15th GST Council Meeting Dated:- 3-6-2017 GST Council – Minutes – Circulars – GST – Minutes of the 15th GST Council Meeting held on 3 June 2017 The fifteenth meeting of the GST Council (hereinafter referred to as 'the Council') was held on 3 June, 2017 in Vigyan Bhawan, New Delhi, 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 15th Meeting of the Council- 1. Confirmation of the Minutes of the 14 th GST Council Meeting held on 18-19 May, 2017 2. Presentation on Information Technology (IT)-readiness of GSTN for roll-out of GST 3. Approval of amendments to the following draft Goods and Services T
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19 May, 2017: 4. The Hon'ble Chairperson invited comments of the Members on the draft Minutes of the 14 th Meeting of the Council (hereinafter referred to as 'Minutes') held on 18-19 May 2017 before its confirmation. 4.1.1. The Secretary informed that a written request had been received from the Commissioner of Commercial Tax (CCT), Rajasthan, to replace the version of the Hon'ble Minister from Rajasthan recorded in paragraph 15.9 (xxxii) with the following version indicated in bold letters: Hand tools: The Hon'ble Minister from Rajasthan stated that agricultural hand tools like karni, etc . non- electrically operated hand tools i.e. gurmala, karni. sawal, gunia. etc . should be under the exempt category. The Council agreed to record this version in the Minutes. 4.1.2. The Hon'ble Minister from Rajasthan stated that the second sentence of paragraph 15.9 (xxxii) would also require to be changed and it should be added that heading 8201 coveri
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The Hon'ble Minister from Rajasthan stated that his specific demand was to exempt hand tools like gurmala, karni, sawal, gunia, etc. The Secretary stated that exemption from tax would be available for goods covered under the Chapter heading 8201 and in case exemption was sought in respect of goods falling in headings other than Chapter heading 8201, it would need to be discussed at a later date. 4.2. The Hon'ble Minister from Meghalaya stated that in paragraph 15.9 (Ixxii) relating to roofing material, he had mentioned 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. He requested to add his version in this paragraph. The Council agreed to record his version in the Minutes. 4.3. The Hon'ble Minister from Punjab stated that in paragraph 19.2, it was recorded that Shri V.K. Garg, Advisor (GST), Punjab,
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ge the taxation model where excise duty on alcohol could be increased and licence fee on liquor could be reduced. He had further observed that for the transitional period, the affected States could pass some order. Shri Sanjeev Kaushal, Additional Chief Secretary (ACS), Haryana, stated that the decision of the Hon'b1e Chairperson was that for the transition phase, some decision would be taken so that the States did not lose financially. The Secretary stated that the decision in the Minutes was recorded correctly and several States had very strongly opposed the proposal of exempting the liquor fee charged by the States from GST. 4.4.2. The Hon'ble Minister from Punjab stated that if the last line of paragraph 19.4 was not deleted, it would lead to loss of revenue for Punjab to the tune of about ₹ 1,000 crore. The Hon'ble Chairperson stated that after 1 July, 2017, the scheme ofliquor licence could be restructured where licence fee could be reduced and excise duty
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6. The Hon'ble Deputy Chief Minister of Delhi stated that he had proposed exemption from tax for entry to circus, dance, theatrical performance, drama and Indian classical dance but this was not reflected in paragraph 26.1 of the Minutes and that the same should be incorporated in this paragraph. The Council agreed to record his version in the Minutes. 4.7. The Hon'ble Minister from Uttarakhand stated that in reference to discussion on plywood and particle board in paragraph 15.9 (xlviii) of the Minutes, he had 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 stated that his version should be recorded in this paragraph. The Council agreed to record his version in the Minutes. He further stated that tax rate on plywood made of eucalyptus should be revisited when rates of other goods came up for reconsideration. 4.8. The Hon'ble Minister from Uttarakhand stated that just like dal
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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 at the rate of 12%; (iii) All the hotels which served liquor (other than hotels having rating five star and above) could be retained in tax bracket of 18% as recommended by the Council.' The Council agreed to record his version in the Minutes. 4.10.1. The Hon'ble Minister from Maharashtra stated that on page 42 in paragraph 24.3 of the Minutes, his version was recorded as under:- The Hon'ble Minister from Maharashtra stated that abatement regarding value of land 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 val
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(a) Abatement for the part transfer of property in goods or services used in construction, before the contract between buyer and the developer came into existence: Sr. No. Stage during which the developer enters into a contract with the purchaser. Rate of Abatement a) Before issue of the Commencement Certificate. NIL% b) From the Commencement Certificate to the completion of plinth level . 5% c) After the completion of plinth level to the completion of 100% of RCC framework 15% d) After the completion of 100% RCC framework to the Occupancy Certificate. 45% e) After the Occupancy Certificate 100% (b) For determining th
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vices where the full amount in lieu of tax was already deposited in the Government treasury along with the return for the tax period preceding the appointed day. The Hon'ble Minister from Maharashtra sought a recommendation from the Council for grant of exemption under Section 11 of the SGST Act from levy of State GST on such construction services. The Council agreed to record his version in the Minutes. However, the Council did not agree to give any such exemption under the SGST Act. 4.12. The Hon'ble Deputy Chief Minister of Gujarat stated that during discussion on electricity in paragraph 15.9 (xxxiv) at page 26, he had suggested that electricity should be exempted from GST, but the same was not recorded in the Minutes. He requested to record his version in the Minutes and the Council agreed to the same. 4.13. The Hon'ble Deputy Chief Minister of Gujarat stated that during discussion on roofing material in paragraph 15.9 (Ixxii) at page 33, he had suggested tha
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f the Council should be reflected appropriately in the Minutes. The Secretary stated that the full speech could not be reproduced in the Minutes but any written speech circulated by the Hon'ble Members during the Council Meeting would be taken on record and a reference to this effect would be made in the Minutes. 4.17. The Hon'ble Minister from Kerala stated that with reference to discussion on plywood and particle board in paragraph 15.9 (xlviii) of the Minutes, his version recorded in the Minutes was that he suggested that wood based particle board should be taxed at the rate of 18%. He requested to modify his version and to record that 'the Hon'ble Minister from Kerala suggested that wood based particle board should be taxed at a lower rate.' The Council agreed to record the modified version. 4.18. The ACS, Haryana, stated that with reference to discussion on plywood and particle board in paragraph 15.9 (xlviii) of the Minutes, the following should be a
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and this would lead to increase in price of such cars by 15%. He stated that based on this information, he would like to reopen the issue of taxation on large hybrid cars at an appropriate time as the Council had decided that during fitment exercise, the GST rate should not become higher than the existing rate of tax. He requested that these facts should be suitably incorporated in the Minutes. The Secretary stated that as these facts were not mentioned in the last Council Meeting, it would not be appropriate to incorporate it in the Minutes. The Hon'ble Minister from Karnataka agreed to this suggestion. 5. In view of the above discussion, for Agenda item 1 , the Council decided to adopt the Minutes of the 14th Meeting of the Council with the changes as recorded below: – 5.1. to replace the version of the Hon'ble Minister from Rajasthan recorded in paragraph 15.9 (xxxii) with the following version: 'The Hon'ble Minister from Rajasthan stated that none-lectri
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n paragraph 19.2, to delete the following version attributed to Shri V. K. Garg, Advisor (GST), Punjab: and as fee had the character of service, the Government of Punjab was paying Service Tax on collection of such fee from 1 April, 2016 ; 5.5. In paragraph 15.9 (xlviii), to add the following version of the Hon'ble Deputy Chief Minister of Delhi: 'The Hon'ble Deputy Chief Minister of Delhi stated that if one wanted to prevent wood to be cut, then boards based on bagasse and fibre should be encouraged.'; 5.6. In paragraph 26.1., to add the following version of the Hon'ble Deputy Chief Minister of Delhi: 'The Hon'ble Deputy Chief Minister of Delhi stated that entry to circus, dance, theatrical performance, drama and Indian classical dance should be exempt from tax. '; 5.7. In paragraph 15.9 (xlviii), to add the following version of the Hon'ble Minister from Uttarakhand: 'The Hon'ble Minister from Uttarakhand stated that plywood
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er 26, 2013 (Para 115) which was as follows: It may, however, be clarified that activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by th.e State Government. In view of this, he made the following proposal for abatement for the part transfer of property in goods or services used in construction, before the contract between buyer and the developer came into existence: Sr. No. Stage during which the developer enters into a contract with the purchaser. Rate of Abatement a) Before issue of the Commencement Certificate. NIL% b) From the Commencement Certificate to the completion of plinth
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ng 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 in lieu of tax was already deposited in the Government treasury along with the return for the tax period preceding the appointed day. The Hon'ble Minister from Maharashtra sought a recommendation from the Council for grant of exemption under Section 11 of the SGST Act from levy of State GST on such construction services.'; 5.11. In paragraph 15.9 (xxxiv), to add the following version of the Hon'ble Deputy Chief Minister of Gujarat: 'The Hon'ble Deputy Chief Minister of Gujarat suggested that electricity should be exempted from GST. '; 5.12. In paragraph 15.9 (1xxii), to add the following version of the Hon'ble Deputy Chief Minister of Gujarat: 'The Hon'ble Deputy Chief Minister of
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rd sector fell under micro and small enterprises with a turnover ofless 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.' 5.17. In addition, the Council decided that any written speech circulated by the Hon'ble Members during the Council Meeting would be taken on record and a reference to this effect would be made in the Minutes. Agenda Item 2: Presentation on Information Technology (IT)-readiness of GSTN for roll-out of GST: 6. Introducing this Agenda item, the Secretary invited the Chairman, Goods and Services Tax Network (GSTN) to present the status of IT preparedness for implementation of GST. Shri Navin Kumar, Chairman, GSTN in his power point presentation explained the Info
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n put in place. He informed that Data Centre (DC) and Near Data Centre (NDC) at Delhi as well as Disaster Recovery (DR) and Near Disaster Recovery (NDR) at Bangalore were operational and that connectivity between DC/DR/NDC/NDR and between DC and States/ CBEC was provided by two service providers, namely, TCL and Airtel, so that if one fails, the other would take over. 6.2. As regards the status of application development, the Chairman, GSTN explained that application development was to be done in three phases where the first phase related to GST External Service Components (like Taxpayer registration, Taxpayer registration approval, Invoice Upload, Tax Payments, Return Filing, Input Credit reconciliation, Ledgers; IGST Settlement and MIS Reports) for all taxpayers and all tax authorities which was to be completed before the launch of GST; the second phase of application development was development of GST Internal Service Components (which included audit, assessment, refund, adjudi
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nges in April and May 2017 and they were implementing these changes. He stated that some other application development tasks were under progress, like allotment of unique ID to UN bodies, payments reconciliation and Offline Utility (with invoice upload) and these were to be completed by 2 June, 7 June and 15 June 2017 respectively. 6.4. In respect of enrolment of existing taxpayers for GST, the Chairman, GSTN explained that enrolment of taxpayers was started on 8th Nov 2016, which was closed on 30th April 2017 and was re-opened on 1 st June 2017. As a result of this exercise, the status of enrolment was as below: Sl No. Taxpayer Type Provisional ID Issued Enrolled % 1 VAT Taxpayers (29 States and 5 UTs) 71 . 78 Lakh 54.89 1akh 76 . 5% 2 Excise
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h worked out to 53,823 officers out of a working strength of 62,558 officers. He stated that by 15 June 2017, they would complete the training of all officers. 6.7. CEO, GSTN informed that a 1 OO-seater call centre for taxpayers had become operational from November 2016 for enrolment and that a new call centre with 400 agents (including accountancy literate agents) would be operational from 1 July 2017. He stated that in order to ensure taxpayer facilitation, they had empanelled 34 Information Technology (IT) companies as GST Suvidha Providers (GSPs) and due to demand for enlarging this pool, they had started the next round of empanelment. They had also made available Frequently Asked Questions (FAQs) on each module on the GSTN system. 6.8. The CEO, GSTN also gave an overview regarding GSTN's integration with banks. He stated that Internet Banking and Over the Counter payment integration was completed with all 25 Banks and Payment gateway integration was completed with 6 out
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f Network security, Identity and access management, Digital signatures in respect of Application security, encryption, HSM (Hardware Security Module) in respect of Data security, API gateway, license key in respect of API security, SOC in respect of Security operations, STQC in respect of Security audits, Security Monitoring and Analytics Centre (SMAC) and ensuring security throughout SDLC in respect of Secure Coding practices. He informed that they had already completed Standardization Testing and Quality Certification (STQC) Audit for many business processes. The performance Testing/load Testing for functional! security was undergoing, which was likely to be completed by 15th June. 6.10. The CEO, GSTN further stated that beta version of the GST system was launched and run for 15 days to provide an opportunity to taxpayers to get familiarized with GST applications, to receive feedback based on usability/issues faced, and to utilize the feedback to provide superior user experience i
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PC or through offline tool. He informed that one of the regular complaints was that once an invoice was uploaded, there was no immediate confirmation from the System regarding the upload. He explained that the reason for the same was that acknowledgment was given only after invoices uploaded were checked for duplicates not only in the lot uploaded but with all invoices uploaded earlier. Also, the system runs validation checks on all data uploaded to do sanity check before giving final acknowledgement and this took a few minutes and for this duration, the System gave a temporary acknowledgement and the taxpayer could come back to the System after a few minutes to see the acknowledgment. The Hon'ble Minister from Kerala enquired whether from the backend module of a tax administration, an invoice could be seen on real times basis and the CEO, GSTN confirmed that it could be seen. The Hon'ble Minister from Chhattisgarh stated that their State faced certain difficulties in relation
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for a month beyond 15 June, 2017. The Secretary explained that this deadline was for migration of existing dealers and that the new registration would start from 21 June, 2017. 6.13. Starting the discussion on the presentation, the Hon'ble Deputy Chief Minister of Gujarat stated that first time such a System was created and that they needed an assurance that the System was secure and would work without any difficulty. He added that there were lakhs of invoices to be uploaded on the System and the server should not go down once GST implementation started. The Hon'ble Minister from Karnataka agreed with the views of the Hon'ble Deputy Chief Minister of Gujarat and stated that while they did not know the technical details, they needed an assurance that when the time for GST implementation came, the System would work. He observed that GST was a major reform and it should not get affected due to IT related issues. 6.14. The Hon'ble Deputy Chief Minister of Delhi enqui
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em interface for regular uploading of their invoices. He stated that broadly, GSP would be used by those tax payers who wanted some extra services beyond filing of returns or where a tax payer directly did not want to go to the GST Portal. The Hon ble Deputy Chief Minister of Delhi further asked as to why a tax payer would like to go to the GST Portal through a GSP. The CEO, GSTN, stated that those tax payers who wanted accounting software to create GSTR-1 and wanted to work from System to System would use the services of GSP. He stated that big suppliers issuing a large number of invoices could upload the invoices on GSTN on day-to-day basis to permit buyers to do reconciliation on a daily basis and this would ensure that the load was distributed throughout the month instead of being concentrated on the 10th of the next month (the due date offiling GSTR-1). He stated that the GST empaneled companies were given APls (Application Programme Interface) to check how the functionalities wor
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's end and problems in bulk uploading of invoices. He observed that e- Way Bills had not yet been finalized and it was not clear whether software for the same could be prepared in the remaining 20 days before GST implementation. He added that not more than 40% of GSPs had tested their System. He also enquired regarding the amount of fee charged by GSP per month. He also referred to the hacking of websites of several world-renowned companies last month and enquired regarding the level of security of the GSTN System and whether STQC (Standardisation Testing and Quality Certification) had been done and the Home Ministry clearance taken. He stated that an assurance was needed that the kind of hacking that occurred last month would not affect 300 crore transactions per month on GSTN. He suggested that a white paper could be issued in a week or so on the user preparedness of small and medium enterprises for GST implementation. 6.16. The Hon'ble Minister from Goa stated that if tra
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problems in regard to difference between the phone number linked to Aadhaar and actual mobile phone being used by the taxpayer and that uploading of data was not taking place even after one hour of sending the same and repeated error message kept coming. He stated that the System would become very slow if every tax payer took 15-30 minutes to upload data. The Hon'ble Minister from Mizoram stated that one of the major problems faced in relation to Aadhaar link verification was that the actual mobile number being used by the tax payer was different from the one registered with Aadhaar. 6.18. Responding to the concerns raised by the Hon'ble Members of the Council, the CEO, GSTN, stated that the entire System had been developed on the basis of the GST Rules made public in December, 2016 and they were making changes to software based on the amendments made to the GST Rules and Forms during April and May, 2017. He assured that no changes in the IT System would go through without
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d Computing) and NSDL (National Securities Depository Limited) some problems were noticed after EVC system of authentication was made operational and it was being addressed. He refrained from commenting on e-way bill as it was a separate agenda item for the Meeting. As regards the concern regarding whitepaper on security of GST Systems, he stated that he would circulate a separate note on the same. 6.19. On a query from Shri R. K. Tiwari, ACS, Uttar Pradesh, he added that the security systems of States could not be addressed by GSTN as the States would have to develop their own security system. The Secretary stated that security of the IT Systems of the States could not be looked after by the GSTN. CEO, GSTN further informed that he had issued a 10-page security advisory regarding data security. Regarding the fees to be charged by GSPs, CEO, GSTN stated that GSPs would carry out different functions from uploading data to providing accounting software, and therefore, they did not ven
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ised regarding large number of invoices to be issued by Banks, he clarified that one invoice could be raised by a Bank at the end of the month for the various services provided to a customer. As regards concerns regarding handling large volume of data, he pointed out that the volume of transactions handled in the IT systems of National Stock Exchange and IRCTC (Indian Railway Catering and Tourism Corporation) was much higher than envisaged under GST and they were handling it smoothly and assured that handling large data was not a challenge today. He further clarified that they had obtained STQC go ahead when enrolment was started and same process was underway for the main system. He further stated that no security clearance was required from the Home Ministry. 6.21. The Hon'ble Deputy Chief Minister of Delhi enquired as to why GSTN could not be audited by the Comptroller and Auditor General of India (CAG). The Secretary stated that GSTN would be subject to audit by CAG. The Hon&
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Council and they would incorporate the changes. He further stated that they had already released the APIs. 6.23. The Hon'ble Minister from Punjab raised a question whether a dealer could be allowed to change his income tax PAN card. The CEO, GSTN, stated that since registration was based on PAN, if PAN was changed, registration would also change and a new GSTIN would be issued to the taxpayer. The ACS, Uttar Pradesh stated that problems were being faced in respect of the new migration window opened from 1 June, 2017. The CEO, GSTN, stated that there could be some challenges in this regard on the first day but these have been addressed. The ACS, Uttar Pradesh, stated that in his State, tax payers tended to upload their invoices on the last date of return filing and enquired whether GSTN was geared to handle big data load on the last day. The CEO, GSTN, stated that as per interaction from the States who operated a system of data upload, it transpired that about 50% of tax payers
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e meeting of the officers of the Central and the State Governments held before the Council Meeting on 3 June, 2017 and they suggested a few changes which were agreed to be incorporated suitably in the Rules. The Secretary invited Shri Upender Gupta, Commissioner (GST Policy Wing), CBEC to brief the Council about the proposed changes in the Rules. The Commissioner (GST Policy Wing), CBEC made a presentation explaining the changes in the Transition and Return Rules (copy ofthe presentation attached as Annexure 3 ). 8.2. Explaining the changes in the Transition Rules, the Commissioner (GST Policy Wing) stated that application to be submitted in the earlier Rule had now been replaced by a mere declaration. He stated that several representations had been received regarding insufficiency of the input tax credit allowed at the rate of 40%, to the traders not registered with Central Excise, on the stock held on the appointed day without any documents evidencing payment of Central Excise du
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ale. He added that a provision had also been made for a declaration to be filed regarding the proportion of supply on which VAT or service tax had been paid before the appointed day but the supply was made after the appointed day. He stated that the time period for filing of declaration in relation to tax or duty carried forward under any existing law or on goods held in stock on the appointed day was proposed to be increased from 60 days to 90 days, and this could be extended further up to 90 days by the Commissioner. 8.3. The Commissioner (GST Policy), CBEC then explained the changes proposed in the Return Rules and Return Forms. He stated that the Return Forms and Tables had been simplified and Part A of GSTR-3 had been designed to be completely auto-populated. This would ease filing of return by the taxpayers. He further stated that the details of advances were to be now reported only if invoice was not issued in the same tax period and adjustment of taxes paid on receipt of ad
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persons supplying Online Information and Database Access or Retrieval (OIDAR) services from a place outside India to an unregistered person; a provision had been proposed for auto-population of supply details of non-resident supplier in the return of corresponding recipient; and a provision had been proposed for person withdrawing from Composition scheme to furnish the details relating to the period prior to his opting for payment of tax under normal scheme till the due date of furnishing the return for the quarter ending September of the succeeding financial year or furnishing of annual return of the preceding financial year, whichever was earlier. He then explained the changes proposed in the Rules for Goods and Services Tax Practitioner. He stated that a provision had been proposed for conducting examination for enrolment of GST Practitioners; for obtaining confirmation from registered person for any application submitted by GST Practitioners; and for deemed enrolment of GST Practi
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ing credit at a higher percentage would lead to over compensation, and this would also include goods coming from the States under the area based Central Excise exemption scheme. The Hon'ble Minister from Punjab stated that higher rate of deemed credit could be considered only for SGST portion in Punjab. The Secretary stated that the benefit of deemed input tax credit was made available to goods coming from the States under the area based Central Excise exemption scheme to bring them into the tax net and any higher percentage of deemed credit of Central tax would lead to a net outgo of revenue of the Central Government. He further observed that if a higher percentage of deemed credit was allowed under SGST, there would be a similar demand for increasing the percentage of deemed credit for Central tax. 8.5. The Hon'ble Minister from Kerala suggested that the existing Tax Practitioners should be accepted as GST Practitioners subject to the condition of having a minimum period o
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xisting Tax Practitioners could continue as GST Practitioners for one year and could continue beyond that only if they passed the examination for qualifying as GST Practitioner. The CCT, Gujarat, stated that in some States, even non-commerce graduates were allowed to be Tax Practitioners which might not be desirable under GST. The Hon ble Minister from Kerala suggested that retired officers of VAT should also be allowed to work as GST Practitioners. The Commissioner (GST Policy Wing), CBEC, clarified that this was already provided for in the Rules. The Secretary suggested that all existing Tax Practitioners who had five years of experience of working as Tax Practitioner could continue to be GST Practitioner for one year and should pass the prescribed examination within this period to continue to work as a GST Practitioner beyond the period of one year. He said that for this one year, there should be no requirement for the Tax Practitioner to be a commerce graduate. The Council agreed t
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2017 and the decision taken in the Council. 9. For agenda item 3 , the Council approved the GST Rules and the related Forms on (i) Return; (ii) Transition Provisions and (iii) Goods and Services Tax Practitioner Forms along with the changes as agreed upon during the meeting of the officers ofthe Central and the State Governments held prior to the Council Meeting on 3 June, 2017 along with the following amendment- (i) all existing Tax Practitioners who have five years of experience of working as Tax Practitioner shall continue to be a GST Practitioner for one year and should pass the prescribed examination within this period to continue to work as a GST Practitioner beyond the period of one year. Agenda Item 4: Finalization of the rates oftax and cess to be levied on commodities remaining after the Fitment exercise in the 14th GST Council Meeting: 9.1. Introducing this agenda item, the Secretary recalled that during the 14th Meeting of the Council held on 18 and 19 May
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ith Agmark and whether such products would also be considered as branded ones. The Secretary statedthat for the proposed tax, only those products would be considered to have a brand name if the brand name was registered and it would not cover an Agmark. The Hon'ble Chairperson observed that for wheat flour, there was a large difference in price between the branded and unbranded goods or cheapest of the branded goods and the question before the Council was whether such goods should be charged to Nil rate of tax or at 5%. The Hon ble Minister from Assam stated that branded cereals, pulses and flour should be taxed. The Hon'ble Minister from Punjab supported this proposal. 9.2.2. The Hon'ble Minister from Bihar observed that since such branded cereals were not consumed by poor people, it would be reasonable to tax them, especially as the proposal was to tax only those goods which were sold under a registered brand name. The Hon'ble Minister from Karnataka stated that hi
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9.2.3. The Hon'ble Chairperson observed that such brand owners could avail input tax credit of the tax incurred on packaging and advertising. The Hon'ble Minister from Karnataka stated that this ) aspect was mentioned during the last Meeting ofthe Council and when he presented this argument to the stakeholders, they responded that many such retailers did not carry out advertisement and they were not eligible for input tax credit on the cost incurred on transportation and energy. He added that 80% of the cost of the output consisted of cereals. The Hon'ble Minister from Assam stated that all traders appear to make convincing points and tax should not be exempted on all of them. He added that value addition in many cases was substantial, and therefore, they should be taxed. The Hon ble Chairperson observed that one should also be cautious of the self-serving claims of the tax payers. The Secretary observed that sellers of branded cereals would be eligible for input tax cre
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The Secretary stated that the food processing industry would be helped by imposing a small tax on packed cereals. The Hon'ble Chairperson observed that a big cost for branded sellers was advertising and they would get input tax credit for the same. After further discussion, the Council agreed to tax cereals, pulses and flour put up in unit container and bearing a registered brand name at the rate of 5% instead of the proposed Nil rate. 9.2.4. The Hon'ble Minister from Uttarakhand stated that pasta and macaroni should also be taxed at the rate of 5% instead of the present rate of 18%. The Hon'ble Chairperson stated that this product could be taken up for discussion along with the other products where rates had been finalised but which needed to be reconsidered on account of representations from the stakeholders. 9.2.5. The Hon'ble Minister from Karnataka stated that millets and millet flour were exempted but hulled millet had come under tax. He stated that Chapter
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(vii) Vibhuti sold by religious institutions, (viii) Unbranded honey (proposed GST Nil) (ix) Wick for diya (x) Misri, batasha, bura (proposed GST rate 18%). He further stated that goods like incense sticks commonly known as agarbattis, dhupkathi or dupbatti, sambhrani or lobhana were manufactured items and exempting them from GST would put domestic manufacturers of such goods at a disadvantage vis-a-vis imports and the agreed GST rate was 12%. He further stated that except the listed goods, namely, (i) incense sticks commonly known as agarbattis, dhupkathi or dhupbatti (to be taxed at GST rate of 12%); (ii) Sambhrani or lobhan (proposed GST rate 12%), (iii) Mishri, batasha, bura (proposed GST rate 18%), all other goods, namely, (i) Rudraksha, rudraksha mala, tulsi kanthi mala, panchgavya (mixture of cowdung, desi ghee, milk and curd); (ii) Sacred thread (commonly known as yagnopavit); (iii) Wooden khadau; (iv) Panchamrit; (v) Vibhuti sold by religious institutions; (vi) Unbranded honey
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batti should be 5%. The Secretary stated that tax on agarbatti was decided separately as it was not a puja item and despite the combined incidence of tax on agarbatti being about 14%, a 12% rate was suggested. 9.3.3. The Hon'ble Minister from Uttar Pradesh suggested that tax on lobhan, mishri and batasha should be kept at Nil rate. The Joint Secretary (TRU-I), CBEC, stated that mishri and batasha were kept at 5% as they were also in the nature of sugar items, and sugar was at 5%. After further discussion, the Council agreed to keep the puja samagri, namely (i) Rudraksha, rudraksha mala, tulsi kanthi mala, panchgavya (mixture of cowdung, desi ghee, milk and curd); (ii) Sacred thread (commonly known as yagnopavit); (iii) Wooden khadau; (iv) Panchamrit; (v) Vibhuti sold by religious institutions, (vi) Unbranded honey (already under Nil rate); and (vii) Wick for diya (viii) Roli, (ix) Kalava Raksha sutra), (x) Chandan tika at Nil rate and lobhan, mishri, batasha and bura at 5%.
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I), CBEC, explained that the tax would originate from a manufacturing unit and the description given during supply from a manufacturing unit would continue in the retail chain. After discussion, the Council agreed to this definition. Biscuits (Chapter 19): 9.5.1. The Joint Secretary (TRU-I), CBEC, explained that in Central Excise, biscuits were taxed at two rates. The low-priced biscuits (per kg equivalent Retail Sale Price not exceeding ₹ 100 per kg.) were exempted. However, such biscuits had embedded excise duty and service tax and attracted VAT at the rate of 14.5% and with CST, Entry Tax, Octroi, etc., the present incidence was about 20.6% with Octroi etc. and 18.1 % without Octroi etc. He further stated that for other biscuits, taking into account Central Excise duty of 6%, VAT of 14.5% and adding embedded tax on account of post-clearance Service Tax (about 0.14%) and CST, Entry Tax, Octroi, etc. (about 2.50%), the present incidence of tax came to about 23.11 % wit
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ed and non-branded biscuits as was done for cereals and the Joint Secretary (TRU-I), CBEC, clarified that it was not proposed to have two different rates for branded and non-branded biscuits. The Hon'ble Minister from Karnataka stated that as the proposed rate on biscuits was in tune with the current level of taxation, he supported the proposed tax rate of 18%. The Hon ble Deputy Chief Minister of Delhi suggested that the rate of tax on biscuits could be kept at 12% as otherwise, manufacturers in small scale sectors would evade tax. The Chief Economic Adviser (CEA) pointed out that even the existing incidence of tax on biscuits was 18% or more. 9.5.3. The Hon'ble Deputy Chief Minister of Gujarat suggested that biscuits should be taxed at the rate of 5%. The Hon'ble Minister from Tamil Nadu suggested that as pizza, rusk and bread were being taxed at the rate of 5%, unbranded biscuits should also be taxed at the rate of 5% and branded biscuits could be taxed at the rate of
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thereof ( 8432, 8433, 8436 and 8437 ): 9.6.1. The Joint Secretary (TRU-I), CBEC, stated that for goods falling under Chapter heading 8437 (Cleaning, sorting, grading machinery, milling machinery), no Excise Duty drawback was prescribed under the Duty Drawback Schedule as there was no request from industry, but even on these goods, there would be embedded taxes, which would be more or less the same as for the other agricultural machinery falling under HS Codes 8432, 8433 and 8436, i.e. 5%. He said that taking into account the weighted average VAT rate of about 6.2% and embedded taxes (0.09% due to post-clearance Service Tax and 2.5% due to CST, Entry Tax, Octroi, etc.), the present incidence of tax on goods falling under HS Codes 8432, 8433 and 8536 was more than 12%. He stated that taking this into account, the Fitment Committee proposed the rate of 12% for all types of agricultural and horticultural machinery falling under Chapter headings 8432, 8433, 8436 and 8437. 9.6.2. Th
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x, as these goods were made of iron and steel which were subject to Central Excise duty. He also stated that if these goods were taxed at the rate of 5%, tax payers would seek refund which had both a carrying cost and administrative cost. 9.6.3. The Hon'ble Minister from Kerala supported the proposed rate of 12%. The Hon'ble Minister from Uttar Pradesh stated that items like thresher and biomass, biogas and biodiesel pump sets should also be taxed at Nil rate. The Hon'ble Minister from Telangana suggested to keep the tax rate at 5%. The Hon'ble Minister from Assam stated that the Council should stick to the fitment principle decided in the 4th Council Meeting (held on 3-4 November, 2016) and levy tax at the rate of 12%. The Hon'ble Minister from Goa stated that the principle offitment decided by the Council should be applied for all goods and exceptions should not be made only for some goods because some States made a lot of noise. 9.6.4. After further discuss
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parts used only for tractors could be put in the tax bracket of 12%. The Hon'ble Minister from Tamil Nadu stated that this issue was very important for them and the Hon'ble Chief Minister of his State had desired that this issue should be raised in the Council. The Hon'ble Chairperson stated that it was important not to lose the big picture of achieving revenue neutrality and to meet the commitment of assured compensation to the States at the growth rate of 14%. He stated that if revenue rates were fixed very low, the compensation formula might need to be revisited. The Secretary stated that this issue could be taken up later along with other items for which the tax rate might come up for reconsideration. Footwear (Chapter 64) 9.7.1. The Joint Secretary (TRU-I), CBEC, explained that the tax rate structure on footwear, both under Central Excise and VAT, was somewhat complicated. He stated that in Central Excise, all footwear with retail sale price of less than 
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ated that this was one commodity where the Council needed to decide whether tax rate should be based on a value based description. 9.7.2. The Hon'ble Minister from Kerala raised a question as to why reduce tax for some categories of footwear from the highest tax rate of about 30%. The Hon'ble Minister from Jammu Kashmir questioned the need to define such categories and thereby bring into GST, the distortions of Central Excise and VAT. He suggested to have a single rate of tax for footwear. He added that it was important to move towards the goal of one common GST rate of about 14.5% for goods and services over a time horizon of about 4-5 years. The CEA stated that distinction on the basis of objectively measurable criteria could be considered but rates on the basis of value would lead to evasion. 9.7.3. The Hon'ble Minister from Madhya Pradesh suggested to exempt plastic footwear and to tax the other categories of footwear. The Hon'ble Minister from Uttar Pradesh
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tail sale price of less than ₹ 500 at the rate of 5%. He said that keeping in view the need to make available good quality sports shoes to the poor to enable them to take part in sports activities, footwear with retail sale price between ₹ 500 and ₹ 2,000 could be kept in the 12% tax bracket and the rest of the footwear could be taxed at the rate of 18%. The Secretary stated that for sports promotion, States could give budgetary support instead of tax concession. After discussion, the Council agreed that the rate of tax on footwear with retail sale price of less than ₹ 500 would be 5% and for the other categories of footwear, the rate of tax would be 18%. Textiles (Chapters 50 to 63): 9.8.1. The Joint Secretary (TRU-I), CBEC, explained the present tax incidence on various products in the value chain of the textile sector. He stated that broadly the present tax incidence on cotton was 5%; cotton yarn and fabric were exempt from Central Excise but there w
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the present incidence of tax, and the proposal from the textile sector to maintain fibre neutrality, the proposed tax rate for woollen yarn was 5% and for woollen fabric and garments was 12%. He further stated that the tax rate on other natural fibre was proposed to be at the rate of 5%, while their fabrics and garments were proposed to be at GST rate of 12%. He stated that for man-made fibre and filament yam, the proposed rate of tax was 18% as the present incidence of tax was more than 18%. He added that taking into account the present incidence of tax, the GST rate for man-made fabrics and garments was proposed at 12%. 9.8.2. The Secretary stated that the overall picture in textile sector was that it was a fragmented chain where cotton and fibre were taxed at 5%, yarn and fabric were at 0% and garments were taxed at the rate of 5% in VAT and at the rate of 2% in Central Excise for garments with retail sale price of more than ₹ 1,000 per piece. He stated that if the entire
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bre, cotton yarn, and cotton fabric at 5% was close to the present position of tax and the proposal to tax other fabrics and garments of all types at the rate of 12% would lead to least amount of credit overflow and thus a demand for tax refund. He pointed out that chemicals would be taxed at the rate of 18% and if value addition was very high, no refund on manmade fabric might arise. The Hon'ble Minister from Kerala observed that cotton would become less competitive as compared to other fabrics. The Joint Secretary (TRUI), CBEC, stated that such a situation would not arise as the present taxation rates were proposed to be continued in GST. 9.8.4. The Hon'ble Deputy Chief Minister of Gujarat stated that cotton was an important crop and many people were employed in this sector and greater use of cotton would help farmers. He stated that most of the fabrics today were mixed fabric like terry cotton, terylene, etc. and enquired as to at what rate such mixed fabric would be taxe
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it should also be kept at Nil rate. The Secretary stated that there was a difference between jute and cotton as the former was used in making sacks etc. while the latter was used for making textiles. The Hon'ble Chairperson stated that the rates of tax on jute and cotton should be kept close to the existing rates and if jute attracted Nil tax, it should be charged to Nil rate under GST and if cotton attracted a tax of 5%, it should be taxed at the rate of 5% under GST. The Hon'ble Minister from Bihar stated that all agricultural products need not be taxed at Nil rate. He observed that even opium (afeem), cannabis (ganja) and tobacco were agricultural products but they could not be kept at Nil rate of tax. 9.8.6. The Hon'ble Chairperson suggested that fibre of silk and jute could be kept at Nil rate of GST as they were presently exempt, and cotton and other natural fibres could be taxed at the rate of 5%, while man-made fibres could be taxed at the rate of 18%. He furthe
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evel when cotton boll was sold whereas tax burden was falling on silk reelers and not on the earlier processes. The Secretary stated that as silk fabric was proposed to be taxed at the rate of 5%, yarn could also be taxed at the rate of 5%. The Hon'ble Minister from Assam also supported the proposal of the Hon'ble Minister from Karnataka. The Hon'ble Minister from Karnataka added that silk industry was already facing a threat due to smuggling of silk yarn from some neighbouring countries and taxing the reelers would disincentivise this sector. Dr. P.D. Vaghela, CCT, Gujarat, stated that if silk yarn was kept at Nil rate, it would lead to huge leakage of revenue due to mis-declaration. He added that the reelers would not be affected because the tax would be charged on reverse charge basis. The Hon'ble Deputy Chief Minister of Delhi stated that today, cotton fabric was also at Nil rate oftax. The Hon'ble Minister from Karnataka stated that reeler would bear full charg
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t the livelihood of more than 3.51akh artisan families depended on it. He added that handloom products were not only in demand outside the State, but were also used by the common people. He stated that he was in favour of exempting handloom fabrics and saris. The Secretary responded that keeping this into account, the rate of tax for all types offabrics was proposed to be kept at 5%. The Council agreed not to exempt hand loom fabric. 9.8.9. The Hon'ble Minister from Kerala raised a question as to why rate of tax on man-made fabrics was being lowered from 12% to 5%. The Secretary stated that most of the fabric were of mixed type and it would be very difficult to distinguish between man-made fabric and other types of fabric. He further added that power looms and hand looms also survived on polyester in places like Surat and presently the tax on fabric was zero, and therefore, it was desirable to keep the rate of tax on fabrics at 5% during the initial stage of GST implementation.
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, Tamil Nadu, stated that chemicals used for washing, bleaching of fabrics were taxed at the rate of 18% and this could lead to refund of taxes. The Secretary stated that it was already decided that accumulated input tax credit would not be refunded. The ACS, Tamil Nadu raised a question regarding applicable rate for imports and the Joint Secretary (TRU-I), CBEC, clarified that IGST on imports would be leviable at the applicable GST rates. 9.8.12. The Joint Secretary (TRU-I), CBEC, stated that embroidery or zari articles falling under Chapter 58 was already agreed to be taxed at the rate of 5% in the last Council Meeting held in Srinagar (18-19 May, 2017). The Hon'ble Minister from West Bengal stated thatzari should be in the exempt category and recalled that the Hon'ble Minister from Uttar Pradesh and the Hon'ble Deputy Chief Minister of Gujarat had made a similar suggestion during the last Council Meeting. The Hon'ble Minister from Odisha supported this proposal an
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consumers of carpet were wealthy persons and they could pay tax at the rate of 12%. Bidi wrapper leaves (tendu patta – Chapter 14) and Bidi (Chapter 24): 9.9.1. The Secretary stated that the Fitment Committee had proposed the GST rate of 5% for tendu patta as the present incidence of tax on this item was 8.41 % with CST, Octroi etc. and 5.91 % without Octroi etc. (embedded Central Excise duty – 0.85%; post-clearance Service Tax embedding – 0.14%; VAT – 5%; CST, Entry Tax, Octroi, etc. – 2.5%). He added that the Fitment Committee had proposed the GST rate of 28% on Bidi taking into account the fact that the total tax incidence on Bidi was 25.68% (Central Excise duty – 3.72%; Weighted average VAT rate – 19.46%; CST, Octroi, etc – 2.5%). He added that the Fitment Committee had left open the issue of Compensation Cess on Bidi. 9.9.2. The Hon'ble Minister from Madhya Pradesh suggested that no Cess should be imposed on bidi. The Hon'ble Minister from Kerala stated that
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oth tendu leaves and bidi should be kept at Nil rate. The Hon'ble Minister from Odisha stated that the rate of tax of tendu leaf in Odisha was 5% and tax rate on bidi was 10% .. His State being a tendu leaf bearing State, he suggested to keep the rate of tax at 5% on tendu leaves and 18% on bidi. 9.9.3. The Hon'ble Deputy Chief Minister of Gujarat raised a question as to whether dry tobacco leaves would also be covered under this category. The Joint Secretary (TRU-I), CBEC, clarified that it was already decided in the last Council Meeting that it would be charged to tax at the rate of 5% under reverse charge. The Hon'ble Minister from Jharkhand stated that presently in his State, there was 5.5% VAT on tendu leaves and no tax on bidi and suggested that tax on bidi should not be more than 12%. 9.9.4. The Hon'ble Minister from Karnataka stated that if tax treatment was to be differentiated on the consideration that it was hand-made, then he would present a list of pr
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e and bidi. The Hon ble Minister from Kerala asked as to why there was no VAT on bidi in Karnataka and the Hon'ble Minister from Kamataka responded that his State was contemplating to levy VAT on bidi about one and a half years back but decided to wait for implementation of GST. 9.9.5. The Hon'ble Minister from Kerala reiterated that if bidi was taxed at a rate similar to cigarette, then market demand would shift towards cigarette. He referred to a study by the Tobacco Institute ofIndia which stated that if there was a uniform taxation policy on cigarette and bidi, then market preference would shift towards cigarette. He stated that in Kerala, smoking had come down due to increased awareness and suggested that to curb smoking, there should be more awareness campaigns rather than higher tax. The Secretary stated that bidi was put in the 28% tax bracket as the existing tax incidence was about 25.68%. He stated that the Governments could not afford to lose revenue and health ha
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Minister from Maharashtra suggested that tax on tendu leaves should be kept at 5% as the present incidence of tax was 6%. Shri R.K. Tiwari, ACS, Uttar Pradesh, stated that tax on tendu leaves should be confined to the existing level of taxation. The Secretary stated that as bidi rolling was done in unorganised sector, it was a good idea to get tax at the stage of supply of tendu leaves itself. 9.9.6. The Hon'ble Minister from Kerala stated that he still opposed equal rate of taxation on cigarette and bidi. The Hon'ble Minister from Karnataka stated that bidi would become cheaper as cigarette attracted Cess at the rate of 160% whereas no Cess was proposed to be charged on bidi. He stated that there was a stronger case to put higher Cess on bidi as this was consumed by the poorer sections of the society who faced higher health hazards. He suggested to charge Cess on bidi, but at a lower rate than cigarette. The Hon'ble Minister from Punjab supported levy of Cess on bidi.
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n but no tax incentive should be given as bidi posed a serious health hazard. 9.9.7. The Hon'ble Minister from Kamataka stated that Governments should be mindful that the cost of treating the poorer sections of the society would also largely fallon the Government. The ACS, Uttar Pradesh stated that for the sake of good optics, the rate of tax on bidi should be 18%. The Hon'ble Minister from Chhattisgarh stated thatif tendu leaves was being taxed at the rate of 18%, then the tax rate on Bidi should be increased, as otherwise the cost of Bidi would come down. The Hon'ble Minister from Maharashtra stated that tendu leaves were collected by farmers and present incidence of tax on this item was 6% and therefore it should not be taxed at a rate higher than 6%. The Hon'ble Chairperson suggested that tendu leaves could be taxed at the rate of 18% under reverse charge and bidi could be taxed at the rate of 28%. The Council agreed to this suggestion. 9.9.8. The ACS, Tamil N
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tral Excise duty of 6%; silver unwrought or in semi manufactured forms at the rate of 8.5% and gold unwrought or semi manufactured form were charged to duty at the rate of 9.35% and base metals or silver clad with gold; platinum, unwrought or in semi manufactured form; and base metals, silver or gold clad with platinum not further worked were chargeable to duty at the rate of 12.5%. He further stated that articles of jewellery were charged to Central Excise duty at the rate of 1 % without input tax credit and at the rate of 12.5% with input tax credit. He added that imitation jewellery attracted Central Excise duty at the rate of 6%. As regards VAT rates, he stated that almost all States taxed jewellery at the rate of 1% with the exception of Kerala (5%), Maharashtra (1.2%) and Tripura (2%). He further stated that VAT rates for diamonds and other precious and semi-precious stones in different States were same as that for jewellery except in the case of Gujarat which had Nil VAT on roug
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on gold should be at the rate of 2%. He added that this would carry a good message that care had been taken of people across the population. The Hon ble Deputy Chief Minister of Gujarat supported the proposal to keep a low rate of tax on gold. The Hon'ble Deputy Chief Minister of Delhi stated that the tax rate on gold should be kept low in order to curb tax evasion. The Hon'ble Ministers from Telangana and Maharashtra also supported a low rate of tax on Gold. The Hon'ble Minister from Karnataka stated that during his interaction with trade representatives, they raised the issue as to what was the justification to tax gold at a low rate when it was essentially a luxury commodity. The Hon'ble Minister from Kerala stated that gold need not be treated as a special item to be taxed at a low rate. He observed that it was not an item of consumption by the poor people as the top two income deciles accounted for about 80% of the total consumption of gold in India. He stated this
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at gold should not be taxed at a low rate as it was a means of hoarding black money and pointed out that more than 30 crore people in the country were below the poverty line and they could hardly afford to buy gold. He stated that gold was like a luxury good. The Hon'ble Minister from Andhra Pradesh stated that gold should be taxed at the rate of 5% in order to achieve revenue neutral rate. 9.10.3. The Hon'ble Minister from Chhattisgarh stated that the main issue in respect of gold was evasion of tax and a low rate of tax should be kept in order to bring gold in the tax net. The Hon'ble Minister from Jammu Kashmir stated that there was no justification to keep gold at a low tax rate and suggested to minimise the tax rate slabs and tax gold at the rate of 5%. The Hon'ble Minister from Jharkhand stated that almost all States charged VAT on gold at the rate of 1 % and the poorest people also wanted to buy gold for marriage ceremony. He suggested to keep the rate of ta
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very less because they claimed very high wastage or it was difficult to distinguish between machine made and handmade jewellery in their premises. 9.10.5. The Hon'ble Chairperson observed that the Council had a vertically divided opinion between 2% and 5%. He stated that he agreed with the arguments of the Hon'ble Ministers from Kerala and Bihar for not supporting a low rate of tax but it also needed to be borne in mind that higher tax rates on gold would lead to smuggling as roughly the annual demand for gold in India was about 1000 metric tonnes. He stated that gold and cigarettes were the largest smuggled items in India. The Hon ble Deputy Chief Minister of Gujarat, suggested as a compromise, to keep the tax rate on gold and gold jewellery at 3% as this sector provided large scale employment and also attracted considerable investment. The Hon'ble Ministers from Assam and Kerala suggested a compromise rate of 4%. The Hon'ble Chairperson suggested to keep the rate o
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rmed Forces (commonly referred to as CSD), was created to provide easy access to quality products of daily use, at prices less than market rates to the soldiers, ex-servicemen and their families and it was not driven by profit motive. He stated that the Canteen Stores Department had 34 depots strategically located across India which in turn catered to thousands of Unit Run Canteens (URCs) which it was mandated to serve. He explained that presently, CSD enjoyed partial or full exemption (which varied from State to State) on procurements by CSD, supplies by CSD to the URCs and supplies by URCs to the customers. He stated that during 2015-16, sales from CSD was about ₹ 15,828 crore; sales net of liquor sales was ₹ 13,421 crore; total VAT exemption benefit on non-liquor sales was ₹ 1376 crore; and percent of VAT concession on items other than liquor was 10.3%. He stated that the Council could consider 50% concession from GST on supplies to CSD through a reimbursement mech
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He stated that refund of CGST and SGST could be given for supplies to CSD canteens and the subsequent supplies to the Unit Run Canteens and from there the customers could be exempt from the tax. He added that under this scheme, a different rate for supply to CSD canteen was not being applied and only a mechanism of refund would be implemented through a notification. The Hon ble Chairperson observed that earlier the entire burden of exemption for CSD Canteen was on the States but now 50% of this burden would be shared by the Centre while refunding the tax proceeds. 9.10.9. The Secretary requested the Council to consider whether the same treatment could be given to the para military forces. The Hon'ble Minister from Jammu Kashmir suggested that this scheme should be limited to the defence forces only. The Hon'ble Minister from Maharashtra suggested to give this benefit to para military forces also. The Hon'ble Minister from Uttar Pradesh suggested to give this benefit t
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Addendum. 10. For agenda item 4, the Council approved the rates of GST on supply of goods as listed in Volume-2 of the detailed agenda notes with the following modifications: – (i) to tax cereals, pulses and flour put up in unit container and bearing a registered brand name at the rate of 5% instead of keeping them in the exempt category; (ii) to tax goods falling under Chapter heading 8437 (cleaning, sorting, grading machinery; milling machinery) at the rate of 5% instead of the proposed rate of 12%; (iii) to tax footwear with retail sale price of less than ₹ 500 at the rate of 5% instead of the proposed rate of 12%; (iv) to tax raw jute at Nil rate instead of the proposed rate of 5%; (v) to tax khadi yarn made from charkha at Nil rate instead of the proposed rate of 5%; (vi) to tax all varieties of fabric at the rate of 5% instead of the proposed rate of 12% and not to allow cash refund of any accumulated credit of duty arising out of inversion of tax;
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da Item 5: Presentation on concept note on operationalizing the Anti-profiteering Clause in GST Law: 11.1. Introducing this agenda item, the Secretary stated that Section 171 of the CGST Act and the corresponding provision in the SGST Act required that any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit should be passed on to the recipient by way of commensurate reduction in prices. This Section also provided for constitution of an Authority or empowering any existing Authority to examine whether the benefit of input tax credit or reduction in tax rate availed by a registered person had actually resulted in a commensurate reduction in the prices of the goods or services supplied by him. It also provided that the authority shall exercise such powers and discharge such functions as may be prescribed in the Rules. He stated that to operationalise this provision of the law, Rules would need to be drafted. He stated that the draft Rule
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nd then either the Council itself or a Committee constituted by the Council could take a final decision. 11.2. The Secretary informed that during the meeting of officers of the Central and the State Governments held in the morning, a major doubt expressed was whether the Council should itself take a decision as there could be several Court cases arising out of such decisions and it might not be advisable to expose the Council directly to court related litigation. The CEA observed that a lot of anxiety had been expressed in the media on the Anti-profiteering clause and there was a fear of return of 'raid raj'. He suggested that as the spirit of this provision was to help in the transition to GST, the Anti-profiteering Rules should have a sunset clause of nine months or one year. The Hon'ble Deputy Chief Minister of Delhi stated that there was a lot of anxiety among the public about this provision. He stated that tax would be levied on the market price and this would also
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the very purpose of this provision. He stated that one possible organisation to conduct investigation could be the Competition Commission of India. The Hon'ble Deputy Chief Minister of Delhi observed that the experience with the Competition Commission ofIndia was not good. 11.4. The Hon'ble Minister from Kerala stated that he was happy that Anti-profiteering Rules were being considered. He observed that due to reduction in incidence of tax, there would be less collection of tax to the tune of about ₹ 50,000 crore and it was important that this should be passed on to the consumer. He suggested that a matrix of previous tax rate and present tax rate should be made available to public in order to enable them to take an informed decision. The Hon'ble Chairperson observed that Section 171 dealing with Anti-profiteering was part of the law and to shorten its life, a legal exercise would be required. He observed that one could observe during the course of the year whethe
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hat newspaper publicity had already started. 11.5. The Hon'ble Minister from Mizoram supported the suggestions of the Hon'ble Chairperson. He also suggested to insert a provision for offence and punishment in the Act itself or to incorporate it in the Consumer Protection Act. The Secretary clarified that punishment on account of Anti-profiteering was inbuilt in the proposed draft Rules where it was provided that in case where profiteering was found, the taxpayer could be directed to reduce price; return the amount equivalent to the amount not passed on to the recipient by way of commensurate reduction in prices along with 18% rate of interest; or recover the amount not returned within thirty days and such amount to be deposited in the Consumer Welfare Fund created under Section 57 of the CGST and SGST Acts. The Principal Secretary (Revenue), Telangana, stated that as the Council would change rates of tax many times, it would not be advisable to have a sunset clause for the a
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ed an inquiry, an investigation would be carried out by an Authority and its inquiry report with the recommendations would be referred back to the Standing Committee. The Council further agreed that the Anti-profiteering Rules would be worked upon further on the basis of the discussions held in the Council. 12. For agenda item 5 , the Council approved the broad principles of the draft Anti-profiteering Rules, namely, that when a complaint was received, it would be referred to a Standing Committee which would decide whether an inquiry should be initiated on the complaint and once the Standing Committee recommended an inquiry, an investigation would be carried out by an Authority and its inquiry report with the recommendations would be referred back to the Standing Committee. The Council also approved that the Anti-profiteering Rules would be worked upon further on the basis of the discussions held in the Council. Agenda Item 6: Any other agenda item with the permission of the C
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n had been restricted to taxes on intra-State sale of petroleum products and alcoholic liquor for human consumption. Further, Entry 62 of List-II (State List) of the Seventh Schedule to the Constitution had been restricted to taxes on entertainment and amusement to the extent levied and collected by the Panchayat or the Municipality or the Regional Councilor the District Council. He added that consumption or sale of 'electricity' was a separate Entry 53 in the List-Il (State List) of the Seventh Schedule to the Constitution which read as follows: Taxes on the consumption or sale of electricity . He pointed out that the Hon'ble Supreme Court in a number of decisions had held that 'electricity' fell under the category of' goods'. He stated that gi ven these Constitutional provisions and the observations of the Hon'ble Supreme Court, a view needed to be taken as to whether GST would be applicable on supply of 'electricity' or not. 13.2. The Secr
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Ministry of Law, it was proposed that the Council could recommend that the supply of 'electricity' be exempted from the levy of GST. 14. After discussion, the Council agreed to exempt the supply of 'electricity' from the levy of GST. Notifying Provisions related to Composition Levy 15.1. Introducing this agenda item, the Secretary stated that Section 10 of the CGST Act, 2017 provided that a registered person, whose aggregate turnover in the preceding financial year did not exceed ₹ 50 lakh, could opt to pay tax under Composition levy. Under this option, which was essentially meant to reduce compliance cost for small taxpayers, a person could pay tax at an alternative rate on the turnover. He stated that the taxpayers who were registered under the existing laws were being migrated to GST and that the process of migration had already started in November, 2016. The migrated taxpayers had been allotted a provisional registration. At the time of giving Go
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enefit of Composition levy would have to be granted under the CGST Act, 2017 and such option would be deemed to be allowed under SGST Act and UTGST Act as and when such Acts were notified. The Secretary proposed that the Council could approve notifying Section 10 of the CGST Act relating to Composition levy from 19 June, 2017 and the States that had enacted their SGST Act could also notify the same Section. The Council agreed to this proposal. Notifying Provisions related to Appointment of Officers 16. Introducing this agenda item, the Secretary stated that Section 3 of the CGST Act, 2017 provided that the Central Government shall, by notification, appoint different classes of officers for the purposes of the CGST Act. Section 4 of the CGST Act empowered the Board (Central Board of Excise and Customs) to appoint officers as it might think fit in addition to the officers notified by the Government under Section 3. Section 5 of the CGST Act provided for powers of the officers.
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tifying Provisions related to Registration 17.1. Introducing this agenda item, the Secretary stated that Sections 22 to 30 of the CGST Act, 2017 provided for registration of taxpayers under GST. However, persons already registered under the existing law (Central Excise, Service Tax, Value Added Tax, Central Sales Tax etc.) were proposed to be migrated to GST through a simpler process so that the existing taxpayers were not required to apply for fresh registration for GST. The existing taxpayer would be migrated under the provisions of section 139 of the CGST Act. He informed that the process of migration of presently registered taxpayers had already started in November, 2016. He informed that the migrated taxpayers had been allotted a provisional registration. He further stated that during the 14th Meeting of the Council held on 18 and 19 May, 2017, Rules on registration, apart from other six rules, had been recommended by the Council. 17.2. He stated that in order to issue re
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31 May, 2017 but most were yet to be notified. Therefore, issuance of registration certificates to migrated taxpayers and fresh registrations to new taxpayers would have to be granted under CGST Act, 2017 and such registrations would be deemed to be granted under SGST Act and UTGST Act as and when such Acts were notified. He proposed that the Council could approve notifying Sections 22 to 30 and Section 139 of the CGST Act, 2017 and Section 20 of the IGST Act, 2017 from 19 June, 2017 and the States that had enacted their SGST Act, could also notify the same Sections (other than the IGST Act). The Council approved this proposal. E-Way Bills: 18.1. Introducing the agenda item on e- Way Bills, the Secretary stated that consequent upon bringing Draft Rules on e-way bills framed by the Law Committee in public domain in April, 2017, various representations had been received on these rules. He enumerated the key issues raised by the trade and industry in relation to e- Way Bills:
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or completion of transport operation, which appeared to be impractical and removed from reality. Further any violation of time lines had penal consequence. v. The coverage of the rules was ubiquitous and did not provide for relaxation for any kind of movement such as that for imports or exports. So any movement of the export goods from the ICD to the Gateway port or for the transhipment of the imported goods from gateway port to the ICD had not been given any relaxation from the application of rules. vi. The rules required that any transhipment of the goods during movement would entail the generation of a new e- Way Bill. The compliance burden created by this requirement would be huge as transhipment was one of the essential attributes of cargo movement and was required for efficient movement of goods throughout the country. Besides, there might be certain eventualities such as accidents where the goods would require to be shifted from one conveyance to another. vii. The draf
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d in this view, finalisation of Rules and related Forms might take some time and software could be developed only after finalization of the Rules and Forms by the Council. He suggested that implementation of the e-Way Bill system could be postponed by a few months. He informed that GSTN would require about six months to put the e- Way Bill system in place, as during the first three months after the GST roll out, they would be busy in the implementation phase. The Secretary placed the agenda before the Council to discuss and decide regarding a suitable date and modalities of implementation of the e-Way Bill System in the GST regime. 18.4. Starting the discussion on the agenda item, the Hon'ble Deputy Chief Minister of Gujarat stated that in his State, the e- Way Bill system had been introduced two years back and the system was functioning well. The Hon'ble Minister from Bihar stated that as the CGST and the SGST Acts had been passed, e-Way Bill system could not be kept in abe
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blem and wondered whether an agency, other than GSTN, could carry out the work of developing an e- Way Bill system. The CCT, Karnataka, stated that States like Karnataka, Gujarat, Kerala and West Bengal had an efficient e- Way Bill system and replacing them with a system of physical inspection would lead to a lot of harassment. CCT, Gujarat stated that his State had no check-posts and the e-Way Bill was being given online as well as on mobile phone. He stated that only using invoice could potentially lead to traders destroying the invoice after crossing the inter-State border and there would be no trace of movement of goods leading to evasion of tax. He suggested that till the e-Way Bill system was introduced in GST, the States should be allowed to retain their present system of validation. 18.5. The ACS, Uttar Pradesh, stated that his State also had a very robust e-Way Bill System which was found useful both by the traders and the Government. He noted that the system had helped to
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on e-Way Bill system were yet to be reviewed by the Law Committee and the process of tendering and subsequent work could take about five months. The Hon'ble Minister from Odisha stated that in Odisha, waybills were generated online and waybills were for inter-State movement of goods only and not for intra-State movement of goods. However, the present system should continue till such period when GSTN created e-waybill system. The CCT, Gujarat, stated that the Law Committee would try to finalise the e- Way Bill system at the earliest and that the NIC (National Informatics Centre) could possibly do this work in the shortest time span. The Secretary enquired whether the existing e-Way Bill system of Karnataka could be scaled up to make it operational at all-India level. The CCT, Karnataka, stated that such a system could only be created by NIC, Delhi. The Secretary stated that even for NIC to take up this work, e- Way Bill Rules would need to be finalised. The Hon'ble Minister fro
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d as a result, cost of goods supplied to these islands increased between 5% and 25%. He stated that in order to allow the local residents access to goods at a reasonable price, no VAT was introduced in the UT. He stated that with the introduction of GST in the UT of Andaman and Nicobar, the goods would become expensive and he suggested to establish a mechanism to give compensation to the UT of Andaman and Nicobar. The Administrator of Lakshadweep also stated that they had no octroi etc. and introduction of GST would lead to increase in prices. The Secretary stated that their problems would be looked into separately. The Hon'ble Lt. Governor of Andaman and Nicobar also stated that presently they had no bureaucracy dealing with tax but they were training their staff and thanked the Central Government for extending help in this regard. Request for reviewing the rates of tax agreed earlier by the Council: 20.1. The Hon'ble Deputy Chief Minister of Delhi stated that he had
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as follows: … curry and other spices, masalas using mixture of spices of all forms and in all varieties ; unbranded sugar confectionery be taxed at 5% instead of 18%; sea shells and handicraft items made from them should be Nil rated; pickles be taxed at the rate of 5% instead of 18%; electrical apparatus irrespective of capacity should be taxed at 18%; roasted gram should be included in Chapter 7, item 11 as fried grams ; glass for corrective spectacles and frames and mounting for spectacles should be kept at 12% instead of 18%; attachments to tractors should be taxed at 12%; cess on motorcycle should be only for engine capacity above 500 cc; concrete blocks/bricks be taxed at a rate lower than 18% and fly ash bricks should be taxed at 5%; wet grinder should be taxed at 18% instead of 28%; air compressors and weighing machineries should be taxed at 18% instead of 28%; power driven pumps should be taxed at 5% instead of 12%; non air-conditioned restaurants should be taxed at th
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Hon'ble Minister from West Bengal raised an issue regarding the timeline for implementation ofGST. He stated that the state of preparedness for GST roll out was not adequate because of several factors like Rules having not been finalised, GSTN not being fully ready, etc. He stated that because of this, July 2017 deadline for GST implementation looked difficult to achieve. He proposed that the deadline for implementation of GST should be extended by one month. The Hon'ble Chairperson observed that most of the issues relating to implementation of GST stood resolved by the Council. The Hon'ble Minister from Maharashtra stated that while passing the SGST Act, they had given an assurance in their Legislative Assembly that GST would be implemented by 1 July, 2017 and this deadline should not be changed. The Hon'ble Minister from Assam stated that the Council had decided the GST rollout by 1 July, 2017 and any extension in the deadline would adversely affect the entire market
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o 30 and Section 139 of the CGST Act, 2017 and Section 20 of the I G ST Act, 2017 from 19 June, 2017 and the States that had enacted their SG ST Act, to also notify the same Sections (other than the IGST Act); 22.5. to defer a decision on the e- Way Bill system and to ascertain whether NIC along with GSTN could create an all-India e-Way Bill system in a short time frame; 22.6. all representations regarding reduction in rates of tax to be submitted within a day or two and these shall be considered by the Fitment Committee of officers and their recommendations shall be placed before the Council; 22.7. the deadline for GST implementation shall continue to be 1 July, 2017. Agenda Item 7: Date of the next meeting of the GST Council: 23. The Hon'ble Chairperson suggested that the Council could meet in a week's time to consider the representations relating to rates of tax approved by the Council. He suggested that the next meeting of the Council could be held on 11
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