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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 ..... T 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 REG 01 i.e. Application for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 priority as otherwise it would lead to legal difficulties in revenue sharing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 discussions held in the Officers' meeting. Agenda Item 3(i): Alignment of provisions of the CG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 as Members in GSTAT -as earlier it was proposed to have only Judges and not advocates. 4.5 The Pr. Commissioner, GST Policy Wing clarified that Advocates will be eligible for appointment as Judicial M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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 providing the bank guarantee for the purpose of sanctioning of credit facilities to the said company and therefore, no transaction value can be attributed to the said service being provided by the Director. 4.13 Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 following sub-rule (2) in Rule 28 of CGST Rules, 2017: 28. Value of supply of goods or services or both between distinct or related persons, Other than through an agent. 2. Notwithstanding anything contained in sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 payment of an amount of pre-deposit of 12.5% of the tax under dispute by the said person, out of which at least 20% (i.e. 2.5% of the tax under dispute) should be debited from Electronic Cash Ledger. He also informed that this was agreed to in the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 Accordingly, the Law Committee recommended the following amendment in clause (61) of section 2 of the CGST Act, 2017 i.e. definition of ISD: '(61) Input Service Distributor means an office of the supplier of goods or services or both which receives tax invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 amongst such recipients 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 recipients and which are operational in the current year, during the said relevant period; f. the inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the input tax credit contained in the original invoice was distributed in terms of Clause (f), and the amount so apportioned shall be- i. reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR- 6 ; or ii. added to the output tax liability of the recipient where the amount so apportioned is in the negative by virtue of the amount of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educed 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 cease to have effect after the expiry of a period of one year from the date of the order i.e. provisional attachment order in the form of FORM GST DRC-22. However, as per Rule 159(2) of CGST Rules, 201 7, provisional attachment of a property shall be removed only on the written instructions from the Commissioner to that effect. But, even after completion of I year, the property is not released as the banks and other agencies with which the property is provisionally attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 supplier of services or location of recipient of services is outside India, the place of supply is to be determined as per sub-section (2) of section 13 of the IGST Act, i.e. in cases where location of recipient of services is available, the place of supply of such services shall be the location of recipient of services and in cases where location of recipient of services is not available in the ordinary course of business, the place of supply shall be the location of supplier of services. This shall help in aligning th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty) 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 architect and engineer or stay in hotel, the place of supply in such cases is where the land is located and the GST goes to the state where the land property is situated irrespective of B2C or B2B supplies. Similarly, if any GST is collected on advertising through hoarding, then GST should go to the state where thefrm-gis located. Hence for advertising through hoarding, place of location of hoarding should be considered as 'Place of Supply'. 4.37 The Pr. Commissioner GST Policy Wing mentioned that the concern of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces- 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 to the exporters by such tax authorities claiming that the said exporter has not realized export proceeds in convertible foreign exchange and accordingly, the conditions for qualifying as export under clause (6) of section 2 of IGST Act, 2017 are not fulfilled. 4.41 Sub-clause (iv) of Section 2(6) of the IGST Act, 2017 requires that for a supply of service to qualify as export of service, the payment for such service should be received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 portal as well as in Part-B of Form GST PCT-01 in line with the rules as below: a. Certificate of Practitioner is not required for CA/ICWA/CS as per the rules. b. Option related to Graduate or Post Graduate in Law and Higher Auditing is not available in notified form and the portal and needs to be inserted. c: Option related to any other examination notified by Government is also not available in notified form and the portal and needs to be inserted. d. Deleting the option of Advocate as it is not aligned with the existing rules. C. Application for cancellation of TCS a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 Act, 2017, and assert that refund of accumulated credit on account of inverted duty structure is restricted by this notification for such services. 4.53 On the contrary, other field formations argue that the construction of roads and bridges is not covered by item 5(b) but rather they fall under works contract services as pe Item 6(a) of Schedule II of the CGST Act, 2017 and therefore, there is no restriction on refund of accumulated credit for inverted duty structure in the case of such supply of service under Notification No. 15/2017-central Tax (Rate), dated 28.06.2017. 4.54 Accordingly, clarification is needed to resolve this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em 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 argued that since all engineered constructions used for public purposes, like bridges and roads, fall under the category of civil structures, they should not be eligible for refund. Furthermore, he informed the Council that the State of Karnataka has been following this practice consistently, with most assesses complying, except for one who 'is litigating the matter in the High Court- The Members tressed that there have been no significant challenges, and the implementation has been smooth. He asserted that in their interpretation, item 5(b) of Schedule Il of the Act encompasses more than just the real estate sector. They contended that the entry comprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 structure clearly encompassed bridges and roads, even though that may not be the original intent of Notification No. 15/2017-CentraI Tax (Rate), dated 28.06.2017 to restrict refund of credit in respect of construction of bridges and roads, In line with the Hon'ble Member from Karnataka's suggestion, the Secretary proposed that the said notification could be prospectively amended to explicitly state what the entry includes. This would protect the revenue from previous years for the States and provide clarity for future situations. This approach could potentially merge both views and address the grey area in question, particularly since these projects typically involve government contracts where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 services, there were a total of 24 agenda items, of which the Fitment Committee had recommended making changes in the GST Rate or issue of clarifications in case of 10 items (Annexure-IV of the Agenda Volume- l), no change recommended in respect of 5 items (Annexure-V of the Agenda Volume-I) and deferred 9 items for further examination (Annexure-VI of the Agenda Volume-I). 5.3 Thereafter, JS, TRU presented the agendas pertaining to the recommendations of the Fitment Committee. ( Annexure-4 ) 5.4 The first item for discussion was concerning Food preparation of millet flour in powder form, containing at least 70% millets by weight in respect of which the Fitment Committee had recommended for reduction of GST rate from 18% to 0% for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. That looking at the spirit of the Council, the processed foods based on millets, with higher share of millets could be considered at least in the future as the present agenda was limited to only atta. 5.10 The Hon'ble Member from West Bengal asked for clarification regarding the content in view of the proposal of the Hon'ble Member from Karnataka. 5.11 The Hon'ble Chairperson clarified that the proposal was for 70% and that Council might consider bringing that to two-thirds based on proposal of Hon'ble Member from Karnataka. 5.12 The Hon'ble Member from Meghalaya stated that the idea was to change the food habits by including millets in diets of people which would ultimately benefit the small and marginal farmers and supported th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yester 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 zari thread. She stated that as per the HS Explanatory Notes, the same would be covered under heading 5605 with 5% GST. The Fitment Committee has therefore, recommended issuing a clarification to that effect and in view of the reservations expressed by the state of Gujarat, also recommended to clarify that no refund will be permitted on polyester film (metallised)/ plastic film on account of inversion. Decision: The Council approved the issue of clarification as recommended by the Fitment Committee that imitation zari thread or yarn made from metallised polyester film/plastic film are covered under heading 5605 and levied to 5% GST and recommended that no refund will be permitted on polyester film (metallised)/ plastic film on account of inversion in duty st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommittee 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 Defence to exempt GST compensation cess on supply of aerated beverages by Unit Run Canteens (URCs) or alternatively, the applicable cess may be collected at the Canteen Stores Department (CSD) depot level for supplies made by URCs. She stated that currently all supplies by URCs to authorised customers is fully exempt from GST, however, a conscious decision was taken in the 15th meeting of the GST Council not to exempt levy of Compensation Cess. She stated that currently Compensation Cess is being levied on two wheelers, four wheelers and aerated beverages. Two wheelers and four wheelers are being supplied through CSD depots only and cess is being duly collected and paid to the government. Aerated beverages were being supplied by URCs and because of the difficulties associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive 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 he agreed with the arguments of Hon'ble Member from Karnataka, and it is the poor who suffer from the ill effects of tobacco use, increase in taxation will promote the grey market where such products are sold without paying any taxes whatsoever, Therefore, there is a need to balance the taxation in such a way that that it did not lead to illegal market in a big way. He stated more data was required to arrive at an appropriate well thought out decision. 5.26 The Hon'ble Member from Maharashtra stated that he supported the view of Goa as it has been their experience in Maharashtra that increase in rates leads to increased black marketing. He stated that while the cause was good, caution needs to be exercised in increasing the GST rate 5.27 The Secretary informed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 (Part-II): (i) Agenda on Extra-Neutral Alcohol (ENA) 5.34 Joint Secretary, TRU then presented the agenda no 4 (Part-Il) related to taxation of Extra Neutral Alcohol (ENA). She informed the Council that that issued was first discussed in 20th Meeting of the GST Council and in subsequent meetings but decision could not be arrived except for the fact that 18% GST would be levied on ENA for Industrial Use. Thereafter, there are varying practices across States wherein some States levied VAT and some levied GST and where taxpayers had paid GST they had been issued notices demanding VAT on the same; where assessees had paid VAT, they have been issued notices demanding GST on ENA supplied. This had led to multiple litigations. She stated that over 40 Writ Petitions had been filed in the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 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 agreeable to the proposal. 5.37 The Secretary clarified that there was no specific entry for ENA and that currently it is taxed under the residual category. In the pre GST era, there was no excise duty on ENA meant for manufacture of alcohol. He further stated that it is a pro-State measure and the Centre was in fact conceding the revenue arising out of GST on ENA to the states, which would then enable the States to impose higher taxes in the form of excise duty and VAT on alcohol, the end product, as already mentioned by the Hon'ble Member from Goa. The Council is not clarifying whether VAT can be imposed on ENA meant for use in production of alcohol for human consumption as the Council is not empowered to decide the same. The present proposal is to not impose GST on ENA meant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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 101 st 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 evasion in case of differential tax structure on ENA. 5.41 The Hon'ble Member from Punjab, while welcoming the proposal to not tax ENA meant for use in production of alcohol for human consumption under GST, observed that it might lead to tax evasion as it would be difficult to differentiate ENA which would be put to multiple uses. 5.42 The Hon'ble Members from Goa, Meghalaya, Himachal Pradesh, Chhattisgarh, Maharashtra, Uttar Pradesh and West Bengal supported the proposal. The Hon'ble Member from Himachal Pradesh also recommended exempting ENA from GST irrespective of end use. Decision: The Council approved the proposal to keep ENA for use in manufacture of alcoholic liquor for human consumption out of the ambit of GST, to place the intent of the Council before the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 of business has been described in the entry as service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle . Fitment Committee recommended that it may be clarified through a circular that input services in same line of business include transport of passengers (SAC 9965) or renting of motor vehicle with operator (SAC 9966) and not leasing of motor vehicles without operator (9973), which attracts GST at the same rate as sale of motor vehicles, that is, 28% plus compensation cess. Decision: The Council approved the recommendations of the Fitment Committee that, a. Bus operators organised as companies may be excluded from the purview of section 9(5) of the CGST Act, 2017; b. Where GST on input service in the same line of business is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per 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 Committee had recommended to clarify that DMF is a governmental authority and thus eligible for all exemptions available to governmental authorities. She further informed that the issue was discussed in the Officer's meeting and no objections were raised. Decision: The Council agreed with the said recommendation of the Fitment Committee. 5.50 Joint Secretary, TRU then presented the next item which was to clarify whether the job work of converting Barley into Malted Barley amounts to job work services in relation to food and food products which attracts GST at 5% or job work services in relation to manufacture of alcoholic liquor for human consumption which attracts GST at 18%. She stated that Fitment Committee had recommended to clarify that job work services in relation to manufacture of malt are covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities 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 revenues. He requested that the exemptions under the proposal may be broadened to include all governmental authorities other than those providing purely commercial activities. 5.55 The Secretary clarified that the issue of whether an Urban Development Authority is a governmental authority or a local authority is a separate agenda which had been deferred by the Fitment Committee and the Council may decide the same after the Fitment Committee has examined and given its recommendations on the issue. He stated that there was a difference in the way entities such as government, governmental authorities, public authorities, local bodies, etc. and other entities were taxed and similarly there is a disparity in taxation of goods and services being supplied to such bodies. He stated that this was inherited from the pre-GST era and would have to be looked into. 5.56 The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Committee may also examine whether governmental authorities can be treated at par with Government and Local authority. 5.64 The Hon'ble Member from Maharashtra stated that the issue in the agenda was pending for long and hence a decision may be taken recommending the same. Any additions could be made later. 5.65 The Hon'ble Chairperson clarified that the agenda would be cleared as all the members were in agreement with the same and the concerns raised by the Hon'ble Members would be examined by the Fitment Committee. She also stated that the Council had taken a position on the matter discussed which was aligned with the legal position in the pre-GST era and expressed hope that the Council would take that into cognizance. 5.66 The Hon'ble Member from Meghalaya requested that since the Fitment Committee was looking into the issue of local authorities, the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anism. 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 objections were raised. Decision: The Council approved the recommendation of the Fitment Committee to bring the supplies of all goods and services made by Indian Railways under forward charge mechanism from the existing reverse charge mechanism and Indian Railways may be excluded from the exemptions available for services supplied by Central Government as recommended by the Fitment Committee. 5.70 Joint Secretary, TRU informed that the next item was a request received from CAMPCO seeking clarification on entry 54(g) of 12/2017-CT(R) dated 28.06.2017 with regard to the scope of exemption for commission agent in facilitating the sale of agricultural produce. She informed that the Fitment Committee had recommended that since this issue pertained to only a single party and was not a general issue impacting many states, CAMPCO may be advised to approach the Authority for Advance Rulin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 renting of residential dwelling for use as residence and exempted as per entry no. 12 of the notification No. 12/2017-CT (Rate) dated 28/06/2017, She stated that the accommodation services under heading 9963 by a hotel, inn, guest house, club or campsite by whatever name called, having declared tariff of a unit below one thousand rupees per day or equivalent were exempt till 17.07.2022 vide entry no. 14 of the notification No. 12/2017-CT(R) dated 28.06.2017. Hostels and hotels were claiming the said exemption. However, vide the amendment notification No. 04/2022- CT(Rate) dated 13.07.2022, the exemption to hotel accommodation having per day charges below Rs. 1000/- has been withdrawn w.e.f. 18/07/2022 and the said supply is now made taxable at 12% by the notification No. 03/2022-CT (Rate) dated 13.07.2022. Currently, hotel accommodation having value of supply less than or equal to Rs. 7500 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 at Sr. No. 2 of Annexure-V of Agenda No. 4(e) regarding request to bring renting of residential dwellings by registered persons to registered persons under Forward Charge Mechanism where the Fitment Committee had recommended to maintain status quo as no real life examples or difficulties in implementation of the said notification were brought to notice Decision: The Council approved the recommendation of the Fitment Committee. 5.80 Joint Secretary, TRU then presented the issue regarding request to clarify that 'sale of land' includes assignment of leasehold rights in such land and stated that Fitment Committee examined the issue and recommended that the request be not acceded to because sale of land and assignment of leasehold rights are not one and the same thing and the question of lease of land being covered under entry 5 of Schedule Ill which deals with sale Of land and building does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applicable on the statutory collections made by the Real Estate Regulatory Authority (RERA) in accordance with the RERA Act, 2016 5.87 The Hon'ble member from Maharashtra suggested that RERA authorities should also be consulted while deciding the issue. 5.88 The Hon'ble Chairperson clarified that the agenda was deferred and RERA authorities would be consulted. Decision: The Council deferred the agenda item for further examination. 5.89 Joint Secretary, TRU then presented the item regarding the proposal of state of Punjab requested to levy GST on renting of commercial property on RCM basis and stated that the same was agreed to be deferred in the officers meeting as Punjab's view was not considered in the Fitment Committee and sought permission of the Council to defer the issue. Decision: The Council deferred the agenda item for further examination. 5.90 Joint Secretary, TRU then stated that 10 issues a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on: 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 being seen on the GST front but the growth on IGST on import of goods had been subdued. He informed the Council that there had been an overall growth of 11% in the gross GST revenues. He presented to the Council the details of GST revenue and stated that the GST revenues had been approximately 1.6 lakh crores from April to August in FY 2023-24. He further informed that the GST revenues for the month of September had also crossed 1.6 lakh crores. He presented to the Council the details of IGST settlement and informed that the IGST settled was slightly more than what was collected. He then presented the details of Compensation Cess collected since the implementation of GST till July 2023 and the compensation released till September 2023. He presented the status of the receipt and processing of AG's certificate from the States for release of compensation. 8.2 The Hon'ble Member from Karnataka requested the Centre to expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring 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 that required extensive study and that the devolution of surplus IGST and levy of cess post March 2026 would be studied in detail and discussed in Council. 8.11 The Hon'ble Member from Kerala stated that the revenue share of Kerala State was not commensurate with its consumption. He further stated that IGST revenue from various sectors like online trading, e-commerce, etc. were not properly accruing to the State. He requested for a detailed examination of the devolution of surplus IGST. 8.12 The Hon'ble Member from Manipur informed the Council that the growth in GST revenues for the State during April, 2023 was 35%, however due to the violent unrest in the state from 3rd May, 2023 there had been a drastic decline in the growth. He stated that the violence caused several hindrances such as closure of markets, suspension of ecommerce activities, blockage of highways, break down of internet, stoppage of construction activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary 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 agreed to the said recommendation of the Fitment Committee to exempt foreign flag, foreign going vessels from 5% IGST levy upon conversion to coastal run subject to the condition that it reconverts to foreign going vessel within a period of 6 months. However, applicable duties on stores, fuel etc. will continue to be paid. 10. Agenda Item 9: Agenda Note for notifying supplies and class of registered person eligible for refund under IGST route. 10.1 The Principal Commissioner, GST Policy Wing stated that the agenda was regarding amendment of Notification no 1/2023- IGST, dated 31st July, 2023 issued as per the recommendations of the 50th Council meeting to restrict IGST refund on certain evasion prone commodities such as Pan masala, Gutkha, etc. based on the report of the Group of Ministers on capacity-based taxation. He stated that in the 50th Council meeting, it was also recommended to notify amendments in section 16(3) and 16(4) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Economic Zone unit for authorised operations as the class of persons who may make supply of goods or services (except the goods specified in column (3) of the TABLE below) to the Special Economic Zone developer or the Special Economic Zone unit for authorised operations on payment of integrated tax and on which the said suppliers may claim the refund of tax so paid: Decision: The Council agreed with the said proposal and the recommendation made in the Officers' meeting on the draft notification. 11. Agenda Item 10: General Discussion with the permission of the Chair 11.1 The Hon'ble Member from Bihar during the discussion of Agenda Item pertaining to clarification on issues related to Place of Supply raised the issue regarding Place of supply for Online services. He stated that the recent amendment in rule 46(f) of the CGST Rules, 2017 on 'Online Gaming' should be made applicable to 'other Online Services' as well. He further proposed that so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 withdraw the said notices issued by them. 11.5 The Hon'ble Member from Goa stated that while they had accepted the decision of the Council to tax the casinos at 28% and review the decision after six months, it was a matter of concern to the State of Goa. He stated that DGGI had been conducting raids and issuing notices demanding tax which was much more than the worth of the casinos. He stated that demanding tax for the past period amounted to retrospective taxation and would be detrimental to the industry. He submitted that the casinos had collected tax at 18% as was the practice in the pre- GST era and paid the same and the said notices demanded tax that they had not collected- He also stated that as the State of Goa was heavily dependent on the casino and allied industries, decline in revenue from them would affect the prosperity of the State. He requested the Council to take measures to withdraw the notices issued by DGGI and stop demanding tax on past period. 11.6 The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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