TMI BlogMinutes of the 30th GST Council Meeting held on 28th September 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT Grievance Redressal Committee for information of the Council 5. Review of Revenue position 6. Analysis of Revenue Gap of select States and Union Territory of Puducherry for information of the Council 7. Status report on Anti-profiteering measures under GST for information of the Council 8. Proposal of State of Kerala for imposition of Cess on SGST for rehabilitation and flood affected works 9. Proposal of State of Punjab to address difficulties arising out of recent amendment to rule 96 of the CGST/SGST Rules relating to exports. 10. IGST exemption to imported goods supplied for relief and rehabilitation of people affected by floods in the State of Kerala for information of the Council 11. Any other agenda item with the permission of the Chairperson i. Addendum to Agenda Item 6 (Analysis of Revenue Gap of select States and Union Territory of Puducherry for information of the Council)- Report on Bihar ii. Minutes of 10 th Meeting of Group of Ministers (GoM) on IT Challenges in GST Implementation for information of the Council and discussion on GSTN issues 12. Date of the next meeting of the GST Council 3. The Hon'ble Chairperson welcomed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Act Union territory Tax (Rate) 13 to 23 of 2018 GST (Compensation to States) Act Compensation Cess (Rate) 2 of 2018 Circulars Under the CGST Act 50 to 65 of 2018 Orders Under the CGST Act 4 of2018 7.1. The notifications, circulars and orders issued by the Member States, which are pari materia with the above notifications, circulars and orders were also deemed to have been ratified. Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of the GST Council 8. The Secretary stated that the GST Implementation Committee (GIC) took certain decisions between 21 st July, 2018 (when the 28 th Council Meeting was held) and 17 th September, 2018 (before the 30 th Council Meeting scheduled on 28 th September, 2018). He stated that due to urgency, certain decisions were also taken by obtaining approval of the GIC by circulation amongst the GIC Members. He stated that this Agenda item was also discussed during the Officers meeting held on 27 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took note of the decisions/recommendations of the I.T. Grievance Redressal Committee. 11. For Agenda item 4 , the Council took note of the decisions taken during the second meeting of the IT Grievance Redressal Committee held on 21 st August, 2018. Agenda Item 5: Review of Revenue position 12. Introducing this Agenda item, the Secretary informed that during the Officers meeting held on 27 th September, 2018, a detailed State-wise review of revenue situation was undertaken. It was noted that all-India total revenue collection under CGST, SGST, IGST and Compensation Cess for the month of July, 2018 was ₹ 96,483 crore and for August, 2018, it had come down to ₹ 93,960 crore. He stated that approximately ₹ 49,000 crore was being collected in terms of IGST Revenue out of which, normally, every month ₹ 35,000 crore went to settlement and about ₹ 5,000 crore went as refund leaving a balance of approximately ₹ 10, 000 crore. He stated that in accordance with the decision of the Council, the practice of provisional settlement of the IGST amount lying in balance would continue in the current year, which would help to bring down the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue gap analysis of the States of Jammu Kashmir, Punjab, Himachal Pradesh and UT of Puducherry was in the main Agenda notes whereas the report on Bihar was part of Additional Agenda notes [Agenda Item II(i) of the Additional Agenda Notes]. He broadly summarised the main reasons for the shortfall. I 14.1. The Secretary stated that for Punjab and Puducherry, the pre-GST rate of growth of VAT collection was only about 6%, and therefore, the assured growth rate of 14% during GST would cause a persistent shortfall of 8% unless this gap was bridged through extra effort of revenue collection. For Jammu Kashmir and Himachal Pradesh, the average growth rate of VAT revenue was about 11%, which would lead to a gap of about 3%. Bihar had a higher than the assured 14% growth rate (about 18%). This was due to certain specific reasons, namely increase in VAT rate by one per cent preparatory to introduction of Prohibition in the State during 2016- 17. He further stated that there were certain State specific reasons for revenue shortfall. For instance, Punjab got about ₹ 3,000 crore revenue from tax on food grains by way of Purchase Tax and Infrastructure Development Fee, and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of Computers was manufactured in the UT which were mostly getting exported to other States which added to their CST income. Now, the CST income was gone. The revenue base of the UT was also low. He had given specific suggestions for improving the revenue position. 14.5. He stated that Bihar had certain advantage because of a peculiar reason that during 2015-16, preparatory to imposition of Prohibition in 2016-17, there was increase in the rate of VAT by one per cent on all items. This gave them a revenue growth rate of about 28% in 2015-16 but otherwise, the average growth rate of Bihar was about 18%. Due to this higher revenue base, the shortfall of GST collection for Bihar was initially very high (38%) as compared to the national average (16%), but in the current year, it had narrowed to 20%, as against the national average of 13%. He further stated that once the lGST settlement went up, revenue accruing to consuming States would increase, which would benefit not only Bihar but also States like Odisha and Chhattisgarh. He added that during VAT, one of the big sources of revenue for Bihar was Entry Tax to the tune of ₹ 1,100 crore, for which no input tax credit had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjab is largely a consuming State and this was an area of concern. He requested for a deeper study on this aspect. He stated that he was not entirely satisfied with the Study Report and one needed to dive deeper into the subject to understand the reasons for the high revenue shortfall for Punjab. He further pointed out that in paragraph 3 at page 134 of the Detailed Agenda Notes, it was indicated that some other reasons for revenue shortfall are natural and structural factors such as geographical location, size of economy, endowments of natural resources .... He raised a question whether these observations in the agenda note could be passed on to the 15111 Finance Commission, which has been mandated to look at, inter alia, these factors for finalising the devolution of resources. He requested the Hon'ble Chairperson to bring this to the notice of the 15 th Finance Commission. The Hon'ble Chairperson stated that sometime back he read a study of different States and how they were rated in terms of their performance on various social and other indicators. He added that the five States namely Kerala, Punjab, Sikkim, Delhi and Himachal Pradesh were right on top based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the revenue had gone to other States during the last 18 months, it should be restored to Bihar. He suggested that RFlD (Radio Frequency Identification) tag should be made mandatory, as it was implemented successfully in the State of Uttar Pradesh. He also suggested that there should be provisional IGST settlement every two months, which would help to boost the revenue of consuming States and narrow the gap between the revenue collected and the revenue to be protected. He added that they had done a detailed analysis of the report of the Secretary and would take steps as suggested by him. 14.11. Shri Suresh Bhardwaj, Hon'ble Minister from Himachal Pradesh, thanked the Secretary for his analysis of the revenue situation in his State. He stated that for the period April, 2018 to August, 2018, they had a revenue gap of 36% despite performing higher than the national average in return filing. He stated that they were taking steps, as suggested in the Report of the Secretary. He added that since Himachal Pradesh was not a consuming State, the goods manufactured in Himachal Pradesh were largely going out and so was the revenue. He further stated that some of the measures sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Ministers from Punjab and Himachal Pradesh to convey views to the 15 th Finance Commission through the GST Council. He observed that the GST Council and the Finance Commission were separate bodies and specific suggestions to the Finance Commission should be sent to it by the individual States and not through the GST Council. 14.14. Shri Prakash Pant, Hon'ble Minister from Uttarakhand, stated that, as could be seen from the Agenda notes, they suffered a revenue shortfall of 35% as compared to the national average of 13% during April to August, 2018. He stated that Uttarakhand is largely an exporting State and for the period August, 2017 - August, 2018, the total revenue accrued to the State was ₹ 4,028 crore, of which the SGST component was ₹ 3,888 crore and IGST settlement was ₹ 140 crore. The IGST settlement was approximately 3% of the State's total revenue which was low as compared to other major revenue shortfall States. He observed that Puducherry accounted for 42%, Jammu Kashmir 53% and Himachal Pradesh 49% of their revenue by way of IGST settlement. He stated that a comparative analysis for pre-GST regime and GST regime collections indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual returns. He suggested that GSTN could generate State-wise report and associated annexures of the data available in the annual returns. He added that in the services sector, historically they had been concentrating on big service providers only but there was a scope for expansion of the base. He added that the services sector needed to be analysed more systematically and closely to see how their revenue was getting apportioned and allocated across the States. 14.16. Shri Alok Sinha, ACS (Commercial Tax), Uttar Pradesh, stated that in addition to the blocking of e-Way Bill generation in case of non-filing of returns, there should also be option with the tax administration to block the facility of issuing e-Way bills when misuse of the e -Way bill was seen. He added that the revenue shortfall of his State was only 5% but they were not getting equivalent compensation. Shri Ritvik Pandey, Joint Secretary, Department of Revenue (DoR), explained that the State of Uttar Pradesh had been demanding that the arrears of VAT that they had collected should be kept aside for calculation of compensation whereas it was earlier decided that compensation would be calculated after taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider holding a meeting of the Council in Goa. 14.19. Shri Somesh Kumar, Principal Secretary (Revenue), Telangana, stated that presently, provisional IGST settlement was being given based on the promotion of the State in revenue to be protected but now the time had come to change the same. He suggested two approaches for the same. The first could be based on where the material was going based on which a proportionate revenue could be distributed between the States and the second could be based on the percentage of IGST settlement going to the various States in the previous year rather than the guaranteed growth rate of 14%. He stated that either of the two would be a better approach rather than giving the provisional JGST amount on the basis of guaranteed 14% growth rate, which was related to VAT period. 15. For Agenda item 6 , the Council: (i) took note of the report of the Secretary on the revenue gap analysis of the States of Jammu Kashmir, Punjab, Himachal Pradesh, Bihar and the UT of Puducherry; and (ii) approved that the Law Committee shall frame a proposal to deny the facility of generation of e-Way bills to taxpayers who had not filed returns for two cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the website of NAA was functional and 293 cases of profiteering came directly from the website. Another 40-50 cases came through the helpline, which was also functional. He informed that ₹ 176.90 crore had been deposited in the Consumer Welfare Fund mainly from the two cases of alleged profiteering. 16.2. The Hon'ble Deputy Chief Minister of Bihar observed that the application form for filing anti-profiteering complaint was complicated, which required filling of HSN code, maximum retail price and tax rate, pre and post rate reduction, etc. He suggested to have a more simplified form for filling application against profiteering. The Secretary stated that even if an anti-profiteering complaint was received in a plain paper, the instruction was that the officer concerned would sit with the complainant and help him to fill up the prescribed form. However, the Law Committee could also examine if any further simplification could be done in the application relating to complaint against profiteering. 17. For Agenda item 7, the Council: i (i) took note of the work done till date by the National Anti-Profiteering Authority; and (ii) approved that the Law Committee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, to meet the needs of his State. He stated that now his State was in the stage of reconstruction where money was required to pay compensation and for repair and maintenance of various infrastructure. This could not be done from borrowed funds. He stated that the present funds could be used for payment of compensation and the revenue coming later could be used for reconstruction. He requested the Council to decide on this issue. 18.2. The Hon'ble Deputy Chief Minister of Bihar stated that the proposal of the State of Kerala to levy additional cess was examined during the 10 th meeting of the GoM on IT Challenges in GST held on 22 nd September 2018 in Bengaluru. It had then transpired that about six months' time would be required to change the GST software are Invoice module and challan module, GSTR-1 and GSTR-3B etc. would need to be changed in order to distinguish the current Compensation Cess and the proposed levy. He stated that it might be difficult for GSTN to make such a drastic change in the software. He pointed out that Article 279A (4) (f) of the Constitution permitted levy of any rate or special rate for a specified period to raise additional resources duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een sent to the Attorney General (AG) of India for clarification whether it was legally permissible under GST to impose additional Cess or any Cess. The comment from the AG had not yet been received as the issue was also under challenge before the Hon'ble Supreme Court. He stated that the proposal of the State of Kerala would have a bearing on a matter which was presently sub judice. He stated that even lower Assam was in the grip of flood as of today also. He stated that it was not clear whether law allowed to levy additional Cess or not but if Cess has to be levied for helping in case of calamity or disaster, then it should be levied only on the commodities which attracted Cess and not for all the commodities. He wondered whether one could also increase some percentage of Cess already being levied on certain commodities to create a separate Fund for calamities or disasters. He stated that they supported the proposal in principle and expressed his solidarity with the State of Kerala in its hour of crisis and stated that it should be helped in every possible way. However, he wondered whether, in the absence of opinion of AG, any cess could be imposed. 18.5. The Hon'ble M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from that State. He stated that while new provision could be enacted later to make compensation available in case of natural calamities and disaster, as an immediate act, for Kerala, tax waiver should be granted on damaged goods which the insurance companies were not compensating. He added that Kerala should be compensated and rehabilitated quickly through National Disaster Response Fund (NDRF) or any other way by the Centre. 18.9. Dr. P.D. Vaghela, CCT, Gujarat, stated that Kerala should be helped. He added that though Compensation Act was under legal challenge, the Council had power under Article 279A for levy of any special rate or rates for a specified period during any natural calamity or disaster. This provision was preferable compared to the option of cess. He suggested to have a separate IT system for Kerala by allowing increase of 1% tax on SGST component in the State of Kerala. He observed that for supply made from Kerala, the cost would be passed on to the consumers of other States which would make the supply from Kerala less attractive, but this was the case even in the earlier regime. The ACS, Uttar Pradesh, stated that the issue of sugar cess had been referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Sisodia, Hon'ble Deputy Chief Minister of Delhi, stated that there were two options emerging from the ensuing discussion. One was that all States should contribute to Kerala by an increase in the rate of tax and consequent changes in the rules should be carried out. The second option was to increase the rate of SGST in Kerala only. He supported the proposal as proposed by Hon'ble Minister from Kerala to increase the rate of tax in Kera1a only. 18.13. Summarising the discussion, the Hon'ble Chairperson stated that five issues arose out of the discussion in the Council on this issue. First issue, which was supported by the Hon'ble Minister from Tamil Nadu and the Hon'ble Deputy Chief Minister of Delhi, was that the State of Kerala may be allowed to levy a special cess. The second issue, which was supported by the Hon'ble Deputy Chief Minister of Bihar and some other States, was that the State of Kerala had already suffered and whether a further special tax should be imposed on the people of Kerala. The third issue was raised by the Hon'ble Minister from Punjab that trade might shift from Kerala due to increase in taxation if the special tax was levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the issue should be decided now or after consideration by the proposed GoM. 18.15. The Hon'ble Minister from Kerala stated that discussion in the Council showed bonding of the States. Everyone was very considerate during the discussion. He stated that raising additional 1% cess at all-India level could raise issues as highlighted by the Hon'ble Chairperson and therefore in his view levying special tax in Kerala would have been the easier approach. But, looking at the Constitutional provision and the spirit of discussion in the Council, one could consider levy of all-India tax for a limited period after considering all the views expressed by the Council Members. He supported the proposal to have a small Group of Ministers to take a considered view on this issue and bring it to the next Council meeting. The Hon'ble Chairperson stated that rescue and relief in Kerala was almost over and it was in a state of rehabilitation which could take several months and the funding would keep coming from various sources. So, the funding through GST route would be an addition and a little delay would not make much of a difference. He observed that the coastal States, Hill States ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itlement of refund of IGST paid on goods exported which are manufactured from capital goods imported under EPCG Scheme. This Agenda was discussed in the Law Committee and it was decided to delete the reference to Notification No.79/2017-Customs with retrospective effect i.e. from 23rd October 2017. 20.1. The Commissioner (GST Policy), CBIC, further stated that after the circulation of the Agenda notes, the issue had been re-examined in consultation with the Law Committee. It is seen that Notification No.79/2017-Customs which was proposed to be deleted in the Agenda note placed before the Council covers not only import of capital goods under EPCG licence but also import of inputs under Advance Authorization (Annual requirement), Special Advance Authorization and Advance Authorization (Export of prohibited goods). If reference to Notification No.79/2017-Customs was removed completely, as proposed in the original Agenda notes, it would make all those exporters eligible to pay lGST and claim refund on goods exp01ted where inputs were imported without payment of IGST under any of the above-mentioned schemes. In view of this, he stated that the Agenda note was proposed to be modified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier sanctioned refunds and the proposed amendment could be done only with prospective effect. It was, therefore, proposed that Notification No.39/2018-Central Tax dated 04.09.2018 be rescinded to then extent it is related to the amendment of Rule 96 (10) of the CGST Rules, 2017. 20.5. Keeping in view the above proposals, the revised formulation of Rule 96(10) of CGST Rules and Rule 89(4B) of the CGST Rules is reproduced as below:- Suggested formulation for Rule 96(10) of the CGST Rules (proposed deletion in strike through mode and proposed addition in italics and underlined) (10) The persons claiming refund of integrated tax paid on exports of goods or services should not have - (a) received supplies on which the benefit of the Government of India, Ministry of Finance notification No. 48/2017-Central Tax, dated the 18th October, 2017 published in the Gazette of India, Extraordinary, Part IT, Section 3, Sub-section (i) ,vide number G.S.R 1305 (E), dated the 18th October, 2017 except so far it relates to receipt of capital goods by such person against Export Promotion Capital Goods Authorisation or notification No. 40/2017-Central Tax (Rate), dated the 23 rd October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R 1272(E) dated the 13th October, 2017 or notification No. 79/2017 -Customs dated the 13th October, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 1299(E) dated the 13th October, 2017, or all of them, the refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted. 20.6. The Secretary stated that the issue was discussed in detail during the Officers meeting held on 27 th September, 2018 and all had agreed to this amendment. The Hon'ble Minister from Punjab thanked the Secretary for a very quick response to his letter. The Council agreed to the changes as proposed above. 21. For Agenda item 9 , the Council agreed to amend Rule 96(10) of CGST Rules and Rule 89(4B) of CGST Rules, as indicated in para 20.5 above. The exact wording of the amendment shall be finalised in consultation with the Legislative Department, Union Law Ministry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting of the GoM held on 22 nd September, 2018 at Bengaluru was contained in the minutes and placed as an Agenda note. However, he wanted to highlight one issue concerning the date of making available the software for Annual Returns. He stated that during the 10 th meeting of GoM, lnfosys informed that they would be able to make the software ready for Annual Return for regular taxpayer (GSTR-9) by 18 th December, 2018, the Annual Return for composition taxpayers (GSTR-9A) by 18 th February, 2019 and the Reconciliation Statement (GSTR-9C) for normal taxpayers with turnover exceeding ₹ 2 crore would be made available after the finalisation of the SRS (Software Requirements Specification). He stated that the time-line for filing these returns was 31 st December 2018 but it appeared that lnfosys would not be able to develop this software by 15 th November, 2018. He stated that the Council would need to consider whether the date for filing the annual return for normal taxpayers and composition taxpayers should be extended. He further informed that during the meeting of the GoM, it was also explored whether the Form GSTR-9C could be uploaded in pdf form but it transpired t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested the Council to approve the same so that these could be forwarded to all the States. The Council approved the FAQs on TCS and SOP for TDS, for circulation to the States. 28.1. The Hon'ble Minister from Uttarakhand stated that under Section 13 of the CGST/SGST Act, 2017, the time of supply of works contract services was when the contractor raised the bill and hence they were liable to pay the tax after issuing the bill. However, it took quite a long time for them to get the payment for the same. He stated that this was causing difficulties to the contractors. He observed that small contractors with annual turnover of less than ₹ 1.5 crore should be given benefit of composition scheme for the works contract services so that they could get benefited as well. The Secretary stated that this problem had been raised from many quarters. He suggested that one solution could be for the Government to take a policy decision to expedite payments to Government contractors. Second option could be to examine the possibility of raising quarterly bill or raising the invoice only when Government was ready to make payment. He observed that the same provision of law relating to wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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