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TMI BlogMinutes of the 45th Meeting of the GST Council held on 17th September, 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... aw Committee for the consideration of the GST Council i. Aadhaar authentication of existing taxpayers under GST ii. Agenda Note for issuance of clarification relating to export of services- condition (v) of the Section 2 (6) of the IGST Act 2017 iii. Clarification in respect of certain GST related issues iv. Notifying www.gst.gov.in as the Common Goods and Services Tax Electronic Portal v. Mechanism to collect late fee imposed under section 47 of the CGST Act for delayed filing of FORM GSTR-I vi. Review of requirement of filing FORM GST ITC-04 vii. Agenda Note for amendment in CGST Rules for refund to be disbursed in bank account linked with same PAN and Aadhaar on which registration has been obtained under viii. Applicability of interest on ineligible Input Tax Credit (ITC) wrongly availed and/or utilized, in terms of section 50 of Central Goods and Services Tax Act, 2017 (CGST Act) ix. Proposal for clarification in respect of refund of tax wrongfully paid as specified in section 77(1) of the CGST/SGST Act and section 19(1) of the IGST Act- x. Transfer of CGST /IGST cash ledger balance between 'distinct persons' (entities having same PAN but registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the GST Council and stated that this physical meeting is being held after the 38th meeting held a year and a half ago. 3.1. The Secretary, GST Council at the outset placed on record his gratitude and sincere appreciation on behalf Of the Council for the valuable contribution made to the Council by the outgoing Hon'ble MOS (Finance) Sh. Anurag Singh Thakur and welcomed the new Hon'ble MoS (Finance) Sh. Pankaj Chaudhary to the Council. He also welcomed Sh. Lakshminarayanan, the Hon'ble Minister for Public Works, Puducherry, Sh. Badal Patralekh, the Hon'ble Minister for Agriculture, Animal Husbandry and Co-operative Department, Jharkhand; and Ms. Chandrima Bhattacharya, the Hon'ble Minister of State for Urban Development and Municipal Affairs Department, West Bengal, who were attending the GST Council meeting for the first time. 3.2. He informed the Council that on the previous day (16th September 2021), he met the Officers from all the States and his colleagues from the Centre and had an excellent discussion and deliberations on various agenda items. They were able to reach a consensus on most issues. On the items, where there were still differences, those w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of existing taxpayers under GST 7. The Principal Commissioner GSTPW informed that the provision for Aadhaar authentication for new registration has already been implemented. As regards Aadhaar authentication for existing registrations, the Law Committee recommended that the requirement to get the GST registration Aadhaar authenticated may be made mandatory on such occasions where there is a potential threat to revenue or the taxpayer is availing a beneficial provision under the GST law. Law Committee further recommended that to start with, Aadhaar authentication may be made mandatory for being eligible for refund and revocation of cancellation of registration and recommended amendment in CGST Rules, 2017 to this effect. The Council unanimously agreed to the proposal. It was also decided that the amendments to the rules, as proposed in the agenda note, would be notified when requisite IT readiness is made on the portal. Agenda Item 3(ii): Issuance of clarification relating to export of services- condition (v) of the Section 2 (6) of the IGST Act 2017 7.1 The Principal Commissioner, GSTPW informed that in order to clarify the issues arising due to different interpretations by fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of refund of accumulated ITC. The Council agreed with the recommendation of the Law Committee, along with the proposed circular. Agenda Item 3(iv): Notifying www.gst.pov.in as the Common Goods and Services Tax Electronic Portal 7.3 Section 146 of CGST Act, 2017 provides that the Common GST Electronic Portal may be notified for facilitating registration, payment of tax, furnishing of returns, computation and settlement of integrated tax, electronic way bill and for carrying out such other functions and for such purposes as may be prescribed. Vide notification No. 4/2017 dated 19.06.2017 read with notification No. 9/2018 dated 23.01.2018, GST portal was notified for facilitating registration, payment of tax, furnishing of returns, computation and settlement of integrated tax, and electronic way bill only. Subsequently, vide notification No. 69/2019 dated 13.12.2019, GST portal has been notified for the purpose of preparation of the e-invoice. However, various other functions and purposes such as composition levy, input tax credit, refund, transitional provisions, etc. do not have a common portal notified yet. In order to prevent any legal challenges with respect to various onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(vii) was regarding an earlier decision of the GST Council, as per which in-principle approval was given by the GST Council for disbursing refunds to only those bank accounts which are linked with both PAN and Aadhaar, on which GST registration has been obtained. The issue was further deliberated by the Law Committee and it was discussed that since Aadhaar is issued only for natural persons (and not legal/juristic persons), the requirement of both PAN and Aadhaar would be applicable only for proprietorship concerns. However, in case of other firms, the bank account should be required to be linked only to the PAN of the concerned legal entity. Law Committee also recommended amendment in CGST Rules, 2017 accordingly. During the officers' meeting, Tamil Nadu suggested slight modification in the proposal and recommended to link PAN with Aadhaar in case of proprietorship firm. The recommendation of the Law Committee, as amended as per suggestion given by Tamil Nadu, Was agreed upon by the Council. It was also decided that the said amendments will be notified when necessary IT readiness on portal is made. Agenda Item 3(viii): Applicability of interest on ineligible Input Tax Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the term "subsequently held". The Law Committee recommended for insertion of sub-rule (IA) in rule 89 of CGST Rules 2017 for prescribing the procedure and time limit in respect of such refunds. The Law Committee also recommended for issuance of a circular to clarify the term "subsequently held" and time limit for filing such refund claims for past as well as prospective periods, to remove any ambiguity on the issue, as detailed in agenda note. There was unanimous agreement on the same in the Council. Agenda Item 3(x): Transfer of CGST /IGST cash ledger balance between 'distinct persons' (entities having same PAN but registered in different states) 7.9 The Principal Commissioner, GSTPW mentioned that this issue relates to those cases where a person with same PAN has multiple registrations in different States. Presently, such distinct persons are unable to transfer their balance in electronic cash ledger from one State to the another, on their own. There are no revenue implications involved since such person can get refund of the excess balance in electronic cash ledger in respect of registration in one State and deposit the same in respect of registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, GSTPW mentioned that with effect from 1st January 2021, a new sub-rule (6) was inserted in rule 59 of CGST Rules which provides that a registered person shall not be allowed to furnish FORM GSTR-I, if he has not furnished the return in FORM GSTR-3B for preceding two months. This has also been implemented on the portal from the beginning of September, 2021. He added that the law amendments providing for sequential filing of FORM GSTR-I, and requirement of mandatory filing of FORM GSTR-I before filing of FORM GSTR-3B, have already been recommended by the Council in its 43rd meeting. Accordingly, in order to further strengthen the provisions against fake invoicing, Law Committee has recommended that the rule 59(6) of the CGST Rules may be amended to provide that a registered person shall not be allowed to furnish FORM GSTR-I, if he has not furnished the return in FORM GSTR-3B for the preceding month/ tax period. This Will not only help in reducing the amount of credit passed on without filing of return and payment of tax thereon, but will also streamline the process of return filing in GST. It was also recommended by the Law Committee to make the said amendment with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council unanimously agreed to it. Agenda Item 3(xv): Notifying supplies and class of registered person eligible for refund under IGST route. 7.14. The Principal Commissioner GSTPW drew the attention of the Council towards Section 123 of the Finance Act, 202, vide which Section 16 of IGST Act was proposed to be amended, based on the approval given by of the GST Council in 39th meeting. It was proposed that export under LUT would be made the default route and refund of ITC on payment of IGST would be restricted to only a notified class of taxpayers and/ or notified supplies of goods or services. The said provision is yet to be notified. The Law Committee recommended that all services may be notified, as class of supplies for the purpose of refund of IGST, as the refund of IGST paid on export of services is processed by the jurisdictional GST officer. Besides, the Law Committee also recommended to notify certain class of taxpayers, like persons who have been granted Authorized Economic Operator (AEO) certification under SAFE Framework of WCO; persons who have been granted status holder certification of 2 star or above by DGFT under Foreign Trade Policy; and Government Departments, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r present recommendation of the Law Committee. He also added that if refunds are delayed because of the said amendment, it may not go well with a very important segment of the economy. Based on the discussions in the Officers' Meeting, he suggested that the proposal made in this agenda, along with notification of Section 123 of the Finance Act, 2021, vide which Section 16 of IGST Act was proposed to be amended, may be kept in abeyance for the time being and may be relooked at an opportune moment. 7.17. The Hon'ble Member from Delhi stated that 10,000 exporters would be taking the benefit of the IGST route for refunds and the question was about the remaining 60,000 odd exporters. He enquired if there was any rough assessment regarding the break-up of quantum of amount of refund taken by the above-mentioned exporter groups. He stated that it is a catch- 22 situation where, it is visible that there may be some misuse of provisions and if the quantum of refund in question is found to be significant, then stringent anti-evasion measures have to be undertaken, otherwise it may not be prudent to burden the government machinery for the sake of low quantum of revenue. Principal Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of provisions of Sections 108, 109, and 113 to 122 of the Finance Act, 2021. Agenda Item 4: Nominations from State Governments on Board of GSTN 8. The Secretary invited Joint Secretary (DOR) to present the agenda. JS, DoR stated that the Council was aware about the three representatives of States on the GSTN Board and officers from State are nominated by the Council on rotation basis from time to time. While officers from different States have been on the Board, there is no definite policy for nominating officers from State to the Board. Officers are also not nominated for any fix tenure on the Board and once nominated; an officer has normally been replaced only after he is transferred out from the post to another post that is not connected with GST administration. Therefore, it was proposed to have a wider representation on the Board of GSTN. For this purpose, the States have been divided into three groups (based on the census code and then alphabetically arranged). It is proposed that officers from State in each of the three groups may be nominated on the Board in alphabetical order for a period of one year. Currently, there are officers from Uttar Pradesh in Group-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal use. (Order copy enclosed). AEO No. 07 of 2021 09th June 2021 Request from Shri Sourabh Shinde for exemption from import duties on import of life saving drug Zolgensma for personal use. (Order copy enclosed). AEO No. 08 of 2021 12th July 2021 Request from Shri Nagumantri VSL Raman for exemption from import duties on import of lifesaving drug Zolgensma, for personal use. (Order copy enclosed). AEO No. 09 of 2021 14th July 2021 Request from Shri Satheesh Kumar for exemption from import duties on import of life saving drug Zolgensma for personal use. (Order copy enclosed). AEO No. 10 of 2021 03rd August 2021 Request from Shri Rafeeq for seeking exemption from payment of import duty for import of lifesaving drug Zolgensma, for personal use. (Order copy enclosed). AEO No. 11 of 2021 29th August 2021 Request from Shri Nazar P.K., for exemption from import duties on import of life saving drug Zolgensma for personal use. (Order copy enclosed). 10.2. The GST Council took note of Ad-hoc Exemptions Orders issued under Section 25(2) of Customs Act, 1962. Agenda Item 7: Report of Group of Ministers (GoM) on levy of Covid Cess on Pharma and Power in Sikkim 11. The Secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cult to meet the ends. Sikkim sought a special package of assistance by Government of India to help them tide over the financial stress caused due to the Covid pandemic and rightly so. Everyone had faced this problem. His humble submission was that for small States, like Sikkim, Goa, Arunachal Pradesh, Manipur and other North Eastern States, slightly different treatment has to be given. In the past, tax holidays used to be given which is not the norm in the present day. He added that having passed through the Covid norms, they faced so much difficulty and in the light of a presentation on Compensation which would come to an end and options available after it would also be made in the current meeting, the Council should have a look at the plight of the smaller States. He further stated that they will not have enough money to even pay the salaries to their government employees. 11.5 The Chairperson stated that she appreciated the concerns of Goa and the fact that they were raising the concerns of the smaller States but the current agenda pertains to looking at recommendations of a GOM which was formed on the request of Sikkim. She invited if any other Hon'ble Member who was a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagaland do not get any excise revenue since there was prohibition in these States. However, liquor is not banned in Sikkim. Despite that, they had financial problems. Therefore, these three States with prohibition have bigger financial problems since they do not get any revenue from sale of liquor. At the same time, out these three States, the revenue deficit grants, as per the XV Finance Commission, Manipur gets the least per capita. Manipur gets Rs 8,838, Nagaland gets Rs 23,027 and Mizoram gets Rs 16,317. He definitely supported the recommendations Of the GOM including the recommendation of the special package by the Government of India to help Sikkim. He requested that a similar consideration may be given for a special package of assistance by Government of India so that they can meet their requirements and solve their problems. He stated that he would write a special request letter on behalf of State of Manipur on this issue. 11.9. The Secretary stated that this was not the subject matter related to GST but since the Hon'ble Member from Manipur had raised the issue, he assured that Government of India would take such special circumstances into consideration. Agenda Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d one Officers' Meeting were held in the interim period. First meeting of GoM was held on 6Üi July 2021 where it was decided that a committee consisting of CCTs of member States and JS, TRU should go into the details and examine the issues while taking all the relevant factors into account like law. data and other relevant information and present possible options before the GOM so that it can deliberate further and take informed decisions. The officers met on 17th August 2021 and submitted their inputs to the GoM. The 2nd meeting of the GoM was held on 31st August 2021. He then had presented the interim report of the GoM. The recommendation of GOM were summarised as: (i) On brick kiln: Special Composition Scheme w.e.f. 1st April, 2022 for brick kiln wherein the threshold limit was recommended at I O lakhs rupees and the GST rates of 5%/6% without ITC and 12% with ITC. Threshold exemption limit in the sector may be reduced to Rs. 10 lakhs in order to increase the tax base, keeping in view the fact that majority of the firms in the sector are small and unorganized. (ii) On Mentha Oil: Reverse Charge Mechanism on the first stage for mentha oil, as a measure to improve com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon'ble Member from Rajasthan had observed that 6% and 12% was higher rate and needed more deliberations as cost of construction in bricks, mining and stone crushing was very high. The time given to GoM should be extended further for more deliberations and the opinions from States should be invited since the issues vary from State to State. The threshold limit of Rs. 10 lakhs, was also too low. In his opinion, it should continue to be Rs 40 lakh. These decisions affect the brick kiln industry and employment of people. while higher rates may be applied on pan masala etc., the proposals regarding brick kiln, stone crushing and mining should be relooked at. 13.5. The Hon'ble Member from Uttar Pradesh expressed his gratitude for constitution of the GoM on the request from State of Uttar Pradesh. He also expressed gratitude towards Hon'ble Member from Odisha for going into the minute details to sort things out. He supported the proposal. During the VAT regime, their revenue was Rs 700 crores which reduced to Rs 170- 180 crores in the GST regime. This was the sole reason behind his request for this GoM. He supported these recommendations since this would stop tax evasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince there are numerous small brick kiln units which indulge in evasion. He further said that construction material business was very profitable. He supported the recommendation and emphasized on keeping the threshold limit to Rs.10 lakhs. 13.10. The Hon'ble Member from Assam fully agreed with the recommendation of GoM on special composition scheme in brick kiln sector with a GST rate of 6% without ITC and 12% with ITC. It will help the sector immensely and will foster tax compliance. The GoM had meticulously gone through both the items and she felt that GoM on capacity based taxation may also examine the feasibility of having a special composition scheme for works contract executed in Govt. departments. Such composition scheme was in existence in VAT regime. 13.11. The Chief Commissioner of State Tax from Gujarat submitted that the in the VAT regime they had lower threshold ranging from Rs 5 lakhs to 15 lakhs in different States. The Council took the judicious decision to first have threshold limit of Rs 20 lakhs and later raise it to Rs 40 lakhs. Due to the threshold limit, the governments were losing revenue. Perhaps, there was no study undertaken on how much revenue was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution. Further it was the interim report and the final report on pan masala has not been submitted yet. 13.15. The Hon'ble Member from Arunachal Pradesh told that Pan Masala production boosts rural economy and North East States are increasing the cultivation of supari and are canut. The GoM was yet to make recommendations on pan masala. The other recommendations are logical and he supported them. 13.16. The Official from Haryana stated that there were two types of apprehensions about tax burden and the threshold limit of Rs 10 lakhs as far as brick kilns were concerned. The same composition scheme existed on brick in VAT regime in Haryana and the current revenues from brick kilns under GST was far less as compared to the VAT regime. He was sure about Haryana that if the same dispensation was entered into, the tax burden would not be more than the previous regime. State of Haryana was part of the GoM and the GoM has taken a conscious decision since the value of goods in brick kiln industry was less and reduction in threshold limit was required. Whether other goods or services also required such a scheme may be debated upon by the Council. 13.17. The Hon'ble Membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to services at present. The Council may come back on the issue in later meetings. He requested that since the recommendation of GoM was unanimous, the Council may also decide on this issue unanimously. 13.21. The Hon'ble Member from Uttar Pradesh also requested that Council may consider the proposal with increase the threshold from Rs 10 lakhs to Rs 20 lakhs. 13.22. The Hon'ble Member from Delhi also requested to approve the proposal with Rs. 20 lakhs threshold limit which was practical. 13.23. The Hon'ble Member from Rajasthan stated that he had no issue with the rates but the threshold must be increased further from Rs 20 lakhs. This would help many people. He further added that GoM should consult more states and should seek suggestions from the other states who were not members of GoM so that broad and fruitful discussion can happen. 13.24. The Hon'ble Member from Delhi stated that the GoM had deliberated a lot on various data points to arrive at the Rs 10 lakh threshold limit. He agreed that there was a huge evasion in this sector. Personally, he would want the threshold limit to be at Rs 10 lakh. But considering the fact that there was already a thresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilize the HSN codes listed in the Custom Tariff. The Customs Tariff codes are internationally aligned up to certain (6-digit) level and are periodically updated (every 5 years) in consultation with the World Customs Organization. These changes are effected through changes in the First Schedule to the Customs Tariff A 1975. The latest changes have been enacted through Section 104 (iii) of the Finance Act, 2021, which states that the First Schedule to the Customs Tariff Act, 1975 shall, with effect from 1st January, 2022, be amended in the manner specified in the Fourth Schedule (of the Finance Act, 2021). Thus, the proposed changes to Customs Tariff as part of the periodic update to the Harmonised System of Nomenclature (HSN) have been enacted and will take effect from 1st January, 2022. Therefore, some of the tariff codes listed in GST rate notifications may also accordingly need to be changed to align them with the changes in Customs Tariff. Few entries in GST rate notifications, largely from amongst those where HSN code is specified at 8-digit level, are likely to be affected. With effect from 01.012022, tariff items 9405 50 10 to 9405 50 59 (including 9405 50 31) will be omitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber from Punjab stated that the issue was one of principle and not of the magnitude of impact. Barring GST, the Constitution does not allow for concurrent taxation, and this particular tax was a transgression on the domain of the States. He also stated that he was aware of the Delhi High Court Judgment, and as the case is in the Supreme Court the Council should not take a call on an issue which was sub- judiee. He then stated that one of objectives of GST was to abolish multiple levies, and by going for multiple levies again the rules of GST would be breached. The Secretary clarified that no rules of GST were being flouted, and the issue at hand was whether 5% or 18% rate of taxation should be imposed on Job Work. The Official from Punjab stated that when the negative list of services was drafted in 2012, all states were opposed to imposition of service-tax on job work on alcohol, and thus it was placed in the negative list. The Central government recognised that there cannot be service tax on job work in relation to manufacture of alcohol. However, in 2015, Centre introduced service tax on such job work. The 'aspect theory' propounded by the Supreme Court justified paralle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ITC available for payment of state excise imposed on it. The final sale price of liquor reflects this add-on tax. He added that this impinges on the taxation space of the State government. He suggested that this tax should be left as it is, and that if there was any differential capacity of the State to tax, then the State government could use the differential capacity to levy excise. 15.8. The Secretary stated that the contention of the Official from Tamil Nadu is that nothing should be taxed where GST is not there. Thus, this shall apply to petroleum, electricity, etc. which may not be an acceptable principle, 15.9. The Official from Maharashtra stated that he agreed with the principle of inclusion of Job work under GST, but stated that tax should not be raised to 18%. As fiscal space of the States was limited, an increase in the rate limits their space to raise resources. He requested that the rate should be kept at 5%, and referred to the analogy of the transport sector, where the GST rate was kept at 5% considering that petrol and diesel were under VAT and ITC could not be passed on. Based on this analogy, the tax on job work for liquor should also be kept at 5%. The offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue under discussion and stated that this matter was not before the Court, and that the Council was to take a decision on the issue. 15.16. The Official from Tamil Nadu stated that they would want Job work to continue to be taxed at 5%, and if needed, a special rate could be notified. 15.17. JS, TRU clarified that the issue was whether liquor should be treated as food item or not, and that the understanding was that it should not treated as a food item. Once such a decision is taken, it will go outside the 5% category. 15.18. The Secretary stated that the Council should decide the issue in principle, and not see if some small benefit accrues to someone. He then stated that the issue was whether liquor was a food item or not, and the Council should also keep in view the optics of the decision. He then stated that the Council should accept that alcoholic liquor is not a food item, and the job work in relation to manufacture of the same should be taxed at the standard rate. The Council eventually agreed to the view that alcoholic liquor would not fall under that category of food item and job work in relation to it would attract GST at the rate of 18%. Agenda 12- Agenda note based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the one nation and one tax concept, a new tax slab will have to be created which may require amendment in the Act or any other way as may be suggested by the Law Committee. However, this Will have to be done sooner or later in the interest of the consumers. 16.4. The Hon'ble Member from Rajasthan stated that on Diesel and Petrol, the Basic Excise duty is Rs. I .80 per litre which is shared by both the Centre and the State. Special Excise Duty is Rs. 8 Per Litre and Additional Excise Duty by the name of Road and Infrastructure Cess is Rs. 18 per litre where States do not get any share. So, while States have a share in Basic Excise Duty, it is kept on lower side and where States do not get share in Special Excise Duty and Cess, they are being kept on higher side, He stated that share Of Central Government taxes on per litre Petrol and Diesel is much more as compared to the share of State government taxes. He further stated that even though this agenda is being discussed as per Hon'ble Court's direction and has not been brought up by either Centre or States, it is not the right time to consider it. Even if this is to be considered, first it should be ascertained that if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue Secretary stated that in 43rd meeting of the Council, it was decided that a review will be done before September and if recommended by the Health Ministry, the tax concession will be extended. Accordingly, he proposed for extending the concession on above specified medicines including the new seven medicines till December, 2021, and to review the position again in December, 2021. 17.3. The Hon'ble Member from Bihar further stated that it is requested that not only on these medicines but tax reduction announced earlier on other COVID- 19 related items and equipment like ambulance, oxygen concentrator and hand sanitizer etc. should also be extended to effectively combat the situation if any third wave of COVID happens. 17.4. The Revenue Secretary stated that when tax reduction on COVID related items was announced in the previous meeting, demand of these items was very high in the market. Now, most of the items like Oxygen Concentrators etc. are being made in the country itself. He stated that in case any such need is felt to further extend the current position of tax rates on Covid related items, we may take the delegation from the Council that the same can be done wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be taxed at uniform rate of 12%. The GST rate on Biodegradable bags and their inputs should be kept at 5 0/01 Regarding the e- commerce operators pertaining to supply of food items, he stated that it would be appropriate to cover only unregistered food suppliers. Further, the issue of eligibility of ITC on such transactions needs to be deliberated upon. 18.2. The Hon'ble Member from Punjab stated that the GST Council is in a position to change the destiny of India. He stated that the Council should benchmarks itself, not to the past, but to the future and there was a need to take a holistic view of the GST rates, the number of slabs and the number of exemptions. He proposed that the Council should hold in the next six months, a special meeting on fitment issues, as there were 91 proposals on goods alone, of which 49 were rejected, and 10 deferred. He then stated that of the 32 which were taken up, some of them 'were of clarificatory nature. He stated that by giving exemptions, people would clamour for more and more exemptions. He stated that the import of scrap is of such magnitude that potential revenue from this source could not be foregone and suggested that a mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metals are also at 18%. This would resolve the issue of inversion in GST rates on ores. 18.7. The Secretary referred to item at S.No. 8 [Annexure-I to the Agenda i.e. coconut oil. He stated that coconut oil is available at 5%, and that the proposal is to take it to 18% for small bottles. He then stated that a particular company was labelling their oil as pure coconut oil, and selling it in small bottles, and that this oil was not being used for cooking, but rather was being used for cosmetic purposes. He stated that as all cosmetics are at 18%, so the coconut oil used for hair oil should be at 18%. He then stated that if the rate is increased to 18%, the consumption of coconut oil would not fall. He stated that the question was whether the size of bottles which should be charged at 18% rate should be one litre or less. 18.8. Hon'ble Member from Kerala stated that in Kerala the major edible oil is coconut oil, and that production wise, the majority of farmers are engaged in Coconut farming. He stated that Member from Tamil Nadu raised the same issue in the letter he circulated. He stated that if coconut oil is being singled out, this would affect the farmers as well the price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achets can be used for cooking, and questioned that if segregation is made only in respect of packaging, whether it would lead to any benefit. Hon'ble Member from Rajasthan stated that the packaging costs of smaller packages would be prohibitively high, and it would reduce the margin of the manufacturer. Hon'ble Member from Goa stated that for the first time the coconut sector is looking up, and just because one company managed to package the product so well that it can be used as a hair oil, it should not be singled out. He then stated that sustained campaigns of multinationals tried to put forth to people that coconut oil is not good for hair at all, and that it could be harmful. Those multinationals are using coconut oil to make their products now. He added that because of one single industry, the entire coconut plantation farmers should not be made to suffer and that this would be a retrograde step. 18.13. Hon'ble Member from Puducherry stated that if lower quantity items are charged at 18%, the common man will get affected. He stated that moreover, non-branded items are also sent to the market, and it would lead to a lot of misclassifications. He stated that lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh had stated that the rate be retained at 12%, as 18% would increase the rate of the user manufacturer. He further stated that in the officers meeting Odisha had strongly supported that the rate should be 18%. He further stated that this was a packaging material which is an intermediate good, and it would not raise the cost as mostly it would pass through, and in cases it is not, it would give certain revenue. He stated that the standard rate should be 18% and if Hon'ble Member from Madhya Pradesh agree to 18%, and no other Hon'ble Member had an issue, then Council may agree to this proposal. 18.18. The Secretary referred to item at Serial Number 32, i.e., Spiced water. He stated that all States in the officers meeting were of the opinion that this should be kept at 28%, otherwise, it may also become another avenue for misuse by classifying many products as spice water, as the definition was not clear. He then stated that the fitment committee had not given a decision on this issue and a decision was being asked for from the Council. 18.19. The Secretary referred to item at Serial Number 2 [Annexure-II] on Scrap. He stated that Hon'ble Member from Punjab had alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities from these exemptions as well as pruning the concerned exemption with regard to the scope of these entries. This proposal entails significant changes. As regards scope of entries, he stated that these exemptions have become wide and are inviting multiple litigations on their interpretations and scope. The exemption on pure services/composite supplies provided to any of these bodies in relation to functions entrusted to these bodies by the Constitution, was being claimed by various organizations to which these exemptions are not intended, including various hospitals, institutes and other authorities and all kind of input service to these bodies are being claimed as exempted under these entries even if there is no direct nexus to discharge of constitutional function. Accordingly, Fitment Committee has made two suggestions, one to exclude the Governmental entities and Governmental Authorities from the ambit of exemption, and two, the services which need to be exempted, when provided to Central Government, State Government and local authorities under these exemptions, must be specially enlisted. He further stated that a list has been provided in the Agenda note. He stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racts on turn-key basis, which includes all works including waste collection to waste plants to STP. He then opined that the provisions should be clarified, otherwise it would lead to a lot of confusion. 18.26. The Secretary referred to the list of services sought to be exempted under the provisions, listed at S.No. 25, Annexure 4. 18.27. The Hon'ble Member from Rajasthan stated that the scope of the activities enumerated is so large, that it would need to be clarified, otherwise a lot of people would fall outside the revenue and taxation limits. He further stated that the scope of activities would need to be defined. He then gave the example of healthcare and sanitation which has a very wide scope and would need clarification. 18.28. The Officer from Tamil Nadu stated that similar to the point that Hon'ble Member from Rajasthan was making, clarity on these issues, such as in case of healthcare, where manpower is outsourced under healthcare. Then under municipal services, sanitation is specified, solid waste management is specified, but sewerage is not specified, so these sources could be outsourced. He then opined that the list needed to be fine-tuned before it could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommended that it be kept at 18%. Officer from Himachal Pradesh stated that ropeways are now not only used for tourism or luxury purposes, but are now increasingly becoming a reliable, and safe means of transport. Ropeways can be used for urban transport and to decongest cities. In holiday season, there are massive traffic jams, and in the mountains, roads cannot be widened beyond a point, and ropeways are a way out. He stated that previous attempts to popularize ropeways did not attract much investment, and one reason was that capital costs were very high. He stated that if GST on the ropeway project as well as on the related services is reduced to 5%, it would attract investment, and would provide viable transport solution to remote locations, and decongest cities. He further stated that a presentation could be made before the fitment committee so that they could reconsider it in the next meeting. 18.34. The Hon'ble Member from Uttar Pradesh stated that in places where there is a necessity, like the mountains, GST can be reduced to 5%, in other places, where it is used for tourism, it can be kept at 18%. He stated that tax slabs could be created on the basis of ticket pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquired about the intent or source of demand of such an exemption. He then questioned what advantage would be gained from removing IGST on these border Haats, as they are small markets and are so small that they are already outside the purview. Members GST clarified that these Haats are set up in no-man's-land between countries, and that this is traditional trade, with most items 'being traditional items. Licenses are given to traders, and the haats are held on certain days of the week. He then stated that as these are imports, there is no threshold IGST exemption for these. 18.37. The Hon'ble Member from Delhi referred to item at S.No. 6 and S. No 24 in Annexure-IV, concerning E-Commerce Operators such as Swiggy and Ola/Uber. He stated that these were major issues for the Metropolitan cities. He requested if there could be a little more clarity on the issue, and a small presentation could be made to help understand what is 'the current situation, and what is proposed and how it will benefit. 18.38. JS, TRU explained that if some restaurant is delivering through Swiggy or Zomato, then, in the current situation, the tax is being paid by the restaurant and not by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve state as it accrues today. JS, TRU stated that this proposal is proposed to be implemented from 1st January 2022, and the few issues which exist, or are raised will be clarified. 18.41. The Hon'ble Member from Delhi also stated that the whether the question related to Ola/Uber is similar to Swiggy/Zomato and if the same could be similarly explained as well. The JS, TRU stated that in respect of Ola/Uber there already exists such a provision and they (Ola/Uber) already pay taxes on services supplied through them. He stated that Ola and Uber engage small drivers, and the drivers are the service providers, but the tax is currently paid by Ola/Uber only. He also stated that now it is being proposed that the same mechanism be extended to all types of passenger transport, as per the proposal placed before the Council for its approval. He gave the example of Red Bus, which provides bus ticket booking service. He stated that the mechanism employed for Ola/Uber will now be extended to these other entities, like red Bus, as well. 18.42. The JS, TRU stated that in respect of Ola/Uber there already exists such a provision and they (Ola/Uber) already pay taxes on services supplied thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Approval of Standard Operating Procedure (SOP) for correcting Technical issues requiring data fixes through backend utilities (Annexure -3 of the 15th ITGRC Minutes). e. Reversal of interest paid on delayed filing of statement in Form GSTR-8 by e-commerce operators due to technical glitches (Annexure -4 of the 15th ITGRC Minutes). f. Additional Agenda containing suggested resolution procedure for Refund case of M/s Atibir Industries in WP (T) No. 4061/2019 (Annexure -6 of the 15th ITGRC Minutes). 19.2 Recommendations of ITGRC in TRAN-1/TRAN-2 Cases forwarded by the nodal and court cases: GSTN post technical analysis categorized the TRAN-1/TRAN 2 under following categories: (A) category A1- Cases where the taxpayer received the error 'Processed with error.' In these cases, as per GST system logs the taxpayer had attempted to submit first time/fresh Tran-1 or revise TRAN-1 but could not file because of technical errors and (B) categories Bl/B2/B3/B4/B6/B7 -where evidence of technical glitches were not found post technical analysis 19.3. The Committee has recommended that: a. out of four cases forwarded by the nodal officers; one case falling under category Al merited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correcting the errors by GSTN would be as follows: Sr. No. Technical issue Category Modules affected Type of error and knowledge of correct data Approving Authority 1 Technical issue with no financial implications Such as Registration, Back office, Front Office etc. Correct data known [Internal (SVP, GSTN) 2 Technical issue with no financial implications Such as Registration, Back office, Front Office etc.. Correct data not known Internal (EVP GSTN) for resetting/ reopening the forms. 3 Technical issue affecting locally with financial implications Such as Returns, cash ledger /ITC ledger/Refund etc. Correct data known GSTN to correct data after Internal Approval by EVP/CEO. The tax administration to be provided with MIS. 4 Technical issue affecting locally with financial implications Such as Returns, cash edger/ ITC ledger/ Refund etc. Correct data not know with certainty GSTN to correct data after Internal Approval by EVP/CEO. GSTN to enable the reset button ko that the taxpayer can correct the form and file again. Post facto the approval of ITGRC to be taken and tax administration to be provided with MIS. 5. Technical issue affecting globally with fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into cash ledger. c. The ITGRC recommended the waiver of interest only from the date on which deposit was made till the actual filing of the GSTR-8 statement wherever it could not happen because of technical glitch. However, in case there was delay in deposit of TCS from the due date of filing of Return, the ITGRC is not recommending waiver of interest. d. ITGRC further observed that, there is no mandate for the ITGRC to consider cases of waiver/refund of interest due to technical glitch as the Circular no. 39/13/2018-GST dated Yd April, 2018 mandates the ITGRC to recommend the cases of 'waiver of fine and penalty only. e. Since there was no legal provision either in the GST laws for waiver or refund of interest, therefore, the decision needs to be taken by the GST Council to issue an appropriate notification under Section 148 of the CGST Act. 19.12. With regards to additional agenda of ITGRC containing suggested resolution procedure for Refund case of M/s Atibir Industries in WP (T) No. 4061/2019, as the same was returned by the ITGRC to GSTN for resolution through the tax administration, not being an IT issue. 19.13. Discussion and Decision of the Council: The reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Member from Punjab stated that pricing decision should be dictated by market rather than the tax administration. However, since the market is not mature enough and GST rollout was also far from perfect, Punjab had favoured the setting up of NAA. He stated that his own feeling is that this is not the opportune time to close the NAA as due to pandemic, the NAA have not been able to dispose of the cases and there is large pendency of cases. Also, as discussed a holistic view on GST rate rationalisation would be taken and hence, the tenure of this authority should be extended for another year. He further stated that he feels that it needs to be considered as to whether the Competition Commission of India would have the expertise or the domain knowledge required to handle anti profiteering cases. He suggested that the pendency of cases with NAA must be brought down to nil. Thus, one year extended tenure can be given to the NAA. 20.4. The Hon'ble member from Kerala stated that the anti-profiteering authority has investigated some cases in Kerala also and there are some more cases that are pending. When the GST was introduced, it was expected that prices would reduce becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal would be paid from the cess itself, the cess that would be collected after 1st July, 2022 up to March 2026 would be used to pay back the loan. Further, he requested that the Council needs to take certain steps for revenue augmentation so that States are better prepared beyond July '22. 21.1. JS, DOR stated that in the current presentation (attached as Annexure-4), GST revenue from the inception had seen an increasing trend, even if with monthly ups and downs. The revenue in the current financial year is expected to be better than initially estimated. He drew attention of the Council to the legal framework and highlighted that the law does not provide for payment of compensation from the Consolidated Fund of India. This has been discussed in the Council at various occasions as well as in the Parliament. He explained that after the compensation requirement till March 2020 having been fully met, to meet the shortfall in compensation fund and the immediate need of resources, borrowing was done by the Government of India and passed on to the States as a back-to-back assistance after detailed consultations with States. 21.2. Accordingly, Rs. 1.1 lakh crores were 'borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was clearly evident that the base under 5% tax was quite significant and, if say 5% rate was increased by percentage point i.e. 5% is increased to 6%, it would yield about Rs 50,000 crores additional revenue per year. The rate related changes that could be considered can be classified into following: * The inverted duty structure should be taken up for immediate correction. Council had agreed to correct the GST rates on items such as renewable energy equipment, railway parts, pen parts, ores etc. in this Council meeting. Earlier, Council had recommended rate calibration in Mobile to correct inversion, which was implemented with effect from 1.4.2020. The proposals to correct inversion in textiles and footwear are already there with the Council since 39th meeting. It had earlier been discussed in the 43rd meeting that recommendations have been received from the Ministry of 'Textiles that there was a need for correcting inverted rate structure in textiles if the potential of sector has to be realized in India, growth has to be achieved and the industry has to be enabled to become a big player in the international market. This had been discussed in detail by the Council and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e average rate of taxation was reduced by 20 to 25% as compared to pre-GST rate. His considered suggestion to the Council was that the Hon'ble Chairperson could constitute GoMs. One GoM to look into tariff, exemption and thresholds. The second GoM had to be on GST design and to plug leakages in the law as there were leakages in the law which they need to plug. The GoM could look into possibilities for strengthening the IT capabilities as they were losing a large amount of revenue as IT was not up to the expectations. He suggested that Council might allow some states to have SGST rates which were higher than others and cess rates needed to be reviewed for inflation. His plea 'was that compensation should be extended by three years, the amount of compensation could be capped at amount payable for the financial year 2021-22 and that center must take over 50% or 70% of the money which was borrowed during COVID to meet part of the compensation. This would enable the compensation cess collection to be used for continued compensation. He was willing to produce a paper for the Council and the Council could debate that paper or have a look at how to augment tax revenues. He felt tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne could witness both prosperity and poverty in Jharkhand and they did not have requisite infrastructure yet. To conclude, he invited the Secretary along with the officials of the Council to visit his state and thanked the UP government for organizing the GST Council meeting. 21.10. The Hon'ble member from Uttarakhand stated that the state of Uttarakhand also faced financial difficulties when they transitioned into GST. The State Government of Uttarakhand had ushered in an industrial package with the aim to increase tax receipts. He stated that Uttarakhand was not a consumer State and State had expenditure related to subsidies to people for land and electricity and social responsibilities like pensions, welfare schemes, etc. and they needed more funds for Infrastructure development. If they did not finance infrastructure, migration from borders districts would only increase which would be harmful to not only Uttarakhand but to other States as well. He took the example of ropeway stating that it was not only a mode of transportation for humans but was also used by farmers for transporting their produce and a loan was taken from NABARD for 'funding ropeways in the State. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly Rs 3,000-4,000 crores. Naturally, there was an increase in gap in last two years due to the pandemic. He further stated that, the State's average growth was 14-16% for the last 11 years. Kerala Sales Tax rate was 14% and Central tax was also 14%, so in total tax rate was 28%. However, under GST, the tax rate was 16% approx., which meant that the State would get only 8%. Due to various compulsions and other issues, the actual average rate of taxation came to be about 11% so that the State was getting only 5.5% whereas before GST they were getting 14%. Naturally, the Centre's share also got reduced. Hence, revenue augmentation had to be looked into and suggested that rate rationalization and system upgradation would improve the revenues. He further stated that other issues such as issues pertaining to Finance Commission still existed. Earlier in 1970s or 80s they were getting revenue from the divisible pool at 3.92%, however when it came to 14th Finance Commission it was reduced to 2.45% which was further reduced to 1.92 % approx. by 15th Finance Commission. While in 2018-19, the state received Rs 17,500 crores per year from the divisible pool, it received only Rs. 10,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years as the State was not in a position of self-sustenance. 21.16. The Hon'ble Member from Goa said that at the time of GST roll out, revenue was growing at 14% and revenue was only expected to go up. However, because of certain factors, revenue had not grown the way it was conceived in the GST Council. Now, rate rationalization has to be done. First of all, the Members tended to be State specific. If a lower rate benefitted a State, the State Member ensured that the rate was fixed much lower than the revenue neutral rate. So, large revenue was lost while conceiving the GST regime itself. It was only in the recent meetings they were very cautious because the State's revenues were not increasing. However, in couple of earlier meetings, the rates were slashed and its effect can be seen at present. [f the Centre had good funds in its kitty, then the States would be looked after well. He requested to consider the revenue neutral rates. He stated that by raising the 5% slab by 1%, additional revenue of around Rs 50,000 crores could be _garnered per year. While rationalizing the rates, instead of having so many rates it may be prudential to look into how many items were being t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their endeavor to ensure that the IGST balance is close to zero. With respect to compensation, he explained that the cess available after end of two-month period is being fully released in the ratio of the compensation requirement. On both counts, the entire amounts are being fully released on regular basis. 21.20. The CEO, GSTN stated that earlier 70% returns used to get filed by the end of month but now 80% returns get filed and three or four months down the line, 90% returns get filed, implying an improvement of ten percentage points. Additionally, clear improvement can be seen in GSTR 1 filing from 37% to 39% earlier to 70% now. GSTN has done technological improvements in terms of improving concurrency and removing the redundancy, which has led to improved taxpayer experience. Earlier, for every 10,000 returns filed, 67 tickets were raised. Now, for every 10,000 of returns, the number of tickets had come down to 3.5 3.7. He said that as far as BIFA was concerned over a period of time they have given a lot of functionalities/tools to the States. Some States were using the tools very efficiently and they were using it far beyond what they had conceived. So, what was required was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that Uttar Pradesh supported the proposal that tax slabs should be revisited and if 5% slab is made 6%, it might not have a huge impact on the tax payers. Many items were moved to lower tax slabs in the past which needs to be reviewed. The enforcement should be in such a way that leakages/evasions would be minimized. The enforcement should be technology based. For example, E-way bills could be reduced from Rs 50,000 to Rs 25,000 and it could be restricted to 100 kms. per day. This could be further restricted to 20 kms. per hour. The present E-way bill needed a proper review for minimizing revenue leakages. If it could be confirmed by usage of technology that the goods were delivered at the place they were supposed to be delivered, then leakages could be further arrested. Since, only 9 months are left, the entire mechanism had to be created. He stated that in the current situation the Council should meet bi-monthly as it would help in taking timely and important decisions. He stated that Uttar Pradesh had enhanced its revenue. In 2018-19, UP did not claim any compensation since their revenue collections were so good that they did not have to claim compensation. However, due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am said that the question of GST compensation arose because of shrinking of taxable base of the States on permanent basis in view of subsuming of certain taxes. The SGST rates on the commodities being lower than the existing VAT rates further made a dent in the State% revenue. The States like Assam would face a huge deficit if compensation is not extended and it would not be even able to meet its revenue expenditure. The need for GST compensation to Assam had increased due to distress caused by the pandemic and it would require about Rs 250 crores per month towards GST compensation. She firmly believed that GST compensation for the states needed to be continued for another five years as the revenue of States had not stabilized and so the present situation called for some policy intervention on priority basis and alternatively some measures must be taken to augment States' revenue. 21.26. Hon'ble Chairperson congratulated and thanked the Member from Uttar Pradesh and the State administration for the outstanding arrangements for this physical meeting of the Council which is being held after a considerable time. She enlisted the main objectives behind the introduction of GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. Secretary explained that the Council had earlier agreed with the principle but decided that the time was not right then for its implementation. After deliberations, the Council decided to approve implementation of the recommendations of the Fitment Committee with respect to textile and footwear sectors with effect from 01.01.2022. 21.30. The Secretary summarized that regarding review of composition coverage and rates, some decisions were taken by the Council in the present meeting. Regarding plugging revenue leakages, the specific suggestions would be placed before the GoM. The suggestions in the Officers' Meeting on the previous day were also collated and would be presented to the GoM for consideration. He also stated that all the decisions regarding rate changes taken by the GST Council in the current meeting, unless otherwise specified in the agenda note, would be implemented from 1st October, 2021. 21.31. The Secretary to the Council mentioned that the 45th meeting of the GST Council was physically held almost after 2 years and it was a great success. The Officers' Meeting on the previous day was also a fruitful one. His experience was that the physical meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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