed to exempt tax on children's picture, drawing or coloring books instead of the proposed tax rate of I 2%. (xviii) Spectacle Cases; Glasses for Corrective Spectacles and Flint Buttons (Sl No. 49 & 67 of the Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Secretary stated that ply board was in the nature of finished goods. The Hon'ble Minister from Kerala stated that rubber wood based board (at SI. No. 51 of the List) should be treated as plywood as they were competitive products. The Hon'ble Minister from Jammu & Kashmir stated that if rate of tax on goods was to be based on goods of special importance in various States, then this %as akin to going back to the VAT regime. The Hon'ble Chairperson stated that if rate was to be reduced on a large number of goods, then one would need to consider how to make up for the lost revenue. The Hon'ble Minister from Haryana stated that taxing ply board at the rate of 18% would improve compliance as a high rate of 28% would make it highly evasion prone commodity. The CCT, Assam observed that while deciding the rates, the interest of the consuming States should also be kept in mind. After discussion, the Council agreed to keep the tax rate on ply board (Particle board, fiber board) and plywood at the proposed rate of 28%. (xx) Laundry detergents and dish washing products (SI. No. 38 of the List): The Hon'ble Minister from Odisha stated that laundry detergent was an item of mass consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he volume of sale of ply board was very high and there would be substantial revenue loss if rate of tax on ply board was reduced. The Council agreed to keep the rate of tax for human hair dressed, thinned, bleached or otherwise worked at Nil. xxiii Bamboo based products (SI. No. 50 of the List): The Hon'ble Minister from Kerala suggested that rate of tax on bamboo based products should be reduced. The Joint Secretary (TRU - I). CBEC stated that the present incidence of tax on these products was about 18.65%. After discussion, the Council agreed to keep the rate of tax for bamboo based products at 18%. (xxiv) Coir mats, matting and floor covering (SI. No. 58 of the list): The Hon'ble Minister from Kerala suggested that the products coming from handloom industry should be exempted and the other categories of coir mats, etc. should be taxed at the rate of 5%. The Secretary stated that handloom was made across various sectors and it was a very big item in the textile industry. He added that it was very difficult to distinguish between textiles made from handloom and power loom, and therefore, all were proposed to be taxed at same rate. He stated that the same logic applied for coir m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of repair activities took place for tractors and their spare parts were easily distinguishable and were only used in tractors. The Joint Secretary (TRU-l), CBEC, stated that tractor parts that were distinguishable as exclusively being used in tractors were proposed to be taxed at the rate of 18% by taking a carve out in Chapter heading 4011 (tyres and tubes) and in Chapter heading 8708 (parts and accessories of motor vehicles) and other parts, including engines, were proposed to be taxed at the rate of 28% in order to avoid misclassification and duty evasion. The Hon'ble Chief Minister of Puducherry stated that when the rate of tax on fixed speed diesel engines (SI. No.74 of the List) was reduced from 28% to 12%, there was no justification to levy tax on tractor engines at the rate of 28%. The Secretary clarified that for the sake of parity, the rate of tax on submersible pumps and fixed speed diesel engines of up to 15HP was kept at 12%. He further pointed out that tractor engines would get full input tax credit and would be eligible for refund of input tax credit because the final goods, namely, tractors were charged to tax at the rate of 12%. After further discussion, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced, the car manufacturers did not pass the benefit of the same to the consumers. The Hon'ble from Karnataka reiterated that in addition to the cost of fitting extra equipment, there would be an additional cost for these cars due to imposition of 15% Compensation Cess, which was not desirable for an environment-friendly product. The Hon'ble Minister from Kerala stated that he did not support taxing an environment-friendly product at a high rate. The Hon'ble minister from Goa stated that 15% Compensation Cess should not be imposed on environment- friendly car. The Hon'ble Chairperson stated that the note on hybrid cars should be circulated by the Secretariat to all the Hon'ble Members of the Council after which, if need be, it could be discussed during the next meeting of the Council. (xxxiii) Molasses: The Hon'ble Minister from Karnataka stated that they had concerns on the rate of tax on molasses and invited the CCT, Karnataka, to explain the issue. The CCT, Karnataka, stated that under the VAT regime, the tax paid on molasses was set off against the excise duty on clearance of alcohoIic liquor for human consumption. In the GST regime, as alcoholic liquor for human consumption w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of scrap bottles in the environment, if they were not reused. He added that the present rate of VAT on this item varied from 0% to 5%. After discussion, the Council decided not to change the rate of tax on these goods. (xxxvi) IGST Exemptions: The Secretary stated the certain lGST exemptions were proposed to be continued/introduced due to reasons like bilateral commitments between India and Pakistan/Bangladesh for regulation of bus services (notification 4/99-Customs dated 08.01.1999)); technical exemption for temporary import/re-import (notification 40/2015-Cus dated 21.07.2015; 9/2012-Cus dated 09.03.20 12); and declaring inter-State movement of any mode of conveyance for carrying goods or passengers or both or for repairs and maintenance as neither a supply of goods nor a supply of service. The Council approved these proposals. 9. For agenda item 3, the Council approved the rates of GST on supply of goods as presented in the agenda notes with the following modifications: - (i) For Composition scheme, to increase the annual turnover threshold from ₹ 50 lakh to ₹ 75 lakh for eligible taxpayers and to have a list of manufacturers who shall be ineligible for Compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Article 243G of the Constitution or to any function entrusted to a Municipality under Article 243W of the Constitution. He stated that in the Officers meeting held in the morning, it had been suggested that only supply of pure service contract provided to Government, a local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or any function entrusted to a Municipality under Article 243W of the Constitution may be exempted. After discussion, the Council agreed to the proposal. 10.3. The Secretary stated that the third proposal on exemption related to services provided to the Government under any insurance scheme for which total premium was paid by the Government. He informed that the recommendation of the Fitment Committee was to exempt services provided to the Government under any insurance scheme provided 100% premium was paid by the Central Government or the State Government. The ACS, Uttar Pradesh recalled that during the Officers' meeting held today in the morning, he had stated that under some of the Government of India schemes, even if part premium was paid by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... job-work services relating to textiles and cut and polished diamonds and gold jewellery and as a result, these job-work services would attract the standard rate of 18%. 10.5.1. The Secretary informed that to resolve this issue, the Fitment Committee had recommended that job work services in relation to (a) textile yarns (other than manmade fibre/filament) and textile fabrics and (b) cut and polished diamonds; precious and semi- precious stones, or plain and studded jewellery of gold and other precious metals, falling under chapter 71 of the HS Code, could be taxed at the rate of 5%. He explained that tax on job-work service charge was with reference to job charges only while tax on supply of goods was with reference to the full value of goods supplied. 10.5.2. The Secretary informed that an additional agenda note had been circulated pointing out similar difficulties for job work services in relation to printing of books, journals and periodicals. He explained that the tax rate on supply of newspapers, journals, periodicals and printed books (including braille books) was Nil and the rate on selling of space for advertisements in print media was at 5%. He recalled that keeping in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p them utilise their input tax credit. However, it was proposed to exempt individual advocates (including senior advocates) from obtaining registration under CGST/SGST Act [section 23 (2) of the CGST Act. 10.6.1. Explaining the rationale for the proposal, he stated that services provided by (i)an individual advocate or a partnership firm of advocates to another advocate or partnership firm of advocates or (ii) an individual advocate or a partnership firm of advocates to any person other than business entity were exempt from tax under GST regime. Services provided by an individual advocate or firm of advocates by way of legal services were under reverse charge for payment of tax. He further explained that a partnership firm did not include an LLP, but a firm of advocates was said to include LLP. Therefore, an individual advocate providing services to LLP would be taxable under reverse charge in the GST regime and legal services provided by an LLP to a business entity would also be liable to tax under reverse charge. He stated that some of the law firms had asked for putting tax liability for them in forward charge instead of reverse charge. He added that in this individual advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t States. Gujarat wanted the rate of tax on admission to cinema theatres to be reviewed and to be reduced from 28% to 18%, so that the local bodies were also able to tax the same. West Bengal wanted a lower rate of tax for regional films or no tax below a certain threshold, say ₹ 100 per ticket for regional films. West Bengal had informed that presently Bengali films attracted lower rate of entertainment tax, and their representative was of the view that a lower rate was required to support and promote the regional film industry. Karnataka stated that they had issued a Government Order that no cinema theatre including multiplexes would charge more than ₹ 200 per ticket for a regional film. Rajasthan and Kerala supported the rate of tax at 28% (as approved by the Council) for admission to cinema theatres for all films. They did not want a carve-out for regional films as ¡t would be distortionary. Haryana wanted to continue with the tax rate of 28% for admission to cinema theatres. Uttar Pradesh did not support a lower rate for regional films and stated that if a lower rate was provided for films in regional language of the States, the benefit should also be extende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12%. The Hon'ble Minister from Telangana suggested to keep the rate of tax at 12% so that local bodies could impose additional tax and get some revenue. The Hon'ble Minister from Karnataka stated that regional language cinema was a sign of cultural diversity and it should be encouraged. The Hon'ble Chairperson stated that the rate of entertainment tax across the States varied from 20% to 110% and the weighted all-India average rate of entertainment tax was about 31%. He observed that several States granted tax exemption to regional films and it was the only item under GST where local bodies could also impose tax. He observed that States could give refund of GST for regional language films as each State would have different regional language. The Hon'ble Chief Minister of Puducherry stated that States did not have adequate resources to provide reimbursement. The Hon'ble Minister from Uttar Pradesh opposed the suggestion of exempting regional cinema from tax and stated that this would lead to loss of revenue for every State. The Hon'ble Deputy Chief Minister of Delhi stated that the Government as well as the society supported some kinds of cinema and theatre, and this should be encou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for middle class, it would be desirable to keep a lesser rate of tax for them whereas others could be charged tax at the rate of 28%. He suggested to charge tax at a lower rate for tickets sold below ₹ 100. The Hon'ble Minister from Kerala stated that the tax imposed at the level of the producer and the distributor would be 18%, and ¡f tax on the tinal product was 12%, then the question was as to who would bear this extra 6%. He suggested that the minimum rate of tax should be 18%. The Secretary stated that the ticket rate ¡n multiplexes was never less than ₹ 100. The Hon'ble Minister from Kerala reiterated that tax on cinema tickets should not be less than 18% even for tickets sold at a price below ₹ 100. The Hon'ble Ministers from Haryana and Andhra Pradesh supported this proposal. The Hon'ble Minister from Maharashtra reiterated his reservation and suggested that the rate of tax on admission to cinema theatre should be 18%. After further discussion, the Council agreed that the rate of tax on admission to cinema theatres shall be 28% with the exception that the rate of tax shall be 18% if the price of the ticket for admission to cinema theatre was & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the Council: (i) Notification of certain sections of the GST Acts; (ii) Amendment in Rule 19 of the Registration Rules for additional method of authentication. He took up discussion on these two agenda items. (i) Notification of certain sections of the GST Acts 12.1. The Secretary recalled that in its 15th Meeting (held on 3 Jun 2017), the Council had approved to notify with effect from 19 June 2017, the Sections of the CGST Act (as also the SGST Acts in the States where the SGST Acts were enacted) containing provisions relating to registration and composition levy. He stated that some more provisions of the CGST and the SGST Acts needed to be notified. Section 2 of the CGST Act, 2017 and the lGST (Integrated Goods and Services Tax) Act 2017 contained definitions of various terms used in the respective Acts and since some of these defined terms were used in Sections relating to registration and composition levy, these would also need to be notified with effect from 19 June, 2017. Similarly, Section 14 of the lGST Act, which provides for the registration of the supplier of online information and database access or retrieval services under the Simplified Registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cil (held on 18-19 May 2017), list of services on which reverse charge liability would be created under GST was approved by the GST Council. In some cases, the liability under the Act had been fully cast upon the recipient of supply (100% reverse charge). In terms of Section 9 (3) and Section 5 (3) of the CGST Act and IGST Act respectively, though the supplies were taxable but the liability of payment of tax and compliance with the law had been shifted upon the recipient. Therefore, suppliers, whose supplies were taxable under 100% reverse charge basis, were required to be exempted from registration. Sub-section (2) of section 23 of the CGST Act provided that the Government, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration. 12.1.2 In view of the above, the Secretary proposed that the Council may approve the following: i. notifying Section 2 of the CGST Act and Section 2 of the IGST Act from 19 June, 2017; ii. notifying Section 14 of the lGST Act from 19 June, 2017; iii. notifying Section 146 of the CGST Act with effect from 19 June, 2017; iv. notifying Section 164 of the CGST Act and Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Signature Certificate (DSC) which was costly (approximately ₹ 2500, valid for a period ranging from one year to three years) and cumbersome with several documentary requirements. The companies giving one-time e-signature were limited in number and their quality of service was uneven. The taxpayers in other Slates were able to migrate with Aadhaar based EVC which was free of cost. He stated that it was reported that this had effectively prevented the small and medium dealers of Assam from migrating to GST from the existing tax regime. Similar problem was being faced in the State of Meghalaya where Aadhaar had not yet been implemented. He stated that keeping in view the problems faced by Assam and Meghalaya, it was proposed to provide another alternative for authentication in Rule 19 of the GST Registration Rules, namely, authentication based on bank account of the taxpayer and that a suitable text in this regard as presented, in Rule 19, namely "through electronic verification service provided by banks based on net-banking or any other mode of verification provided by bank." 12.2.1. The Secretary further informed that during the meeting of the officers of the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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