2nd GST Council Meeting Dated:- 30-9-2016 GST Council – Minutes – Circulars – GST – Minutes of the 2nd GST Council Meeting (30 September 2016) The second meeting of the GST Council (hereinafter referred to as 'the Council') was held in the Parliament House Annexe, New Delhi on 30 September 2016 under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley. The list of the Hon'ble Members of the GST Council who attended the meeting is at Annexure 1 . The list of officers of the Centre and the States who attended the meeting is at Annexure 2 . 2. In his opening remarks, the Chairperson of the Council welcomed all the members and enumerated the agenda items for the second meeting of the Council. 3. The following three agenda items were taken up for consideration: 1. Approval of the Draft Minutes of the 1st GST Council Meeting along with the Draft Rules for Conduct of Business a.Draft Minutes of the 1st GST Council Meeting b.Draf
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e Hon'ble Minister from Punjab stated that ITC reversals accounted for an additional revenue of ₹ 4,000 crore in his State. The Secretary to the Council observed that it was not desirable to subsume the amount related to ITC reversal for calculation of compensation as it was a distortion in the taxation system and only five States had such a provision in place. The Chairperson observed that if compensation was to be paid for ITC reversal, the Centre's rate of tax would go up and this would imply that taxpayers of all States would be paying extra to compensate five States. He further observed that as the issue regarding compensation for ITC reversal was not discussed in the first meeting of the Council, it would be inappropriate to insert it at the stage of confirmation of its Minutes. However, it was agreed that this issue could be further examined by a committee of officers. 6. The Hon'ble Minister from Uttar Pradesh stated that more clarity was needed as to what
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g, there was no agreement to count CST at the rate of 4% for computing compensation. It was agreed that this need not be incorporated in the Minutes of the 1 st Meeting of the Council. 8. The Hon'ble Minister from Jammu and Kashmir stated that in paragraph 37 (ii) of the Minutes, the revenue to be compensated should cover exemptions and duties. The Secretary to the Council stated that these could not be included for compensation as the population of the whole of India should not be expected to bear the burden for exemptions given by different states. The Hon'ble Minister from Assam stated that the formula for compensation under V AT did not include exemptions as part of revenue and the same methodology should be adopted for GST. The Hon'ble Minister from Bihar also opposed the idea of putting exemptions in the compensation formula. The Chairperson reiterated that additional issues being discussed today could not be made part of the Minutes of an earlier meeting. Such is
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of the committee should cover the entire gamut of activities and functions to be performed from registration, scrutiny, etc. to enforcement. This committee should discuss how information-based enforcement powers should be exercised so that there was no parallel exercise of powers resulting in confusion and possible harassment. 11. The Hon'ble Minister from Tamil Nadu stated that there was no agreement as recorded in paragraph 47 (iii) ( All existing registered service providers irrespective of the value of turnover, for the present, shall continue to be administered by the Central tax administration ). He also expressed his strong reservation in respect of the cap of three years mentioned in paragraph 47. The Hon'ble Minister from Kerala also supported the view of the Hon'ble Minister from Tamil Nadu and stated that the Centre and the States should have concurrent power to administer Service Tax payers having turnover above ₹ 1.5 Crores. He also observed that Stat
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s and the Centre. Audit was proposed to be limited to 5% of the taxpayers on the basis of risk parameters. The issue decided was that the Centre would take up such audit for suppliers of services. He suggested that this issue should not be reopened. 13. The Chairperson recalled the discussions that took place in the 1st Meeting of the Council. He stated that the compromise arrived at was that in respect of goods, taxpayers with a turnover below ₹ 1.5 crore would continue to be administered by the States, as was the practice currently and for those with turnover above ₹ 1.5 crore, there would be concurrent jurisdiction of the Centre and States. In respect of Service Tax, he had stated that 11 lakh current assessees of Service Tax would continue to be administered by the Centre and this clearly implied that no division was proposed on the basis of ₹ 1.5 crore turnover. He also recalled that it was agreed that new Service Tax registrants would be allocated between the
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st Meeting of the Council was in a spirit of cooperation. However, this cooperation was limited to the Centre administering the Service Tax assesses whose turnover was below ₹ 1.5 crore and in his understanding, the agreement was that Service Tax assessees with turnover above ₹ 1.5 crore would be administered jointly by the Centre and the States. The Hon'ble Minister from Chhattisgarh stated that in the Empowered Committee, the decision regarding no dual control on small taxpayers was only to protect small traders in goods and it was not meant for services and therefore, it would not be fair to raise the issue of Services at this stage. The Hon'ble Minister from Meghalaya stated that the States should administer taxpayers with turnover below ₹ 1.5 crore and those above ₹ 1.5 crore should be shared between the Centre and the States. He also stated that there was hardly any presence of Central Government officials in .his State. He suggested a time-frame t
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ent, it should be allowed to handle Service Tax assessees exclusively for the first five years. The Hon'ble Chief Minister of Puducherry also recalled that for Services, it was decided that all 11 lakh existing Service Tax assessees would be administered by the Central Government. The Secretary to the Council brought to the notice of the House that big service providers in sectors such as telecom, banking, information technology, etc. had been representing that they should have a single registration and if that was not possible, they could at least be given the second best comfort of being audited by only the Central administration for initial years. He pointed out that contribution of Services to the Gross Domestic Product (GDP) of the country was 56% and the administrative structure should be such that it does not affect the growth of the Services sector and thus, of the GDP. 16. The Hon'ble Minister from Tamil Nadu stated that transition period should not be for 3 years a
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9;ble Ministers from Punjab and Gujarat suggested to vertically divide the taxpayers between the Centre and States irrespective of any turnover threshold. The Hon'ble Minister from Assam stated that such an arrangement would create difficulty for small traders. The Hon'ble Ministers from Bihar and Kerala stated that in order to consider this new suggestion, it should be circulated as a separate agenda point. 18. Due to persistent differences, the Council decided to defer the approval of the minutes of the meeting in respect to agenda item 5 of the 1st meeting of the Council. It was suggested and agreed that a committee of officers would examine the issue further and the matter could then be taken up in the next Council meeting. 19. The sub-agenda (b) of the agenda item 1, i.e. Draft Rules of Procedures and Conduct of Business in the GST Council with the revisions suggested in the last meeting of the Council was taken up and the Council approved the revised version unanimo
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view that as the compensation was for 5 years, the average growth rate of 5 years or the best 3 out of 5 years should be taken to ascertain the growth rate'. c. The last line of paragraph 22 to be replaced by 'The Hon'ble Minister from Odisha suggested that the best 3 out of 5 years be taken to ascertain growth rate and compensation payment be made monthly and adjusted at the end of the year on the basis of CAG-audited figures and also that the base year could be 2015-16'. (ii) In relation to Agenda Item no. 5 of the first meeting, namely Provision for cross-empowerment to ensure single interface under GST , paragraph 39 to 46 where the discussions have been recorded was approved. In paragraph 47, the last sentence of the main body of the paragraph shall be replace by the following sentence: Thereafter, the following modalities for single interface were discussed but discussions remained inconclusive. (iii) Adoption of modified Draft Rules of Procedures and
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er of Arunachal Pradesh expressed some concern in regard to the draft rules on registration. He mentioned that registration under GST was proposed to be PAN-based which would be difficult to comply with in his State as no Income Tax was payable in his State (as also in Nagaland). He further mentioned that in GST, in B2C (Business to Consumer) transactions, taxes would flow to the consuming states. However, as his State did not have big distributors or high-end retailers, people from his State bought goods from Assam, West Bengal, etc. and a mechanism was required to be devised to ensure that taxes paid for such purchases flowed to Arunachal, Pradesh. The Chairperson observed that this issue could be taken up for clarification in the next meeting of the Council. 23. The Members expressed their approval of the draft Rules relating to Registration, Payment, Return, Refund and Invoice, Debit/Credit Notes. The Secretary to the Council suggested that the Draft Rules may be approved with a
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ermit flow of tax to the destination state. Therefore, a decision would need to be arrived at regarding the treatment of such tax incentive schemes under the GST regime. He observed that one option could be to 'grandfather' such schemes and provide for a budgetary apportionment in the State and the Central budgets for reimbursing the tax paid to those units which enjoyed tax exemption up to a specified period. However, while' grandfathering' any such scheme, it would need to be kept in mind that unlike VAT and the CST which were origin-based taxes, GST was a destination-based tax and an unconditional reimbursement scheme could lead to double outflow for the origin-state – one by way of transfer of tax to the destination State and the other by way of reimbursement to the supplier. Therefore, the States would need to be careful while devising any reimbursement scheme and care could be taken that such reimbursement was limited for supplies made within the State. 26. The
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ght wither away. The Chairperson stated that no compensation was to be paid by the Centre to any State for reimbursements relating to tax incentive schemes and that States would need to make their own budgetary provisions for the same. 28. The Hon'ble Minister from Uttarakhand stated that the Government of India had given an area-based exemption for 10 years and that such exemptions were to continue up to 2020. She observed that the Centre must reimburse such units for the Central taxes as jobs of more than one lakh workers were at stake. The Hon'ble Minister from Jammu and Kashmir stated that his State was in a similar situation as Uttarakhand. The Chairperson observed that once incentive schemes were withdrawn, the taxes paid would be accounted for in the Consolidated Fund of India and 42% of the amount would be devolved to the States. The Centre, therefore, could be expected to only reimburse the units out ofthe remaining 58% of the fund which was not part of the devoluti
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