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TMI BlogMinutes of the 49th Meeting of GST Council held on 18th February, 2023X X X X Extracts X X X X X X X X Extracts X X X X ..... ii Proposal to extend time period mentioned in Section 62(2) of the CGST Act, 2017 iii. Change in Place of Supply of transportation of goods under Section 13(9) of the IGST Act, 2017 iv. Rationalisation of late fee for FORM GSTR-9 and amnesty for non-filers of FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 v. Amendment in CGST Rules and Notification for biometric based Aadhaar authentication of registration applicants vi. Extension of time limit for application for revocation of cancellation of registration vii. Extension of time limit under sub-section (10) of section 73 of the CGST Act for FY 2017-18, 2018-19 and 2019-20. 5. Recommendations of the Fitment Committee for consideration of the GST Council a) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to goods - Annexure-I b) Issues where no change has been proposed by the Fitment Committee in relation to goods - Annexure-II c) Issues deferred by the Fitment Committee for further examination in relation to goods - Annexure-III d) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods and Services Tax Appellate Tribunal with Sh. Dushyant Chautala, Hon'ble Deputy Chief Minister of Haryana as the Convener and Hon'ble Ministers from the States of Andhra Pradesh, Goa, Rajasthan, Uttar Pradesh and Odisha as Members. The GoM had submitted their recommendations in the form of a report which was being placed as an agenda before the Council. He thanked all the Hon'ble Members of this GoM for their valuable recommendations. 1.6 Further, he stated that the GST Council had formed another GoM on Capacity Based Taxation and Special Composition Scheme in Certain Sectors on GST with Sh. Niranjan Pujari, Minister of Finance, Odisha as the Convener and Hon'ble Ministers from Delhi, Haryana, Kerala, Madhya Pradesh, Uttar Pradesh and Uttarakhand as Members. The GoM had submitted its report which was being placed before the Council for deliberations. He thanked all the Hon'ble Members of the GoM for their valuable recommendations. 1.7 He further stated that a GoM on Casinos, Race Courses and Online Gaming was formed to examine the issue of valuation of said services and related aspects with Sh. Conrad Sangma, Hon'ble Chief Minister, Meghalaya as Convener and Hon'ble Ministers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the collection of the cess. She requested all the States to send the pending AG's certificates to enable the Centre to disburse the compensation amount timely. 1.11 The Secretary stated that there were fifteen agenda items in this meeting and the major set of agenda was circulated well in advance as promised in the last GST Council meeting. Agenda Item 1: Confirmation of the Minutes of the 48th Meeting of the GST Council 2.1 The first agenda item pertained to confirmation of the minutes of the 48th Meeting of the GST Council held on 17th December, 2022 through Video Conferencing. The Secretary stated that few States had suggested editorial changes which had been carried out and the revised minutes had been incorporated in the agenda and circulated to all the Hon'ble Members. Further Punjab had suggested certain minor changes in para 4.32 in the Officers' Meeting on 17th February 2023 which had been circulated to the Hon'ble Members in this meeting. The minutes of the 48th meeting of the GST Council after incorporating the suggested changes by the States were being placed before the Council for confirmation. Decision: The Council adopted the Minutes of the 48th meeting of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate level. In this regard, he also informed the Council that the GoM had also considered the issue of various State Advance Ruling Authorities giving varied decisions on the same issue. To elaborate the point, the Hon'ble Convener cited the example of issue involving whether input tax credit (ITC) needs to be allowed on a demo car used by car dealers and in the States of Haryana and Madhya Pradesh, the respective Advance Ruling Authorities had passed orders that input tax paid on a demo car is not an eligible credit but in the State of Kerala and Maharashtra, the AAR had passed an order that ITC can be allowed for demo car. This demonstrates that there could be conflicting views on same issue across States as no single judgement prevailed over the whole country. To address this issue, the GoM had recommended that National Tribunal should be created with Benches at States so that there will be persuasive value of orders/judgements passed by respective Benches in other States. He submitted that this would be keeping in line having uniformity and One Nation, One Tax and One Tribunal as National Tribunal would be able to give a ruling on such aspects. 3.5 The Hon'ble Convener of GoM f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... least 10 years' experience. With respect to qualification of Technical Member (Centre), the GoM recommended that he should be a member of the Group A Service with 25 years of service (IRS -C&IT) or All India Services (AIS) with at least 3-year experience in GST or existing law and 25 years of service. With respect to qualification of Technical Member (State), the GoM recommended that he should have minimum 25 years' service and should be officer of State Government or AIS with a rank higher than the First Appellate Authority of the State. To give an example, the Hon'ble Convener stated that in the State of Haryana it would be an officer at least of the rank of Joint Excise & Tax Commissioner or Additional Excise & Tax Commissioner. Further, he submitted that in many States the equivalent of this is a Class B officer and in such cases the Council has the power to consider the request of the State and amend the requirement from time to time. Also, the requirement of 25 years of Government service in Group A may be reduced on the recommendation of the Council. 3.8 Regarding the retirement age of Members, the GoM recommended that the retirement age of President should be 67 years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to Goods and Services tax imposed by Union or State subject to Article 246 (2). He also drew attention of the Council to the overriding power given in Article 323 B clause (4) which provides that the of this Article provisions shall have effect notwithstanding anything in any other provision of this Constitution or any other law for the time being in force. He stated that the Constitution has accorded power to States to constitute Tribunals and further, he clarified that the issue raised in Revenue Bar Association case pertained to number of Judicial Members and the Court had ruled that the number of Judicial Members should not be less than the Technical Members and that this case was not a precedent for the point that the States do not have the power to constitute a Tribunal. The Hon'ble Member reiterated that States should have the power to constitute Tribunals and also that States should have a say over the appointment of Technical Members. 3.14 The Hon'ble Member from Rajasthan stated that the National Tribunal and State Tribunal should be separate and that the States should have the power to constitute the State Tribunal. He agreed with the view expressed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from Centre and another Technical Member should be from State. He further agreed with the proposal that Technical Member should not be below the rank of Joint Commissioner as it would ensure that people with reasonable experience in taxation to apply for the post. Further, the power proposed to be given to States to notify rank higher than the First Appellate Authority would be redundant where the First Appellate Authority is of the rank of Joint Commissioner but where Additional Commissioner rank officer is not available. Therefore, it was suggested that the proposed formulation may be amended so that Joint Commissioners become eligible for this post of Technical Member as a bigger pool of officers would be available. Further, the Hon'ble Member stated that they supported the proposal for National Tribunal with Benches at State level. 3.16 The Secretary clarified that the GoM had not made any proposal with respect to the number of Benches to be included in the Act and that the number of Benches could be determined by the Council. 3.17 The Hon'ble Member from West Bengal stated that they were in complete agreement with the views expressed by Members of UP and Rajasthan on the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntre) along with Technical Member (State) in these Benches so that there would be assured representation for the State and there could be two Judicial Members Also, it was stated that the Council could decide on the monetary limit for adjudication of cases at the level of State Benches as well as that of the National Tribunal. Further, he also stated that the Chief Justice of the High Court of concerned State should be the Chairman of the ScSC for selection of Technical Member (State). 3.20 The Hon'ble Member from Punjab supported the view taken by Hon'ble Members from Uttar Pradesh, Bihar, West Bengal and Rajasthan and stated that the States should have independent authority while constituting their own State Tribunal and in appointment of Members thereof. He further elaborated that every State has its own specific State based industry, trade practices that are particular to that State and therefore, persons from that State would be well versed with such State specific trade nuances. He also emphasized that keeping in view the federal structure the State should be given the power to set up their own Tribunals and also to make appointment of Members thereof The Hon'ble Member from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for the Tribunals then the same can be taken up before the judiciary for deciding whether the scheme is valid or not under the Constitution. He opined that the directive of the Court that the Tribunals that are to be prospectively set up should follow a set principle, appears to be completely violative of the prerogative of the elected representatives. He pointed out that there are existing VAT Tribunals with one Judicial and two Technical Members which have not been invalidated by the Courts. He mentioned that if the Council proceeded with the view of the High Court, there would be a lot of complexity about the eligibility of the Members both Technical and Judicial. He further stated that in case of National Tribunal having Benches across the States, the administrative burden on a single body would be significantly higher. He stated that the Council should go with ratio of Judicial and Technical Members just like the existing VAT Tribunals and it should not give up the idea of State Tribunals. He also added that the said judgment has not discussed anything about State Tribunal. He also emphasized that when persons who are not from the particular State are appointed as Members o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d recommended that the number of State Benches would be decided according to the population of the State. Regarding the selection of Technical Member (State), it was accepted that in case of Technical Member (State), the Chief Secretary of the State would be a Member of the ScSC. He further stated that there was a conflict regarding whether there should be a State Tribunal or a National level Tribunal having Benches in every State. He clarified that if an appeal is decided at the Joint Commissioner level, then as per the recommendations of GoM, the appeal would go to the National Bench or Bench at State level and then it would go to the High Court and then to the Supreme Court for final judgement; that if a State Tribunal was created then there would be a five tier system and therefore the GoM had collectively recommended the creation of National Tribunal and Benches in order to have faster delivery of judgments. He further stated that on the eligibility criteria of having experience of 25 years for the Technical Member (State), the Council might take a decision regarding relaxation in age or required experience as recommended by the State of Manipur. Regarding the number of Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... varied by the Council as per the requirement of the State. Regarding the request for reduction of 3 years tenure for AIS officers for the eligibility criteria, he stated that it was a fair tenure stipulation and that without that much tenure the officer would not have sufficient experience to adjudicate on tax disputes. The Secretary clarified that Section 109 (5) of the CGST Act, as recommended by the GoM, states that in addition to the Principal Bench, Government shall, by notification, constitute such number of Benches at such locations as may be recommended by the Council based on the request of the State Government. He clarified that therefore, the flexibility to increase the number of Benches has already been provided for in the proposed amendment to the Section. 3.29 The Hon'ble Chairperson stated that the insistence of the States on their right to nominate a person familiar with the States situation in the Benches was a fair point. In this regard, clarification was also sought from the Hon'ble Convener of the GoM regarding the appointment of Technical Member on a rotation basis i.e. in one year, the State Member would be appointed and in the next, the Centre Member would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions between various State Tribunals, then such conflicts could be referred to National Tribunal. 3.33 The Secretary also clarified that the number of appeals should be limited to two and that there was no need for setting a State level Tribunal as appeal in a State should be decided at two levels and thereafter the taxpayer could go to the High Court. He further pointed out that as suggested by the Hon'ble Chairperson a separate Search-cum-Selection Committee could be made for selection of Technical Member (State). 3.34 The Hon'ble Member from Chhattisgarh sought clarification as to if the ScSC can have two Judicial Members and two other Members then why should the Tribunal be precluded from having two Judicial Members and two Technical Members. The Hon'ble Convener of the GoM responded that the rights of the States are secured as provision has been made for nominating Chief Secretary of the State in ScSC for selecting the Technical member of the States in which the Bench is located. 3.35 The Hon'ble Member from West Bengal stated that issues could be divided between the National and State Tribunals; that the disputes relating to place of supply/IGST could be handled by Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for two plus two formulation but to have three Members in the pool, but the quorum of the Bench would be two. This would also enable speedy resolution of cases. He further added that the GoM has recommended a National Principal Bench and State Benches with power of State for appointing the Technical Members for the reason that this would ensure uniformity of judgement across the State Benches and he also added that having State Tribunals would mean that the appeals would lie from those Tribunals to National Tribunals thereby causing further delay in deciding appeals. 3.39 The Hon'ble Member from Maharashtra also suggested to adopt two plus two formulation as this would ensure representation of both Centre and State. The Hon'ble Member from Goa stated that if the Council so decides the formulation can be changed to two plus two but there would be practical difficulties in getting Technical Members as well as Judicial Members in that case especially in smaller States. 3.40 The Hon'ble Member from Tamil Nadu proposed an alternate formulation i.e. a clear demarcation should be made on the issues that would be dealt by the National Tribunal and the State Tribunal. He further stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ScSC as proposed by the GoM for selection of Technical Member (State) can be amended to include the Chief Justice of the High Court, Chief Secretary of the State along with a Secretary level officer nominated by the State so as to secure the rights of the States. 3.43 The Hon'ble Member from Tamil Nadu stated that there needs to be clarification as to whether the proposal is for a National and State Tribunal with the National Tribunal having appellate jurisdiction or whether the National and State Tribunal would be covering different set of subject matter with the appeal lying to the High Court from both these Tribunals. He suggested that the ScSC for Technical Member (Centre) should also comprise State High Court Judge, President of the Tribunal and Secretary of the Centre and Chief Secretary of the concerned State. 3.44 The Hon'ble Member from Punjab raised issue of transfer of Technical Member (State) which was also supported by Bihar and Tamil Nadu. The Hon'ble Chairperson confirmed that transfer of Technical Member (State) would be done within the State. 3.45 The Secretary clarified that there was neither an existing provision in the Act for setting up separate State Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rperson directed the Secretary to the Council to make a draft of the changes proposed consequent to the discussion in the Council and to circulate it electronically among the Members to invite their comments and thereafter, to make further changes to the draft. 3.49 The Secretary proposed that the Council may authorise the Hon'ble Chairperson to finalise the draft and proposed for the closure of the GoM on GSTAT. 3.50 The Council agreed to authorise the Hon'ble Chairperson to finalise the draft and also agreed to close the GoM on GSTAT. Agenda item 3; Ratification of the Notifications. Circulars and Orders issued by the GST Council 4.1 The Secretary took up the next agenda pertaining to ratification of the Notifications, Circulars and Orders issued by the GST Council at Sr No. 3 (page no. 130-133 of the agenda). 4.2 The Hon'ble Member from Delhi referred to the Circular No. 189/01/2023-GST dated 13.01.2023 (on page 133) of the Agenda No 3 and stated that Kachri Papad is being taxed at 18% whereas Papads are taxed at Nil rate and suggested that Kachri Papad should be taxed at 5% or nil rate and he also submitted a representation on this matter to the Chairperson. The Secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(i) is regarding amendment in the Section 23 of CGST Act. In the 48th GST Council meeting, it was recommended to give overriding effect to Section 23 of CGST Act over Section 24 and sub-section (1) of Section 22 of the CGST Act retrospectively with effect from 01.07.2017 so as to provide exemption from mandatory registration for small traders for intra-state supply of goods through e-commerce operators. However, the said amendment has created an anomaly that persons, who are required to pay duty under reverse charge mechanism on their inward supplies, would not be required to get registered if they are otherwise not making any taxable supply themselves, which was not the intention behind the said amendment. To correct this anomaly, the Law Committee has recommended after detailed discussions that the Section 23 of CGST Act be amended retrospectively with effect from 01.07.2017 to give overriding effect only to sub-section (2) of Section 23 (and not to sub-section (1) of section 23) over Section 24 and sub-section (1) of Section 22 of CGST Act. This was agreed to in the officer's meeting held on 17.02.2023 also. The Council agreed with the said recommendation of the Law Committee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act, 2017 may be increased to 90 days, instead of 60 days with an additional 60 days as proposed, to synchronize it with the time limit of filing of appeal or recovery. 5.2.3 The Principal Commissioner, GST Policy Wing clarified that the period of 60 days, with an additional period of 60 days, has been recommended by the Law Committee to align it with the time period of appeal which is 90 days, extendable by another 30 days by the Appellate Authority. The Council agreed with the said recommendation of the Law Committee. Council also recommended that the date for amnesty scheme may be finalized based on preparedness of the portal. Agenda Item No. 4(iii) - Change in Place of Supply of transportation of goods under Section 13(9) of the IGST Act, 2017 5.3 Principal Commissioner, GST Policy Wing stated that the third agenda is about the change in place of supply of transportation of goods under Section 13(9) of IGST Act 2017. He said that in the 48th GST Council meeting, it was decided to delink the place of supply of service of transportation of goods, in cases where both the supplier of services as well as the recipient of services are located in India, from the destination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union territory, under CGST Act with similar late fee under SGST Act. The second slab for Registered persons having an aggregate turnover of more than Rs. 5 crore and upto Rs. 20 crore in a financial year, for which late fee has been proposed to be reduced to Rs 50/- per day subject to a maximum of an amount calculated at 0.02 percent of the turnover in the State or Union territory, under CGST Act with similar late fee under SGST Act. He stated that as per the slabs provided, maximum late fee for delayed filing of annual return would be Rs 20,000/- for the taxpayer with aggregate turnover of Rs 5 crore and would be Rs 80,000/- for the taxpayer with aggregate turnover of Rs 20 crore. 5.4.2 He further stated that Law Committee has also recommended one time Amnesty Scheme for non-filers of FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 as per the Agenda. He informed that Amnesty Schemes for non-filers of FORM GSTR-1 and FORM GSTR-3B were brought a number of times in the past. In respect of non-filers of FORM GSTR-4, amnesty schemes have been brought twice, but was not brought out last time, when amnesty scheme was brought out for FORM GSTR-1 and FORM GSTR-3B. He stated that no such amnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the provision that if any payment due to a micro or small enterprises is not paid by the PSUs within the time limit as specified, then they will not be able to claim offset within that financial year. Legal provisions have been made where all PSUs under Centre have been instructed to clear the payments due to MSMEs within the due 45 days for claiming the offset for that year. However, such instructions are not applicable for PSUs under State. She further stated that this provision has been brought out to promote timely payments to MSMEs. She clarified that both the Centre and States are taking substantial measures to protect and promote the MSMEs in best possible way. 5.4.7 Hon'ble Member from Tamil Nadu expressed his apprehension regarding reduction on the cap of late fee from 0.25% to 0.02% which would be a huge drop by cutting it to almost 90% and whether such steep reduction would act as a deterrence for delayed filing of annual return in FORM GSTR-9. He queried whether capping the late fee at an amount of Rs 80,000/- could be deterrent for a taxpayer having an aggregate turnover of Rs 20 crore. He stated once the penalty becomes stagnant to a certain amount, then i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he recommendations of the Council in 48th meeting, to mandate biometric-based authentication of Aadhaar for high-risk applicants and also to provide for exemption from such biometric-based authentication in States/ UTs other than State of Gujarat. However, the said amendments has resulted in certain anomalies, as detailed in the agenda. He mentioned that Law Committee deliberated on the matter and recommended that rule 8 of CGST Rules may be amended with effect from 26.12.2022 to substitute sub-rule (4A) and to amend sub-rule (4B) as detailed in the agenda. Law Committee has also recommended that Notification No. 27/2022- Central Tax dated 26.12.2022 may also be amended with effect from 26.12.2022 to correct the anomaly. The Secretary sought for the comments from the members in case they did not agree with the amendments recommended by Law Committee. The Council agreed with the said recommendations of the Law Committee along with the draft Notifications. Agenda item 4(vi): Extension of time limit for application for revocation of cancellation of registration 5.6 Principal Commissioner (GST PW) informed that a recommendation has also been made by the Law Committee for extension o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018-19 and FY 2019-20. 5.7 Principal Commissioner (GSTPW) informed that there have been requests from tax administrations for further extension of time limit under Section 73 of CGST Act for issuance of Show Cause Notices (SCN) and Orders for financial year 2017-18, 2018-19 and 2019-20, considering that the scrutiny and audit were delayed because of Covid-19 pandemic. He informed that the issue was discussed by the Law Committee and it was observed that earlier, such extension was given for the F.Y. 2017-18. It was felt by the Law Committee that while there may be a need to provide additional time to the officers to issue notices and pass orders for FY 2017-18.2018-19 and 2019-20 considering the delay in scrutiny, assessment and audit work due to COVID-19 restrictions, however, the same need to be made in a manner such that there is no bunching of last dates for these financial years as well as for the subsequent financial years. After detailed deliberations. Law Committee recommended that such time limits may be extended for another three months each for the FY 2017-18, 2018-19 and 2019-20. It was discussed in detail in officers meeting where one view was that extension for FY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. Principal Commissioner (GSTPW) informed that that this issue was taken up by the Law Committee and two contradictory views emerged on the issue, due to which the Law Committee has not been able to reach a conclusion. He assured that this issue would be taken up again in the Law committee meeting and would be taken up in the future GST Council Meeting. Agenda item 5: Recommendations of the Fitment Committee for the consideration of the GST Council 6.1 The Secretary introduced the agenda item relating to the recommendations of the Fitment Committee. These recommendations had been given in four (04) Annexures where the first three related to Goods and the fourth one related to Services. The first Annexure provided details of the items (Goods) where tax rate changes or clarifications were being recommended; the second Annexure listed items (Goods) where no tax rate changes were being recommended and the third Annexure listed items (Goods) where the issues were deferred by the Fitment Committee for further examination in relation to Goods. The fourth Annexure listed the recommendations for making changes in GST rates or for issuing clarifications in relation to Services. 6.2 The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of import, as is available to container under Customs notification 104/94-Cus ; and amendment of the entry at Serial number 41A of Notification number 1/2017-Compensation Cess (Rate) pertaining to exemption from compensation Cess on coal rejects when supplied to and by a coal washery on which Compensation Cess had already been paid subject to the condition that no ITC has been availed by any person. Decision: The Council agreed with the recommendations of the Fitment Committee and recommended to explain that a tag, tracking device or data logger already affixed on a container of durable nature at the time of import shall be eligible for IGST exemption, as is available to the said container under the notification 104/94-Cus and also agreed that no such exemption would be available to tags, tracking devices and data loggers when imported separately. The Council also agreed for amendment of the entry at Serial number 41A of Notification number 1/2017-Compensation Cess (rate) as recommended by the Fitment Committee. 6.9 The Secretary then requested the opinion of the Hon'ble Members on reduction in the GST rate on Millet based health mix products consisting at least 70% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves which was proposed by Hon'ble Member from Odisha in the last GST Council meeting. He informed that Odisha, Madhya Pradesh and Chhattisgarh were invited to the Fitment Committee meeting for their views on the issue. Odisha requested for reduction of GST rate on Tendu leaves from 18 % to Nil or 5% whereas Madhya Pradesh and Chhattisgarh were of the opinion that no rate reduction should be recommended on Tendu leaves as post GST the trading of Tendu leaves had increased. In view of this Fitment committee had suggested no change in GST rate on Tendu leaves. He further informed the Council that in the Officers Meeting, Telangana also supported the reduction in tax rate on Tendu leaves, however besides Telangana and Odisha, all other States were not in favour of any change in GST rate on Tendu leaves. 6.18 The Hon'ble Member from Odisha stated that in case Tendu leaves were exempted from GST, there would not be any loss in revenue to both the State and Central Governments. He further stated the Tendu leaves had no other use except making Bidis where the GST rate was already at highest slab of 28%. He also stated that initially the Fitment Committee had recommended 5% tax on Tendu le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he GST on Tendu leaves was reduced, then the aggregator might pass on some benefit of tax reduction to the Tendu leave pluckers. 6.26 The Secretary stated that if all Hon'ble Members agreed, then the tax rate might be reduced to 5% on RCM basis which would ensure that the item would remain within the value chain while benefit could accrue to the pluckers. 6.27 The officer from Telangana suggested reducing the GST rate on Tendu leaves. 6.28 The Secretary stated that the tax rate on Tendu leaves was discussed in the 15th meeting of the GST Council and though the recommendation of the Fitment Committee was for 5% but the Council decided to levy 18% GST on Tendu leaves. It was deliberated again in the Council, however no change was recommended. He stated that as it was a Council decision, the Council might continue with no change in the GST rate on Tendu leaves. Decision: The Council agreed with the recommendation of the Fitment Committee for retaining the GST rate on Tendu leaves. 6.29 Principal Commissioner, GSTPW stated that the second issue was regarding GST rate reduction on ship and vessels for breaking up as proposed by Ministry of Shipping. He stated that in the Officers m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Tribunals also. There was consensus in the Officers meeting on this. Decision: The Council agreed with the recommendations of the Fitment Committee regarding the agenda points on Services as detailed in Annexure-IV. 6.34 The Hon'ble Member from Himachal Pradesh stated that Himachal Pradesh, Jammu and Kashmir and Uttarakhand have a large apple based economy However' the apple industry is getting affected due to increase in the tax rate on carton boxes from 12% to 18%. He requested that the rate on carton boxes may be reduced to 5% as this would help the apple growers in Himachal Pradesh, Jammu and Kashmir and Uttarakhand. He requested that the issue may be got examined by the Fitment Committee. 6.35 The Hon'ble Chairperson stated that since carton boxes are used in various industries and not only for packaging fruits, the proposal to reduce tax rate on carton boxes used for packaging horticulture produce only, as suggested by the Hon'ble Member from Himachal Pradesh, might prove difficult to implement at ground level, based on the end use. 6.36 The Hon'ble Member from Maharashtra stated that they support the proposal of Himachal Pradesh as in Maharashtra the mango growers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first meeting was held on 06th July, 2021, the second meeting was on 31st August, 2021 and the third and the final meeting was held on 07th July, 2022. He then informed the Council that the GoM had extensively deliberated on broad challenges associated with the complexity involved in the implementation of Capacity based levy in this sector and stated that GST is a destination-based tax on supply of goods and services and not on their production. He further asserted that the Constitution does not provide authority for capacity based levy of GST. He also stated that capacity based taxation is extremely complex and requires frequent changes in the rate structure and emphasized that there are no further check and verification in supply chain which could lead to revenue leakages. It was also emphasized that capacity-based taxation suppresses the competition and goes against the small producers who are not capable of making huge investment in capital infrastructure. He then pointed out that such system has deep rooted malice and may encourage 'officer-producer' collision at the level of jurisdictional officers. 7.4 The Hon'ble Convenor of GoM further discussed the international practic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of dummy persons in lieu of some remuneration and if the goods are seized, then the responsibility is fixed on the dummy person instead of the actual manufacturer and therefore, he emphasized that more efforts are required to curb this practise. He stated that despite the keen interest evinced by the Hon'ble Union Finance Minister of India in curbing such malpractices, there is a largescale black marketing in the trade of Pan Masala. He thereafter stated that there is large scale evasion of tax in this sector as there is a high demand for these products in the market and even if such evasion is eventually caught, dummy persons are prosecuted and actual offenders walk free. He stated that if the recommendations of GoM are incorporated in totality, then the supervisory authority/ inspection authority will have tremendous power in their hands and there could be a possibility to collude and manipulate the reports. He thereafter stated that such a capacity based taxation system is not within the purview of existing GST laws. He thereafter put forth his other point before the Council and suggested that the Council should ponder over as to which mechanism should be adopted to preve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Chairperson to accept the report of GoM however he emphasized that the matter should be forwarded to Fitment committee/ Law committee to deliberate upon a possible solution to curb the tax evasion in this sector. 7.11 The Secretary sought the permission of the GST Council to close the GoM on Capacity based taxation and Special Composition Scheme in certain sectors on GST. The Hon'ble Chairperson thanked the Members of the GoM for their comprehensive report and also stated that the suggestion of Hon'ble Member from Uttar Pradesh to find a possible solution to curb tax evasion shall be considered by the Council. The Report of the GoM was accepted by the Council. Agenda Item 7: Closure of Group of Ministers (GoM) on lew of Covid Cess on Pharma I and Power Sector in Sikkim. 8.1 The Secretary proposed the closure of the GoM on levy of Covid Cess on Pharma and Power Sector in Sikkim and thanked the Chairpersons and Member of these GoM for their detailed report. The GST Council approved the closure of the GoM on Pharma and Power Sector in Sikkim. Agenda Item 8: Closure of Group of Ministers (GoM) to examine the feasibility of implementation of e-wav bill requirement for movem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTN works as a company on a cost recovery basis for the services provided. Therefore, this proposal was agreed to be dropped and clause five was deleted from the draft. 10.3 The Secretary stated that it was further agreed in the officers meeting that the demand for capital expenditure should also be incorporated in the advance user charges requested from tax administrations by GSTN. Tax administrations would be provided separate accounting for Capex and Opex. He proposed that in principle approval for this change in the draft revised revenue model of GSTN may be given by the GST Council. 10.4 The Secretary further stated that above proposal would lead to drafting changes, for which a preliminary draft was enclosed. The draft would be finalized by GSTN Board on the basis of in principle approval of the GST Council as proposed above. He informed the Council that all other proposed changes in this agenda remain the same. 10.5 The officer from Tamil Nadu stated that in the revenue model it was proposed that CAPEX contribution would be made by the different States based on the number of users. He suggested that instead, the CAPEX contribution should be based on the shareholding whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could take guidance and follow the good points from the Model All India GST Audit manual. 12.4 In response of the Hon'ble Member from Tamil Nadu, the Secretary confirmed that this is only a model Audit Manual for guidance to States and States are free to make their own GST Audit Manual and proceed accordingly and the same is put up just for information of the GST Council, Accordingly, same was being circulated. Agenda Item 13: Decisions of GST Implementation Committee for the information of the Council 13.1 Principal Commissioner, GST Policy Wing in his presentation informed the Council that a decision was taken by the GST Implementation Committee (GIC) regarding sharing of GST data with Department of Telecommunications (DoT), Ministry of Communications and the same was placed before the Council for information. Decision: The Council took note of the decision of the GST Implementation Committee and ratified the same. Agenda Item 14: Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act. 1962 to be placed before the GST Council for information 14.1 The Secretary presented the Agenda No. 14 i.e., Ad-hoc exemption orders issued under Section 25(2) of the Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The Hon'ble Member also requested to release the amount due to them for the F.Y. 21-22 before 31st March in this financial year. 15.4 The Secretary informed the Hon'ble Member that the 95% of the due amount is paid on provisional basis and AG's certificate is asked for the rest 5% and that the Hon'ble Finance Minister had announced this earlier and letters had been sent to the Chief Secretaries of the States for sending the AG's certificate. 15.5 Further, the Hon'ble Member from Rajasthan raised the issue of extending the period of Compensation Cess in support of Kerala. 15.6 Hon'ble Chairperson stated that it was impossible to extend period of Compensation Cess legally. If it was extended, then revenue would have to be raised by imposing Cess on items having 28% GST but Compensation Cess had already been extended till 2026 to service the loans taken during Covid. Further, extending the period of Compensation Cess would send the message to public that States want more revenue by imposing more taxes on them. 15.7 The Secretary in his concluding remarks stated that they had very long and detailed in- depth deliberations and sincerely thanked each and every Member for takin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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