TMI BlogMinutes of the 29th GST Council Meeting held on 04th August 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of the GST Council. Preliminary discussion 3. The Hon'ble Chairperson extended a warm welcome to all the Hon'ble Members of the Council and the officers. He noted with delight that this Meeting had a better presence of the Hon'ble Members as compared to the last meeting and stated that he looked forward to the valuable contribution of all the Hon'ble Members during the meeting. He observed that earlier the only forum in which issues relating to Micro, Small and Medium Enterprises (MSME) could be discussed was Niti Aayog, and its earlier avatar, the Planning Commission and this was the first time, a focussed meeting was being organised on an extremely important subject of MSME. 3.1. The Hon'ble Chairperson recalled that during informal discussion with the Hon'ble Council Members last time, many of them, like those from Bihar, Punjab, Delhi, Haryana and Puducherry had suggested to have one meeting of the Council for a focussed discussion on many concerns of the MSME Sector. Subsequently the Council decided to convene a special meeting within two weeks for the MSME sector. He observed that the MSME sector with very small investments made very s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his team of Central Government officers, had interacted on video conference from 12 locations with stakeholders representing Composition business, small traders, manufacturers and job workers. Generally, they all unanimously welcomed GST and wanted to be part of the new indirect taxation system. 3.3. The Hon'ble Chairperson thanked all the States for sending the representations of the industries from their States which were tabulated and circulated before the Council meeting. He observed that it was a very good collaborative effort of the States by which initially 146 suggestions were received and then some more were received later. With these words, he once again welcomed the Hon'ble Members of the Council and then requested Dr. Hasmukh Adhia, Union Finance Secretary and Secretary to the Council (hereinafter referred to as the Secretary) to take up discussion on the Agenda items. 3.4. The Secretary invited Shri Shashank Priya, Joint Secretary, GST Council to brief the Council regarding various volumes of the Agenda notes circulated for the Meeting to facilitate the ensuing discussion. The Joint Secretary, GST Council informed that altogether four volumes of Agenda n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain be examined by the Law Committee.' The Council agreed to record the proposed revised version in the Minutes. 4.2. The second suggested change was in paragraph 20 (xiv) of the Minutes where CCT, Gujarat had requested to replace the presently recorded version ( Nicotine Gum : The Hon'ble Deputy Chief Minister of Gujarat stated that to quit smoking habit, Nicotine Polacrilex Gum is used and the present rate of tax on this item was 18% which should be reduced. The Hon'ble Chairperson stated that this may be examined by the Fitment Committee. The Council agreed to this suggestion. ) with the following version: - 'Nicotine Gum : The Hon'ble Deputy Chief Minister of Gujarat stated that to quit smoking habit, Nicotine Polacrilex Gum is used and the present rate of tax on this item was 18% which should be reduced. He added that these products are like medicines and its rate should be reduced to 12%. The Secretary suggested that it may be referred to the Fitment Committee for further discussion. The CCT, Gujarat stated that the Fitment Committee had discussed this proposal and rejected it. The Joint Secretary, TRU-ll stated that this product could not be differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment which would need to be examined. The CCT, Gujarat suggested that this issue could also be addressed through the Removal of Difficulties Provision under the GST Law. The Secretary observed that it would need to be examined further. The Council agreed to this suggestion.' The Council agreed to record the proposed revised version in the Minutes. 4.5. The fifth change proposed was in paragraph 35.4 of the Minutes where CCT, Gujarat had requested to replace the presently recorded version ( CCT, Gujarat stated that it was a good proposal to do away with permit system. ) with the following: 'The CCT, Gujarat stated that state road permit and national permit system should be done away with and loss in revenue due to abolition of permit system could be taken care of by appropriately raising registration charges, etc.' The Council agreed to record tile proposed revised version in the Minutes. 4.6. The Chairman, CBIC informed that CCT, Rajasthan had sent a written communication stating that after the version of tile Hon'ble Minister from Goa recorded in paragraph 22(ii) of the Minutes, ( The Hon'ble Minister from Goa stated that at least the cap of room re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 11 April 2019. He noted that in the Minutes, it was recorded that implementation date of 1 st January 2019 was on best effort basis. He stated that one should also be prepared to do some trial run for filing of return in the new format, as also suggested by the Hon'ble Deputy Chief Minister of Bihar. He further stated that such trial could commence by mid-February 2019 but the new return should be finally implemented from 1st April 2019 so that one did not nm into some difficulties like last year. 4.9. The Secretary stated that the new return was very crucial for revenue mobilisation. Presently, due to gaps in return data, computer analytics was incomplete and this gap needed to be bridged at the earliest. In this view, the new return format needed to be implemented as fast as possible. He stated that the return could be attempted to be implemented on best effort basis from 1 st January 2019 and if at that time, deadline appeared to be difficult to achieve, the due date could be postponed to 1 st April 2019. He stated that he had also discussed this issue with Shri Nandan Nilekani who had informed that work for 30% of the new return format could be started right away ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine how to ensure that taxpayers did not pay less amount in the first two instalments of the quarter. In view of the above, he requested the Hon'ble Chairperson to accept this proposal as final, only when all States agreed to it. He added that practical difficulties of small States should be taken into account while arriving at such a decision. 4.13. The Hon'ble Chairperson stated that during the last Council Meeting, Hon'ble Minister from Kerala had initially objected to this proposal but eventually, he had agreed to it when it was pointed out that there were only 26,000 taxpayers in his State with annual turnover between ₹ 1.5 crore and ₹ 5 crore. He added that Puducherry would have about 1,000 taxpayers with annual turnover between Rsl.5 crore and ₹ 5 crore. Odisha also agreed when the final decision was taken as this was an investor friendly measure. He added that there would be no revenue loss by reducing the frequency of return for such taxpayers to quarterly basis. He stated that the Law Committee had been mandated to examine whether monthly payment of tax should be one-third of the amount for the quarter, or what could be the formulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rganised to some extent. However, after it got to retail level, particularly to retailers enjoying ₹ 20 lakh threshold exemption, or some exemption scheme etc. and also to possibly non-compliant dealers, the last part of the value chain was lost which, in the Central Excise regime, was captured indirectly through the Maximum Retail Price (MRP) based tax i.e. it used to have MRP, abatement and then tax on it. Now, it was not clear whether by reducing the tax rates, the benefit of tax reduction was being passed on to the ultimate consumer. He stated that it was for the Council to decide as to what could be done collectively to capture the value at all levels and particularly for the goods that were prone to be moved out of the formal value chain into the unorganised sector and this needed to be looked at the conceptual level. He stated that another example of this type of goods was pan mas ala gutka where value chain may not be captured at the retailer level. 4.16. Shri Sushi! Kumar Modi, the Hon'ble Deputy Chief Minister of Bihar stated that the proposal to reduce tax rate on cement could be agreed to and this could be taken up as an Agenda item in the next meeting of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of last meeting's rate reduction to the tune of ₹ 6000 crore was not small either. He, therefore, reiterated that rate of tax on cement should be reduced from 28% to 18%. 4.19. Shri Yanamala Ramakrishnudu, Hon'ble Minister from Andhra Pradesh supported the proposal of the Hon'ble Minister from West Bengal. He stated that not only a lot of weaker section housing was under construction but there were several other types of housing projects in several States, other than those stated a while ago, which required cement to be procured at a reasonable rate. He stated that in his State, there were about 19 lakh houses under construction which also included affordable housing. In addition to construction of houses for weaker sections, construction of housing was underway in villages as well as for urban poor. Cement was a primary raw material for construction of all such houses. He suggested to hold a separate discussion on the topic of reduction of rate of tax on cement as early as possible. 4.20. Shri Manish Sisodia, Hon'ble Deputy Chief Minister of Delhi stated that there were always two perspectives to a proposal for reduction in tax rate; one was loss of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Anti-profiteering Authority should give a report regarding its work during the next meeting of the Council such as investigations done, number of notices issued, recoveries made thereunder etc. 4.22. The Hon'ble Deputy Chief Minister of Gujarat stated that earlier it was decided that all big manufacturers should advertise about cost reduction of their products whose prices got reduced because of GST implementation but to his knowledge, none of the company/manufacturer was doing this on large scale, and as a result, consumer was not able to see the benefit of rate reduction under GST. The Hon'ble Chairperson observed that it was a good suggestion that the consumer should come to know regarding the reduction in tax rate. He suggested that a small percentage, say 0.1% or 0.2% of GST collections should be spent on GST education for consumers. The Secretary informed that the National Anti-Profiteering Authority had already collected about ₹ 150 crore and a portion of it could be used for this purpose. The Hon'ble Chairperson stated that this amount should be used for advertisements for GST education of consumers. 4.23. Shri Tuhin Kanta Pandey, Additional Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cinemas in public interest without hampering the interest of commercial cinema. He stated that if a blanket rate reduction was done, it would not help the cause of regional cinema. The Hon'ble Minister from Andhra Pradesh stated that cinema was a common man's entertainment and the present rates of 28% and 18% were very high and they deserved to be reduced. The Hon'ble Chairperson stated that this issue needed to be examined with respect to revenue data and suggested that the Fitment Committee could examine it. The Council agreed to this suggestion. 4.26 The Hon'ble Chief Minister of Puducherry stated that during the last meeting of the Council held on 21 st July, 2018, it was decided under Agenda Item 8(ii) to set up a Committee under the chairmanship of the Chairman, CBIC, and consisting of Finance Secretaries of Delhi, Puducherry, Tamil Nadu and one each from the States of North East and West to address concerns regarding treatment of the IGST amount vis-a-vis the Consolidated Fund of India. He stated that there were long arguments during the last Council meeting on the subject and wondered what the Committee would decide when both Delhi and Puducherry were Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Deputy Chief Minister of Delhi stated that it would need to be distributed to the States and the Union Territories should also be made part of this distribution. The Secretary stated that the IGST devolution was a Constitutional issue. The Hon'ble Deputy Chief Minister of Delhi enquired as to under what law it was decided to devolve IGST money. The Hon'ble Chief Minister of Puducherry stated that after September, 2018, the remaining amount should be given to the States. The Secretary stated that if data was available, then distribution shall be done. The Hon'ble Deputy Chief Minister of Delhi stated that application of the 42% formula was wrong. The Secretary stated that if one went by the argument of the Hon'ble Deputy Chief Minister of Delhi to take money out of the Consolidated Fund of India and keep it in the Public Account, then no State would get devolution of this amount. The Hon'ble Chairperson stated that the Committee constituted on this issue could discuss the matter further. The Hon'ble Chief Minister of Puducherry reiterated that the Finance Commission formula could not be applied to IGST. Dr. T. M. Thomas Isaac, Hon'ble Minister from K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s more than ₹ 20 lakh, the Municipality will be required to take registration. At present, even if such income is less than ₹ 20 lakh and as activities undertaken as part of Article 243W of the Constitution are not declared as 'no supply' , turnover of such activities is included in the total turnover and Municipalities are required to take registration even when their revenue from renting of property and other commercial activities is less than ₹ 20 lakh. If this proposal is accepted, Municipalities are put at par with Panchayats;' 5.4. To replace the version recorded in paragraph 26 (ii) of the Minutes with the following: 'The CCT, Gujarat requested that this issue should be considered sympathetically in the interest of export. The Secretary stated that there were a lot of such interim issues for retrospective amendment which would need to be examined. The CCT, Gujarat suggested that this issue could also be addressed through the Removal of Difficulties Provision under the GST Law. The Secretary observed that it would need to be examined further. The Council agreed to this suggestion;' 5.5. To replace the version of CCT, Gujarat recorde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently. The Hon'ble Minister from Punjab thanked the Hon'ble Chairperson for focusing attention on such an extremely important sector. He suggested that instead of discussing the nitty-gritty of the Agenda, each State could be given five minutes to highlight the most important issues of concern for it and then these could be discussed one by one. The Chairperson agreed to this suggestion and invited the Hon'ble Members one by one to highlight the important issues of concern to them. 6.1. Starting the discussion, the Hon'ble Deputy Chief Minister of Delhi stated that the MSME sector was one of the most important sectors for generating employment in the country. He added that contribution of the MSME sector to the overall GDP, employment and exports of the country was very significant and the core issue of concern for MSME was that the Council should consider formulating a scheme for the MSME with annual turnover up to ₹ 5 crore under which a certain proportion of tax paid by the registered dealer in the MSME sector could be reimbursed to him both by the Union Government and the State Government. He observed that in the erstwhile Central Excise regime, manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry and a high tax rate was affecting this industry and suggested to reduce tax on the same. He further stated that tax rate of 18% on job work was too high and it was a serious issue which was creating difficulty for people because contractors were not willing to take up contracts even from the Government to do job work. He observed that these were labour intensive areas and suggested that a small group of Ministers should be constituted to address the issues raised by the Hon'ble Ministers of the States so that the small and medium industries were able to survive. 6.4. Shri Jayant Malaiya, Hon'ble Minister from Madhya Pradesh, stated that the Laghu Udyog Bharti in his State had represented that tax rate of 18% on dona patta made from waste papers was too high. He stated that MSME manufacturing dona patta from waste papers employed thousands of people and the investment in setting up the plant and machinery for such manufacturing units was very low. To enable them to survive and compete, the rate of tax on these products, manufactured by MSME, should be 5%. He stated that at the present rate of 18% tax on this product, people were not even paying any tax. The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Chartered Accountants (CAs) for GST and income tax. He suggested that there should be only one tax audit by CA for income tax and GST, and it could be certified in two different forms, one for GST and the other for Income Tax. The Hon'ble Chairperson stated that this was a good suggestion and, in that process, the revenue figures from GST and Income Tax would also get aligned. The Hon'ble Minister from West Bengal stated that his State had also implemented a procedure similar to the one suggested by the Hon'ble Deputy Chief Minister of Bihar. The Hon'ble Deputy Chief Minister of Delhi supported the proposal made by the Hon'ble Deputy Chief Minister of Bihar. The Hon'ble Deputy Chief Minister of Bihar further suggested that for legacy issues of VAT, a one-time settlement scheme should be introduced so that the officers could thereafter concentrate on compliance under GST. He also supported the proposal of reimbursement scheme put forth by the Hon'ble Deputy Chief Minister of Delhi by refunding a part of the tax collected from the taxpayers in the MSME sector. He stated that under Central Excise, tax was exempt for units having an annual turnover below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied appropriately. He further stated that there should be a facility to download FORM GSTR-2A in the desired sequence. He also suggested to 'launch a special refund fortnight for the MSME sector as earlier done for exporters. He also suggested that there should be only one refund authority for both CGST and SGST and for this, the State authority could be declared as DDO (Drawing and Disbursing Officer) under the Central rule and vice versa. He also stated that there were complaints of demand of 10% commission for granting refund to exporters as it was a manual system of refund. He emphasized that this should be checked. 6.10. The Hon'ble Minister from Kerala stated that he shared the concerns of the other Hon'ble Members for MSME sector. He observed that earlier they enjoyed a number of privileges not only in taxes levied but also rebate in sale, purchase preferences, interest subvention, etc. apart from significant planned fund allotted to MSME sector. He observed that all these incentives had been whittled down and now the load for helping MSME sector was only on the taxation policy. He warned that this had a danger to adversely impact the revenue. He further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... craft the State's tax structure in accordance with the needs of the developmental programmes of the State, but now he was stuck with poor revenue collection. He further stated that the Council should be cautious regarding giving up revenue because the implication of what was already done was not yet known. 6.12. The Hon'ble Minister from West Bengal stated that during the VAT regime, manufacturers having an annual turnover up to ₹ 1.5 crore paid VAT but did not pay Central Excise duty and now all taxpayers with an annual turnover between ₹ 20 lakh and ₹ 1.5 crore had to pay both CGST and SGST. He stated that keeping in view the issues raised by the Hon'ble Deputy Chief Ministers of Delhi and Bihar and the concerns expressed by the Hon'ble Minister from Kerala, a new norm should be that CGST would not be paid by manufacturers with an annual turnover up to ₹ 1.5 crore. He stated that the Central Government could pay it as reimbursement so that amendment in law was not required and the ITC chain remained intact. He further stated that unbranded food grains like atta, daal and rice were exempt from GST but packaged foods were liable to tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India should evolve a scheme for the same so that they could compete with the big industry. He stated that since the MSME were also competing with big manufacturers, they needed help just like cottage industries to market their products. He further stated that special exhibitions should be organised where these small units could sell and market their products. He suggested to constitute a task force or a Group of Ministers to formulate a detailed plan to help small scale industry. He observed that almost all States supported small industries in some or the other way. The State of Gujarat was helping the MSME sector through a budgetary support of approximately ₹ 2000 crore. He further stated that in addition to budgetary support provided by States, the MSME sector should also be helped financially through reimbursement scheme under CGST. 6.14. Shri Krishna Byre Gowda, Hon'ble Minister from Karnataka, stated that he supported the concerns of MSME. He endorsed the view of the Hon'ble Chairperson about the employment situation and employment potential of the MSME and stated that to increase the share of manufacturing in GDP, growth of MSME was very important. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented on the premise of revenue buoyancy, as experienced ' during VAT. However, after one year of GST implementation, there was a consistent revenue deficit of about 30%. He observed that State revenues were protected only for four years but States had built up commitments for public welfare which would have to be met even after four years and, therefore, he was very much concerned about revenue. He stated that even if INITIALS there was a 25% growth in revenue, month on month, in the next four years, his State would still fall short of its protected revenue. Therefore, while addressing concerns of all sectors, Council should be mindful of revenue consideration as well. 6.16. The Hon'ble Minister from Karnataka also observed that simplicity should not be mixed up with concession. He observed that concessions were not the only way to address the problems of the MSME sector. He supported the suggestion of the Hon'ble Minister from West Bengal that if a concession had to be given to MSME on tax, then it should be from CGST and through a refund route. He also endorsed the view of the Hon'ble Chief Minister of Puducherry to refer the issues raised by the States to res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsport Agency (GTA) and other legal services should be taxed on forward charge basis as tax on reverse charge basis on these two services was causing a burden on MSME. He stated that bread should be kept under the exempted list for the purpose of reverse charge mechanism of GTA under Section 9(3) of the CGST Act and SGST Act as its shelf-life was very less. 6.18. The Hon'ble Minister from Uttarakhand further suggested that ice-cream manufacturers should be extended the benefit of Composition scheme. He also suggested that branded and unbranded namkeen should be differentiated. While branded namkeen could continue to be taxed at the rate of 12%, unbranded namkeen should be taxed at the rate of 5%. He suggested that the Fitment Committee should examine this issue. He stated that another major problem faced by MSME was that only 14 banks were authorised for payment of GST and suggested that all banks registered under RBI should be included in this list so that no bank enjoyed any monopoly. He also suggested that the job workers should be exempted from the requirement of filing ITC-04 and they should also be exempted from filing e-Way bill, both for inter-State as well as intra- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat during the first three months after implementation of GST, he often faced abuses from the public but now there was a positive response to GST. He complimented the Members of the Council for bringing about this change in attitude of the public towards GST. He also observed that the tax rate reductions carried out during the last Council Meeting to help the middle class had gone down very well and observed that middle class were the opinion framers. He stated that the suggestions received for MSME were of mixed nature wherein some related to administrative or clarificatory matters but more than anything else, people were again looking at rate reduction on various items. He cautioned that revenue was also a very important issue and unless there was an overall buoyancy in tax revenue, no further cut in tax rate should be considered. He supported the proposal of appointing GoM which could listen to the associations of MSME and identify problems at the ground level. He suggested that the GoM could take about two months' time to formulate its recommendations by when one could also analyse revenue buoyancy and areas of revenue leakages. He also supported the proposal to exempt MSME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of various MSME organisations on 26 th July 2018 to understand their difficulties under the GST regime. Based on this feedback, they had compiled and furnished a list of issues concerning the MSME to the Council Secretariat. He stated that the predominant request of MSME related to tax on job work services. Prior to GST, they were out of the ambit of VAT but now under GST, they were reportedly facing blockage of working capital due to levy of GST at the rate of 18% on job work. He stated that reduction of rate of taxes on job work uniformly to 5% would considerably mitigate the burden on job workers without affecting the revenue adversely since it was an intermediate stage activity. He further stated that this was a problem particularly in the engineering sector where, small manufacturers had to pay tax upfront while making supplies to big companies whereas they typically received payment after three months. He pointed out that earlier, the Council had taken cognizance of the difficulties faced by the textile sector and had reduced the rate of tax on job work in textile sector to 5%. 6.23. The Hon'ble Minister from Tamil Nadu further stated that his State was a major hub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in place a mechanism for hassle free refund without intervention of tax authorities. He also stated that in order to avoid delay in sanction of GST refund by dual authorities, the Council should explore the possibility of empowering the proper officer, to whom the taxpayer is allotted, to sanction refund under all the three Acts and at the end of the month, the amount of refund may be reconciled and net balance may be apportioned to the States and the Centre. He observed that timely refund to the MSME sector would remove blockage of working capital. He further observed that the Council had taken several ameliorative measures to overcome IT glitches under GST. However, the MSME sector had raised various IT related issues that needed to be sorted out on a priority basis by the GSTN. He informed that these issues were highlighted in the list of issues forwarded to the Council Secretariat. 6.26. The Hon'ble Minister from Tamil Nadu further stated that he had been repeatedly speaking for reduction in rate of tax on goods and services mostly pertaining to the MSME sector. Therefore, all the outstanding requests made by Tami Nadu should be considered favourably by the Council on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g MSME. This issue could not be addressed only by way of changes in tax structure which had a limited impact. 6.29. He further stated that the factors that would help ease of doing business for MSME needed to be looked into. He suggested that the rate related issues should be referred to the Fitment Committee and the Council could decide on the procedural issues. He cited the example of different e-Way bill procedures in different States for intra-State movement of goods. He observed that this was not a good situation and suggested to review this issue and formulate a national policy for intra-State e-Way bill at least for the MSME sector. He further stated that goods and services predominantly supplied by MSME should be identified and then it could be discussed how to help them through a lower tax slab and wider relief for job work. He stated that in his State, job workers for auto parts, LED lights, utensils and tractor parts needed relief of lower tax rate of 5% as already provided to newspapers, textile yam, diamonds and certain other things. He suggested that a similar research was required to be done State-wise. He suggested that the Council should remain focussed on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; exemption from requirement of e-Way bill for value up to Rs. one lakh. 6.31. The Hon'ble Minister from Punjab further stated that it was desirable to review the reasons and factors disabling the MSME sector. For example, the large-scale units had captive power plants on which they could take input tax credit on all inputs but MSME drawing power from power suppliers could not take input tax credit on power. He suggested to give some weighted deductions in tax credits to MSME. He further stated that as the Indian economy moved from commodities to services and the distinction between goods and services was narrowing down, there should also be a Composition scheme for persons engaged primarily in services supply except for Restaurants, albeit with a lower annual threshold limit, say ₹ 50 lakh for services with a flexibility that they could also supply goods upto a value of ₹ 5 lakh. He stated that a flat lower tax rate of say 5% would help in getting many more people under the tax net and would ensure that those suppliers of services who charged tax at the rate of 18% would have to necessarily declare turnover of over ₹ 50 lakh. He also suggested to reduce t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scale industries because of their area specific industrial policy. He added that reimbursement of CGST and SGST could be considered up to a certain limit by the Council and that this single step would help the MSME sector to a large extent. He supported the suggestion of the Hon'ble Deputy Chief Ministers of Delhi and Bihar in this regard. He added that it could be debated whether the limit for such reimbursement should be units with annual turnover up to ₹ 1.5 crore or ₹ 5 crore. He stated that the proposed reduction in rate of tax on cement from 28% to 18% would have an annual revenue implication of₹ 14,000 crore. He expressed that the cement industry would mostly reduce price for some time and then increase the same. He wondered whether instead of giving this ₹ 14,000 crore relief to the cement industry, this kind of benefit could be given to units in the MSME sector. He supported the view of the Hon'ble Ministers from Kerala and Goa that the rate of tax had been reduced on many items and, at this stage, tax rate on the other items need not be reduced. He suggested to have an Inter-Ministerial Group within the Council to take a holistic view afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l simplification rather than reduction in tax rate and revenue issues. As regards revenue issues, he suggested that they should be taken up carefully. He observed that cement, while used for common man housing, was also used by big builders for making bridges, railway constructions, etc. He stated that rate reduction on cement would not be equitably shared between common man and the big builders and would hamper revenue generation. He suggested that return filing and tax payment should be made quarterly for taxpayers up to an annual turnover of ₹ 5 crore to reduce compliance burden, accommodate late release of payments by recipients and prevent blockage of capital. He suggested that the audit requirement under Section 35(5) of the GST Act in case of MSME with annual turnover up to ₹ 5 crore should be dispensed with for the first year of GST implementation i.e. 2017-18 as there was a lot of confusion regarding GST and also there was lack of clarity due to frequent changes in the law, rates and procedure. He further stated that supplier of goods should be made legally responsible for generation of e-Way bill i.e. both for part 'A' and part 'B' of thee-Way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 100 should be reduced from 18% to 12%. 6.38. The Hon'ble Minister from Andhra Pradesh further stated that in the VAT regime, aquafeed, poultry feed, cattle feed and feed supplements were exempted from tax. But under GST, as per Notification No.2/2017-Central Tax (Rate), Entry 10 (Exempted List), the item described as aquafeed and supplements was causing confusion due to improper description. He suggested that the entry should be re-drafted and a specific clarification should be issued to grant exemption on feed supplements irrespective of the source of such supplements whether from the residues of food industries or from other sources. 6.39. He also requested to grant exemption from registration under Section 23(2) of the CGST Act and SGST Act for Tirunmala Tirupati Devasthanams (TTD) as it was a religious trust and not engaged in business activities and providing services to the devotees was its main objective. Levying tax on the amounts it received in providing services or sale of goods was not justified. He also mentioned that TTD utilised the surplus amount for charitable purposes. He also suggested that fish-nets, fish-net fabrics and fisherman boats currently tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x), Chhattisgarh suggested that GST on milling charges of paddy to rice should be exempted from tax. He stated that there was no Service Tax earlier but 5% GST was levied currently which ultimately came as a burden on the Public Distribution System subsidy. Shri Rajeev Sharma, CCT, Himachal Pradesh stated that pharmaceutical sector suffered due to inverted duty structure on inputs and final products and this should be rectified. Shri Praveen Gupta, Secretary, Finance (Revenue), Rajasthan raised the issue of inverted duty structure. He stated that in certain cases, the output GST rate for the MSME units was 5% whereas input GST rate was 18%. He stated that railways also suffered from inverted duty structure and huge amount of input tax credit and working capital was blocked. He suggested that this issue should be addressed. He also stated that the notification issued on 26th July 2018 in respect of textiles did not give clarity on accumulated input tax credit lying unutilised in the balance and what would happen to inward supplies received upto 31st July 2017 and whether it would lapse. He further stated that a distinction should be drawn between input tax credit availed and input t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.45. The Hon'ble Minister from Karnataka stated that another very important issue related to one segment of Knowledge export in the Biotech sector. He explained that biotech research units in Bengaluru, Hyderabad, Chennai, etc. imported certain items for research and development and then exported the outcome of the research. In such cases, as an item had been imported but was not exported, the other connected outcome like a research report was not treated as export. He stated that this was severely affecting export competitiveness and many MSME were also working in this sector. He gave an example of import of tablets of crocin for doing research to improve its efficacy and the results of the research were exported but not the crocin tablet itself, which was used up during the study. Under the current provisions of the IGST Act, this was treated as domestic consumption and the output supply was taxed in India. He stated that a provision to treat such activities as export was there in the original draft of Law Amendment but it was removed subsequently due to fear of misuse. He stated that this provision should be introduced in the GST Law with safeguards, as needed, to preven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls, colleges, and even for commercial activities for 30 or 99 years and charging salami on it. This was considered as sale of interest in an immovable property and it resulted in Government paying huge amount of GST. On the other hand, land given on freehold basis or to the private sector was not being charged to GST. He stated that the Fitment Committee should examine this issue. He also voiced his support to the suggestion of the Hon'ble Minister from Karnataka on the issue of difficulty being faced in Knowledge exports i.e. research. He stated that the products which were imported for research were broken down during the research and could not be re-exported. He recalled that when this issue was discussed earlier, the Secretary had raised concerns of its misuse in some other areas. However, the present law was hurting knowledge outsourcing and he strongly supported the suggestion of the Hon'ble Minister from Karnataka to address this issue. 7. For Agenda Item 2 , the Council: - (i) took note of the suggestions received from the States and the field formations of Central Tax Administrations on MSME related problems as also those which were raised in the Council ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been issued by various banks. He recalled that the earlier proposal was to provide for a reduction in the rate of tax but now it was proposed to refund 20% of total GST paid through cashback with a cap of ₹ 100 per transaction. For this cashback scheme, the NPCI (National Payments Corporation of India) would need funds and it was proposed that this could be pooled by the Centre and the respective State. He stated that it was estimated that average value per transaction would be around ₹ 1,103 and if 20% of the transactions got the benefit, then the financial implication for a year would be approximately ₹ 991 crore. He stated that very few transactions were expected to take place in the first year. 8.1. The Hon'ble Deputy Chief Minister of Bihar added that some Hon'ble Members had raised concern regarding urban and rural divide and suggested to limit this benefit only to rural areas. To address this concern, the revised proposal limited this benefit only to RuPay (Debit) cards which was mostly used in rural areas. Another concern raised was regarding lack of digital infrastructure in rural areas like POS (Point of Sale) machines. He stated that to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the purchaser would receive an SMS about completion of the transaction and also of getting a specified amount of refund shortly so that there was immediate recognition of the benefit. This would incentivise digital transactions. 8.4. The Hon'ble Minister from West Bengal expressed his regret at not being able to attend the last meeting of the GoM on Digital Payments because of his other preoccupations. He recalled that during the first meeting of the GoM which he had attended, there were significant differences amongst the Members but now the proposal had been modified. He informed that he had sent a letter as a member of the GoM to the Convenor of the GoM raising some concerns on the revised proposal. He observed that if one started a policy of giving incentive through GST, today it was for using digital platform but there could be 25 other issues which could be deserving of incentive. He stated that once the principle of giving incentive from GST revenue was accepted, it could potentially open floodgates. He suggested that as the amount involved was small, instead of creating problem with the GST revenue system, it could be done through the budget of the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould help in encouraging people to switch to digital payment particularly in small towns and rural areas. He informed that in the last Budget, it was announced that 20 lakh POS machines would be spread across the country in addition to other efforts like BHIM-Aadhaar etc. He added that even the Fair Price Shops (FPS) under the Public Distribution System were being enabled to get payment through BHIM-Aadhaar. 8.8. The Hon'ble Deputy Chief Minister of Bihar pointed out that in 2017-18, the value of transactions through UPI, BHIM and USSD was ₹ 1,09,832 crore in approximately about 92 crore transactions; through RuPay POS was ₹ 48,886 crore in approximately 46 crore transactions and through RuPay (eComm) was ₹ 16,635 crore in approximately 21 Crore transactions. He observed that the internet penetration had gone deep into the villages and rural population therein would be able to use RuPay. He further observed that the State of West Bengal had, in fact, received a national prize for popularizing digital use. 8.9. The Hon'ble Minister from Kerala supported the concerns raised by the Hon'ble Minister from West Bengal. He stated that he had sent a long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were generally giving credit cards of other agencies like Master and Visa and not RuPay (Debit cards). He added that NPCI could handle the technology issues as they were already monitoring RuPay card transactions and it would also be possible to know technologically as to what tax was paid by the purchaser. 8.11. Responding to the concern raised by the Hon'ble Minister from Kerala, the Secretary stated that traders were possibly not agreeable to incentivising digital payment as they would have a vested interest in encouraging transactions in cash., He pointed out that the average annual turnover of Composition taxpayers was only ₹ 17 lakh and even then, they had got registered on the GST portal. He added that approximately 75% of the Composition taxpayers had turnover of less than ₹ 20 lakh. He stated that this was done possibly to encourage cash transaction and to evade GST and income tax. He stated that incentivising digital payment would encourage payments through RuPay, BHIM etc. As for the concern raised by the Hon'ble Minister from Punjab regarding identifying the tax component in the bill amount debited in NPCI, he stated that the NPCI was trying to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the RuPay card. He observed that almost ₹ 3.60 lakh crore was being transferred directly into the bank account of the roughly 20 crore Government of India beneficiaries. He added that incentivising digital transactions through RuPay cards would increase revenue collection and formalisation of economy. He further added that there was a potential to improve digital payment by encouraging traders to have more POS machines. He emphasized that this was only a baby step and the Council should approve it to experiment with the same. 8.14. The Hon'ble Chairperson observed that Republic of Korea incentivized payment through credit cards in a very big way and that had helped to formalize its economy. The Hon'ble Minister from Kerala stated that this scheme could be tried in one or two States as B2C transactions did not affect other States at all and then it could be evaluated. The Hon'ble Minister from Assam stated that this agenda item had been discussed during the last two meetings of the Council and was referred to the GoM which had now come up with a good idea of encouraging digital payment through RuPay card and BHIM interface i.e. Government of India owned ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon'ble Minister from Assam stated that continuation of the Composition scheme was a kind of incentive relating to GST. The Chairman, GSTN, stated that BHlM-Aadhaar could also be added to the modes of transactions under this pilot incentive scheme. The Council agreed to this suggestion. 8.17. The Hon'ble Ministers from Assam and Tamil Nadu volunteered to introduce this scheme on a pilot basis. The Hon'ble Chairperson stated that the other States could also volunteer. The Council approved that the proposed scheme to incentivise digital payment could be introduced in the States that agreed to implement it on pilot basis and the Council could take a decision for its all India application after studying the impact of the pilot scheme in the volunteering States. 9. For Agenda item 3 , the Council approved the proposal to introduce the following scheme for incentivising digital payment under GST regime: i) The GST concessions on digital payments be given on the B2C transactions made through RuPay (Debit Card) and UPI-Unified Payment Interface, BHlM, USSD and BHIM-Aadhaar; ii) The GST concession shall be given by way of refund to the consumer in his account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponding quarter for the registered persons having aggregate turnover of up to ₹ 1.5 crore in the preceding financial year or the current financial year; (iii) the due date for filing the return in FORM GSTR-3B for the months of July, 2018 to March, 2019 to be the 20 th of the corresponding next month; (iv) the due date for furnishing the details in FORM GSTR-2 and filing the return in FORM GSTR-3 for the months of July, 2018 to March, 2019 shall be notified. The Council approved the above proposal. 11. For Agenda item 4(i) , the Council approved the proposals contain ipa:ra7grnaphe dr -CHAIRMAN'S 10(i) to 10(iv) above. Agenda item 4(ii): Proposal to withdraw amendment to Section 16(2) of the CGST Act, 2017 12. The Hon'ble Chairperson stated that during the 28 th Meeting of the Council held on 21 st July, 2018, certain proposals for amendment to the GST law were approved. However, he proposed to withdraw the proposed amendment to second proviso under Section 16(2) of the CGST Act, 2017. He stated that the original formulation of the second proviso under Section 16(2) of the CGST Act, 2017 was more beneficial to MSME and deletion of the phrase ..... X X X X Extracts X X X X X X X X Extracts X X X X
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