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TMI BlogMinutes of the 52nd meeting of the GST Council held on 07th October 2023X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Council i. Alignment of provisions of the CGST Act, 2017 with the provisions of the Tribunal Reforms Act, 2021 in respect of Appointment of President and Member of the proposed GST Appellate Tribunals. ii. Seeking clarity on various issues a. Regarding taxability of personal guarantee offered by directors to the bank against the credit limits/loans being sanctioned to the company. b. Regarding taxability of corporate guarantee provided for related persons including corporate guarantee provided by holding company to its subsidiary company. iii. Providing a special procedure for condonation of delay in filing of appeals against demand orders passed until 31st March, 2023 iv. Law amendment w.r.t. ISD as recommended by the GST Council in its 50th meeting v. Clarification regarding restoration of provisionally attached property vi. Clarification on various issues related to Place of Supply vii. Agenda Note for issuance of clarification relating to export of services condition (iv) of the Section 2 (6) of the IGST Act 2017 viii. Amendment in Central Goods and Services Tax Rules, 2017 and GST REG/PCT - FORM(s) a. Incorporation of 'One Person Company' in FORM GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lag foreign going vessels being operated by an entity not registered under GST in India when it converts to coastal run 9. Agenda Item 9 (Addendum to Agenda Volume-II): Agenda Note for notifying supplies and class of registered person eligible for refund under IGST route. 10. General discussion with the permission of the Chair 1.3 The Secretary to the GST Council (hereinafter called 'The Secretary'), welcomed all the Hon'ble Members of the Council and participating officers to the 52nd meeting of the GST Council. He welcomed incoming Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Sh. Sanjay Kumar Agarwal to his first GST Council meeting as Chairman, CBIC. 1.4 The Secretary stated that the important agendas of the day pertained to setting up of GST Tribunals and pending issues like taxability of Extra Neutral alcohol for deliberation besides other Law Committee and Fitment Committee agendas and other routine agenda items. 1.5 The Secretary requested the States who were yet to pass the amendments in SGST/UTGST Acts corresponding to amendments in the CGST Act, 2017, IGST Act, 2017 pertaining to Casinos, Online Gaming and Horse racing to do so on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext agenda pertaining to the Ratification of the Notifications, Circulars and Orders issued by the GST Council and decisions of GST Implementation Committee for the information of the Council (Page 220-242 of the Volume-I). She stated that this agenda was discussed in the officers meeting held yesterday and there was consensus on the same. She requested the Council to ratify the Notifications, Circulars and Orders issued and take note of the decisions of the GST Implementation Committee (GIC). Decision: The Council ratified the Notifications, Circulars and Orders issued and took note of the decisions of GST Implementation Committee. 4. Agenda Item 3: Issues recommended by the Law Committee for the consideration of the GST Council 4.1 The Secretary took up the next agenda for the consideration of the GST Council. He informed that these agendas were discussed in the Officers' meeting held on 6th of October 2023 and there was an agreement among the officers on most of the issues. The Principal Commissioner, GST Policy Wing made the detailed presentation (attached as Annexure-3) giving an over view of the recommendations made by the Law Committee, as well as the gist of the disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, or decree of any court or any law for the time being in force, the President of the Appellate Tribunal shall hold office for a term of four years from the date on which he enters upon his office, or until heattains the age of seventy years, whichever is earlier and shall be eligible for re-appointment for a period not exceeding two years 10. Notwithstanding anything contained in any judgment, order, or decree of any court or any law for the time being in force, the Judicial Member, Technical Member (Centre) or Technical Member (State) of the Appellate Tribunal shall hold office fora term of four years from the date on which he enters upon his office, or until he attains the age of sixty-seven years, whichever is earlier and shall be eligible for re-appointment for a period not exceeding two years. 4.3 The Pr. Commissioner, GST Policy Wing, further stated that the issue was discussed in officers' meeting and agreed to. It was also noted in the Officers' meeting that there would not be a need for any amendment in SGST Acts. 4.4 The Hon'ble Member from Delhi agreed to the change in age limit for the posts of President and Members. She enquired about having advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be passed by the Supreme Court. She also welcomed the suggestion of Gujarat to make the entire process online and portal-based. Decision: The Council agreed with the said recommendations of the Law Committee alongwith the proposal to make the processes of Tribunal online and portal-based. Agenda Item 3(ii): Seeking clarity on various issues : A . Regarding taxability of personal guarantee offered by directors to the bank against the credit limits/loans being sanctioned to the company: 4.12 The Pr. Commissioner, GST Policy Wing stated that the services that are provided by the director to a company by way of providing personal guarantee to banks/ financial institutions in order to secure credit facilities even without any consideration, will fall under the category of supply of services. Therefore, the same was taxable under GST. However, as per the mandate of RBI , as per Para 2.2.9 of RBI Master Circular RBI/2021-22/121 dated 9th November, 2021 regarding guidelines relating to obtaining of personal guarantees of promoters, directors, other managerial personnel , and shareholders of borrowing concerns, no consideration can be charged by the director from the company for prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed persons, the taxable value of the supply has to be determined as per Rule 28 of the CGST Rules, 2017 which is mainly based on the open market value of such supply or as per value of services of like kind and quality or as per Rule 30 or 31 of CGST Rules, 2017. Field formations as well as the taxpayers are finding it difficult to arrive at the open market value for such supply of services under Rule 28 of CGST Rules, 2017 as corporate guarantees, unlike bank guarantees, are specific and peculiar to a particular corporate group or company and therefore external third-party comparisons may not be available or relatable. While in cases, where the recipient is eligible for full input tax credit, as per the second proviso to the rule 28 of CGST Rules, 2017, the value declared in the invoice, if any, shall be deemed to be the open market value of the said supply of services, however, in cases, where the recipient is not eligible for full input tax credit, then there was difficulty in determining the open market value. 4.17 The matter was deliberated by the Law Committee and the Law Committee recommended to provide for specific valuation rule for such supply of services by inserting fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient recovery. As the appeals are likely to be rejected even if they are filed, in view of limited power of the appellate authority to condone any delays, the pre-deposit amount iS also not being realized in the books of the government. If such appeals are allowed by condoning the delay, then a large number of such taxpayers are likely to come forward and pay the pre-deposit amount. It is also to be mentioned that due to the non-constitution of GST Appellate Tribunals, the only remedy available to the taxpayers was approaching the Hon'ble High Courts, which might not be always possible for small and medium taxpayers. Law Committee recommended providing a special procedure under section 148 of CGST Act, for taxable persons to file appeal till 31st December 2023, who could not file an appeal under section 107 of the said Act against the order passed on or before the 31st day of March, 2023 by the proper officer under section 73 or 74 of the said Act and the taxable persons whose appeal against the said order was rejected solely on the grounds that the said appeal was not filed within the time period specified in sub-section (1) of section 107, subject to the condition of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cil agreed with the said recommendations of the Law Committee, as modified as per discussions in Officers' meeting, along with draft Notification. Agenda Item 3(iv): Law amendment w.r.t. ISD as recommended by the GST Council in its 50th meeting. 4.25 The Pr. Commissioner, GST Policy Wing, stated that the GST Council in its 50th meeting recommended that ISD procedure as laid down in Section 20 of Central Goods and Services Tax Act, 2017 read with rule 39 of Central Goods and Services Tax Rules, 2017 may be made mandatory prospectively for distribution of ITC in respect of input services procured by Head Office (HO) from a third party but attributable to both HO and Branch Office (BO) or exclusively to one or more BOs. Further, ITC on account of input services received from a third party, where such input services are liable to tax on reverse charge basis, should also be required to be distributed through ISD route. Further, the Council authorized the Law Committee to formulate the requisite law amendments. The Council also recommended that the manner of distribution of ISD credit as provided in section 20 of CGST Act 2017 does not require amendment at present. 4.26 Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure for distribution of input tax credit by Input Service Distributor- 1……… a. the input tax credit available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR-6 in accordance with the provisions of Chapter VIII of these rules; b. the amount of the credit distributed shall not exceed the amount of credit available for distribution; c. the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient; d. the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period; e. the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te tax or Union territory tax that qualifies for distribution to such recipient as referred to in clause (d) and (e); k. the Input Service Distributor shall issue an invoice, as prescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of input tax credit; I. the Input Service Distributor shall issue an Input Service Distributor credit note, as prescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit already distributed gets reduced for any reason; m. any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor by the supplier shall be distributed in the manner and subject to the conditions specified in clauses (a) to (j) and the amount attributable to any recipient shall be calculated in the manner provided in clause (f) and such credit shall be distributed in the month in which the debit note is included in the return in FORM GSTR-6; n. any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recipients are available, previous to the month during which credit is to be distributed; ii. the expression "recipient of credit" means the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor; iii. the term "turnover", in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule." 4.29 Accordingly, the recommendations of the Law Committee for amendments in CGST Act and CGST Rules have been placed before Council for approval. Decision: The Council agreed with the said recommendations of the Law Committee. Agenda Item 3(v): Clarification regarding restoration of provisionally attached property. 4.30 The Pr. Commissioner, GST Policy Wing took up the next agenda regarding provisional attachment of the property of the taxpayers. He stated that Section 83(2) of CGST Act, 2017 states that the provisional attachment shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned officer then the same could be done well before the lapse of the time limit. GSTN was requested to provide the said functionality on the system so that officers could be alerted about the time limit of expiry of one year of provisional attachment order. Decision: The Council agreed with the recommendations of the Law Committee, including the recommendations of the officers in the officers' meeting, along with proposed amendment in sub-rule (2) of Rule 159 of CGST Rules, 2017 and Form GST DRC-22. Agenda Item 3(vi): Clarification on various issues related to Place of Supply. 4.33 The pr. Commissioner, GST Policy Wing informed that the next agenda is regarding issuance of a clarificatory circular on 'Place of Supply' in respect of three kinds of supply of services as discussed below. A. Clarification regarding place of supply of services of transportation of goods by mail or courier when either supplier or recipient of service is located outside India 4.34 Law Committee recommended that a Circular may be issued to clarify that in respect of supply of services of for transportation of goods, including by way of mail or courier, in all cases where location of sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e advertisement, the vendor is in possession of the hoarding/structure at the said location on which advertisement is displayed whereas the advertising company is not occupying the space or the structure. As there is no supply (sale) of space on the hoarding/ structure (immovable property)belonging to vendor to the client for display of their advertisement on the said display board/structure, it does not amount to sale of advertising space, Also, as there is no supply (sale) of rights to use the structure (immovable property) belonging to vendor to the other person to use for any purpose, it does not amount to supply by way of grant of rights to use immovable property. Therefore, such services provided by the Vendor to Advertiser are purely in the nature of advertisement services in respect of which Place of Supply should be determined in terms of Section 12(2) of IGST Act, 2017 according to which place of recipient (Advertiser) is the Place of Supply and nature of transaction as to whether inter-state or intra-state shall be decided accordingly. 4.36 The Hon'ble Member from Goa raised his concern that in services connected to 'Immovable Property' like the services of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices and the further responsibility of upkeep, running, monitoring and surveillance, etc. of the servers and related hardware is of recipient of services only, then the said supply of services shall be considered as the supply of the service of renting of immovable property under provisions of clause (a) of sub-section (3) of Section 12 of the IGST Act. Decision: The Council agreed with the recommendations of the Law Committee along with the proposed Circular. Agenda Item 3(vii): Agenda Note for issuance of clarification relating to export of services- condition (iv) of the Section 2 (6) of the IGST Act 2017. 4.40 The Pr. Commissioner, GST Policy Wing informed that doubts were raised by trade and industry associations on the issue that export remittances realized in INR into Special Vostro accounts are being denied the benefit of exports by some of the tax authorities by taking a view that the remittances received by taxpayer in 'INR' in such Vostro accounts are not permitted by RBI for the purpose of consideration of supply of services as export of services as per provisions of clause (6) of section 2 of IGST Act, 2017. Therefore, the refunds of ITC are being denied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for applicants to provide details of at least two Partners/Promoters in certain specific categories of 'Constitution of Business'. However, there was no option for the category of 'One Person Company' applicants in the dropdown To address this issue, an advisory was issued by GSTN advising 'One Person Company' applicants to select 'Others' in the dropdown and specify 'One Person Company' in a text field to complete the registration process. 4.44 Therefore, it was proposed to make available in Part B of FORM GST REG-01 as well as on portal in the 'Constitution of Business' tab, an option of 'One Person Company', so that one can apply as 'One Person Company'. With this option, the system will allow the applicant to fill in the details of the single member or owner and to submit the application successfully on system. B. Application for Enrolment as Goods and Services Tax Practitioner- Amendment in Form GST PCT-01. 4.45 Rule 83(1) of the CGST Rules stipulates the conditions for enrolment as Goods and Services Tax practitioner by any person. It was recommended that necessary changes are required to be made on the port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation of the aforesaid amendment. Since, existing FORM GSTR-8 does not contain late fee table, it has been recommended to make requisite changes in FORM GSTR-8 as per the agenda note. Decision: The Council agreed with the recommendations of the Law Committee in Agenda Item 3(viii) along with the amendments in said rule and said Forms. Agenda Item 3(ix): Subject: Clarification on the scope of the refund on account of inverted duty structure in respect of supplies of certain construction services. 4.50 The Pr. Commissioner, GST Policy Wing presented the agenda and stated that the issue pertained to Notification No. 15/2017-Central Tax (Rate), dated 28.06.2017, whereby refund of unutilized input tax credit was restricted in respect of supplies specified in item 5(b) of Schedule Il of the Act. 4.51 Field formations have sought clarification regarding the applicability of Notification No. 15/2017-Central Tax (Rate), dated 28.06.2017, concerning refund applications for services involving the construction of bridges and roads, among others. 4.52 Some field formations consider roads and bridges as "civil structures" falling under item 5(b) of Schedule II of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Member from Maharashtra emphasized the need to distinguish the construction of roads and bridges from the real estate sector, as special concessions had been granted to the real estate sector, which is not the case for the construction of roads and bridges. Therefore, he stated that the refund of accumulated credit should not be restricted for construction of roads and bridges 4.59 The Hon'ble Member from Karnataka highlighted that Notification No. 15/2017-Central Tax (Rate), dated 28.06.2017, restricted the refund of unutilized input tax credit concerning supplies specified in item 5(b) of Schedule II of the Act. He stated that item 5(b) of Schedule II encompasses 'civil structures,' and the Act does not provide a specific definition for this term. However, he provided a common definition of 'civil structure,' explaining that it refers to engineered constructions that serve various purposes in society. These structures are designed to support infrastructure, transportation, utilities and public services. Examples of civil structures include bridges, dams, highways, tunnels, airports, sewage treatment plants, and water supply systems. He argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Member's argument that there might not be a necessity to define the term "civil structure" used in item 5(b) of Schedule II, to provide clarity as to whether the term "civil structure" in item 5(b) of Schedule II includes bridges or not. However, she pointed out that the Law Committee's intent seemed to be more focused on including only real estate structures in item 5(b) of Schedule II and in the notification by using clarification route. She expressed her concern that if the Law Committee's intention was to exclusively include real estate structures only in item 5(b) or in the restriction in the said Notification, it should have been formulated the Law/ Notification more explicitly, rather than taking a circuitous route through the clarification. 4.62 The Secretary clarified that it appeared that the provisions were made to restrict accumulated credit for the real estate sector. However, the inclusion of the term "civil structure" in item 5(b) of Schedule II apparently was to prevent any inadvertent omissions of other complexes, buildings or structures within real estate. The Secretary acknowledged that the definition of "civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2017 prospectively to clearly define the scope of restriction imposed by the said notification so as to provide that refund under inverted duty structure shall be restricted only in respect of supply of services Of construction of a complex, building, structure, etc., which are intended for sale to a buyer, wholly or partly, and not to other construction/ work contract services 5. Agenda item 4: Recommendations of the Fitment Committee for the consideration of the GST Council 5.1 The Secretary asked the Joint Secretary, TRU to present the agenda relating to the recommendations of the Fitment Committee. 5.2 Joint Secretary, TRU stated that the Fitment Committee agenda was summarized in six Annexures (l to VI). There were a total of 12 agenda items relating to goods out of which the Fitment Committee had recommended making changes in the GST Rate or issue of clarifications in case of 4 items (Annexure-I of the Agenda Volume-I), no change recommended in respect of 6 items (Annexure-Il of the Agenda Volume-I) and deferred two issues for further examination (Annexure-Ill of the Agenda Volume-I), One agenda item was being placed before the Council for information. In the case of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... row millets, he suggested that processed and packaged foods made out of millets should also be brought to 5%. He stated that India has a lot to gain by promoting millets and might gain some export markets as well. 5.7 The Hon'ble Chairperson clarified that baked items, biscuits etc. referred to by the Hon'ble Member form Karnataka was not part of the agenda to be discussed. She further asked the Council to take a conscious call on the issue under discussion. 5.8 The Secretary clarified that atta whether of wheat or millets, if sold loose is chargeable to Nil GST. However, if sold in packaged form, atta even if it is a mix of millets and wheat, as long as it is flour, attracts 5% GST. However, if the flour has other ingredients added to it, like dry fruits etc. then it will attract higher rate of duty. Proposal is to charge 12% GST on such preparations containing at least 70% millets, packaged and labelled, and nil if sold loose, instead of present rate of 18% GST. 5.9 The Hon'ble Member from Karnataka proposed for bringing the content of millets to two-third and that the rest of one-third could be anything like sugar, dry fruits, nuts, pulses, Jaggery powder etc. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI as per the public notice issued by DGFT in August, 2023. She stated that the Fitment Committee has also recommended that the GST Council might consider giving approval to update such lists as and when amended by DGFT and thereafter place the same before the Council for information, Decision: The Council approved the recommendations of the Fitment Committee with regard to updating the list 34A and 34B of Notification No. 50/2017-Cus as per revised appendix 4B issued vide DGFT Public Notice dated 18.08.2023 and to update such lists as and when amended by DGFT and placing before the Council for information thereafter. 5.17 Joint Secretary, TRU then presented the next agenda item pertaining to clarification on imitation zari thread or yarn made out of polyester film (metallised) or plastic film. She stated that the GST Council in its 50th meeting had recommended reduction of GST rate to 5% on all imitation zari thread or yarn known by any name in trade parlance. She stated that doubts had been raised as to whether imitation zari thread also covers metal coated plastic film converted to metallised yarn and twisted with nylon, cotton, polyester or any other yarn to make imitation z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TRU to examine all end use based exemptions. 5.20 Joint Secretary, TRU then presented the next agenda item pertaining to reduction in GST rate on lithium ion batteries from 18% to 5%, She stated that when Fitment Committee examined the issue, it was found that lithium ion batteries have multiple uses and hence recommended to maintain Status quo. Decision: The Council approved the recommendation of the Fitment Committee for maintaining status quo on the GST rate for supply of lithium ion batteries. 5.21 Joint Secretary, TRU then presented the next agenda item pertaining to request for clarification on scope of sugar boiled confectionary. She stated that sugar confectionary currently attracts 18% GST while sugar boiled confectionary attracts 12% GST. Fitment Committee recommended that no clarification is required in this regard as there exists FSSAI standards for the products. Decision: The Council approved the recommendation of the Fitment Committee that no clarification is required to be issued regarding scope of sugar boiled confectionary. 5.22 Joint Secretary, TRU then presented the next agenda item pertaining to requests from Beverages associations and Ministry of Defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher tax on those products and therefore, GST rate on tobacco products should be increased and slowly brought on par with global standards which was 75%. He stated that there was a worldwide consensus on limiting the usage of tobacco and that it was the people in middle and lower income level which suffered the most due to the detrimental health effects of the use of tobacco. He reminded the august house that India is a signatory to the Framework Convention on Tobacco Control of WHO wherein parties to the Convention have agreed that price and tax policies are effective measures for controlling consumption of tobacco. He further stated that tobacco companies are now focussing on developing and under developed countries as the developing countries have been very aggressive with their tax policies. He urged the Council to consider increasing the tax on tobacco products to global standards. He stated that the same applied to aerated beverages also as they cause huge health risk and that many countries had moved aggressively in taxing aerated beverages and that the Council should look towards increasing the tax on tobacco products 5.25 The representative from Goa stated that while h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a visually impaired person who sought the same concessional rate of GST(18%) which is currently applicable to orthopedically disabled persons. She said that an appeal has been filed against the decision along with stay petition and the issue is being brought for information of the Council. 5.32 The Hon'ble Member from Goa stated that the GST Concession for purchase of motor vehicles available to only Orthopedically disabled persons should also be made available to all Divyangjans. In future, vehicles may also be modified for use by other Divyangjans beyond those orthopedically challenged. Since the concessional rate requires a certificate from Ministry of Heavy Vehicles, there is no scope for misuse of this concession. He reiterated that the facility should be extended to all Divyangjans. 5.33 The Secretary clarified that if any concession had to be given to any person and not to goods, then the same had to be through subsidy or reimbursement route and that the Council had decided the same in its earlier in 47th meeting. He stated that this issue has been brought to notice of the Council that an appeal has been filed in this case before the Hon'ble Court. Agenda Item 4 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and various judgements already pronounced in this regard. He mentioned that the Hon'ble Allahabad High Court had held that imposing VAT on ENA is ultravires. Further, administration of two rates on ENA at the hands of supplier, based on end use, would pose implementation problems. It would be difficult to make out whether the ENA is meant for industrial use or for manufacture of alcoholic liquors for human consumption. He also mentioned that in the 47th meeting of the GST Council, the Fitment Committee had not recommended the request for exemption of molasses on the grounds that end use based exemptions are difficult to monitor and need to be discouraged and the Council had accepted the recommendation of the Fitment Committee. Thirdly, net importing states like Tamil Nadu stand to lose if supply of ENA for manufacture of alcoholic liquor is kept outside the ambit of GST. Their study estimates the loss to be of Rs. 35 crore. He requested that ENA may be brought within the ambit of GST. He stated that reduction in rate of GST on molasses from 28% to 5% will have a huge impact on the revenues of the state to the tune of Rs. 92 crore per annum. Therefore, Tamil Nadu was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o are in line with the same. The learned AG had also opined that both the Centre and the States have a right to impose GST on ENA. The current proposal is to cede that right of the Centre when ENA is supplied for manufacture of alcoholic liquor for human consumption. The intent of the Council would be placed before the Hon'ble Supreme Court and other High Courts where the issue is pending. The amendments to law etc. will be examined by the Law Committee. 5.40 The representative of Madhya Pradesh stated that the views of the Hon'ble Member from Madhya Pradesh may be taken on record. He stated that only alcoholic liquor meant for human consumption had been kept out of purview Of GST and the content of alcohol in ENA, which is 95%, makes it clear that it is not alcohol meant for human consumption. He further stated that the Hon'ble High Court of Allahabad had held in the case of M/s Jain Distillery that after the 101st Amendment to the Constitution, the states had no legislative competence to levy tax on ENA. He opposed the proposal to tax ENA based on end use and stated that earlier the Council had discouraged the same. He stated that there might be a possibility of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a balance between the need of small operators for ease of doing business and the need of large organized players to take ITC, Fitment Committee had recommended that bus operators organized as companies supplying passenger transport services could be excluded from the purview of Section 9(5) of the CGST Act, 2017. She also stated that during the examination of the issue the Fitment Committee had found that GST rate of 5% for the said services with credit of input services in the same line of business was leading to inversion of tax and credit accumulation. She informed the Council that one of the reasons for the same was that input services in the same line of business attracted GST at rates higher than 5%. She stated that the Fitment committee had further recommended that where GST on input service in the same line of business is payable/paid by the supplier of input service at a rate higher than 5%, the supplier of passenger transport service by any motor vehicle would be entitled to ITC only to the extent of such amount of GST as would have been payable on the input service in the same line of business at the rate of 5%. 5.45 Further she stated that, presently the same line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from Maharashtra suggested that if any other charges were being collected with electricity, only those charges should be taxed and not the electricity charges as it would amount to double taxation. 5.48 The Secretary clarified in respect to agenda regarding reimbursement of electricity charges that the exemption would be available as long as actual charges were being reimbursed to Resident Welfare Association or any other body even in the absence of meters. Decision: The Council approved the issue of clarification as recommended by the Fitment Committee and that where electricity was being supplied by the RWAs or real estate owner as a pure agent, the same would not form a part of the value of supply. The Council also approved the recommendation that a resident welfare association or real estate owner or developer etc. should be deemed to be pure agent for the said purpose, as long as it charges for electricity on actual basis the amount payable to electricity distribution company or electricity supplier. 5.49 The next item presented by Joint Secretary, TRU was regarding exemption of services provided by District Mineral Foundation (DMF) from GST. She stated that the Fitment C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Conservancy Solid waste management Slum improvement and upgradation 5.53 The Hon'ble Member from Delhi appreciated the recommendation of the Fitment Committee to not prune the list and requested that in addition to the five services recommended by the Fitment Committee, an entry may be made to include services relating to education provided to governmental authorities. 5.54 The Hon'ble Member from Andhra Pradesh stated that the recommendation limited the exemption to the said five services by governmental authorities. He stated that the Urban Development Authorities also perform the functions of local bodies. He listed out some functions performed by Urban Development Authorities viz., provision of urban amenities and facilities such as parks, gardens, playgrounds, street lighting, parking lots, bus stops etc. that urban development authorities have similar responsibilities as local authorities. He said that the proposal would see the urban bodies being taxed on the same services that the local bodies were being exempted from. He further stated that the tax rate of 18% imposed a huge burden on these bodies which were already reeling under severe dearth of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the same was decided the present issues being raised by the Hon'ble Members would be resolved. 5.61 The Hon'ble Member from Andhra Pradesh quoted 2(69) of the CGST Act 2017, wherein Local authority is defined and stated that the same did not include Urban development authority. He requested that a comprehensive view may be taken on this issue. 5.62 The Hon'ble Chairperson remarked that as pointed out by the Hon'ble Member from Andhra Pradesh the Urban Development Authorities were separate from Local authorities as per the GST Law as well as by common understanding and hence the issue of Urban Development authorities should be examined separately. She urged the Fitment Committee to examine the issue of all similar bodies as early as possible. 5.63 The Hon'ble Member from Delhi stated that there were two issues to be considered; what constituted a governmental authority and whether governmental authority should be treated at par with government and local authority. She further stated that while government and local authority is exempted, in case of governmental authorities a list of exempted services is being specified. She requested that the Fitment Committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ensure that individuals or small unregistered businesses are not required to take registration to pay GST on them under RCM. Similarly, services by Central Government, State Government, Union Territory or local authority to another Central Government, State Government, Union Territory or local authority have been exempted as services supplied by Central Government, State Government, Union Territory or local authority have been exempted as services supplied by Central Government, State Government Union Territory or local authority are generally under Reverse Charge Mechanism (RCM). She stated that if the Council were to decide to tax all goods and services supplied by Indian Railways under forward charge, Indian Railways may be excluded from the above exemptions; otherwise, it would defeat the purpose of bringing all supplies of Indian Railways under forward charge mechanism. Accordingly, it was recommended by the Fitment Committee that i. All goods and services supplied by Indian Railways may be brought under forward charge. ii. Indian Railways may be excluded from the aforesaid exemptions. 5.69 She informed that the proposal was discussed in the officers meeting and no ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l was to amend Sl. No. 34 (iv), (v) of services rate notification No. 11/2017CT(R) dated 28.06.2017 and to carry out consequential amendments in the classification of services and explanatory notes. Decision: The Council approved the recommendation of the Fitment Committee to amend services rate notification No. 11/2017-CT(R) dated 28.06.2017. 5.73 The Joint Secretary, TRU informed that the next agenda pertained to declaring Delhi Development Authority as a Local Authority for the purposes of GST. She stated that the matter was already discussed during the discussion specifying a positive list of services under Sr No. 3 & 3A of notification No. 12/2017- Central Tax ( Rate). She informed that the Fitment Committee had recommended for deferring the issue as it required detailed examination. Decision: The Council approved the Fitment Committee's recommendation. It also directed that the Fitment Committee examine all similarly placed bodies/authorities expeditiously. 5.74 The Joint Secretary, TRU then presented the next agenda pertaining to clarification of whether service by way of hostel accommodation, service apartments /hotels booked for longer period is a service of rentin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered in such cases. 5.76 The Hon'ble Members from Goa, Chhattisgarh, Meghalaya and West Bengal supported the suggestion by the Hon'ble Member from Maharashtra Decision: The Council decided to defer the issue for further examination. 5.77 Joint Secretary, TRU then presented the issues pertaining to services mentioned in Annexure-V where the Fitment Committee had recommended for no change. 5.78 She stated that the first agenda item in Annexure V pertained to proposal to apply uniform GST rate of 5% on Business Correspondent services provided in both rural and urban areas. She stated that the issue was examined by the Fitment Committee and it was felt that the specific exemption provided by Business Correspondents to banking companies in respect of rural area branches has been given in line with the objectives of financial inclusion and therefore, the Fitment Committee had recommended to maintain status quo, Decision: The Council approved the recommendation of the Fitment Committee for rejecting the proposal for uniform GST rate of 5% on Business Correspondent services provided in both urban and rural areas. 5.79 Joint Secretary, TRU then presented the issue mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further stated that the issue regarding availability of ITC would be examined by the Law Committee at the earliest and would be brought before the Council in the next meeting. Decision: The Council approved the recommendation of Fitment Committee to not exempt reassignment of leasehold rights of land from GST where the initial lease was exempt from GST. It also desired that the admissibility of ITC may be examined and put up to the Council. 5.85 Joint Secretary, TRU stated that the next agenda was a request from the State of Nagaland to keep rate of GST @ 12% on works contract services which commenced prior to 18.07.2022. She stated that based on the recommendations of the GST Council in its 47th meeting, rate of GST on works contract services supplied to Central and State Governments for specified projects has been increased from 12% to 18% and that the Fitment Committee recommended maintaining status quo as continuing 12% rate for old contracts would lead to complication of tax rate structure. Decision: The Council approved the recommendations of the Fitment Committee. 5.86 Joint Secretary, TRU then presented the item regarding request to clarify whether GST is applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case prior to the implementation of GST, shall be placed before the GST Council for information. 7.2 The Joint Secretary, GST Council Secretariat informed the Council that three Ad-hoc exemption orders had been issued since last meeting of the GST Council. The First Order No. 06 of 2023 dated 28/08/2023 pertained to Request from Disaster Management Division (DMD), MHA, for Ad hoc exemption for import of instruments for implementation of pilot project on Glacial Lake Outburst Flood (GLOF) risk in Sikkim. The second Order NO. 07 of 2023 dated 29/08/2023 was regarding request from Department of School Education & Literacy, Ministry of Education for Ad hoc exemption for import of 1.15 million footballs for distribution amongst Schools in India and the third Order No 08 of 2023 was regarding request from the Ministry of External Affairs for Ad hoc exemption for import of Dornier Engines to be exported to Seychelles. Decision: The Council took note of the ad-hoc exemption orders issued. 8. Agenda Item 7: Review Of revenue position under Goods and Services Tax 8.1 The Joint Secretary, Department of Revenue presented the Agenda to the Council. He stated that a good growth rate was bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er from Karnataka and stated that there was time till 2026 for repayment of loans. 8.7 The Hon'ble Chairperson clarified that while post March 2026, Compensation cess could not be collected based on the Compensation to States Act, 2017, the Council had the prerogative to devise some mechanism to collect cess. 8.8 The Hon'ble Member from Karnataka sought an initiation of debate and discussion on this for perspective planning. He requested the Secretariat to present details of the borrowings, growth in cess and estimated repayment schedule of loan factoring in the growth in cess in the next meeting. 8.9 The Secretary agreed to provide the same. He brought to the notice of the Council that there was a certain amount of surplus IGST every month / quarter. He informed the Council that presently 50 percent was being allotted to Centre and the remaining was being distributed between the States on the basis of their revenues during 2015-16. He stated that there had been changes in the proportion of revenues of the States and submitted for the consideration of the Council if there was a need to revise the base year. 8.10 The Hon'ble Chairperson stated that this was a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the vessel. She further informed the Council that since foreign vessels were not registered under GST Law, they were not eligible for input tax credit leading to huge operational cost for them which goes against the idea of promoting tourism. She referred to the specific case of the Cruise ship Costa Serena as received from Ministry of Shipping which would have to convert to coastal run for operating the cruises in coastal waters (Mumbai -Goa- Mumbai and Mumbai-Kochi-Lakshadweep Mumbai) and they would be operating in coastal waters for two months. She further stated that since the cruise ship operator did not intend to enter into a lease arrangement, they would be liable to pay IGST of 5% on the value of the vessel upon conversion to coastal run. The proposal was to exempt foreign flag foreign going vessels from levy of IGST subject to the condition that they reconvert to foreign going vessel within a period of 6 months. 9.2 The Secretary stated that the agenda was received only a few days ago and is being put up as a table agenda in view of the urgency. It was discussed in officers' meeting. 9.3 The Hon'ble Member from Goa welcomed the proposal. Decision: The Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 1.10. 2023 to allow IGST refund in case of zero rated supplies to SEZ units and developers through IGST route. He informed the Council that in the Officers' meeting held on 6.10.2023, it was suggested that the goods prone to evasion, which have been excluded from claiming IGST refund on export, should also be excluded from IGST refund route for zero rated supplies made to SEZ. 10.3 Accordingly, it was proposed to amend Notification No 01/2023 -IGST, dated 31st July 2023, w.e.f. 01 .10.2023 as- "In exercise of the powers conferred by sub-section (4) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) (hereafter referred to as the "said Act"), the Central Government on the recommendations of the Council, hereby notifies i. all goods or services (except the goods specified In column (3) of the TABLE below) as the class of goods or services which may be exported on payment of integrated tax and on which the supplier of such goods or services may claim the refund of tax so paid; and ii. all suppliers (other than suppliers of goods specified in column (3) of the TABLE below) to a Special Economic Zone developer or a Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was not legal to consider the consumer/user/player's original place of residence if they have provided a different address. Moreover, it could not be the job of the Secretariat to trace the original place of residence of every consumer/user/player. 11.4 The Hon'ble Member from Delhi sought the permission of the Hon'ble Chairperson to place an agenda before the Council. She stated that the Council had deliberated much on the issue of taxing online gaming and had arrived at the decision to tax it at 28% from the 1st of October, 2023. However, she expressed concern on the matter that companies, even before the implementation of the decision by the Council. She further stated that while it could be claimed that the Council decision was a clarification and not a retrospective taxation, demanding tax for the past years appeared to be in bad faith. She stated that this affects industry, discourages young entrepreneurs as well as foreign investors. She also stated that the demand made by DGGI was on every game as opposed to the decision of the Council to tax the deposit in case of online gaming. She requested that the Council may take a decision that DGGI should withdra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that the DGGI was an independent regulatory body. She assured the Council that the concerns of the Council could be conveyed to DGGI.
11.10 The Hon'ble Member from Delhi requested the Council to take a decision that the amendment to taxation of online gaming would not be retrospective as such taxation would kill the industry.
11.11 The Secretary clarified that the amendment was prospective coming into force from 1st of October 2023. The notices issued by DGGI for the past period were under the law as it existed prior to 1st of October 2023 and not a retrospective application of the Council's decision.
11.12 The Hon'ble Chairperson stated that the Council represented the country and wanted investment for the country as well as opportunities for the youth. She stated that it is never the intent of the Council to kill an industry. However, all industries are to be regulated. She further stated that the Council shall take decisions to generate income from industries including sunrise industries.
11.13 The Secretary thanked the Hon'ble Chairperson and the Members of the Council for their contribution in the meeting. X X X X Extracts X X X X X X X X Extracts X X X X
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