6th GST Council Meeting Dated:- 11-12-2016 GST Council – Minutes – Circulars – GST – Minutes of the 6th GST Council Meeting held on 11 December 2016 The sixth meeting of the GST Council (hereinafter referred to as 'the Council') was held on 11 December 2016 in Pravasi Bharatiya Kendra, New Delhi 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, the States, the GST Council and the Goods and Services Tax Network (GSTN) who attended the meeting is at Annexure 2 . 2. In his opening remarks, the Hon 'ble Chairperson of the Council welcomed all the members and informed that this meeting would discuss the carryover agenda of the fifth GST Council meeting, namely the draft Model CGST/SGST law. He added that before that, confirmation of the draft Minutes of the 5th GST Council Meeting held on 2-3
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on'ble Deputy Chief Minister of Gujarat observed that in respect of amendments in the definition of 'agriculture' and 'agriculturist', four to five States did not agree to the new definition and in this regard, the following aspects should be considered: a. Instead of keeping activities out of the tax ambit, particular items should be exempted. b. As the threshold for the registration was ₹ 20 lakh, a large number of smaller tax payers would remain out of the tax net and the proposed definition was so wide that even major farmers would be benefited, which was contrary to the principles of taxation. c. Minor forest products like honey, timber and medicinal material were taxable under the V AT Act, and expansion in the scope of definition of 'agriculture' would result in loss of this income, and the tax base would narrow down. d. The possibility of tax evasion and issues related to tax compliance would arise. e. Processing activity might b
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ude 'cooperative societies' along with 'individual' and 'HUF' within the meaning of 'agriculturist', the Hon'ble Chairperson had stated that the expression 'on his own account' would cover anyone who carried out agriculture on his own account, and that this would also cover cooperative societies. He further added that in Punjab, surplus land was diverted to the Scheduled Caste families and cooperative societies were formed giving a small share each to such families, and that they should not come within the purview of GST. The Hon'ble Chairperson observed that as this provision had already been discussed, it could be revisited after completing discussion on all the provisions of the Model GST law. iv . Section 9(1) (Composition Levy) : The Hori'ble Minister from Tamil Nadu observed that there was a typographical error in paragraph 11 (xiv) of the Minutes and the formulation 'as specified by the Council but not less than ₹
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be levied on Composition dealers only. He added that as the provision was not envisaged for other classes of dealers, there would be no level playing field.' The Council agreed to add the version of the Hon 'ble Minister from West Bengal in the Minutes. vi. Paragraph 11 (xv): The Hon'ble Minister from Rajasthan stated that his version recorded in this paragraph should be replaced by the following: 'The Hon'ble Minister from Rajasthan stated that instead of having two rates of composition levy, manufacturers should be kept out of composition and the Centre should give them reimbursement of CGST component.' The Council agreed to amend the version of the Hon'ble Minister from Rajasthan. vii. Paragraph l1(xv): The Hon'ble Deputy Chief Minister of Gujarat stated that the following should be additionally recorded as his version in this paragraph: 'The benefit of lump sum tax should be limited to the traders who were involved in the re-sale and s
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rovision, a distinction could be made between goods and services because it was easier to check supply of goods than supply of services. The Commissioner, Commercial Taxes (hereinafter referred to as 'CCT') Karnataka explained that in services, there was a presumption of a possibility of fake billing to avail input tax credit if payment was not made by the buyer to the supplier, but in goods, it was easier to verify from records whether or not it had been received by the buyers. He added that if this provision was extended to goods, this could create problem for those suppliers who supplied to the government departments or supplies made by small enterprises who might not get payment within three months. He further added that at times quality testing etc. on goods could take longer than three months, and payment could be delayed on that account too. The Hon'ble Minister from West Bengal did not agree with this submission and observed that there could be fake bills for goods
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he Minutes which related to definition of the term 'input service distributor'. The Council agreed to this suggestion. x. Section 46(1) (Tax deduction at source) : The Hon'ble Minister from West Bengal observed that during discussion on Section 46(1), he had suggested to define the term 'Governmental agencies' in paragraph 11(xxvii) and the Council had agreed to it but it was not recorded in the Minutes. He requested to add this in paragraph 11 (xxvii) of the Minutes. The Council agreed to this suggestion. xi. Paragraph 13 of the Minutes: The Hon'ble Minister from West Bengal stated that this paragraph should also record that if the Union Law Ministry had any reservations or comments on certain provisions of the Model GST law as approved by the Council, then it must be brought to the notice of the Council and discussed accordingly before it was placed before the Parliament. The Hon'ble Chairperson observed that during legal vetting, normally only ch
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asthan observed that his version was not recorded in paragraph 18 of the Minutes, and requested to add the following as his version: 'The Hon'ble Minister from Rajasthan stated that cross-empowerment was required in all three Acts as otherwise the aim of single interface would not be achieved.' The Council agreed to add the version of the Hon'ble Minister from Rajasthan. 4. In view of the above discussions, for Agenda item 1, the Council decided to adopt the Minutes of the 5th meeting of the Council with the following changesi. i. To replace the version of the Hon'ble Minister of Jammu Kashmir recorded in paragraph 11 (i) of the Minutes with the following – 'The Hon 'ble Minister from Jammu Kashmir suggested that Section 1 (2) may be amended so as to exclude Jammu Kashmir by inserting the words (except the State of Jammu and Kashmir) . Jammu Kashmir would then take the process of extending the law further as required by the Constitution of Ind
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to the traders who were involved in the re-sale and should not be extended to manufacturers. He suggested to consider one of the following two options: (i) Manufacturers should not be entitled to the benefit of lump sum tax; (ii) If it has to be given at all, it should be at the rate of 5% (2.5% CGST and 2.5% SGST) and that if the Government of India decided to extend relief, it should be given from its budgetary provision.' v. Section 16(2) (Eligibility and conditions for taking input tax credit) : To incorporate the decision in the Minutes that in Section 16(2), the time period for making payment shall be increased from three months to six months from the date of issuance of invoice and that this provision shall apply to both goods and services. vi. To omit reference to definition of the term 'input service distributor' in paragraph 11 (xxiii) of the Minutes. vii. To add in paragraph 11 (xxvii) of the draft Minutes that the Hon'ble Minister from West Benga
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tates.' xi. To add the following version of the Hon'ble Minister from Rajasthan in paragraph 18 of the Minutes – 'The Hon'ble Minister from Rajasthan stated that cross-empowerment was required in all three Acts as otherwise the aim of single interface would not be achieved.' Agenda Item 2: Approval of the Draft GST Law, the Draft IGST Law and the Draft GST Compensation Law: 5. The Hon'ble Chairperson observed that in the last meeting, the Council had discussed up to Section 46 of the draft Model GST (hereinafter referred to as the 'GST Law') law and he invited comments of the Members from Section 47 onwards. The Hon'ble Minister from West Bengal pointed out that there was certain contradiction between Section 4 and Section 5 of the GST Law in respect of the jurisdiction of the SGST officer and this needed to be addressed. The Hon'ble Chairperson stated that this could be taken up after the first reading of the whole GST Law. 6. A
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50,0001-. The Hon'ble Minister from Kerala suggested that self-certification of refund in regard to lack of unjust enrichment could be allowed up to a limit of ₹ 1 lakh. The Commissioner (GST), CBEC informed that the limit of ₹ 5 lakh was kept in view of the cost involved in obtaining certification for unjust enrichment. The Secretary to the Council stated that such a limit would help a large portion of refund to be directly credited to the applicant's account as was the case in Income Tax. The Hon'ble Chairperson stated that in GST, as there was a possibility to pass the tax burden to the consumer, there was a need to exercise caution and suggested to reduce the amount for self-certification to Rs two lakh or such amount as the Council may decide. He also suggested that in all Sections where amounts were mentioned, the same formulation should be used in order to avoid seeking approval of the Parliament for every change in the amount in future which could be a t
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(1) (Refund of tax): The CCT, Telangana observed that the twoyear period allowed for claiming refund was too long, and should be reduced to one year. Shri P.K. Mohanty, Consultant, CBEC explained that it was a trade friendly provision and it was in tune with the larger period allowed for demanding short payment of tax from the taxpayer. The Hon'ble Minister from Karnataka stated that in certain cases, the business practice could be such that not all documents might be put in place within one year and such businesses would be at a disadvantage if the period permitted for claiming refund was shortened. The Hon'ble Minister from Uttar Pradesh observed that while taxpayer would normally be keen to apply for refund at the earliest, at times due to some humanitarian reasons, a larger time period for claiming refund might be helpful. The CCT Gujarat pointed out that as the taxpayer would file the annual return by end of December following the end of the financial year, a period of tw
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ning the types of transporter. The Secretary to the Council suggested that normally, the expression 'transporter' would cover all modes of transport and it would not require to be specified in the law, and if required, it could be kept in the GST Rules. After discussion, the Council agreed not to define the term 'transporter' in the GST Law. vi. Section 54 (Period of retention of accounts): The Hon'ble Minister from Uttar Pradesh suggested that the period of retention of records be increased from five years to six years in order to harmonise it with the revisional power of the Chief Commissioner or Commissioner in Section 99(3). Shri Vivek Kumar, Additional Commissioner from Uttar Pradesh further explained that in case a proceeding of revision was started after five years and one month, no account might be available if the period of retention of record was kept as five years. The Hon'ble Minister from Uttar Pradesh suggested that alternately, the revisional
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es. viii. Section 56(1) (Collection of tax at source) : The Hon'ble Minister from West Bengal pointed out that the definition of 'electronic commerce operator' did. not exclude those entities who sold their goods through their own electronic portal. The Secretary to the Council explained that such entities would be required to pay the full tax instead of 1 % Tax Collection at Source (TCS). The Commissioner (OST Policy Wing), CBEC clarified that provisions of Section 56(1) shall not apply to entities selling their goods through their own electronic portal. The CCT Karnataka pointed out that Section 56(1) used the expression 'taxable supplies made through it' and not 'taxable supplies made by it' which implied that this provision was not applicable for entities supplying their goods through their own electronic portal. The Secretary to the Council observed that in order to avoid, confusion, it would be prudent to clarify that only aggregators would be trea
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ired regarding the circumstances in which provisional assessment would be required. The Commissioner (OST Policy Wing), CBEC explained that such a provision could be used where test report for a product was awaited as for example the value of busbar supplied to a State Electricity Board depended upon the copper content in the busbar. The supplier could seek provisional assessment till such time that the chemical test report was obtained. The CCT Telangana observed that there was an overlap in the concept of advance ruling and provisional assessment. The Consultant, CBEC clarified that advance ruling covered seven subjects whereas provisional assessment was limited to two subjects, namely value of goods and the applicable rate of tax. The Hon'ble Minister from Uttar Pradesh observed that the Commissioner should not have unlimited power to extend the period of provisional assessment and that he could have the power to extend it by another year. Shri Ram Tirath, Member (OST), CBEC cla
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onal assessment should be subject to a limit of four years. The Council agreed to this suggestion. xi. Section 59(1) (Scrutiny of returns): The Hon'ble Minister from West Bengal observed that as scrutiny of returns was normally to be done electronically; it was contradictory to provide for scrutiny of returns by officers. He stated that officers would need to do scrutiny only in certain cases. The Hon'ble Ministers from Assam and Tamil Nadu supported the existing provision and stated that officers needed to do scrutiny. The Hon'ble Chief Minister of Puducherry also supported the provision and observed that while the officer would carry out scrutiny, he would also be backed by the electronic system. The Secretary to the Council pointed out that the expression used in Section 59(1) was 'may', which implied that Officer would not always carry out scrutiny. CCT Karnataka further clarified that while the IT system would throw up the suspicious cases requiring scrut
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luded from carrying out scrutiny. He added that where one administration took an enforcement action, the other administration would be informed. CCT Tamil Nadu observed that while audit would be limited to 5% of the taxpayers, the remaining taxpayers would be subject to scrutiny and both Central and State administrations could potentially give notice and then it would not be clear to whom the taxpayer had to send a reply. The Principal Secretary, Finance, Odisha stated that on account of such considerations, it was important to have a system where the taxpayer must know who was his officer. The Hon'ble Deputy Chief Minister of Gujarat observed that if the arrangement was that the one who gives notice first would handle all subsequent proceedings, then there could be a competition to issue notices which was not desirable. The Hon'ble Minister from Tamil Nadu emphasized that only Option II was workable for small taxpayers whereas the bigger taxpayers could face both the administr
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tion of an assessing officer could be affected. He observed that this issue had cropped up in the context of various regulators as to whether CAG was entitled to audit quasi-judicial orders of the regulators. The Hon'ble Deputy Chief Minister of Delhi and Gujarat and the Hon'ble Minister from Uttar Pradesh also suggested to delete this provision. The Principal Secretary, Finance, Odisha observed that a tax audit was different from a CAG audit. The Hon'ble Minister from Bihar observed that CAG had power to audit only revenue of the Governments and not of the tax paid by the taxpayer. The Hon'ble Chairperson observed that the power of audit should only be in the relevant CAG Act, but as the office of CAG had also written to the GST Council on this subject, it would be separately discussed with the CAG. The Secretary to the Council stated that the CAG would be informed that the Council was not in favour of keeping this provision. The Council agreed to this suggestion. x
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as deterrent. The Hon'ble Minister from Tamil Nadu suggested to retain the existing provision and cautioned that if there was too much distinction between penalty provisions, this could lead to undue discretionary power to the assessing officer. The Hon'ble Minister from Uttar Pradesh also supported the existing provision. The Council decided not to make any changes to the provision. xv. Section 67 (1) (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts): The CCT, Telangana suggested to add the clause 'or tax arrived to the best of his judgement' in section 67 (1) to permit extrapolation of short levy where the tax payer was not furnishing the details. Shri Manish Kumar Sinha, Commissioner, GST Council explained that the settled legal position was that the tax department could raise demand only to the extent that it had evidence and
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such a historical fiscal reform. The Hon'ble Chairperson observed that the GST Law had the broad consensus of the officers but now some suggestions had come up from the States. He suggested to continue with discussion on the suggestions but to hasten the process. xvi. Section 71 (Initiation of recovery proceedings): The Hon'ble Minister from West Bengal suggested that no discretion be given to the officer for recovery of revenue before a period of 90 days from the passing of an order. The CCT, Karnataka explained that in normal circumstances, no amount could be recovered before the expiry of the appeal period of 90 days, but in case of enforcement action, an officer could demand instantaneous payment as otherwise the evader could vanish as for example a truck caught with non-tax paid goods. The Hon'ble Chairperson also observed that there could be other circumstances where an officer could demand payment in a shorter period as for example, admitted tax liability, but
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). The Council decided not to make any changes to this provision. xix. Section 80 (Inspection of goods in movement): In respect of provision of inspection of goods in movement, there was a discussion regarding the desirability of keeping check posts at the borders. The Hon'ble Minister from Kerala observed that check post for other purposes like State Excise, Transport Department, etc. would continue and that for the tax administration, there should be an automated check post for capturing data of Inter-State movement of goods. He added that such a facilitation centre could be at three or four main entry points of the State and that such a mechanism would help curb tax evasion in the Origin State. The CCT Telangana observed that presently, check posts performed four functions, namely recording movement of goods, verifying genuineness of transactions, tracking transit vehicles and collecting tax and penalty. He observed that functions like collection of tax and penalty might no
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re was a provision in GST to carry electronic way bill and RFID devices which could log on to GSTN and read and verify data electronically. In this view, instead of a check post, there could only be a 'reader' to record details of the movement of goods. The CCT Gujarat stated that multiple mobile checking of the same vehicles in different States could also cause harassment and to mitigate this, it could be provided that once a vehicle had exited the State of its Origin, no check would be done en route. The Hon'ble Minister from West Bengal supported the idea of no physical check post at the border and random check of way bills uploaded electronically at the State border. He further observed that check posts would continue for other agencies such as for checking over loading. The Hon'ble Minister from Tamil Nadu observed that there should be no checks at the borders and even a trade facilitation unit need not be kept at the border as this would lead to a vested interest
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d by the Hon'ble Minister from Kerala was addressed by the provision in the Model GST Law to carry devices like RFID, which would enable uploading of data on the official electronic system when a conveyance crossed a highway. He added that if a physical data collection centre was created, this would amount to a check post. He further added that suspicious vehicles could be stopped anywhere for checking and this need not be at a State border. After discussion, the Council approved this Section in its present form. xx. Section 81 (Power to arrest): The Additional Chief Secretary, Maharashtra observed that the power of arrest and of confiscation was not in tune with the concept of ease of doing business. The Hon'ble Minister from West Bengal stated that under VAT law, there was no power of arrest and that First Information Report (FIR) could be lodged only with the police and it might not be prudent to give such power to tax authority. He further added that the tax administra
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could be carried out only by an officer not below the rank of Assistant Commissioner. The Commissioner, GST Council clarified that as per the draft GST Law, every arrest had to be approved by the Commissioner but he could authorise any officer, including an Inspector, to carry out such arrest. He also pointed out that the power to grant bail was only restricted to the Court. The Hon'ble Minister from Kerala and Uttar Pradesh suggested to raise the duty evasion threshold of arrest from ₹ 2 crore to ₹ 5 crore. The Hon'ble Chairperson pointed out that where evasion of tax was ₹ 2 crore, the value of offending goods or services would be approximately ₹ 20 crore. The Hon'ble Minister from Assam suggested to keep the evasion threshold at ₹ 50 lakh, as in his State, quantum of evasion would not be very high. The Hon'ble Chairperson suggested that in order to make the arrest provision less prone to abuse, arrest could be made for duty evasion of &
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the taxpayer had collected the tax but not deposited it with the Government. The Hon'ble Minister from Assam strongly opposed this proposed dilution of power of arrest and stated that there was no reason to side with the corrupt. After discussion, the Council noted that while most State VAT laws did not have the power to arrest and that no draconian power should be provided but arrest power could be allowed in limited cases as discussed above and within the guidelines as provided by the Hon'ble Chairperson. The Hon'ble Chairperson observed that Section 81 could be redrafted on the above basis and brought before the Council in the next meeting. The Hon'ble Minister from Tamil Nadu raised a point that the practice of certain community of charging Y2% or 1 % over and above the invoice value for community's welfare should not come within the ambit of the provision of tax collected but not deposited with the Government, as it was not a tax but a contribution to the commu
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ion 85. The other issue raised was that in Section 85, there was a reference to a specified amount of penalty and that it would be prudent to add 'or such amount as may be prescribed by the Council'. The Council agreed to this suggestion. xxiii. Section 89(1)(a) (Detention and release of goods and conveyances in transit): The CCT Andhra Pradesh observed that this Section had no provision for issuing a detention order. The Hon'ble Chairperson observed that a provision could be added that while detaining a vehicle, a detention order shall be served on the owner or the driver of the vehicle. The Council agreed to this suggestion. xxiv. Section 89(1)(c) (Detention and release of goods and conveyances in transit): The CCT, Andhra Pradesh suggested that language of Section 89(1)(c) should be slightly modified to also provide for issuance of notice before imposition of penalty. The Council agreed to this suggestion. The CCT Andhra Pradesh further suggested that this prov
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ister from West Bengal suggested a pre-deposit of 20% or 15%. The Hon'ble Minister from Kerala supported a pre-deposit of 20%. After discussion, the Council agreed to increase the rate of pre-deposit from 10% to 20% for all cases without providing for any discretion. xxvi. The Hon'ble Chairperson observed that Section 100 (Constitution of the National Appellate Tribunal) onwards of the Model GST law shall be taken up in the next meeting. 7. For agenda item 2, the Council approved the provisions of Chapter X to Chapter XX (Sections 47 to 97) and Sections 98 and 99 of Chapter XXI subject to the decisions/observations as recorded below. It was also agreed that during legal vetting, if the Union Law Ministry had reservations or comments on certain provisions of the Model GST Law or suggested changes in the language of the law, these would be brought before the Council for discussion and approval before placing the draft law in the Parliament. i .. Section 2(7), 2(8) and 2(
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Sections where amounts are prescribed, an amendment be done by incorporating an additional expression 'or such amount as the Council may decide'. v. Section 48(3) (Refund of tax): To add another proviso to this Section granting power to the Council not to allow refund in certain cases even when there was an inverted duty structure. vi. Section 53(6) (Accounts and other records): To add the expression 'transporter' so that they are also made liable to maintain record of goods being transported by them. vii. Section 54 (Period of retention of accounts): To amend the Section by increasing the period of retention of records from five years to six years. viii. Section 56(1) (Collection of tax at source): To suitably clarify that only aggregators would be treated as electronic commerce operators and it would exclude those entities who sold their goods through their own electronic portal. ix . Section 56(4), 56(5)J 56(6), 56(7), 56(8) and 56(10) (Collec
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ower to arrest): To be redrafted providing that arrest could be made for duty evasion of ₹ 2 crore or more and that arrest made for duty evasion ranging from ₹ 2 crore to ₹ 5 crore shall be bailable and beyond ₹ 5 crore shall be non-bailable. The language of the provision to also convey that wherever there was a grey area relating to assessment, no arrest shall be made. xvi. Section 85 (1) (xiv) (Offences and penalties): The committee of officers dealing with GST law to harmonize the provisions of Section 85 (1) (xiv) and Section 89(l)(a) of the Model GST law. xvii. Section 85 (Offences and penalties): In addition to the reference of the specified amount of penalty, to further add 'or such amount as may be prescribed by the Council' xviii. Section 89(1)(a) (Detention and release of goods and conveyances in transit): To amend the provision by adding that while detaining a vehicle, a detention order shall be served on the owner or the drive
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