14th GST Council Meeting Dated:- 19-5-2017 GST Council – Minutes – Circulars – GST – Minutes of the 14th GST Council Meeting held on 18 and 19 May 2017 The fourteenth meeting of the GST Council (hereinafter referred to as 'the Council') was held on 18 and 19 May 2017 in Sher-i-Kashmir International Conference Centre (SKICC), Srinagar under the Chairpersonship of the Hon'ble Union Finance Minister, Shri Arun Jaitley. The list of the Hon'ble Members of the 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. The following agenda items were listed for discussion in the 14 th Meeting of the Council- 1. Confirmation of the Minutes of the 13th GST Council Meeting held on 31 March 2017 2. Rate of interest for delayed payment of tax by the taxpayer and delayed refund by the Government to the
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10. Any other agenda item with the permission of the Chairperson 11. Date of the next meeting of the GST Council 3.1. The Hon'ble Chairperson welcomed all the Members to the Council Meeting. He conveyed the sad news that Shri Anil Madhav Dave, the Union Minister for Environment had passed away on 18 May, 2017. The Hon'ble Members of the Council observed one-minute silence in memory of the departed soul. 3.2. At the start of the proceedings, the Hon'ble Chairperson placed on record his profuse thanks to Dr. Haseeb A. Drabu, the Hon'ble Finance Minister of Jammu Kashmir and all his colleagues for the outstanding arrangements for the Meeting. He observed that this had set at rest any lurking doubts regarding the environment in the State and the feasibility of holding the Council meeting in Srinagar. He added that all participants were surprised and happy to find normalcy in Sri nagar. The Hon'ble Minister from Jammu Kashmir thanked the Council for
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entral Government had been exempting the entire Central Excise duty despite the fact that 32% of the total Central Excise collection was being devolved to the States. He added that since devolution of Central taxes in the divisible pool to the States had been enhanced to 42%, the liability of States to reimburse the Central Goods and Services Tax (CGST) collected in the GST regime should at best be limited to 10%. The Secretary to the Council (hereinafter referred to as the Secretary) recalled that in the 2 nd meeting of the Council, it was decided that if the Central Government continued with the present areabased exemption scheme, it shall reimburse only 58% of the total CGST collected from the eligible industries due to the fact that only 58% of the CGST revenue shall remain in the onsolidated Fund of India and that the remaining 42% shall be devolved to the States. He stated that if any Value Added Tax (VAT) exemption was given to such units, the State concerned could reimburse th
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the exemption had been given under the old taxation regime and the Government was not obliged to continue with the same in the GST regime. He added that presently, the discussion was limited to the Minutes of the last Council meeting and enquired whether the version of the Hon'ble Minister from Uttarakhand recorded therein required any modification. The Hon'ble Minister from Uttarakhand did not propose any modification to his version recorded in the Minutes. 5. In view of the above discussion, for Agenda item 1 , the Council decided to adopt the Minutes of the 13th Meeting of the Council without any changes. Agenda Item 2: Rate of interest for delayed payment of tax by the taxpayer and delayed refund by the Government to the taxpayer: 6. Introducing this Agenda item, the Secretary stated that Section 50(1) and Section 50(3) of the CGST Act and the SGST Acts provided for an upper ceiling of rate of interest of 18% and 24% respectively to be paid by the taxpa
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the States and the Centre held in Srinagar on 17 May, 2017 and the officers suggested that the rate of interest should be simple interest per annum and should be the same as the prescribed upper ceiling of interest rates under Sections 50(1) (18%), 50(3) (24%), 54(12) (6%), and 56 (6% for the main Section and 9% for the proviso to Section 56) of the CGST Act and the SGST Acts and the same would be made applicable under the IGST Act under corresponding circumstances. He suggested that the Council could agree to this suggestion and approve rates of simple interest per annum at the upper prescribed ceilings under the various Sections. The Council agreed to this suggestion. 7. For agenda item 2 , the Council approved the following rates of simple interest per annum for the delayed payment of tax by the taxpayer and the delayed refund by the Government to the taxpayer: – SI. No. Section Rate of Simple Interest per annum
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r e sponding circumstance s in the IGST Act (Section 20 ) 9% Agenda Item 3: Finalization of the rate of tax to be collected at source under Section 52 of the CGST Act, 2017 and Section 20 of the IGST Act, 2017: 8.1. Introducing tills agenda item, the Secretary stated that in terms of the provisions of Section 52 of the CGST Act and SGST Acts and Section 20 of the IGST Act, an electronic commerce operator (e-operator) was obliged to collect the tax at source (TCS) at a rate not exceeding 1 % and 2% respectively on the aggregate value of taxable supplies made through him by other suppliers and to pay the same to the Government by the 10th of the following month of the collection. He stated that this provision was essentially meant to create an audit trail for a supplier who made supplies through the electronic platform of others. He stated that this agenda item was discussed during the meeting of officers of the States and the Cen
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operations under Section 146 of the CGST Act, 2017: 9.1 . Introducing this agend a item , the Secretary stated that in the GST regime, the GST Act and Rules would be common in all States and the Centre and that it was envisaged that certain front end processes of the taxpayers, namel y, registration , furnishing of return and payment of tax would be done on a Common Goods a nd Services Tax Electronic Portal for the Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act , the State Goods and Services Tax (SGST) Act and the Union Territor y Goods and Services Tax (UTGST) Act . He stated that Section 146 of the CGST and the SGST A cts provided that Th e Government may, on the recommendations of the Council, notify the Common Good s and Services Tax Electronic Portal for fa c ilit a ting r eg i s tration , pa y m e nt of tax , furni
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he Common Goods and Services Tax Electronic Portal specifi e d under Section 146 o f the CGST and the SGST Acts and Section 21 of the UTGST Act , w hich is being managed by the Goods and Services Tax Network on behalf of the Government . Agenda item No.5: Constitution of Project Management Team, Standing Committees and Sectoral Working Groups for smooth roll-out of GST: 10.1. Introducing this agenda item , the Secretary stated that till now two Committees of officers of the Centre and the States was involved in the GST related work. The first was the Law Committee which prepared the draft GST Laws and Rules and the second wa s the Fitment Committee , which was involved in recommending the GST rates on goods and services . He stated that these two Committees needed to be continued and in addition , more Committees consisting o f officers from the Centre and the States would need to be formed to enable a smooth rollout of GST. A 3-tier structure wa
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all be the Nodal officers to give inputs to the Project Management Team on issues relating to their area of responsibility . The decisions could be taken by the individual Standing Committees to the extent possible , and where necessary, at the level of the PMT. PMT might place issues of importance before the Revenue Secretary or GST Council for decision, where necessary. 10.2. He stated that the following eight Standing Committees were proposed to be constituted with defined areas of responsibilit y : – (i) Law and Rules Committee (ii) IT Committee (iii) Single Interface Committee (iv) Fitment Committee (v) Publicity and Outreach Committee (vi) Capacity Building and Facilitation Committee (vii) Fund Settlement Committee (viii) Guidance Notes Committee 10.3. He stated that broadly the area of responsibilities of the proposed Committees would be as follows: (a) Law Committee (i) Finalizing all the Rules (ii) Draf
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(v) Examining all representations of trade on rate and other issues (e) Publicity and Outreach Committee (i) Publicity in print, electronic and social media (ii) Outreaching taxpayers (iii) Circulating publicity material for uniformity of messaging (iv) Publicity in vernacular media particularly on issues such as cascading of taxes, benefits of GST , anti-profiteering etc . (f) Capacity Building and Facilitation Committee (i) Capacity building of officers (ii) Capacity building of trade (iii) Preparing material for field offices to act as Facilitation Centres (g) Fund Settlement Committee: (i) All issues relating to revenue subsumed and compensation post GST rollout (ii) CST Compensation, if an y (iii) IGST fund settlement (iv) Any legal issue relating to any of the above (h) Guidance Notes Committee: (i) To prepare guidance notes on important Legal provisions (ii) To prepare guida
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(x) Services received and provided by the Government (xi) Food Processing Sector (xii) E-commerce (xiii) Big Infrastructure (Airport, Sea port- including MRO) (xiv) Travel and Tourism (xv) Handicrafts (Exports) (xvi) Media and Entertainment (xvii) Drugs and Pharmaceuticals 10 . 5. The Secretary further informed that in the agenda note circulated by the Council for this agenda item, 17 sectors were identified for sectoral analysis and that during the meeting of the officers of the Centre and the States held on 17 May, 2017 in Srinagar , Secretary Finance (Revenue), Government of Rajasthan had suggested inclusion of an additional sector, namely Mining. He suggested that the Council might approve the same . The Council approved the proposal. He further stated that during the meeting of the officers , Joint Commissioner , Commercia l Taxes , Government of Sikkim had suggested to add another sector , namely Hydro proje
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onstitution of the various Committees, the Secretary informed that on the suggestions received, the Council had tentatively constituted the Committees . He stated that while the Convenors of the Committees had been identified, the States could give names for inclusion as members in various Committees. He further observed that these Committees would be vested more with responsibility rather than authority and that decisions would lie with the Council. He stated that the PMT could take quick decisions on the basis of recommendations of the relevant Committee and that these Committees would need to meet very often . He stated that each Committee would have one Convenor from the State and another from the Centre. On a query from the Hon'ble Deputy Chief Minister of Delhi regarding the l egal status of these Committees , the Secretary stated that this entire scheme was in the nature of an administrative arrangement and was not part of the law. He proposed that the Council mi
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he following : (i) A 3-tier structure for Project Management ofGST consisting of the office of the Revenue Secretary , a Project Management Team called GST Implementation Committee (4 officers from States, 4 from the Centre and 1 from GS T Council) and eight Standing Committees. In addition , there shall be 18 Sector Groups (including one on Mining Sector). (ii) To authorize the Chairperson , GST Council , to con s titute the GST Implementation Committee and other Standing Committee s and the Sectoral Working Groups after incorporating further nominations received from the States and carr y out changes in scope and nomenclature of Committees / Groups , wherever required . (iii) To include Power Sector and H ousing / Construction in the 'Big Infra s tructure' Sectoral Group. (iv) Decisions of the GST I mplem e ntation Committ e e shall be circulated to the Council. Agenda Item 6: Nomination of Additional Se
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retar y, EC , Clause 48 should read as Ex-officio Additional Secretary , GST Council . He stated that in view of this , it was proposed that Additional Secretary , GST Council ma y be nominated as E x -O f ficio Director on th e Board of GSTN to replace Shri Satish Chandra. The Council approved the proposal. 11.2. For agenda item 6 , the Council approv e d the nomination of Additional Secretary, GST Council as ex-officio Director on the Board of GSTN in place of the erstwhile Member Secretar y, Empowered Committee of State Finance Ministers (EC). Agenda Item 7: Approval of mechanism to split the Merchant Discount Rate (MDR) charges between the Centre and the States: 12.1. Introducing this agenda item , the Secretary stated that to incentivize the use of digital economy, the Government o f India had decided to bear the applicable Merchant Discount Rate (MDR) charges of pa y ment of Government dues (taxes , non-taxes an
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ated that similarly, SGST collected by States would also be used for payment of IGST due to cross-utilization. He expressed that a cleaner way of sharing ofMDR charges between the Government of India and the States might be to split these charges, in proportion of the final GST revenues accruing to the States and the Centre after cross-utilization and apportionment processes are finalized . 12.2. The Secretar y informed that this agenda item was discussed during the meeting of the officers in Sri nagar on 17 May , 2017 and some States like Haryana , Assam, Rajasthan and Odisha had not favoured putting additional financial burden on the State Governments. He further stated that some States desired to know the likely financial burden on the State Governments if the MDR charges for payment of GST by debit card up to Rs.l lakh was to be borne by the State Governments and the Central Government . He also informed that Uttar Pradesh had suggested that the Central Government
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ncial implication of this decision , a fresh agenda item could be introduced on a later date. The Council agreed to this suggestion. 12.3 . For agenda item 7, the Council approved to defer the agenda item for consideration and to consider it on a later date after ascertaining the likely financial implications of this proposal . Agenda item 8: Approval of amendments to the following Draft GST Rules and related Forms: (i) Registration; (ii) Return; (iii) Payment; (iv) Refund; (v) Invoice, Debit / Credit Note; (vi) Input Tax Credit; (vii) Valuation; (viii) Transitional Provisions; and (ix) Composition: 13.1. Introducing this agenda item, the Secretary recalled that the Council had approved nine GST Rules during its 13th Meeting held on 31 March, 2017 and that these were put in the public domain and sent to the States. He informed that before the 14th Council meeting, the Law Committee could finalise seven GST Rules and the connected Forms , which w
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to be replaced by thirty days in Rule 9(3) of Registration rules to bring it in consonance with FORM REG RULE 12 . (ii) The word Registration. 16 may be replaced with Registration17 in Rule 1 of Composition Rules. (iii) Under Rule 7(1) (i) of the ITC Rules, { ' F' is the total turnover of the registered person during the tax period } may be replaced with {'F ' is the total turnover in the State of the registered person during the tax period } to bring in more clarity. 13 . 2. Starting the discussion on this agenda item, the Hon ' ble Minister from Uttarakhand stated that Rule 4 of the Registration Rules provided for separate registration for multiple business verticals within a State and enquired as to what treatment would be given to a trader who sold various items like cloth, sanitary ware , hosiery , etc. when his combined turnover exceeded ₹ 20 lakh. The Secretary stated that the trader would be r
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that HSN was not being captured at the invoice level and that only a summary of HSN Code was being taken in the return . He further suggested that this could be discussed in greater detail when GST Rules on Return were taken up for discussion. The Hon'ble Minister from Kerala requested to circulate a note on the scheme of matching of returns under GST. The Hon'ble Minister from Kerala raised another issue as to what mechanism was there to ensure that a vehicle transporting taxable goods interstate was carrying invoice. Commissioner (GST Policy Wing), CBEC , stated that a separate e-way bill Rules would address this issue and that when goods were handed over to the transporter, an e – way bill would be generated. He informed that several comments had been received on the draft e-way bill Rules and after examining them , the Rules on e-way bill would be brought before the Council. The CEO , GSTN , added that where a transport vehicle carried multiple inv?ice f
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have different GSTIN numbers, within the same company. The Hon'ble Minister from Uttarakhand raised another issue that a manufacturer of tractor would use different mechanical and electrical parts falling under different HSN (Harmonised System of Nomenclature) Code and how the manufacturer of tractor would declare the same. Dr. P.D. Vaghela, Commissioner of Commercial Tax (CCT) , Gujarat , clarified that inputs would be accounted separately and ITC would be available on such inputs and the final product (tractor) would be declared separately under a different HSN Code. The Hon ' ble Minister from Uttarakhand also raised the issue of difficulties that job workers for jewellery would face in declaring the HSN Code. The Secretary stated that this issue could be discussed when fitment rate for gold was discussed which was not in the agenda item for this Meeting. 13.4. Shri Somesh Kumar, Principal Secretary (Revenue), Telangana, raised a few questions relating to the R
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tated that this would be an enforcement issue and would be dealt accordingly. On the second question, he stated that if the Registration Certificate was not displayed, the Section in GST Law relating to general penalty would apply, On the third question, he stated that the requirement Of one-year validity period Of a registration was kept only for those taxable persons who had taken registration voluntarily though they were within the exemption threshold. On the fourth question, he clarified that physical verification of a registered premises after the grant of registration would be done only in exceptional cases which would be decided by the computer on the basis of risk parameters . 13.5. The Hon'ble Minister from Meghalaya observed that in Rule l(e) of the Tax Invoice Rules, the requirement of recording the name and address of the recipient was only for those transactions where the value of taxable supply was ₹ 50,000 or more and suggested that this value limit
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tail stores. 13.6. The Hon'ble Deputy Chief Minister ofManipur stated that the cost of goods in the North-Eastern States was high due to high transportation cost and lack of developed roadways and this prompted the persons from the North-Eastern States to buy goods from Silchar or Guwahati. He stated that an exception should be made in the Rules regarding the monetary limit for recording the address of the purchasers in B2C transactions. The Secretary stated that the issue did not relate to the North-Eastern States but to its neighbouring States where such an exception in the relevant Tax Invoice Rules would need to be made. The Hon'ble Minister from Meghalaya stated that the threshold for recording address of the purchaser on the invoice should be reduced from ₹ 50,000 as otherwise smaller States like Meghalaya would lose revenue. The Hon'ble Minister from Bihar stated that different States had different issues and all could not be addressed in the GST Law. He o
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d growth rate was a very liberal arrangement and therefore, the existing provision could be allowed to operate and its impact could be evaluated in due course. 13.7. The Hon ' ble Minister from Meghalaya reiterated that for Special Category States, implementation of this provision in its current form would lead to loss of revenue . The Commissioner (GST Policy Wing) , CBEC, stated that a special provision in respect of this Rule would be required in the neighbouring States like West Bengal. The Hon ' ble Deput y Chief Minister of Gujarat stated that North-Eastern States were good tourist destinations and they would also get revenue for purchases below ₹ 50 , 000 by tourists from outside the State. The Hon'ble Minister from Kerala enquired whether a consumer could insist on writing his address on an invoice of value below ₹ 50,000. The Hon'ble Minister from Meghalaya suggested that this requirement should be made compulsory in the Invoice
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replace the expression {'F' is the total turnover of the registered person during the tax period} with the expression { ' F ' is the total turnover in the State of the registered person during the tax period} ; (iv) To insert a provision in the Invoice Rules that the address of the buyer shall be recorded in an invoice where the buyer insists on it. Agenda Item 9: Approval of the Fitment of goods and services into the various rate slabs: 15.1 . Introducing this agenda item, the Secretary stated that in the 4th Council Meeting (held on 3-4 November, 2016) , the Council had laid down a set of guiding principles in respect of bands of rates of GST and GST Compensation mechanism and that officers of the Fitment Committee consisting of the Central Government and ten State Governments met three times (for a total of six days) and finalised its recommendations on rates on the basis of these guiding principles. He stated that the Committee
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s and jewellery sector, keeping in view that the rate oftax for this sector was to be decided by the Council after the comp l etion of the fitment exercise. He further stated that the Committee also examined the existing exemptions relating to Additional duty of Customs (also called CVD) and Special Additional Duty (SAD) of Customs, so as to cull out the cases , where the Committee recommended continuation of exemptions in the form of IGST exemptions. These cases included Multilateral/Bilateral Commitments [including exemption for goods in transit to the land locked Countries], re-import or re-export cases and passenger facilitation at international Airports . 15.3. He further stated that in the case of services, the Committee largely followed the following principles while recommending the GST rate structure: (a) continuance of exemption for certain services, so as to maintain present tax incidence on services; (b) To suggest broadly the same GST rate for different mode
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er stated that keeping these principles in mind, the Committee had recommended the goods and services that would fall into different rates, namely, Nil, 5%, 12%, 18%,28%, as also the Compensation Cess rates and the IGST exemptions. 15.4. The Secretary stated that the five Annexures indicating the GST rates for goods (including the goods covered under the Addendum to the GST Rate Schedule for Goods, circulated before the Council Meeting) covered about 1211 items at 4-digit HSN classification (total items at 8-digit being about 11,000) and out of these, about 88 items were largely in the exempt List (constituting 7% of the total goods at the 4-digit level), about 173 items were in the 5% List (constituting 14% of the total goods at the 4-digit level), about 200 items were in the 12% List (constituting 17% of the total goods at the 4- digit level), about 521 items were in the 18% List (constituting 43% of the total goods at the 4-digit level) and about 229 items were in the 28% List
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s which included 50 items of tobacco classified as per Central Excise tariff. He stated that Annexure XII contained the proposal to grandfather IGST exemptions and Annexure XIII contained those services which were proposed to be taxed at the same rate as the corresponding goods. He added that Annexure XIV contained services to be taxed under reverse charge. He stated that all these tables and the Addendum to the detailed agenda notes of Agenda Item 9 circulated before the Council Meeting had been discussed during a meeting with the officers of the Centre and the States held on 17 May, 2017 in Srinagar. He added that based on the suggestions agreed upon during the officers' meeting, rates on certain goods/services were proposed to be modified as compared to what was proposed in the original agenda notes and that a 4-page addendum was circulated suggesting these modified rates during the meeting today (enclosed as Annexure 4 to the Minutes). 15.5. Starting the discussion on this
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s regarding revenue implications on these goods to better understand the macro picture. The Secretary stated that it would be very difficult to do an exact projection of revenue. He observed that under Central Excise, manufacturers were exempt for turnover upto ₹ 1.5 crore and as there would be no such exemption under GST, more revenue would accrue on this account. He also pointed out that the turnover limit on which VAT was levied was different in different States. He further stated that there could be additional revenue collection through better compliance by use of lnformation Technology (IT), e-way bill system, etc. He stated that as the present rate structure was loaded against the revenue neutral rate (RNR), one had to be cautious about lowering the rates on State specific goods. He added that the Council would also need to consider how to operationalise the anti-profiteering provisions of the law in order to ensure that Maximum Retail Price (MRP) was reduced for goods whic
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at the presently proposed GST rates should be adopted and could be watched for a year or two and if there was a serious shortfall of revenue, a call could be taken to increase the tax rates. The Hon'ble Chairperson stated that when Constitutional amendment was being undertaken, there was a concern diametrically opposite to the one expressed by the Hon'ble Minister from Kerala and that was to keep the GST rates low and to put a cap of 18% in the Constitution itself He stated that the whole issue of having a band of tax rates arose from this concern and there was an effort to reduce the number of goods falling in the band of 28% rate. He further stated that coverage of goods in the 28% rate band had to take account of the current reality, and some of the goods which were considered luxury earlier, were no longer luxury goods, and therefore, kept at 18%. He further stated that the concern regarding fall in revenue due to lowering of rates were legitimate as every Finance Minister
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n of the law. The Hon'ble Chairperson stated that the officers should suggest ways to operationalise the anti-profiteering provision of the law. The Hon'ble Minister from Haryana stated that the success of GST would depend upon its acceptability by the public and in order to assure them, it was important to highlight reduction in rates on certain goods which would counter the increase in prices of some other goods due to introduction of GST. The Hon'ble Minister from Goa stated that the anti-profiteering provision of law should be operationalised. The Hon'ble Chairperson stated that it would be useful to highlight those goods on which tax was being reduced under GST and the Council and the Governments could do a media campaign to ensure that the tax reduction was passed on to the consumers. 15.8. The Hon'ble Minister from Uttarakhand stated that the goods that were not taxed under VAT would be taxed under GST. The Hon'ble Chief Minister of Puducherry stated
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on the proposed rates of GST on goods, the Secretary stated that discussion would be limited to those goods in each Annexure where an Hon'ble Member wanted the proposed rates to be revisited. He stated that except for such goods, the proposed rates for the rest of the goods in various Annexures could be deemed to be approved by the Council. The Hon'ble Chairperson stated that any suggested modification in rates should be discussed in terms offive criteria namely, (i) revenue impact; (ii) impact on domestic manufacturing; (c) the existing combined rate of tax; (iv) the relevance ofthe product for consumers; and (v) optical perception of GST. The following goods were mentioned Annexure-wise by the Hon'ble Members for discussion: – Annexure I (List of goods at nil CST rate): (i) 'Jari booti ': The Hon'ble Minister from Uttarakhand stated that jari booti was presently kept in Annexure II (5% List) and that it should be put in the nil rate cate
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o justification to tax suji at 5% and suggested that it should also be brought under the nil rate. The Secretary stated that there was 5% VAT on suji in every State, except Uttar Pradesh. The Special Secretary (Finance), Odisha, stated that there was 5% VAT on suji in his State and that it had not created any adverse impact on the consumers. After discussion, it was agreed to bring suji other than put in unit container and bearing a registered brand name under Annexure I attracting Nil rate of GST, while suji, put up in unit container and bearing a registered brand name, to be kept under Annexure II at 5% rate. (iii) ' Dalia ': The Hon'ble Minister from Uttarakhand stated that on the same logic as suji, dalia should also attract nil rate of GST. After discussion, it was agreed that dalia, other than those put up in unit container and bearing a registered brand name, would attract Nil rate of GST and dalia put up in unit container and bearing a registered brand would
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supported this proposal. After discussion, the Council agreed that gur (jaggery) would attract Nil rate of GST instead of the presently proposed rate of 5%. (vii) 'Khandsari': The Hon'ble Minister from Telangana stated that Khandsari should be taxed at Nil rate of duty. After discussion, the Council agreed to tax it at the rate of 5% as proposed in the agenda notes. (viii) Low priced Biscuits: The Hon'ble Minister from Uttarakhand suggested that the low priced biscuits which were mostly used by the poorer sections of the society should be kept in the exempt List. The Secretary stated that value based rate of taxation led to suppression of value and loss of revenue. He suggested that the rate of tax should not be varied on the basis of value of biscuits. After discussion, the Council agreed to discuss this issue separately when they took up discussion on the rate of tax for biscuits. (ix) Silk yarn, cotton yarn in hank : The Hon ble Minister from Assa
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be discussed separately. The Council agreed to this suggestion. (xi) ' Zari ': The Hon'ble Minister from Uttar Pradesh suggested to keep zari in the exempt list. The Hon'ble Deputy Chief Minister of Gujarat stated that zari thread was made in Surat and supplied to Uttar Pradesh. He stated that making of zari thread provided employment to 3 lakh persons and the poor people worked on it at home, and therefore, suggested that zari should be kept in the exempt List. The Secretary stated that embroidery or zari articles was used in high value textile clothing, and therefore, it was reasonable to tax it at the rate of 5%. He stated that the burden of this tax would be borne by the buyers of these textile articles and not the persons who produced them. The CEA stated that GST was a consumption tax and its incidence would be borne by the consumers, and therefore, it was important to see who were the consumers of the product. The Council agreed not to change the recommende
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ble Minister from Goa supported the proposal to exempt handicrafts. The Hon'ble Minister from Manipur supported the proposal to exempt handloom as this was supplied by highly un-organised sector. The CEA stated that exemption from GST to goods which were important in a local area created distortion in the economy and it would be preferable to find a local solution such as Direct Benefit Transfer (DBT). The Secretary suggested that the goods falling in the entire textile chain as well as the handicrafts could be discussed separately. The Council agreed to this suggestion. (xiv) Fish net and fish net fabric: The Hon'ble Minister from Andhra Pradesh stated that these goods were used by fishermen, and therefore, should be kept in the exempt category. The Hon'ble Chief Minister of Puducherry and the Hon'ble Minister from Goa supported this proposal. The Hon'ble Minister from Tamil Nadu stated that India had a long coast line and lakhs of fishermen were dependent o
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and therefore, the rate of GST on fish net and fish net fabric should be kept at least at 12% as proposed. The Council agreed to this proposal. (xv) Bamboo matting, screens, basket works and other articles of bamboo: The Hon'ble Minister from Andhra Pradesh stated that these products should be kept under the exempt List as these were made by tribal people. The Hon'ble Minister from Meghalaya also supported this proposal and stated that bamboo products were used in handicrafts. The Hon'ble Deputy Chief Minister of Manipur also suggested to exempt bamboo matting. The Hon'ble Minister from Tripura suggested that bamboo and bamboo products should be kept under the exempt category. The Secretary stated that the GST rate for these products falling in Chapter 46 was discussed during the meeting of officers of the Centre and the States on 17 May, 2017 in Sri nagar and it was agreed at the officers' level that rather than putting them under exempt category, they could
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the Hon'ble Minister from Tarriil Nadu supported the proposal.The Secretary stated that the existing incidence of Central Excise duty alone on sugar was more than 6% and it was proposed to be kept at the rate of 5%. He stated that putting sugar in the exempted category would lead to huge loss of revenue. After discussion, the Council agreed not to change the recommended tax rate for sugar at 5%. (xviii) Tamarind: The Hon'ble Minister from Telangana suggested that tamarind should be kept under the exempt category. The Secretary clarified that fresh tamarind was already in the exempt category. (xix) Fertilizers: The Hon'ble Minister from Andhra Pradesh suggested that the fertilizers sold by Primary Agricultural Co-operative Societies should be kept under the exempt category. The Hon'ble Minister from Telangana supported this proposal. The Secretary stated that the raw materials used for making fertilizers were chemicals which were proposed to be taxed at the
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clarified that municipal waste, sewage sludge and chemical waste falling under Chapter 38 were already exempt. (xxii) Dry fish, salted and fermented: The Hon'ble Minister from Meghalaya suggested that this product should be kept in the exempt category. The Hon'ble Deputy Chief Minister of Manipur supported this proposal. He stated that dry fish, fermented fish and smoked fish were sold by women in the unorganised sector and it would be difficult to administer tax on these goods and would lead to high cost of collection. The Secretary stated that dry fish was an industrial product which required processing and processing industry would get input tax credit which could be passed through if the product was taxed at the rate of 5%. He further pointed out that dry fish sold by fishermen would not attract GST because of very low turnover (below ₹ 10 lakh in Special Category States and ₹ 20 lakh in other States). He further stated that as fish would be transported t
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ttar Pradesh suggested that these should be kept under the exempt category. The Secretary suggested that the Fitment Committee should first define the term 'puja samagri' and then it might be exempted. The Council agreed to this suggestion. (xxv) Footwear : The Hon'ble Minister from Uttar Pradesh suggested that low value footwear sold at s. 200-300 should be kept under the exempt category. The Hon'ble Deputy Chief Minister of Delhi suggested exemption from tax for footwear of value upto ₹ 500. The Hon'ble Minister from Bihar suggested that shoes and chappals of plastic should be exempt. Ms. Smaraki Mahapatra, CCT, West Bengal, suggested that cheaper footwear should be taxed at the rate of 5%. The Hon'ble Chief Minister of Puducherry stated that taxation on footwear should be categorised on the basis of their sale price. the Hon ble Minister from Kerala observed that chappals other than hawai chappals and straps thereof ere proposed to be kept in the
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ce would not be able to face competition with imported goods. The Council agreed that it might be kept at the proposed rate of 5%. (xxvii) Honey: The Hon'ble Minister from Telangana stated that honey which was proposed at 5% rate was sold by co-operative societies and it should be kept under the exempt category. The Secretary stated that honey sold by well-known brands like Dabur carried out value addition and also incurred advertisement costs. He stated that if honey was exempted, the companies supplying them would be denied input tax credit for taxes paid during value addition and advertisement. He suggested that natural honey other than that put up in unit container and bearing a registered brand name might be kept at Nil rate whereas natural honey put up in unit container and bearing a registered brand name might be taxed at 5%. The Council agreed to this suggestion. (xxviii) Chemical contraceptives: The Hon'ble Deputy Chief Minister of Delhi suggested that ch
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e by CSD Canteen should be exempt. The Secretary suggested that this issue should be discussed separately. The Council agreed to this suggestion. (xxxi) Power driven agricultural implements: The Hon'ble Minister from Haryana stated that these implements should be kept under exempt category, or alternatively under the 5% category, as tax or these implements would increase the input cost of agriculture and this cost was not accounted for in the Minimum Support Price (MSP) announced by the Government for agricultural products from time to time. He added that while discussing the fitment rates, one could not ignore the cascading impact on primary products and that the input tax for farmers should not go up as this would lead to inflation The Chief Minister of Puducherry supported this proposal. The Hon'ble Minister from Karnataka suggested that these goods could be taxed at the rate of 5%. The Secretary stated that there would be embedded input taxes on these products, and t
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hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry were already kept in the exempt List. (xxxiia) Cancer drugs : The Hon'ble Minister from Maharashtra stated that 118 drugs for cancer should be kept under exempt category instead of the presently recommended 5% List. The Hon'ble Deputy Chief Minister of Gujarat suggested that the generic medicines should be taxed at Nil rate of GST. The Hon'ble Deputy Chief Minister of Delhi suggested that other than those medicines which were exempt, all others should be taxed at the rate of 5%. The Secretary stated that there were 255 drugs or medicines and diagnostic kits that were kept at 5% rate, which included life-saving and cancer related drugs while all other drugs were proposed to be taxed at the rate of 12%. He stated that as there was tax on intermediate chemicals, the cancer drug industry would not like the final products to be exempted. As regards the proposal to exempt ge
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covered under List Il (Entry 53) of the Schedule 7 of the Constitution, He added that the issue could be examined further and if necessary, it could be put in the exempt List. The Council agreed to this suggestion. (xxxv) Coffee beans : The Hon'ble Minister from Karnataka stated that taxation on coffee and tea should be equal. He further stated that as raw tea leaves were exempt, coffee beans should also be exempt and not taxed at the proposed rate of 5%. He clarified that unprocessed coffee beans were a primary product and it could not be used directly by the consumers. After discussion, the Council agreed that coffee beans, not roasted, should be exempted from tax. (xxxvi) Assistive devices for disabled: The Hon'ble Minister from Kerala suggested that such devices should be kept in the exempt category. The Secretary stated that this would lead to embedded taxes in he final product and would be harmful for the domestic industry. The Council agreed not to put the
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taxed at 5% which should not be called betel nut. Accordingly, it was proposed that dried areca nuts, whether or not shelled or peeled, might be kept at 5%. The Council agreed to this proposal. Annexure II (List of goods at 5% GST rate): (xxxviiia) Dry fruits: The Hon'ble Deputy Chief Minister of Delhi suggested that dry fruits should be kept in the 5% List instead of the presently proposed rate of 12%. The Secretary stated that dry fruits . were consumed by better-off sections of the society, and therefore, it could be taxed at the rate of 12%. The Council agreed to this suggestion. (xxxix) Natural Resin ('lisa'): The Hon'ble Minister from Uttarakhand suggested that resin should be taxed at the rate of 5% instead of the proposed rate of 18% as this was collected by the poorer sections of the society. After discussion, the Council agreed to this suggestion and decided to put :natural gums, resins, etc. in the 5% rate category. (xl) Tendu le
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be taxed at the rates as proposed in the agenda notes. (xliii) Semi-mechanised safety matches: The Hon'ble Minister from Tamil Nadu stated that match industry was highly labour intensive and gave livelihood to a large number of workers in Tamil Nadu. He observed that the present proposal was to tax hand-made safety matches at the rate of 5% and the rest at the rate of 18% and suggested that semi-mechanised safety matches should also be taxed at the rate of 5% and only matches manufactured by fully mechanised process should be taxed at the rate of 18%. The Secretary stated it would not be advisable to create a separate classification for semi-mechanised safety matches as in a multi-stage levy like GST, it would not be possible to verify this aspect at all stages and this would create disputes at the field level. The Council agreed not to have a separate rate of tax for semi-mechanised safety matches. (xliv) 'Namkeen' including 'Khakhra': The Hon'bl
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Central Excise duty of 5% and in most States, VAT of 5%, and therefore, the rate of all namkeens, including khakhra, could be kept at 12% instead of the recommended rate of 18%. The Council agreed to this suggestion. (xlv) Clay bricks: The Hon'ble Minister from Uttar Pradesh stated that clay bricks should be kept under a compounding scheme as it was very difficult to keep track regarding the quantum of bricks supplied by the brick kilns. He stated that in the alternative, clay bricks should be kept at a higher rate. The Secretary stated that it would not be advisable to have a separate compounding scheme for clay bricks or to keep them at a higher rate. He stated that tax evasion could be addressed through other means. The Hon'ble Minister from Meghalaya and the Deputy Chief Minister of Gujarat stated that any increase in the rate of tax on clay bricks would adversely affect the Pradhan Mantri Awas Yojana Scheme. The Council agreed to keep the tax rate of clay bricks at
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ted that some coal might be used as an industrial input but it was also used for generation of electricity. He further stated that presently, imported coal attracted an additional duty of customs (CVD) at the rate of 2% and this would go up to 12% leading to substantial increase in the cost of power generation. He added that coal was also levied to a cess of ₹ 400 per metric tonne. He stated that raising the rate of tax on coal would only increase the subsidy burden of the Governments as the Electricity Boards would seek more subsidy. He, therefore, suggested to keep the rate of tax on coal at 5%. The Council agreed to this suggestion. The Hon'ble Minister from Chhattisgarh suggested that there should be a separate classification for coal used captively for generation of power. The Hon'ble Chairperson stated that this would pose challenge for levying the tax. After discussion, the Council agreed not to have a separate classification for coal used captively for generation
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m Uttarakhand stated that plywood made of eucalyptus being not in the category of an agricultural crop, should also attract tax at the rate of 12%. He added that most of the units in the ply board sector fell under micro and small enterprises with a turnover of less than ₹ 4 crore and were exempt from Central Excise duty upto the turnover of ₹ 1.5 crore. Therefore, the incidence of Central Excise duty at the rate of 12.5% was not applicable on them and as such, taxing them at the rate of 28% was not justifiable and that GST on ply board at the rate of 18% would be more appropriate. The Hon'ble Minister from Meghalaya stated that his State had a very high green coverage of coniferous forest and if cost of plywood was increased, there would be temptation to cut the trees and to use the planks directly. The Hon'ble Minister from Kerala suggested that wood based particle board should be taxed at a lower rate. The Hon'ble Minister from Haryana stated that most of the
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used by the common man and due to these considerations, no VAT was charged on this product in his State. He suggested that keeping in mind the availability of lTC, mosquito net should be levied to tax at the rate of 5% instead of the proposed 12%. It was suggested to keep this item in 12% bracket at par with fish net. The Council agreed to this proposal. (I) Mobile phone: The Hon'ble Minister from Chhattisgarh stated that in his State even when duty on mobile phone was reduced to 12%, there was no reduction in the price of mobile phones but there was substantial loss of revenue to the State. He suggested that tax rate on mobile phones should be kept at either 18% or 28%. The Hon'ble Minister from Uttarakhand suggested to increase the rate of tax on mobile phone from 12% to 18%. The Hon'ble Minister from Kerala suggested that mobile phone should be taxed at the rate of 18%. The Secretary stated that the present combined incidence of tax on mobile phone was around 14%
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gestion. (Iii) Copper articles : The Hon'ble Minister from Kerala stated that table and kitchen or other household articles of copper should be kept at a rate higher than 12%. However, after discussion, the Council agreed to keep the rate of such goods at 12%. (liii) Sports goods: The Hon'ble Deputy Chief Minister of Delhi suggested that sports goods other than gym equipment should be taxed at the rate of 5%. After discussion, the Council agreed to keep the rate sports goods other than gym equipment at 12% and of gym equipment at 28% as recommended in the agenda notes. (liv) Insulin: The Hon'ble Deputy Chief Minister of Gujarat suggested to tax this product at a lower rate. The Secretary stated that the domestic manufacturers would suffer if the tax rate on insulin was lowered. The Council approved the rate of 5% as proposed in the agenda notes. Annexure IV (List of goods at 18% GST rate): (Iv) Fruit, nuts and other edible parts of plants,
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Minister of Del hi stated that these being input materials, should be taxed at the rate of 12%. The Secretary stated that it was proposed to tax all intermediate products at the standard rate of 18%. The Council agreed to this suggestion. (lvii) Betel nut product known as 'Supari': The Hon'ble Chief Minister of Puducherry suggested to raise its rate from 18% to 28%. After discussion, the Council agreed to keep the tax rate at 18%, since it was an evasion prone item. (lviii) Insecticide and rodenticide: The Hon'ble Chief Minister of Puducherry suggested that these products should be taxed at the rate of 5%. The Secretary stated that such a rate structure would lead to a lot of input tax credit overhang and would lead to large amount of refund claims. The Council agreed to keep the rate of these products at 18%. (lix) Helmet: The Hon'ble Chief Minister of Puducherry suggested that the rate of tax for helmet should be reduced to 5% as it was very
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mport of IT products at Nil Customs duty and there was no harmonisation of domestic taxes. The Hon'ble Minister from Kamataka stated that the annual exports from IT sector was approximately ₹ 200,000 crore and that he was not seeking any rate concession for IT products but requested to recheck whether the classification of goods under ITA-I and GST was in harmony as his feedback from NASSCOM was that they were not. (lxi) Recycled products: The Hon'ble Minister from Karnataka suggested that in order to incentivize use of recycled materials, there should be a lower differential rate for recycled products like recycled paper and recycled plastic. The Joint Secretary (TRU-I), CBEC, stated that if such a differentiation was made, the importers would also claim a similar rate differential and this would create very wide spread classification disputes. The Hon'ble Minister from Karnataka stated that it was a national aspiration to use recycled products. The Hon'bl
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taxed at the rate of 5%. The Hon'ble Chief Minister of Puducherry stated that branded cereals like packed basmati rice should be levied to tax. The Secretary stated that the Fitment Committee had discussed whether food grains and cereals packed in unit containers and branded should be taxed at the rate of 5% instead of keeping them at Nil rate. He suggested that these goods could be taxed at the rate of5%. The Hon'ble Minister from Haryana stated -.. that in order to encourage investment in food sector, it would be desirable to exempt them. The Hon ble Deputy Chief Minister of Gujarat stated that those cereals which were kept at Nil rate of tax should remain so irrespective of the fact that they were sold in a packed and branded state. The Hon'ble Minister from Bihar stated that a lot of money was being spent on advertisement of branded cereals, and therefore, they should be subject to tax. The Hon'ble Minister from Punjab also supported the suggestion to levy tax on
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y products. The Secretary stated that a small 5% tax on packed primary commodities would encourage the food processing industry as they could take credit of the tax paid on inputs. The Hon'ble Chairperson stated that it would be politically unwise to tax packed and branded milk. The Hon'ble Minister from Haryana stated that taxing packed pulses and grains would cause inflation. The Hon'ble Minister from Kerala suggested that tax could be levied on such branded primary products whose brand names were registered with the office of the Trade Mark. The Hon'ble Chairperson stated that this criterion might not help as even if the name Amul was not registered as a brand name, it could get the same right as a registered trade mark. The Hon'ble Minister from Assam stated that all big brands selling packed and branded primary commodities should be subject to tax. The Hon'ble Deputy Chief Minister of Delhi stated that more and more consumers were moving towards buying pack
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jarat stated that bio-diesel should be taxed at the lower rate. After discussion, the Council agreed to keep the rate of tax on bio-diesel at 18%. (lxviii) Food served in anganwadis: The Hon'ble Deputy Chief Minister of Gujarat raised a question whether food served in anganwadis like upma, sheera, etc. would get covered as preparations for infant use. He stated that rate of tax for food served in anganwadis should be exempt. The Secretary stated that this would be difficult to administer and would create classification disputes. He further added that in any case, if these items were served fresh, there would be no tax on them. The Council agreed not to have a separate tax exemption for food served in anganwadis. Annexure V (List of goods at 28% GST rate): (lxix) Motor vehicles: The Hon'ble Chief Minister ofPuducherry stated that bigger and smaller cars should not be taxed at the same rate. The Joint Secretary (TRU-I), CBEC, stated that all cars were propo
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material: The Hon'ble Minister from Meghalaya stated that roofing materials like corrugated sheets were not similar to other building material as they were used by the poorest of the poor for shelter over their head, and therefore, they should be taxed at a lower rate. The Hon'ble Deputy Chief Minister of Gujarat suggested that roof tiles should be exempted from GST. The Hon'ble Minister from Uttarakhand stated that all building materials were proposed to be taxed at the rate of 28% and suggested that there should be a lower rate of tax for roofing materials like corrugated sheets of steel or asbestos. The Secretary stated that it would not be advisable to have separate rates for certain building materials. The Council agreed to this suggestion. (lxxiii) Marble and granite slabs: The Hon'ble Minister from Rajasthan stated that these products were no more luxury items, and therefore, both should be taxed at the rate of 12%. He further stated that this sector gave
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ffordable. He added that the world over, hybrid cars were taxed at low rates. The Joint Secretary (TRU-I), CBEC, stated that electrically operated cars were already proposed to be taxed at the rate of 12%. The Secretary stated that the GST rate for hybrid cars be at the rate of 28%. The Council agreed to this. (lxxvi) Carriage for disabled persons: The Hon'ble Deputy Chief Minister of Gujarat suggested that carriage for disabled persons should be exempted from GST. The Hon'ble Minister from Uttar Pradesh suggested that carriage for physically challenged persons which included motorised wheel chairs should be taxed at a lower rate. The Secretary stated that since wheel chairs for disabled persons falling under Chapter heading 8713 was already at 5%, carriages for disabled persons, whether or not motorised, falling under Chapter head 8713, might also be kept at 5%. The Council agreed to this suggestion. (lxxvii) Intra-ocular lens: The Hon'ble Deputy Chief Minist
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s respectively (at SI.No.50 and 51 of Annexure XI referring to cars of length less than 4 metre and engine capacity of less than 1200 cc for petrol vehicles and of less than 1500 cc for diesel vehicles) and 1% cess on hydrogen vehicles based on fuel cell technology of length less than 4 metre (SI.No.54 of Annexure Xl) could be removed. The Secretary stated that large hybrid vehicles could be charged to Compensation Cess at the same rate (15%) as normal cars. The Council agreed to this proposal. The Hon'ble Minister from Haryana stated that one option of levying cess on motor vehicles could be on the basis of price bands instead of qualitative bands. He observed that criteria like ground clearance could lead to evasion of tax and that a price based rate structure could be adopted. The Secretary stated that due to the past experience of misuse of price based taxation system, certain objective criteria had been adopted for taxation of various categories of cars. The Hon'ble Minist
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hts, the Secretary stated that if the cost of aircrafts and yachts became very high, this could lead to evasion of tax. The Secretary suggested that a Compensation Cess of 3% might be imposed on motor cycles of engine capacity more than 350 cc. He further suggested that similar rate of cess could be imposed on aircrafts for personal use and yachts and other vessels for pleasure or sports. The Council agreed to these suggestions. IGST Exemptions/Concessions: 17. The Secretary introduced the Annexure XII of Volume-3 of the detailed agenda notes, which contained the proposed IGST exemptions/concessions. He stated that these were mostly existing exemptions on imports due to various multi-lateral and bi-lateral commitments and suggested that these should be continued under GST. The Hon'ble Minister from Haryana raised a question as to why there was an exemption from Customs duty for goods imported by the Vice President of India contained at Sl. No. 13 of Annexure XII (Notifi
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brand name to be charged at the rate of 5%; (ii) Dalia: Other than put up in unit container and bearing a registered brand name to be charged to Nil rate of tax and dalia put up in unit container and bearing a registered brand name to be charged at the rate of 5%; (iii) Gur(jaggery): to be charged to Nil rate of tax instead of the proposed 5%; (iv) Low Priced Biscuits: Council to discuss it separately along with the rate of tax on biscuits; (v) Silk yarn, cotton yarn in hank : Council to discuss separately the goods falling in the entire textile chain; (vi) Sewing thread: Council to discuss separately the goods falling in the entire textile chain; (vii) Chikan : not to provide any special dispensation for chikan; (viii) Handloom and handicrafts: Council to discuss separately the goods falling in the entire textile chain and the handicrafts; (ix) Fish net and fish net fabric: to be charged at the rate of 12%; (x) Cotton fabrics
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GST on tobacco leaves under reverse charge; (xxi) 'Namkeen' including 'khakhra' : to be charged to 12% of tax instead of the proposed 18%; (xxii) Mosquito net: to be taxed at the rate of 12%; (xxiii) Packed and branded cereals: Council to discuss separately the rate of tax on packed and branded pulses, cereals and flours; (xxiv) X-ray plates and films for medical use: to be charged to 12% rate of tax instead of the proposed 18% (and retain the proposed rate of 18% for x-ray films for other use); (xxv) Carriage for disabled persons, whether or not motorised (8713) : to be taxed at the rate of 5%; Rate of Compensation Cess on Supply of Goods (xxvi) To not charge cess on small hybrid petrol (less than 1200 cc) and small hybrid diesel (less than 1500 cc) motor vehicles and small hydrogen vehicles based on fuel cell (of length less than 4 metre); (xxvii) Levy a cess on motorcycles with engine capacity above 350 cc at the rate
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detailed Agenda Notes for agenda item 9. Annexure VI (List A-l): 19.1. The Secretary stated that in List A-I of Annexure VI, it was proposed to continue with 54 exemptions under GST that were available under the Service Tax. He stated that one additional exemption was proposed in respect of services provided by GSTN to the Government. The Hon ble Minister from Chhattisgarh suggested that the Local Self Government should also be exempt from GST. The Hon'ble Minister from Punjab raised an apprehension that security services provided to the Chief Ministers and the Governors would become taxable. The Hon'ble Deputy Chief Minister of Gujarat expressed an apprehension that functions of local bodies like giving domicile certificates, caste certificates, etc. would also become taxable. The Secretary clarified that these services were already exempt. 19.2. Shri V.K. Garg, Advisor (GST), Punjab, stated that GST was leviable on a supply made by a person for a considera
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sthan and Telangana also supported the view that no GST should be charged on the licence fee for giving liquor licence for human consumption. Shri Amitabh Kumar, Joint Secretary (TRU-II), CBEC, stated that there was no GST for services given by an employee to his employer in the course of or in relation to his employment under Schedule III of the CGST Act. He further added that services provided by Government to other than business entity, except the specified /prescribed services, were exempt in view of the very first entry in list A-I. The Secretary stated that by issuing a liquor licence, the Government was giving a service to the business entities and GST should be leviable on it. He stated that if GST was not collected for giving service to a business entity, then the Government would lose a huge amount of revenue on spectrum fee. He, therefore, stated that Government services given to a business entity should not be exempt as the tax paid would also be available as input tax cre
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Schedule 7 of the Constitution) and other taxes. The Hon'ble Deputy Chief Minister of Gujarat supported the levy of tax on the fee for giving liquor licence as this would be distributed to all the States. The Hon'ble Minister from Assam stated that no exemption should be given for tax on fee for liquor licence as this would send a wrong signal to the public. The Hon'ble Minister from Goa also supported this view. The Hon'ble Minister from Punjab stated that his State had already lost ₹ 2,300 crore due to abolition of purchase tax and it stood to lose another ₹ 1,000 crore due to tax on licence fee for liquor. The Hon'ble Chairperson stated that this loss could be offset by increasing the rate of tax on alcohol for human consumption which was in the State's domain. The Advisor (GST), Punjab, stated that tax paid on spectrum fee was available as ITC but tax paid on the liquor fee by the contractor could not be used as ITC as there was no GST on alcoho
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facto tax and there should be no tax on tax. The Secretary stated that grant of a licence was a service given by the Government and this could not be exempted. The Hon'ble Chairperson stated that the only way to address this issue was to change the taxation model where excise duty on alcohol could be increased and licence fee on liquor could be reduced. He added that for the transitional period, the affected States could pass some order. He stated that as the States were aware of the GST roll out, they should have changed their policy accordingly. The Hon'ble Minister from Chhattisgarh stated that they had already changed their policy in anticipation of the GST implementation. The Hon'ble Minister from Jharkhand stated that consumers would bear the additional cost of the tax and the Government should not seek any exemption for the same. Shri Navin Kumar Choudhary, Finance Secretary, Jammu Kashmir, stated that licence fee was only about 20% of the total amount collected
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cific schemes for exemption from GST which could be brought before the Council. Annexure VI (List A-2): 20.1. The Secretary explained that List A-2 of Annexure VI contained proposals to continue Service Tax exemptions in GST with modifications as recommended by the Fitment Committee. Starting the discussion on List A-2, the Hon'ble Deputy Chief Minister of Del hi stated that at Sl.No.3, the proposed exemption from GST to hotels with room rent below ₹ 500 per day was too low and that no hotel would be able to take benefit of this exemption. He proposed to increase the limit of room rent to ₹ 1,500 per day. The Hon'ble Chief Minister ofPuducherry also supported this proposal and stated that people using such hotels came from lower middle-class strata of the society. The Secretary stated that the scheme of taxation on hotel industry under GST was that for room rent up to ₹ 500 per day, it was exempt; for room rent above ₹ 500 and up to ₹
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inisters from Uttar Pradesh, Himachal Pradesh, Jharkhand and Bihar supported the exemption limit for room rent at ₹ 500 per day. The Hon'ble Minister from Rajasthan stated that the tourism industry and the hotel industry needed to be treated differently and suggested the exemption limit of room rent to be ₹ 3,000 per day. The Hon'ble Minister from Goa suggested that the exemption limit for room rent could be made ₹ 750 per day. After further discussion, the Council agreed that the exemption limit for room rent of hotels would be ₹ 1,000 per day. 20.3. The Hon'ble Deputy Chief Minister of Delhi expressed his reservation at the proposed removal of exemption on exhibition of cinematographic film (SI.No.9). He stated that this exemption was needed to promote regional films, parallel cinema, one-day events, etc. and suggested that entry at Sl.No.9 should be modified to permit exemption to such films so that viewership of films with a social message
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not have many big events, it had several small events and charitable programmes. The Secretary stated that smaller theatre groups would enjoy exemption up to the turnover of₹ 20 lakh. The Hon'ble Minister from Goa also agreed with the proposed rates. 20.4. The Hon'ble Minister from Punjab stated that exemption at SI.No.7 to processes of electroplating, zinc coating, etc. should be continued. The Secretary explained that in GST,job workers would not suffer any tax if the value of their job charges were less than ₹ 20 lakh in a year but they would need to pay tax if their job charges exceeded ₹ 20 lakh. He stated that in GST, it was not advisable to have a separate exemption for activities like electroplating, zinc plating, etc. The Hon'ble Deputy Chief Minister of Gujarat stated that even small job workers would need to keep account and work on gold and jewellery was done at home and such small people should not be subject to tax. The Hon'ble Chair
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4 of the Minutes) in which some exemptions were proposed to be restored and it was also provided that services by way of collection of contribution under any scheme of the State Governments could also be included in the exemption list after consideration by the Council. The Council approved List A – 3 of Annexure VI along with the Addendum circulated on 18 May, 2017, Annexure VI (List B): 22.1. The Secretary explained that List B of Annexure VI contained those items on which service tax exemption was recommended to be withdrawn or modified by the Fitment Committee but which needed to be reviewed by the Council. The Hon'ble Deputy Chief Minister of Delhi raised a question regarding rationale for levying tax on selling of space for advertisements in print media (SI.No.1 of List B). The Secretary explained that the selling of space for advertisement in the electronic media attracted Service Tax of 18% with ITC and the same was proposed to be continued in GST. He stated
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would fall on the consumers, who would not be eligible for ITC. The Hon'ble Minister from Bihar stated that the print media deserved to be congratulated for coming forward with a suggestion to levy tax in their sector. The Hon'ble Chairperson stated that the taxation on media was different from taxation on business and there were court judgments to the effect that taxation on media should be moderate as it was connected to the freedom of press. After deliberation, the Council agreed to levy 5% tax on selling of space for advertisements in print media. 22.2. The Hon'ble Minister from Andhra Pradesh stated that exemption from tax for sponsorship for sporting events organised by National Sports Federations should be reconsidered. The Hon'ble Chairperson stated that National Sports Federations were short of funds as hardly any tickets were getting sold, and therefore, exemption from tax for sponsorship should be considered. He stated that events like IPL and Pro-Kabad
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Del hi stated that patients did not go to hospital for luxury but for treatment and no tax should be levied for their stay in hospital. The Hon'ble Chairperson stated that taxation in education and health sectors should be avoided and even if some States were charging luxury tax for hospital rooms, rate of 18% appeared excessive. The Secretary stated that the rate could be reduced further but a lower rate could lead to credit accumulation and demands for refund. He, therefore, proposed that tax on room charges in hospitals could be exempt. The Council agreed to this proposal. 22.4. After further deliberation, the Council approved the proposals contained in List B of Annexure VI and also agreed to delete the proviso to SI.No.2 which provided for not extending exemption from tax for renting of rooms in a clinical establishment during the course of providing health care services where room charges were ₹ 2,000 or more per day. Annexure VII: 23. The Secretary
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ket operations whereas the general effort under the GST was to bring all businesses into the tax net. He stated that in order to encourage transparency of business of transport, which was bedrock of economic development, it was important that the tax administration should be able to ascertain as to how much fuel etc. was consumed by the transporter. He stated that this scheme ould encourage under reporting of business and a better method would be to give certain abatement in regard to the value of fuel contained in this service and then fix the tax with full ITC. He stated that evasion in other areas could also be assessed by making an assessment of the volume of business of the transporter and therefore, it was important to bring it into the ITC net. The Secretary stated that non-petrol input in transportation service was about 36% and keeping this into account, a tax rate of 5% had been fixed without any input tax credit. He further stated that the user of transport service would be
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contained the services which were proposed to be taxed at the rate of 12%. He explained the scheme of taxation for restaurants and stated that a composition rate of 5% was available for restaurants with turnover between ₹ 20 lakh and ₹ 50 lakh and airconditioned or non-air-conditioned restaurants would attract a tax rate of 12% with full ITC and restaurants with liquor licence (whether or not air-conditioned) would be taxed at the rate of 18%. The Hon'ble Minister from Maharashtra stated that in his State, the Composition scheme was available to the restaurants at the rate of 5% where turnover was less than ₹ 3 crore and at the rate of 8% where turnover was more than ₹ 3 crore. He suggested the following: (i) The limit of composition scheme to the restaurants, eating house, hotels etc. which did not serve liquor could be increased upto turnover of Rs. one crore; (ii) Hotels which did not serve liquor and whose turnover was above Rs. one crore could be taxed
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restaurants. After further discussion, the Council agreed that restaurants having facility of air-conditioning or central heating at any time during the year (whether serving liquor or not) would be levied to tax at the rate of 18%, restaurants serving liquor-would be taxed at the rate of 18% and restaurants not having facility of air-conditioning or central heating at any time during the year and not having licence to serve liquor would be taxed at the rate of 12%. 24.2. The Secretary stated that in the construction sector, works contracts have been deemed as service and GST would be applicable for supply of work contract services before completion of construction of a building but there would be no GST on the sale of a ready built building or flat. He stated that as per the decision of the Supreme Court, no tax could be charged on the value of land, and therefore, the Fitment Committee recommended that in a supply of works contract service where the value of land was included i
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could lead to confusion and suggested that sale of finished flats should also get ITC as otherwise there was a risk of builder selling finished flats as flats under construction. The Hon ble Deputy Chief Minister ofGujarat stated that this possibility had become remote after the enactment of the Real Estate (Development and Regulation) Act (RERA). The Hon'ble Minister from Maharashtra stated that abatement regarding value ofland should be kept out of the current proposal as in his State, in 12 Corporations, the land value was about 50% of the value of the flat and abatement of 30% would lead to litigation. He suggested that abatement should be given as per ready reckoner of the land value or on the basis of the stamp duty value. He also referred to the Supreme Court Judgment in the case of Mis. Larsen Toubro Limited, decided in September 26, 2013 (Para 115) which was as follows: It may, however, be clarified that activity of construction undertaken by the developer would be work
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CC framework 15% d) After the completion of 100% RCC framework to the Occupancy Certificate. 45% e) After the Occupancy Certificate 100% He added that for determining the value of supply of services as per the above Table, it shall be necessary for the dealer to furnish a certificate from the Competent Authority. This would make the levy compliant with Law laid down by Hon'ble Courts and such deduction would avoid hardship to people in Maharashtra (mainly MMRDA region). He further proposed exemption from levy of Maharashtra SGST on ongoing construction of complex, building etc. services, where lump sum amount was already paid on full consideration under the Maharashtra Value Added Tax Act. He stated that the Government of Maharashtra proposed to grant exemption from levy of tax for such construction services where the full amount i
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other taxation proposals in Annexure VIII. Annexure IX: 25. The Secretary explained that this Annexure contained services which were proposed to be taxed at the rate of 18%. He stated that some of the items covered under this Annexure such as renting of hotels and supply of food/drinks in air-conditioned restaurants had already been discussed earlier while discussing the services covered under Annexure VI (List A-2) and Annexure VIII respectively. He proposed that subject to these modifications, the rate of services proposed under Annexure IX might be approved. He added that any other service not covered in 5%, 12% or 28% Schedule would fall in this slab. The Council agreed to the proposal. Annexure X: 26.1. The Secretary explained that this Annexure contained those services which were proposed to be taxed at the rate of28%. The Hon'ble Minister from Chhattisgarh stated that local bodies had the power to levy Entertainment Tax and if GST was also levied at the rate
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should be kept at the lower slab of 18%. The Hon'ble Minister from Telangana suggested that the rate for entry into multiplex cinema hall could be kept at 28% and for entry into other cinema hall could be kept at the rate of 18%. The Hon'ble Chairperson stated that tax at the rate of about 28% was already being paid on entry into cinema halls. He suggested that services by way of admission or access to circus, Indian classical dance including folk dance, theatrical performance and drama could be charged to GST at the rate of 18% and the rest of the entries under SI.No.l of Annexure X could be taxed at the rate of28%. The Council agreed to this proposal. 26.2. The Hon'ble Minister from Assam raised an issue as to at what rate tax on dish TV, cable TV etc. would be charged. The Secretary clarified that it would be charged at the rate of 18% under S; No. 6 of Annexure IX (all other services not specified in any exemption notification). The Hon'ble Minister from Rajasth
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outs and one should avoid going towards the system of modified VAT. After further discussion, the Council agreed that hotels with room tariff of₹ 1,000 and above but less than ₹ 2,500 per room per day would attract the rate of 12% with full ITC and hotels with room tariff of ₹ 2,500 and above but less than ₹ 5,000 per room per day would attract the rate of 18% with full ITC. 26.3. The Hon'ble Minister from Karnataka stated that a high tax of 28% on horse racing. would lead to evasion of tax. However, the Council agreed to keep the tax rate at 28%. 26.4. After further discussion, the Council approved the entries under Annexure X with the following amendment: – (i) services by way of admission or access to circus, Indian classical dance including folk dance, theatrical performance and drama to be taxed at the rate of 18% and the rest of the entries under Sl.No.1 of Annexure X to be taxed at 28%. Annexure XIII: 27. The Secretary stated that Ann
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ion thereof as given in the First Schedule to the icustoms Tariff Act, 1975 be relied upon. The Council agreed to this proposal. 29.2. The Secretary drew attention to an Addendum to Agenda Notes circulated by the GST Council Secretariat on 16 May, 2017 wherein it was mentioned that a new Chapter 99 was proposed to be added to the First Schedule to the Customs Tariff Act, 1975 which would provide 6-digit classification of services based on the United Nations Central Product Classification (UN CPC). He stated that the 5- digit classification of UN CPC (excluding '99') had been adapted to meet the Indian requirements. He informed that a Committee of officers in CBEC was constituted to recommend a scheme of classification of services for GST. The Committee had proposed a scheme of classification based on National Product Classification for Services Sector (NPCSS) developed by NSO, which in turn was based on the UN CPC. He explained that NPCSS was based on UN's 5-digit Centra
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re disaggregated level visvis the present system of clubbing all services under 120 odd accounting heads. He proposed that the Council might accept this classification of services for GST. The Council approved the proposal. 30. For agenda item 9, the Council approved the proposals related to supply of services as presented in Volume-3 of the detailed agenda notes and the Addendum thereto and another Addendum attached as Annexure-4 to the Minutes along with the modifications, where relevant, as listed below: (i) Annexure VI (List A-1) : The Council approved the proposal of the Fitment Committee to continue under GST, the 54 existing listed exemptions under the service tax, and to also exempt the services provided by the GSTN to the Central of State Governments/Union Territories for implementation of GST; (ii) Annexure VI (List A-2) : The Council approved the proposal of the Fitment Committee to continue under GST, the 10 existing listed exemptions under the service tax with c
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(vi) Annexure VIII : The Council approved the proposal to levy tax at the rate of 12% on the 7 listed services with the following modifications: (a) restaurants having facility of air-conditioning or central heating at any time during the year (whether serving liquor or not) to be levied to tax at the rate of 18% and restaurants not having facility of air-conditioning or central heating at any time during the year and not having license to serve liquor to be taxed at the rate of 12%, , restaurants not having facility of air-conditioning or central heating at any time during the year and having license to serve liquor to be taxed at the rate of 18%; (vii) Annexure IX : The Council approved the proposal to levy tax at the rate of 18% on the 6 listed services subject to the modification of rates in respect of renting of hotels and supply of food/drinks in air-conditioned restaurants recorded under Annexure VI (List A-2) and Annexure VIII respectively; (ix) Annexure X: The Cou
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es: The Council approved the proposal to adopt the First Schedule to the Customs Tariff Act, 1975 and the Rules for Interpretation thereof for classification of Goods under GST and addition of a new Chapter 99 to the First Schedule to the Customs Tariff Act, 1975 providing for a 6-digit classification of Services based on the United Nations Central Product Classification (UN CPC). Agenda Item 10: Any other agenda item with the permission of the Chairperson: 31. The Hon'ble Minister from Jammu Kashmir stated that the Council needed to deliberate on the tax treatment in respect of trade across the Line of Control (LOC) in his State. The Secretary stated that broadly the existing regime could be continued but this could be examined and discussed further. The Hon'ble Minister from Tamil Nadu circulated a written speech which was taken on record. Agenda Item 11: Date of the next meeting of the GST Council: 32.1. The Hon'ble Chairperson observed that it w
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