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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST - 42nd GST Council Meeting

Extract

..... ) for information of the Council 4. Timelines in respect of TRAN- 1/TRAN-2 declarations based on the discussions of 13th meeting of IT Grievance Redressal Committee held on 01.09.2020 5. Update on Return Enhancement and Advancement Project (REAP) & in-principle approval of overall architecture 6. Issues recommended by the Law Committee for the consideration of the GST Council i. Extension of the GSTR-1/3B system of return filing and change in due date for quarterly taxpayers upon introduction of the new GSTR-2B functionality ii. Issues related to Annual Return for Financial Year 2019- 20 iii. Steps taken to improve compliance behavior of taxpayers for making furnishing of GSTR-1 mandatory before furnishing GSTR-3B. iv. Amendment to FORM GSTR-1 and notification 12/2017-Central Tax, dated 28.06.2017 for improving data quality to enhance tax administration v. Agenda Note regarding refund to be disbursed in same PAN and Aadhaar linked bank account on which registration has been obtained under GST. vi. Proposal for amendments to CGST Rules, 2017 vii. Limitation period for taking cognizance or institution of prosecution under GST 7. Issues recommended by the Fitment Committee for the .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... meeting in line 4 to replace the presently recorded version (Several rounds of meetings were held amongst which one was held in the presence of Hon’ble Union Finance Minister and it was agreed that this issue will be resolved) with the following version “Several rounds of meetings were held in this regard. One such meeting was held in the presence of the Hon’ble Union Finance Minister and it was agreed that this issue will be resolved”. b. in Para 9 of the minutes recorded for the 41st GST Council meeting, in lines 46 and 47, to replace the presently recorded version (Further he brought up the issue that every State was getting 51% revenue share whereas Puducherry was getting only 26% whereas it was entitled to 51%) with the following version Further he brought up the issue that every State was getting 41% revenue share whereas puducherry was getting only 26% whereas it was entitled to 41%”. ii The State of Kerala suggested that: a. in Para 40 of the minutes recorded for the 41st GST Council meeting, to replace the presently recorded version (the Hon’ble Member from Kerala staled that he disagreed with the assessment made by the Finance Secretar .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... Wing. Sh. Yogendra Garg to place the Agenda before the Council, PC, GSTPW introducing the Agenda briefed the Council that the Agenda is regarding deemed ratification of Notifications. Circulars and Orders in relation to decisions already taken by GST Council and if deemed fit may be ratified and approved by the Council. He slated that in the 40th GST Council meeting held on 12-6-2020, the Council had ratified all the notifications, circulars and orders issued before 10-6-2020. He thereafter made a presentation (Annexure 5) listing out ail the notifications, rate and non-rate of CGST, UTGST, IGST and Compensation Cess Circulars and Removal of Difficulty orders issued since 10-6-2020 till 25-9-2020 under the GST Laws by the Central Government as available on www.cbic.gov.in 9. For Agenda item 2, the Council ratified the following: i. the notification, circulars and Orders as in Agenda Item and the presentation (attached as Annexure 5) made during the Council Meeting which are available on www.cbic.gov.in Act/ Rules Type Notification/Circular/Order Nos CGST Act/CGST Rules Central Tax From Notification No. 48/2020- Central Tax, dated 19.06.2020 to Notification No. 73/2020- Central Tax .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... Government will go. Now as per the suggestions given by the Hon’ble Member, the same will be incorporated and then in principle approval can be taken with regard to the nature and manner of data sharing, so that whatever is decided for Central Government, the same can be placed before the Council and based on that, data sharing can be done with CAG. He informed the Council that the Deputy CAG had met him some time back and placed similar request that going to all the States separately for data will be cumbersome and hinder proper audit. He emphasised that proper audit was must to ensure timely corrective action on the observations of CAG. 10.3 The CEO, GSTN, clarified that there were two aspects, one being selection of cases where audit will be done and for that data can be taken centrally. Second is once the cases are selected then they need to approach the particular jurisdiction and look at the files. He informed that now the Central Government authorities have created User-ID and password for the CAG Officers so that they can access the information. Suppose the CAG authorities want to look at the entire refund processing, they can see from start to end for those cases whi .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... on by the due date on account of technical difficulties on the common portal and in respect of whom the Council had made a recommendation for such extension. Similarly, due date of filing TRAN-2 had been extended upto 30.04.2020. In view of the spread of pandemic COVID-19, these timelines stood extended to 31.08.2020 vide CBIC Notification No. 35/2020-CT dated 03.04.2020 read with Notification No.55/2020-CT dated 27-06-2020. 12.1 He further informed that the ITGRC in its meeting held on 01.09.2020 had recommended 26 cases (12 cases received from Nodal Officers and 14 eases received on account of Court cases) for opening up of the portal to file revised TRAN- 1/TRAN-2. Further, another 31 cases viz. 9 Court cases and 22 cases received from Nodal Officer (received by nodal officers before 31.03.2020) were under examination by the GSTN. He informed that the ITGRC had observed that as due date for submitting the declaration electronically in Form GST TRAN-1 under present provisions of Rule 117(1A) was already over on 31.08.2020, it therefore appeared that ITGRC could not take up any fresh case for discussion and recommendation unless the Rule was amended. In view of the above, the ITGR .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... were to be carried out in the existing system and achieve the same objective. The Return Enhancement and Advancement Project (REAP)undertaken by the GSTN essentially involved, inter-alia, that the liability got auto-populated from the GSTR- 1, the credit got auto-populated from GSTR-1 of the suppliers and ultimately an auto populated return is generated. 14.1 Briefing the Council PC, GSTPW highlighted that following features had already been enabled under REAP: i Nil filing of GSTR 3B by SMS ii. Nil filing of GSTR-1 by SMS iii. Auto population of liabilities from GSTR-1 to GSTR- 3B for Monthly Taxpayer iv. Auto drafted ITC Statement (GSTR-2B): Elaborating on this point. PC, GSTPW stated that auto drafted ITC statement in GSTR-2B was now available. The Secretary explained that one of the major issues during discussions in the Council was invoice matching. In GSTR-2B details of all the suppliers invoices could be seen and on that basis his ITC was being computed leading us to the final goal of invoice matching. He slated that GSTR-28 was an important step in that direction. Fie reminded the Council of the presentation made by Sh. Nandan Nilekani in the 39th GST Council meeting held i .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... hly payments which was proposed to be rolled out as part of the new return system for smaller taxpayers with turnover less than ₹ 5 crores. He informed that such taxpayers arc about 89% in number and contributed only about 13% to the total tax revenue. PC, GSTPW stated that a similar QRMP system with a slightly different approach is now proposed to facilitate these small taxpayers. He highlighted that the major issue was computation of the tax liability every month after taking into account the outward supplies, inward supplies and ITC computation and filing of return because it may require some external assistance. He stated that under the proposed scheme all the small taxpayers having turnover less than ₹ 5 crores will have an option of either self-assessing their tax liability, or auto generating their challans of 35 percent of the cash liability of the last quarter. Thus, based on past tax liability, monthly tax liability would be allowed to be paid Instead of assessing the tax liabilities, Only at the end of the quarter, they would need to tile their return and assess the correct Liability. This way instead of filing GSTR-38 and GSTR- 1 every month, they would he r .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... M1 and M2 He stated that once GST Council granted in principle approval to the same, the Law Committee would work out the legal framework. 14.4 The Secretary GST Council reiterated that this was proposed to he brought from 01.01.2021 and that it had two components. One part being Technology which was already being worked out and they were confident that this would be done in time. The other part was legal for which certain changes in the Rules would have to be made which Law Committee will work out, so the taxpayers should get the ‘benefit of QRMP right from the fourth quarter of this Fiscal Year. 14.5 The Hon’ble Member from Goa lauded the proposal and stated that it was long due and he was waiting for invoice matching to be there. He complimented the officers for formulating this proposal and opined that they should move ahead with it immediately for it to be implemented from 01.01.2021. He reiterated that it was long overdue and congratulated the officers for having worked on it despite the pandemic. He hoped this will help to plug leakages and firm tip revenues. 14.6 The Hon’ble Dy. CM of Gujarat stated that it had always been discussed that the Forms and Retu .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... d by Law Committee. 16.1 Taking up the Agenda item 6(i) he stated that in the existing returns system consisting of GSTR 1-2-3. since GSTR 2 and GSTR 3 were kept in abeyance. GSTR-1 and GSTR-3B need to be prescribed time and again. He informed that the existing extensions were valid till 30 September 2020. The GST Council in its 39th meeting held 14th March, 2020 had already decided on incremental approach to new return system by enhancing existing return system and that as explained in the previous agenda item, the said project would get completed by 1st April 2021. Therefore, the proposal was that GSTR-3B and GSTR-1 be prescribed till 31st March 2021 and at the same time Law Committee would work on ensuring that the legal framework law gets aligned with GSTR-1 and GSTR-3B system which are going to be the final returns system, so that further extensions are not required. He further stated that second part of the proposal was that the due date of quarterly GSTR-1 is the last day of the month succeeding the quarter which would cause difficulty to the buyers in availing ITC on time since now GSTR-2B has been made available which gels generated on the 14th of the succeeding month. He .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... not have to worry about filing 9C. Further he stated that through data analytics if supposing they Found large gaps and somebody had taken more credit than due to him and if his turnover was Less than 20 crores, they could always ask for more information. The Secretary opined that this kind of balanced approach will protect the revenue and case the compliance burden. He requested the Council to approve the proposal. 16.4 The Hon’ble Member from Kerala stated that when they had increased the limit last time lie had opposed it justifying that the annual return was a very important instrument to check tax evasion. Now virtually they were giving it up in the name of easy compliance. He added that the extra effort to plug tax leakage has a compliance cost. They had already raised the limit and raising it further was not a balanced approach at all and therefore, he was not in favour of the proposal.16.5 The Hon’ble CM of Puducherry stated that the present status for filing of annual returns GSTR-9 and 9A was that it was optional for taxpayers with aggregate turnover less than ₹ 2 crores and the filing of GSTR-9C was mandatory for those with turnover greater than ₹ .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... rd or sonic documents from somewhere and floats a company, issues invoice and disappears. In order to get a registration, one will have to give Aadhaar and if somebody does not give Aadhaar number then in that particular case his premises has to be physically inspected. He was very glad to state that almost 90 percent of the new registration had been through Aadhaar based mechanism. Further he added that GSTR-2B auto-population and matching had been implemented. He requested the Hon’ble FM that instead of taking tune here in the next Council meeting they could actually come up with the presentation on the steps taken thus far to curb leakages minimise ITC leakages, the achievements on that front and the way forward and it could be discussed in detail. 16.7 The Hon’ble Member from West Bengal submitted that what the Hon’ble Deputy CM of Gujarat had said with regard to stakeholder consultation and inputs, in his experience having been on both sides of the story, he found, was a very constructive suggestion. There were two sides of the story one is those who create the shell companies and run away and the other is honest taxpayer who are made to go through such a rig .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ned that there was no need to relax it further as ₹ 5 crore limit was already set, it should be allowed to continue and they should not touch it and for the taxpayers with turnover above ₹ 5 crore, it was not a big deal as they were already getting their accounts audited. 16.10 The Secretary, with the permission of the Hon’ble Chairperson, staled that the older limit could be retained and accordingly no change may be done. The PC, GSTPW, added that as part of this agenda (ii), a clarification that annual return being optional for taxpayers with less than Rs. .2 crores aggregate turnover, was optional for composition dealers as well, my be issued. The Council approved the proposal to that extent. 16.11 The PC. GSTPW taking up Agenda 6(iii) briefed the Council that for auto- population and any matching what was most important is that their outward supply statement, GSTR-1 was flied. Currently the behaviour was very different though the behaviour had been changing ever since rule 36(4) was introduced in terms of which the credit availed cannot he more than 110% of the tax as per invoices declared by the supplier. Re stated that still there was a gap of about 20% betw .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... he delayed payment of tax. He informed that the Council had already decided that interest will be on net basis. Therefore, it is proposed that from 1st of April, the late payment interest would also auto populated in GSTR-3B so that it can be collected with tax payment itself. It will also bring in more discipline in GSTR-3B filing. No change in law was required and these all were procedural changes. Further, he informed that since GSTR-3B can contain liability of earlier months also, there will be a facility to modify and add interest. 16.14 Taking up the next Agenda Item 6(iv) on changes in HSN requirement, the PC, GSTPW, stated that tax administration had been struggling to generate the sectoral data. A conscious decision was taken that in the first two-three years of the GST to not burden taxpayers with HSN requirement. Currently, for taxpayers having aggregate turnover upto ₹ 1.5 crore no HSN is to be given, from R.s. 1.5 to ₹ 5 crore aggregate turnover it is only 2 digits and above ₹ 5 crores it is 4 digits. But this is leading to misuse besides challenge in getting sectoral data. Quoting the example of stainless-steel, PC,GSTPW, stated that people don&rsquo .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... om 15.10.2020 blocking will be reinitiated for taxpayers having aggregate turnover above ₹ 5 crore. He informed that for taxpayers having aggregate turnover below ₹ 5 crores, we would watch the behaviour and then take an appropriate call. He further stated that like they allowed GSTR-3B and GSTR-1 nil filing through SMS now the composition taxpayers who have no liability in a particular quarter also will be able to do NIL filing through SMS. He further highlighted some technical changes as mentioned in his presentation (Annexure 5) for approval of the Council. 16.17 Moving to the next Agenda Item 6(vii) pertaining to inclusion of GST laws in Economic Offences (Inapplicability of Limitation) Act 1974 the PC, GSTPW stated that this was very important as in CrPC there was a time limit for prosecution. He stated that in the Economic Offences Act (Inapplicability of limitation) Act, 1974 aIl the existing laws are listed there but die GST laws are not there. He informed that in some cases, people being arrested in GST offences were given bail on day one saying that GST Officers do not file prosecution application within the limitation period. The proposal is that all the Cent .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ank account of the claimant. xv. Approved Aadhaar revalidation at the time of filing refund application. xvi. Approved waiver of blocking of e-way bill during COVID period from 20.03 .2020 to 14.10.2020 - to be given legal backing through a proviso in CGST Rule 138E xvii. Approved blocking to be reinitiated from 15.10.2020 for taxpayers with turnover> ₹ 5 crore, xviii. Approved Nil filing of CMP-08 through SMS from a date to be notified-change in CGST Rule 67 xix. Approved change in Rule 142(1 A) making communication of demand ascertained by the officer in FORM DRC-01A optional xx. Approved changes in forms-RFD-01, GSTR-5 (non-resident) to include reverse charge liability, GSTR-5A (OIDAR) to include place of supply and Provision for declaring fee in DRC-1,2,7,8,9,24,25 & ASMT-16 xxi. Approved inclusion of GST Laws in Schedule to Economic Offences (Inapplicability of Limitation) Act. 1974 so as to exclude from said limitation and inclusion SGST Act in the Schedule of respective Acts or if such an Act is not there, then to insert proviso to Section 134. Agenda Item 7: Issues recommended by the Fitment Committee for the consideration of the GST Council. 7(i): The represen .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... itizers were classified under tariff item 3808 94 00 and attracted 18% GST mid as such there should be no distinction between them and alcohol- based hand sanitizers. 18.4 The Hon’ble Ministers from Delhi and Kerala expressed their agreement with the recommendations of the Fitment Committee. The Hon’ble Deputy Chief Minister from Gujarat also supported the recommendation. The Hon’ble Minister from Tamil Nadu stated that same rate should be there for all types of sanitizers otherwise it might lead to misclassification disputes. The Hon’bIe Minister from Uttar Pradesh stated that the present GST rate of 18% on all types of sanitizers should continue. The Deputy Chief Ministers from Bihar, Haryana and the Hon’ble Minister from Rajasthan also agreed with the recommendation. The Hon’ble Chief Minister from Puducherry also supported the proposal that GST rate of 18% should continue on all types of sanitizers. Thus, the GST Council, after considering the representation of HADMA dated 27th July, 2020, agreed with the recommendations the Fitment Committee on this issue. 19 For Agenda Item 7(i), the GST Council recommended that the Ayurveda /Unani / Siddha .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... y States and the UTs had not paid the AUC for FY 2020-21. Some of the States had requested for extension of time without interest. Hence, he requested the GST Council to give consent for extension of due date for payment of AUC for FY 2020-21 (both first and second installments) till 31-03-2021 without levying any interest. 21. For Agenda Item 8(i), the GST Council took note of the above and accorded its approval for extension of the due date For payment of AUC for FY 2020-21 (for both first and second instalments) till 31-03-2021 without levying any interest. Further, the States who had not paid the AUC for FYs 2018-19 and 2019-20 are requested to pay their dues at the earliest. Agenda Item 8(ii): Need for moving resources from CR model to T&M model for Important developments. 22. The CEO, GSTN explained the agenda that the proposal of Software development under actual identified resources utilization model, commonly known as Time and Material (T&M) basis, to implement the changes identified under roadmap for incremental improvements to existing Returns (Linking of GSTR-1/GSTR-2A/2B with GSTR-3B) was placed before the GST Council in its 39th meeting held on 14th March 2020 .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ng the software changes mentioned in para 5 of the Agenda Item 8(ii) from 01- 10-2020 to 30-06-2021 over and above the existing resources. He also sought extension of REAP AND LEAP Projects with existing resources from 01-10-2020 to 30-06-2021. 23. For Agenda Item 8(ii), the GST Council look note of the above and accorded its approval to the proposal contained in Agenda Item 8(ii). Agenda Item 8(iii): Status update on conversion of Goods and Services Tax Network (GSTN) into 100% Government-owned Company 24 The CEO, GSTN stated that the GST Council in its 27th Meeting held on 4th May 2018 had decided that the GSTN will he converted into a 100% Government-owned entity by transferring 51% equity shares held by the Non-Government institutions to the Centre and States equally. The Union Cabinet in its Meeting held on 26th September 2018 had approved the proposal and the present status of conversion of GSTN into 100% Government-owned Entity. 24.1 He apprised that the Union Government and 24 States / UTs had paid the amounts while the payment was pending from 07 States as on 16-09-2020. After the payment to the non-Governmental institutions for the shareholding by the remaining States, fu .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... period of five years or for such period as may be prescribed on the recommendations of the Council. To ensure that the total cess is sufficient to cover the compensation requirement during the entire transition period, the ley of cess would have to be extended beyond initial period of five years. He informed that the Learned Attorney General of India, in his opinion in Note dt 26-08-2020. had recommended that the continued levy and collection of the cess beyond the period of five years could take place only in the event there has been a shortfall in the payment of compensation to the States during the 5 year transition period. In other words, the GST Council would recommend the continuance of the cess beyond the transition period of 5 years only in a situation of shortfall during the transition period, which would necessitate the raising of hinds for paying the compensation to the Stales after the 5 year period is over. 26.1 In light of the above, the Secretary requested the GST Council to take a view and consider the recommendation that the levy of compensation cess be extended beyond the transition period of live years for such period as may be required to meet the gap. Further, .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... scussion on the Agenda item. The Joint Secretary, DoR stated that after the discussion on ways to meet shortfall in cess collection in the 41st meeting of the GST Council held on 27-08-2020, States were given two options to meet their GST compensation shortfall for current FY from market borrowing. The details of the two options were communicated to States by the Department of Expenditure, Government of India. Thereafter, 21 States opted for Option-1 while Puducherry indicated that it would accept Option-1 if accepted by all States, He further stated that the States while giving the option have also made several suggestions and given their views which are tabulated in Annexure to the Agenda Item. No State has yet opted for the Option-2. 28.1 The Secretary stated that based cii these suggestions, the Department of Expenditure had agreed to modify Option-1 as under: (i) Projected growth of 10% would be reduced to 7% and the amount under Option-1 would then be about 1.1 lakh crore. (ii) The interest on borrowing will remain the first charge on the Fund. The repayment schedule will be spread out during the period of extension of cess beyond transition period so that the part of the ces .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... of the concept of GST to the passing of the GST Act should work. He stated that the Centre should come forward to carry out its bounden Constitutional duty in times of stress by being the agency taking the loan which would be serviced by the extended Cess collections beyond June 2022. instead of just being a guarantor. 28.4 The Hon’ble Minister from Rajasthan stated that he agreed with the views of the Hon’ble Minister from Chhattisgarh. He stated that during the debate on GST in the Parliament, doubts were expressed regarding availability of compensation to the States and the draft Act was amended to remove the word ‘may’ and insert the word ‘shall’ in its place. He stated that it was a constitutional duty of the Centre to compensate the States and not giving compensation to the States was harming the States, more so during the Covid-19 pandemic. 28.5 The Hon’ble Deputy Chief Minister of Gujarat thanked the Chairperson for finalizing and offering two options to the States for handling the compensation shortfall, especially during the current Covid scenario and the slowdown in the economy and when the revenues of both the Centre and the Sta .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ancial year under Option-1. He further stated that in such circumstances, given that there are only limited options his State chooses Option- with a hope that it would be reworked to reflect the highest proportion of the actual loss in revenue. 28.8 The Hon’ble Minister from Madhya Pradesh thanked the Chairperson for considering the suggestion of the State about reducing the assumed growth rate from 10% to 7%. He stated that under Option-1, even after the State borrows ₹ 4,500 crore, a further sum or about ₹ 2295 crore would be due. He stated that Madhya Pradesh had also suggested that after the period of cess collection is over, after the payment of interest on borrowing, cess collections should be used for paying the pending compensation amount before the principal on the borrowing is paid. 28.9 The Hon’ble Minister from Karnataka stated that there was a need to shift to the solution of the problem, which is unprecedented and was never envisaged by the predecessors. He stated that the whole country was in dire economic and health emergency. He further stated that the proposals brought before the GST Council had further instilled the confidence among the St .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... uncil. on record in the minutes of the meeting; that when there was a shortfall and when the cess was not accumulating, the Centre would go for open market borrowing to compensate the States. He further stated that the Centre should go for market borrowing as it was the liability of tite Centrai Government to do it and it was mitch easier for them, and the Centre should not tell the States to borrow. Further the Union Territories of Delhi and Puducherry would face additional complexities also. He further stated that there had been a strong tradition of arriving at consensus in the GST Council meetings under the then Chairman as well as the present Chairperson by seeing the larger interest of the nation and the people of the country. He suggested that the Centre should approach the RBI for borrowing and give the money to States as it was a much easier method than States going for borrowing. 28.11 The Hon’ble Deputy Chief Minister of Tripura stated that he agreed with view of the Hon’ble Minister from Gujarat regarding being pragmatic and moving forward. He also agreed with the views of the Hon’ble member from Karnataka that it was a practical solution that the loan .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... l Government to compensate the States. Further, on 18th February 2017, the then Secretary of the GST Council was asked why the Act should not clearly say that the Parliament shall compensate in five years, instead of the present reading of the Act. The then Secretary went on record to say that the Centre could raise resources by other means for compensation and this could be recouped by continuation of cess beyond five years. He further mentioned that the Chairperson stated on March 14th 2020 that it was the solemn commitment to the States and the Centre is duty bound to give compensation to the States. The Hon’ble Minister informed that when he was the Chairman of the Empowered Committee, the States had given up 70% of taxing capacity under only one condition that the Parliament shall compensate the States for a period of five years. Fie stated that a letter was sent from the Hon’ble Chief Minister of West Bengal to the Hon’ble Prime Minister, saying the Centre should borrow and the States would cooperate by extending the Cess so that the Centre does not have to pay anything on its own apart from the cess collection irrespective of how long it would take. Fie fur .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... 20. 28.15 He further stated that the state of economy was not good, and the States’ fisc was stretched like never before and hence measures need to be taken to settle the past dues of compensations. He stated that this would collectively match with the 25% of the revenue gap for the current year and hence the compensation cess collected should be disbursed without any further delay. He further mentioned that the Council could go ahead with the interim plan of borrowing for requirements up to December 2020 and by that time, the proposals could be fine-tuned. He stated that the Centre was expanding the first part of borrowing in Option- 1 by another about ₹ 13,000 crore with the provision of IGST settlement of 2017-18 providing additional revenue of ₹ 13,000 crore. With GST picking up in September 2020 and cess crossing ₹ 7,000 crore and hopefully more in near future, there was not much left at stake to deny full compensation as the gap could only be around ₹ 60,000 crore. He suggested that a Group of Ministers may be formed on the subject as the issue was loo sensitive and had potential to become a precedent in settling compensation issues in the future .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... States was that the revenue loss which may occur when the taxing powers of States get subsumed, and when the taxation system changes from origin-based to destination-based. The issue of GST compensation was discussed in the Empowered Committee meetings held on 14th June and 26th July 2016. The States had unanimously agreed that the compensation should be paid in full for a period of five years. The Union Finance Minister, who was appreciative of the concerns of the States, assured the Empowered Committee that the Centre is committed to give full compensation for a period of five years. The States were assured of compensation by the Central Government and it was incorporated in the Constitution (One Hundred and One Amendment) Act 2016, and further to allay the fears it was mandated that “Parliament shall, by law” provided for compensation, instead of “may”. It cannot he denied that compensation package and the comfort it provided to the states was the clincher in implementing GST across the country. He added that during the discussions in the 5th meeting of the GST Council held on 2nd /3rd December 2016, the 7th meeting of the GST Council held on 22nd /23rd .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... which was already permitted. Option-2 did not meet these conditions. With the current proposal, these principles were not upheld. He drew attention to the statement made by the Union Finance Minister two days after the last GST Council meeting, wherein she assured that as a commitment of the Centre, full compensation would be paid to the States. 28.19 The Hon’ble Minister of Kerala further stated that there were four issues which needed to be discussed. (1) the issue of how much compensation would be paid now and how much to be deferred, (2) the issue of who should be borrowing, the States or Centre or both, (3) what would be the terms and conditions of borrowing, and (4) the issue of repayment. He stated that the issue of repayment was already settled. He stated that lie was happy with the statement of the Secretary that the full compensation would be paid. He further stated that he believed that the Council as a federal institution must be strengthened and that all the members must strive to have a professional approach to decision making and must compromise to develop a consensus. Ile stated that he agreed with the view expressed by the Hon’ble Member from West Benga .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... wered Committee and the Parliament, yet, a discussion should be held regarding how much the Centre should borrow and how much should the States borrow and arrive at a consensus. He stated that regarding the terms and conditions, since it was already decided that the repayment was to be made from the extended cess collection and the interest also to he paid from the same, the whole 2% additional borrowing could be made unconditional as few States would it very difficult to implement the condition regarding direct benefit transfer in electricity sector. He stated that in case this was not acceptable, a dispute resolution mechanism be made active and the issue may be referred to the same as it would only show the maturity of the Council in working to arrive at a consensus. 28.21 The Hon’ble Minister from Telangana stated that the distinction of loss of revenue on account of implementation of GST and of Covid was artificial. He further stated that it was the Constitutional right of the Slate to gel the entire shortfall. He stated that compensation payment should not be linked to normal or additional borrowing which is permitted to States under the Aatma Nirbhar Package. He stated .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... he Council would compensate the States for the revenue loss due to the implementation of GST, He stated that as per Section 18 of the Constitution (One Hundred and First Amendment) Act 2016 the shortfall due to implementation of GST was to be compensated, the Centre was helping the States even though the Central Government is also facing several such challenges. He stated that the Central Government was also Facing the Covid-19 crisis as the States did and that the entire vaccination program had been taken over by the Centre which would involve expenditure of huge amount. This is in addition to the handling of the situation at Ladakh. He stated that this was the time to strengthen the hands of the Centre rather than having difference of opinion. He further stated that the assurances about the principal amount the guarantor, the extension of cess period and no limitation on the borrowing of the States, secure the interests of States. He further stated that the Centre had been standing by the States in disbursing the Compensation amount, devolution amount and the revenue grants even though similar situation is being faced by the Centre. 28.24 He further stated that the country was ju .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ble pool was reduced to ₹ 15 lakh crore. This had a direct bearing on the revenues of the States. In 2018-19 ₹ 7.61,000 crore was the share of the States taxes which had come down to ₹ 6,50,000 crore in 2019-20. He stated that the Cesses and Surcharges had become the major portion of total taxation which was reflecting on the divisible pool and on the taxes transferred to the States. 28.26 He stated that in this scenario, where the States had far more direct responsibilities for governance and administration, it was requested that certain decisions may be taken which would have a bearing on the revenues of the States such as (i) the assumed growth rate of 7% may be reviewed further in a scientific manner because there was slowdown in the country’s economy and global economy even before Covid (ii) de - linking of the 2% additional borrowing facility which was provided to the States as part of Aatina Nirbhar Package and (iii) the priority order for repayment to be changed to from interest first, principal next and arrears of compensation later to arrears of compensation being the first charge. interest as the second charge and the repayment of principal as the .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... le because of the impact on the health and subsequent economic costs involved. He stated that cess should be charged on these products as was suggested by scientific data. He stated that according to his calculation an amount of ₹ 49,000-50,000 crore could be raised with minimum increase in the rate of cess so that the burden of loan on the States and the Centre would be reduced. He further stated that around ₹ 1,04.500 crore i.e. 1.16% of the GDP was spent on treatment for ailments of tobacco use in 2011 and it could be further more at present. He stated that the Council need not be subjected to allegations that it was protecting the tobacco industry and all the members of the Council should support this proposal as these products were harmful to the health and were deteriorating the health of the common man in the form of bidis, and of the rich in the form of smokeless, e- cigarettes. He further stated that people from tobacco industry had given a calculation with much reluctance that even with just one rupee increase per stick, the revenue gain would be around ₹ 50.000 crore. 29.2 He further requested that a sum of around ₹ 7000 crore collected at present .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... can possibly be subjected to compensation cess. He stated that similar to raising compensation cess on cigarettes and tobacco products as suggested by the Hon’ble Member from Goa, there was a need to consider a change of tax structure on Pan Masala also as regularly suggested by the Hon’ble Member from Uttar Pradesh. He stated that an Officers Committee may be made to deal with the issues of identifying products which can be subjected to cess and the products on which cess already exists but it can be raised. He stated that the States were already reeling under severe economic pressure and the process for borrowing may be started at the earliest. He further stated that regarding the dispute resolution authority, he was the Chairman of the Empowered Committee amid that the Standing Committee and perhaps even the Parliament had already rejected that proposal since the States are sovereign and no other authority or Tribunal could direct them in these matters. He stated that if a dispute arises, or if there was a difference of opinions, the Council already had the mechanism of constituting Groups of Ministers (GoMs) to deal with those issues and had already constituted 11 .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... e. He stated that these could be good sources of revenue. He stated that before GST, in 2015-16 around ₹ 500 crore tax had been collected in brick kilns and at present, it was reduced to less than ₹ 100 crore and thus a decision should be taken at the earliest. He further stated that the problems in Mentha would also be eliminated if Reverse Charge Mechanism (RCM) in which the buyer who purchases from the farmer at the first instance would pay the tax, was implemented. He stated that the State was already doing better at tax collection, compared to last year’s collection, and hoped to continue the performance with the support of the Centre. 29.8 The Secretary stated that the issues of pan masala, brick kilns, mentha oil and casinos were already discussed earlier and if time permitted, a presentation regarding the same could be made, so that the Council can be made aware of the issues involved, then the Council could guide how to move further. 29.9 The Hon’ble Deputy Chief Minister of Gujarat stated that a scheme of Reverse Charge Mechanism already existed in Cotton in Gujarat, where lakhs of farmers sell cotton and the dealers who purchase the cotton to make .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ng undertaken by the States. She stated that since she took charge with due process, she had given time to address all the long pending issues. She thanked all the members of the Council for being positive in solving the three problems. She further stated that she was always willing to hear any views of the members whether it was suggestions or criticism and that she never hurried through when a member wants to put his point of view forward. The Hon’ble Chairperson further stated that she was not in favour of any code of conduct for the members as each member was a senior and experienced leader managing their States even during the current challenging times. 29.15 The Secretary, GST Council stated that borrowing program was discussed with the Secretary Department of Expenditure and Secretary, Department of Economic Affairs who were in touch with the banks. He further stated that since Agenda Item 9 was approved, procedural formalities could be started within the next two days and that other States which had not exercised their options could also take a decision within the next two days. He stated that the Reserve Bank desired a borrowing calendar so that they can plan the log .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... f the constitution provided a dispute resolution mechanism and that it could be activated. Tie further stated that if there was no consensus, a division could be called. The Hon’ble Member from Chhattisgarh also supported a division. 29.21 The Hon’ble Deputy Chief Minister of Gujarat stated that the matter which was being discussed was of immense importance for the States. He stated that the first priority was how to get the fund at the earliest. He Further mentioned that as the Hon’ble Member from Karnataka and the Hon’ble Member front Assam discussed that once money was received, there would be spurt in economic activities. It was already stated by the Secretary to the Council, if they get approval, they would start the process of availing loan from tomorrow itself. He further stated that any delay would only hurt the States and not the Centre as the States were facing the shortfall of fund and their schemes were not working and requested all the members to choose Option-1 and start the borrowing procedure at the earliest. He stated that there was never a division in the GST Council earlier and it would not be appropriate to go for voting or division. 29.2 .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... Hon’ble Minister from Kerala stated that he had earlier requested that there should be a compromise and a new formula could be arrived at within the broad contours he suggested earlier. 29.30 The Hon’ble Chairperson stated that she heard all the Hon’ble members, had been rightly reminded that there should be consensus in decision making. Therefore, upholding the tradition of the Council and going by the suggestion of the Hon’ble Member from Bihar she proposed to hold another meeting on 12th October 2020, She was open to have another round of discussions on 12th October 2020 and then they would take a call that day. She further reiterated that States were on the forefront of fighting Covid, she had cleared disbursement to the States as soon as resources were available whether it was GST compensation or devolution in terms of Finance Commission’s recommendation The meeting on 5th October 2020 ended with thanks to the Chair. Agenda Item 9A: GST compensation options - ways of meeting the shortfall as discussed on 12th October, 2020. 30. The 42nd meeting of the GST Council resumed on 12th October 2020 with the Secretary of the GST Council welcoming the Hon& .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ransition period. However, as per discussions, it is now decided that at first stage, cess collected would be used for paying the interest and at the second stage, it will be used for repaying the principal and the remaining part would be used for meeting the remaining arrears of compensation. The Secretary submitted that this was the main item for discussion that had been communicated from the Department of Expenditure and requested the Hon’ble Members of the Council to express their views on the Agenda Item. 35. The Hon’ble Minister from Madhya Pradesh thanked the Hon’ble Finance Minister for announcing the special package. He stated that he was glad that Central Government had positively considered the Option- 1 in respect of compensation cess and also considered the other two suggestions given by Madhya Pradesh State. Now, his State could borrow ₹ 4.542 crores instead of ₹ 4,056 crores under the special Facilitation provisions of Central Government and RBI, which they could use for the development work of the State. He added that in last meeting, he also requested that when Central Government was pondering over the options of compensation cess so s .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... e Ministry concurs and the Finance Ministry gives the nod, it would be difficult for Puducherry to borrow. 35.3 He stated that they were grateful to the Hon’ble Chairperson who was hearing the views of the Hon’ble Members of the Council and trying to arrive at a solution. He requested that the disputes had to be resolved by give and take, all States had to agree because of present critical financial position in various States. Therefore, he requested the Government of India to borrow and pass it on to States and all problems associated with State borrowing such as State Governments approaching RBI, going to open market, in their case, State going to the Home Ministry, could be resolved. Borrowing by the Government of India would be very easy vis-a-vis State Government doing it because without the permission of the Government of India, the State Governments cannot borrow and therefore he wanted easy route to be followed. He requested the Hon’ble Chairperson to consider the third option proposed by the Hon’ble Finance Minister of West Bengal i.e. the Govt. of India to borrow and give it to States. 35.4 The Hon’ble Minister from Assam congratulated the Ho .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... and concerted effort to conic to a consensus arid not get into options of division or voting and also thanked her for whatever releases had been done so far. lie quoted para.6.3 of the Minutes of the 10th meeting of the GST Council held on 18th February 2017 wherein it is stated that: “The Hon’ble Minister from Telangana stated that the Compensation Law should provide that if money fell short in the Compensation Fund, it could be raised from other sources. The Secretary stated that Section 8(1,) of the draft Compensation Law provided that cess could be collected for a period of five years or such period as may he prescribed on the recommendation of the Council He stated that this implied that the Central Government could raise resources by other means for compensation and this could then recouped by continuation of cess beyond five years. He stated that the other decisions including the possibility of market borrowing for payment of compensation was part of the Minutes of the Meeting of the Council held on 3rd and 4th January 2017) and need not be incorporated in the Law, The Council agreed to this suggestion.” He stated that the then Hon’ble Chairperson of .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... is submission that there was a historical context. As was discussed in the 10th meeting of the GST Council held on 18th February 2017 wherein the then Secretary of the GST Council in the presence of the then Hon’ble Union Finance Minister who was chairing the meeting, very clearly said that “...this implied that the Central Government could raise resources by other means for compensation and this could be then recouped by continuation of cess beyond five years...” (as mentioned in para.6.3 of the Minutes of the 10th meeting of the GST Council). In the same spirit after several years, on 14th March 2020, the Hon’ble Union Finance Minister said the same thing, “lt was the solemn commitment to the States that the Centre is duty bound to give compensation to the Stated”’. So his first point was that, it was the historical commitment that they were talking about and the matter of trust and faith in a federal system. 35. 10 He further stated that the options of borrowing by the States were sent after day- long discussions in the 42nd meeting of the GST Council held on 05-10-2020. The GST Council Secretariat sent Note regarding GST compensation bo .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... the GST Council had got the spirit to unite as well as had got the spirit of consensus. With the special assistance that had been announced by the Hon’ble Finance Minister, they would be able to keep the expenditure towards infrastructure, committed payments and building something that was necessary for the States. He hoped that all that would help to resolve the problem and by the end of the meeting they would be deciding that matter by consensus and to close that issue once for all. 35.15 The Hon’ble Deputy Chief Minister of Bihar stated that the first question which had been raised by some States was whether the GST Council had the jurisdiction to discuss the borrowing issue. He personally felt that they were stakeholders and in a federal structure they could discuss any issue in this GST Council but not necessarily take a decision and go for voting on that particular issue. He recalled that earlier the issue of natural gas was discussed even though as on date GST is not levied on it Similarly the issue of Stamp duty on securities was the second example that was presented to the Council. Third example was regarding CST Act where many States had raised the issue regar .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... rney General of India wherein it was stated that “this wouldn’t permit extension or deferment of the period of 5 years for the payment of compensation lo States. By law they had no right to extend it beyond 5 years”. Then AGI further stated that ‘where all States come together, agree for a deferment or extension in regard to the payment of compensation to them, that one could adopt such a course of action”. Keeping in view the above response from AGI, the Hon’ble Finance Minister of Kerala was opposed to both the Options suggested by Department of Expenditure, Ministry of Finance, Government of India. According to him, the Option-1 involved deferment of the compensation and there was no guarantee that it would be paid within 5 years. Therefore, he would say that the Attorney General had suggested that it required a consensus and there was no consensus regarding deferment of compensation cess. The Hon’ble Minister also drew attention to the AGI’s opinion that “It is for the GST Council to decide on any other source from it may lawfully recommend crediting the necessary amounts to the GST compensation cess fund”. The amount .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... Minister from Uttar Pradesh stated that Punjab had raised many pertinent questions both in writing and in the previous meetings. As far as Punjab was concerned, their issue was very simple. give them the compensation as per the law or if a pragmatic change was necessary then get the law amended. The word compensation was defined as difference between the projected revenue and the actual revenue. Thus, compensation could not be arbitrarily split into two parts. There was no basis to apply either 7% growth now or 10%. Compensation shall be paid out of the GST Compensation Fund as mentioned in Section 10 of the GST (Compensation to States) Act 2017. Any amount of compensation that comes from sources other than this Fund was not compensation. Thus, unless the Central Government borrowed and credited it to the GST Compensation Fund, it was not compensation. The Section 7 of the Act requires that compensation shall be paid to the States during the transition period which was 5 years. This was clarified in the opinion of the learned Attorney General of India. They needed to take note that in Option-1, a good part of the cess collected would he used to pay the interest on that borrowing o .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... es request to reduce the growth from 10% to 7%. That was the accommodation by the Government of India. That showed the true spirit of coming to a consensus and everybody agreed to that. So all States had agreed that compensation would be paid in lull, they had agreed that it would be through other means that are provided by the law i.e. by borrowing and they had agreed that there would be more amount available for the loans, they had agreed that the entire things would be paid through this compensation cess so there will be no burden on the States or on the Centre. So, these broad parameters had been agreed upon. 35.24 He stated that it had been very clear that the question of compensation had to be addressed immediately. The question was not only that compensation had to be paid; it had to be paid immediately. Further any improvement in terms of efficiency, in terms of broadening the tax net, in terms of procedure, in terms of ultimately increasing the revenue that could be thought over but at the same time, at present. States were in the dire need of money. So, his only humble suggestion was to allow them to operate Option 1. 35.25 The Hon’ble Minister from Karnataka earnes .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ner as Option-1 was now revised to ₹ 1.10 lac crores and Option-2 stood at ₹ 1.83 lakhs crores and the gap was only around ₹ 73.000 crores, out of which, the Chairperson was kind enough to release some amount since the last meeting of the GST Council. Hence, under Option-1, if the amount is revised to ₹ 1.80 lakhs crores, consensus among States would be easy, and requested the Hon’ble chairperson to kindly consider the request at the earliest. 35.28 The Hon’ble Minister from Jharkhand stated that he was in agreement with what had been stated by the hon’ble Members from Chhattisgarh, West Bengal and Punjab. When GST Act was framed, it was an Act of faith for them and they trusted in it. Jharkhand got its 70% indirect tax share subsumed in GST. Today they just had 30% and it was known that Jharkhand was extremely backward and poor State. It is difficult for the State to manage with 30% of the taxes of the erstwhile regime. They depended on GST share and GST compensation which was promised to be paid to them at 14% growth rate. He stated that both Option-1 and Option-2 were not acceptable lo them. They are in favour of Option-3 by which they m .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... 5.30 The Hon’ble Minister from Rajasthan stated that, as provided in the Constitution and the GST (Compensation to States) Act 2017, the States were not getting compensation due to them. As mentioned by the Hon’ble Members from Punjab, Kerala, West Bengal and Jharkhand, whenever there was a problem in federal structure then the Central Government should come forward to resolve the problem of the State Governments. He believed that the Central Govt should borrow from RBI because they had window system and whoever borrowed, fiscal deficit would anyway be impacted. An amount of ₹ 7,300 crore was due for Rajasthan till September 2020 as compensation from the Central Government. He supported the suggestion that if there was a dispute, the provisions of dispute resolution mechanism can be activated. He proposed the GoM option to give time of 7 days, GoMs would sit, reach at consensus find would take decision. Whatever decision it would be at least States would feel that they were heard and decision was taken On consensus. He would not go for borrowing as it was the responsibility of the Central Government to pay compensation to States and reminded that the Central Gover .....

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..... ates which did not agree with Option-1 could discuss with the Hon’ble Finance Minister of India about other options available and it would not be appropriate to stop other States from getting loans for the sake of a few States. He opined that in the present situation, this matter should not be delayed any further and it was the responsibility of all the Stale Governments along with the Central Government to help the States’ people and the matter needed a quick resolution. He also suggested that the amount of loan that the States would get should be based on the formula of net GST revenue and not gross GST income. 35.36 The Advisor to Hon’ble Lieutenant Governor of Jammu and Kashmir stated that they opted for Option-1 in view of their current financial resources and need of funds for the Govt. of J&K. He requested for the Council’s consideration that Option-1 might be implemented on priority since J&K needed finances urgently. 35.37 The Hon’ble Chief Minister of Puducherry, while referring to the package and interest free loans for 50 years for the Slates especially for the North-Eastern States and other States based on the formula for devolutio .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... tion Act passed on 12th April 2017. 36.1 The Secretary clarified the issue raised by the Hon’ble Finance Minister of Punjab, by referring to the opinion given by the Attorney General of India that the levy of the Compensation Cess could be extended beyond five years. On the reference made by Hon’ble Member to the opinion of the Attorney General of India that unless and until all States agrees it could not be extended, Secretary clarified that what the Attorney General of India meant was that under the current Act, the compensation entitlement would be only for five years. However, actual levy and collection could go beyond live years if the Council recommended, that would not permit the extension or deferment of the period of five years for the entitlement of compensation to the States. In his opinion, therefore. AG has stated that only if the Council agrees to deferment or extension in regard to the payment of compensation to them (States), one could adopt such course of action. In the month of August 2020, the Attorney General of India has further clarified that extending the levy and collection of the cess beyond five years under Section 8(1) of the Act can be done o .....

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..... ed that the Compensation cess would come after end June 2022, it was not known today, when and how much amount would come and in which time frame. Article 293 was an entirely different provision and it had no inclusion of compensation cess and the Consolidated Fund of a particular State has no fixed amount. 36.4 The Secretary clarified that the compensation cess goes to the States and it becomes the part of the Consolidated Fund of State and that was exactly the reason why the Attorney General said that under Article 293(1) States can borrow. As regards apprehension of Hon’ble Minister from Chhattisgarh that Compensation Fund was uncertain in comparison to CGST and SGST, Secretary mentioned that in this meeting itself they had approved Agenda item 9 i.e. the GST Council approved that the levy of the compensation cess shall be extended to meet the entire gap. So, once Compensation Cess got extended, it was not an uncertain revenue and it becomes a certain source of revenue. Therefore, on the strength of that compensation fund, the loan or borrowing could be done under Article 293(1). The Hon’ble Minister from Chhattisgarh replied that the amount was uncertain for sure. I .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ears’ collection at 10% would be recalculated on 7%. The calculation was done for each State and S.No.22 showed the figure for Chhattisgarh. He stated that calculations would be would be redone at 7% for all States and would be communicated to all the States. 38. The Hon’ble Chairperson clarified that compensation to the States would be given only for the period pertaining to the first 5 years but the levy of compensation cess can be extended beyond 5 years in order to make up for the shortage. She stated that this is as per the existing law and this was clarified by the Attorney General of India. She informed that exercising the powers that were vested in the Council, Members had collectively agreed to extend the collection of cess beyond 5 years in the last meeting held on 05.10.2020. She asked the Secretary to the Council to read out the relevant portion from the opinion given by the Attorney General in this regard. The Secretary to the Council referred to the paragraph 2 of the answer given by the Attorney General of India to question No.(iii) on this issue. 39. The Hon’ble Deputy Chief Minister of Gujarat referred to the clarification sought by the Hon‘ .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... the constraints, they had worked out a solution where the entire borrowing would be tied up. 41. The Hon’ble Chairperson thanked all the Ministers for having gone through two extended days of discussion on the matter. She stated that there was absolutely no doubt that the GST collections have suffered and these are the things that everybody knows. She also said that however much all of the Members had spoken, she did not see them having a dispute. She expressed that although there might be differences of opinion, they were not fundamentally denying one another’s position. She stated that compensation and compensation in full was payable and there was no question about it. However, it was everybody’s knowledge that compensation cess had not been yielding adequately. She requested everyone to look at how various views have been resolved in the past and have trust and confidence. She reminded that this was an extraordinary situation and the Members of the Council, including some who were in the Empowered Committee before the Council was formed, would not have foreseen a pandemic of this nature. Therefore, it was not only a problem for the States but the problem was .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... x that the need of the hour is that money should go to States so that they could start spending. 45. The Hon’ble Finance Minister of West Bengal wanted to know from the Hon’ble Finance Minister of India about the conclusion. He appealed to the Hon’ble Chairperson that it would be solved if the central Government agrees to borrow. 46. The Hon’ble Finance Minister of Assam stated that they had understood what the Hon’ble Finance Minister of India said. If any State wanted to borrow it could go ahead and other States should allow that. This was what he understood and he was grateful for that. 46.1. The Hon’ble Finance Minister of Kerala commented that at the end of the deliberations, two contentious issues are still not clear. One issue was to finalize whether the Central Government would borrow or individual States. The other issue was about the amount to be borrowed. He was totally against deferring part amount and how much to defer was something that was to be stated more significantly. 46.2 The Hon’ble Minister of Chhattisgarh thanked the Hon’ble Finance Minister of India for the complete openness she exhibited in bringing the facts .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ized to collect GST with an instant and inter-operable payment option. In view of the reasons explained above, he submitted to the Council that GSTN may be permitted to allow UPI and IMPS as an option for GST payments. 51. For Agenda Item 11, the Council approved the proposal for including UPI and IMPS as an option for GST payment apart from the existing ones. Agenda Item 12: Status report of creation of GRC Zone-wise (CBIC) and States / UTs. 52. The Secretary introduced the agenda and stated that the GST Council in its 38th meeting held on 18.12.2019 had decided that a structured grievance redressal mechanism should be established for the taxpayers under GST to tackle grievances of taxpayers on GST related issues of specific / general nature. The GST Council accordingly approved constitution of ‘Grievance Redressal Committee’ (GRO) at CBIC Zonal / State level consisting of both Central Tax and State Tax officers, representatives of trade and industry and other GST stakeholders. 52.1 Office Memoranda F.No.820/GRC/GSTC/2019 dt 30.12.2019 and 07.02.2020 were issued by this GST Council Secretariat for constitution of GRC at CBIC Zonal f State level in accordance with CBIC .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... ced the Quarterly Performance Report of NAA for the 1st quarter of the financial year 2020-2021) i.e. for the period from 01.04.2020 to 30.06.2020, before the GST Council as under: Opening Balance No. of Investigation Reports received from DGAP during the quarter Disposal of Cases (during Quarter) Closing Balance Total Disposal during quarter No. of cases where Profiteering established No. of cases where Profiteering not established No. of cases referred back to DGAP 66 21 21 14 01 06 66 54.1 The NAA reported that due to Corona pandemic outbreak, the orders in cases where in the limitation was expiring between 20.03.2020 and 29.03.2020 might not be passed within a period of 06 months from the date of receipt of the report from the DGAP due to force majeure. Accordingly, the orders were passed in terms of the Notification No.35/2020-Central Tax dated 03.04.2020 issued by the Govt. of India, Ministry of Finance (Department of Revenue), CBIC under Section 168A of the CGST Act, 2017 as amended vide tile Notification No.55/2020-Central Tax dated 27.06.2020. The NAA also reported that the hearings scheduled from 01.04.2020 to 31.05.2020 could not be held due to extended lockdowns in Delh .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... made a very strong observation on this and it reflected poorly on the GST Council. 56.2 The Hon’ble Minister of Assam stated that GST Council was not the right forum to discuss the report of CAG as the CAG report would go to the Parliament and the Public Accounts Committee would discuss it. He advised to restrict the discussions to the report of GoM on IGST settlement. 56.3 The Hon’ble Minister from Telangana submitted that he would like to bring up an issue other than the Agenda being discussed. One was the issue of ineligible, reversed and lapsed IGST ETC not being settled to the States on monthly basis. In this regard when the settlement reports pertaining to annual returns filed upto 24-9-2020 were run by the GSTN, it was noticed that an amount of ₹ 1,000 crores was due to State of Telangana which may be settled at the earliest. Secondly, him being a Member of the GoM, the GoM has unanimously agreed to the recommendations made in the report. As per the report, he requested that an amount of ₹ 25,058 crores which was transferred to the CFI, may now be devolved to the States. 56.4 The Hon’ble Minister from Madhya Pradesh submitted that an IGST recov .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... the stand of the Ministers of the Council in the Media and when the Council was not meeting, were they to keep silent. So if a public issue came forwards should they not express themselves in the public. 57.11 The Hon’ble Minister of Karnataka stated that more focus was required on the Agenda, and the Hon’ble Chairperson should take a call and sought greater clarity on the Compensation issue. 56.12 The Hon’ble Chairperson stated with regard to the issue of lGST settlement, she did not want to go back to the problem as to how it happened but she pointed that after she took over as the Chairperson. GST Council in 2019, some of these issues that had been festering the GST Council were (i) lGST issue related to a particular State with regard to fixing year revenue, (ii) the lGST settlement issue concerning all States, and (iii) the Compensation Cess issue that had been credited to CFI and had not been transferred to public account. She stated that all the three issues were settled by following proper process within a period of 12 months. The issue of lGST Settlement concerning all States was looked into by the GoM on lGST settlement, headed by Sh. Sushil Modi, and the .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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..... nch of their satellites by foreign space companies instead of ISRO. Antrix Corporation Ltd. or NSIL, the premier Indian agencies engaged in the activity of launching of satellites. One of the reasons fbi this was the GST applicable on the service of launch of satellite by an Indian Space agency such as Antrix or NSIL to an Indian service recipient. 58.1 According to the provisions of GST law, supply of satellite launch services by Antrix Corporation Ltd. or New Space India Limited (NSIL) to international customers against payment in foreign exchange constituted export of service and was zero-rated. However, supply of satellite launch services by ISRO, Antrix or NSIL to a person located in India was taxable. This position had been clarified vide Circular No.2/1/2017-IGST dated 29.9.2017. 58.2 The Council agreed that the satellite launch services supplied by ISRO, Antrix Corporation Ltd or NSIL may be exempted from GST. 59. For Agenda Item 14(ii), the GST Council recommended that the satellite launch services supplied by ISRO, Antrix Corporation Ltd or NSIL be exempted from payment of GST. 60. After detailed discussion on the Agenda Item 9A on 12th October 2020, the Secretary to the .....

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Minutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020 - GST

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