TMI BlogMinutes of the 15th GST Council Meeting held on 3 June 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rules and Forms 4. Finalization of the rates of tax and cess to be levied on commodities remaining after the Fitment exercise during the 14th GST Council Meeting 5. Presentation on concept note on operationalizing the Anti-Profiteering Clause in GST Law 6. Any other agenda item with the permission of the Chairperson i. Applicability of GST on supply of Electricity ii. Notifying Provisions related to Composition Levy iii. Notifying Provisions related to Appointment of Officers iv. Notifying Provisions related to Registration v. E- Way Bills 7. Date of the next meeting of the GST Council 3. The Hon'ble Chairperson welcomed all the Members to the 15 th Council Meeting. Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 14th GST Council Meeting held on 18-19 May, 2017: 4. The Hon'ble Chairperson invited comments of the Members on the draft Minutes of the 14 th Meeting of the Council (hereinafter referred to as 'Minutes') held on 18-19 May 2017 before its confirmation. 4.1.1. The Secretary informed that a written request had been received from the Commissioner of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a lower rate. He requested to add his version in this paragraph. The Council agreed to record his version in the Minutes. 4.3. The Hon'ble Minister from Punjab stated that in paragraph 19.2, it was recorded that Shri V.K. Garg, Advisor (GST), Punjab, stated that ... in Punjab, a fee was charged for giving liquor licence and as fee had the character of service, the Government of Punjab was paying Service Tax on collection of such fee from 1 April, 2016. He stated that the highlighted underlined portion was not stated by Shri V.K. Garg and suggested to delete the same. The Council agreed to delete the highlighted underlined portion from paragraph 19.2 of the Minutes. 4.4.1. The Hon'ble Minister from Punjab stated that the Council decision recorded in the last line of paragraph 19.4, namely, the Council agreed to continue this tax on licence fee for liquor in the GST regime also and not to exempt it was not taken. The Hon'ble Chairperson stated that the discussion was to find a way out but it was decided not to exempt GST on licence fee on liquor. The Secretary pointed out that in paragraph 19.4 of the Minutes, it was recorded that the Hon'ble Chairpers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the Minutes. 4.7. The Hon'ble Minister from Uttarakhand stated that in reference to discussion on plywood and particle board in paragraph 15.9 (xlviii) of the Minutes, he had stated that plywood made of eucalyptus being not in the category of an agricultural crop, should also attract tax at the rate of 12%. He stated that his version should be recorded in this paragraph. The Council agreed to record his version in the Minutes. He further stated that tax rate on plywood made of eucalyptus should be revisited when rates of other goods came up for reconsideration. 4.8. The Hon'ble Minister from Uttarakhand stated that just like dalia, other than put up in unit container and bearing a registered brand name, was exempted from tax, there should also be tax exemption to pasta and macaroni as they employed the same process as dalia. The Hon'ble Chairperson stated that these goods could be covered in the list of goods that might come for reconsideration of the rates already approved by the Council. 4.9. The Hon'ble Minister from Maharashtra stated that on page 42 in para 24.1 of the Minutes, his version was recorded as follows: The Hon'ble Minister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposal made by him in paragraph 24.3 of the Minutes: - (a) Abatement for the part transfer of property in goods or services used in construction, before the contract between buyer and the developer came into existence: Sr. No. Stage during which the developer enters into a contract with the purchaser. Rate of Abatement a) Before issue of the Commencement Certificate. NIL% b) From the Commencement Certificate to the completion of plinth level . 5% c) After the completion of plinth level to the completion of 100% of RCC framework 15% d) After the completion of 100% RCC framework to the Occupancy Certificate. 45% e) After the Occupancy Certificate 100% (b) For determining the value of supply of services as per the above Table, it shall be necessary for the dealer to furnish a certificate from the Competent Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. 4.15. The Hon'ble Deputy Chief Minister of Gujarat stated that he had suggested that intra-ocular lens should be kept in lower tax slab. He stated that this was not mentioned in the Minutes and that the same should be suitably incorporated. The Council agreed to record his version. 4.16. Dr. C. Chandramouli, ACS, Tamil Nadu, stated that the written speech circulated by the Hon'ble Minister from Tamil Nadu before the 14th meeting of the Council should be reflected appropriately in the Minutes. The Secretary stated that the full speech could not be reproduced in the Minutes but any written speech circulated by the Hon'ble Members during the Council Meeting would be taken on record and a reference to this effect would be made in the Minutes. 4.17. The Hon'ble Minister from Kerala stated that with reference to discussion on plywood and particle board in paragraph 15.9 (xlviii) of the Minutes, his version recorded in the Minutes was that he suggested that wood based particle board should be taxed at the rate of 18%. He requested to modify his version and to record that 'the Hon'ble Minister from Kerala suggested that wood based particle bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentence of paragraph 15.9 (xxxii) with the following version: 'The Secretary clarified that agricultural hand tools falling under HS Code 8201, namely, spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools ofa kind used in agriculture, horticulture or forestry were already kept in the exempt list'; 5.3. In paragraph 15.9 (Ixxii), to add the following version of the Hon'ble Minister from Meghalaya: 'The Hon'ble Minister from Meghalaya stated that roofing materials like corrugated sheets were not similar to other building material as they were used by the poorest of the poor for shelter over their head, and therefore, they should be taxed at a lower rate.'; 5.4. In paragraph 19.2, to delete the following version attributed to Shri V. K. Garg, Advisor (GST), Punjab: and as fee had the character of service, the Government of Punjab was paying Service Tax on collection of such fee from 1 April, 2016 ; 5.5. In paragraph 15.9 (xlviii), to add the following version of the Hon'ble Deputy Chief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser. Rate of Abatement a) Before issue of the Commencement Certificate. NIL% b) From the Commencement Certificate to the completion of plinth level. 5% c) After the completion of plinth level to the completion of 100% of RCC framework 15% d) After the completion of 100% RCC framework to the Occupancy Certificate. 45% e) After the Occupancy Certificate 100% For determining the value of supply of services as per the above Table, it shall be necessary for the dealer to furnish a certificate from the Competent Authority. This would make the levy compliant with Law laid down by Hon'ble Courts and such deduction would avoid hardship to people in Maharashtra (mainly MMRDA region)'. 5.10. In paragraph 24.3, to add the following version of the Hon'ble Minister from Maharashtra: 'The Hon'ble Minister from Maharashtra proposed exemption from levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat GST on ply board at the rate of 18% would be more appropriate.' 5.17. In addition, the Council decided that any written speech circulated by the Hon'ble Members during the Council Meeting would be taken on record and a reference to this effect would be made in the Minutes. Agenda Item 2: Presentation on Information Technology (IT)-readiness of GSTN for roll-out of GST: 6. Introducing this Agenda item, the Secretary invited the Chairman, Goods and Services Tax Network (GSTN) to present the status of IT preparedness for implementation of GST. Shri Navin Kumar, Chairman, GSTN in his power point presentation explained the Information Technology (IT) strategy adopted by the GSTN. He explained that GSTN would be providing core front-end services namely registration, return and payments as well as Helpdesk support, information on interstate supply, analytics and IGST settlement. He stated that GSTN would also be providing backend services for 27 States/UTs. He explained that the back-end system of the State Governments and the Central Government would enable the statutory functions of approval of registration, assessment, refunds, audit and enforcement, adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r development of these modules, some Rules have undergone changes in April and May 2017 and they were implementing these changes. He stated that some other application development tasks were under progress, like allotment of unique ID to UN bodies, payments reconciliation and Offline Utility (with invoice upload) and these were to be completed by 2 June, 7 June and 15 June 2017 respectively. 6.4. In respect of enrolment of existing taxpayers for GST, the Chairman, GSTN explained that enrolment of taxpayers was started on 8th Nov 2016, which was closed on 30th April 2017 and was re-opened on 1 st June 2017. As a result of this exercise, the status of enrolment was as below: Sl No. Taxpayer Type Provisional ID Issued Enrolled % 1 VAT Taxpayers (29 States and 5 UTs) 71 . 78 Lakh 54.89 1akh 76 . 5% 2 Excise Service Taxpayers 6 . 78 Lakh 5 . 61 lakh 82.74% 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... starting operation which was the best-known standard for an information security management system (ISMS). He stated that ISO 27000 family of standards helped organizations keep information assets secure. He explained the other features of security like CCTV monitoring, access control in respect of physical security, anti-virus, HIPS (Host based Intrusion Prevention System) in respect of infrastructure security, Firewalls, VPN, DDOS protection in respect of Network security, Identity and access management, Digital signatures in respect of Application security, encryption, HSM (Hardware Security Module) in respect of Data security, API gateway, license key in respect of API security, SOC in respect of Security operations, STQC in respect of Security audits, Security Monitoring and Analytics Centre (SMAC) and ensuring security throughout SDLC in respect of Secure Coding practices. He informed that they had already completed Standardization Testing and Quality Certification (STQC) Audit for many business processes. The performance Testing/load Testing for functional! security was undergoing, which was likely to be completed by 15th June. 6.10. The CEO, GSTN further stated that bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The CEO, GSTN responded that they had received the reference and that is why he had explained the process of acknowledgment in detail and that they were also working on other issues. 6.12. The CEO, GSTN informed that keeping in view the countdown of 1 July 2017 for GST roll out, the following timelines have been decided: (i) Enrolment- by 1 June to 15 June, 2017; (ii) Starting TCSffDS Enrolment- by 17 June, 2017; (iii) Starting GST Practitioner Enrolment- by 17 June, 2017 onwards; (iv) Fresh Registration under GST- 21 June, 2017 onwards; Opting for Composition - 25 June, 2017 onwards; and (v) Changes in developed modules based on changes made in Rules/Forms - by 21 June, 2017. The Hon'ble Minister from Jammu Kashmir requested that for his State, relaxation should be given in respect of enrolment of tax payers and it should be continued for a month beyond 15 June, 2017. The Secretary explained that this deadline was for migration of existing dealers and that the new registration would start from 21 June, 2017. 6.13. Starting the discussion on the presentation, the Hon'ble Deputy Chief Minister of Gujarat stated that first time such a System was created and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad was distributed throughout the month instead of being concentrated on the 10th of the next month (the due date offiling GSTR-1). He stated that the GST empaneled companies were given APls (Application Programme Interface) to check how the functionalities worked but some companies had not started working on the APIs. He clarified that they had now started working on them. The Hon'ble Deputy Chief Minister of Delhi desired to have the list of GSPs and the CEO, GSTN, informed that the list was available on their website. 6.15. The Hon'ble Minister from West Bengal stated that he agreed with the observations of the Hon'ble Deputy Chief Minister of Gujarat and the Hon'ble Minister from Karnataka that implementation of GST was a huge exercise and almost 300 crore transactions per month would have to be reflected on the GST system. He stated that there were several issues of concern. He observed that there had been last minute changes in the Return Form and no user testing had been done and no feedback taken and barely 20 days were left for testing the new Return Forms. He further stated that during beta testing with about 100-200 companies, several glitches occurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to upload data. The Hon'ble Minister from Mizoram stated that one of the major problems faced in relation to Aadhaar link verification was that the actual mobile number being used by the tax payer was different from the one registered with Aadhaar. 6.18. Responding to the concerns raised by the Hon'ble Members of the Council, the CEO, GSTN, stated that the entire System had been developed on the basis of the GST Rules made public in December, 2016 and they were making changes to software based on the amendments made to the GST Rules and Forms during April and May, 2017. He assured that no changes in the IT System would go through without three rounds of testing, namely, unit testing, integration testing and user acceptance testing which took note of multiple scenarios. He stated that uploading of data would start from 1 July, 2017 and software tools would be available offline and online for such uploads. He further stated that return filing would start on 1 August 2017. He stated that no slack time was available to them but whatever approvals were done today by the Council would be taken care of in the software. He stated that beta testing had been done with tax paye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout the approval of the tax payer. As regards the concern raised regarding large number of invoices to be issued by Banks, he clarified that one invoice could be raised by a Bank at the end of the month for the various services provided to a customer. As regards concerns regarding handling large volume of data, he pointed out that the volume of transactions handled in the IT systems of National Stock Exchange and IRCTC (Indian Railway Catering and Tourism Corporation) was much higher than envisaged under GST and they were handling it smoothly and assured that handling large data was not a challenge today. He further clarified that they had obtained STQC go ahead when enrolment was started and same process was underway for the main system. He further stated that no security clearance was required from the Home Ministry. 6.21. The Hon'ble Deputy Chief Minister of Delhi enquired as to why GSTN could not be audited by the Comptroller and Auditor General of India (CAG). The Secretary stated that GSTN would be subject to audit by CAG. The Hon'ble Deputy Chief Minister of Delhi suggested that instead of filing monthly return, the tax payer could file quarterly return but pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smatch Forms; and (ii) Transition Rules and Forms: 8.1. Introducing the above agenda item, the Secretary stated that GST Council had already recommended approval of Rules on Return and Transitional Provisions and subsequently, these Rules were placed in public domain. Taking into account the comments received from the departmental officers, trade and industry, certain changes had been proposed in the Rules. The proposed changes had been discussed in the meeting of the officers of the Central and the State Governments held before the Council Meeting on 3 June, 2017 and they suggested a few changes which were agreed to be incorporated suitably in the Rules. The Secretary invited Shri Upender Gupta, Commissioner (GST Policy Wing), CBEC to brief the Council about the proposed changes in the Rules. The Commissioner (GST Policy Wing), CBEC made a presentation explaining the changes in the Transition and Return Rules (copy ofthe presentation attached as Annexure 3 ). 8.2. Explaining the changes in the Transition Rules, the Commissioner (GST Policy Wing) stated that application to be submitted in the earlier Rule had now been replaced by a mere declaration. He stated that several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to be reported in summary form (and not against each invoice) in the following manner: (i) For turnover upto ₹ 1.5 crore - optional at 2-digit level (description to be given); (ii) For Turnover from Rs. l.5 crore to ₹ 5 crore - 2-digit level; (iii)Turnover of more than ₹ 5 crore - 4-digit level. He further explained that TDS/TCS Return was proposed to be filed on consolidated basis instead of the invoice basis; the threshold limit for getting the accounts of a taxpayer audited was proposed to be raised from ₹ 1 crore to ₹ 2 crore; the Commissioner could extend the date of matching of the claim for input tax credit on the recommendations of the Council; the electronic commerce operator required to collect tax at source under section 52 was to also furnish an annual statement; a separate return had been proposed for persons supplying Online Information and Database Access or Retrieval (OIDAR) services from a place outside India to an unregistered person; a provision had been proposed for auto-population of supply details of non-resident supplier in the return of corresponding recipient; and a provision had been proposed for person withdrawing from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar demand for increasing the percentage of deemed credit for Central tax. 8.5. The Hon'ble Minister from Kerala suggested that the existing Tax Practitioners should be accepted as GST Practitioners subject to the condition of having a minimum period of experience of working as a Tax Practitioner. He added that the new applicants would need to fully comply with the qualifications prescribed for GST Practitioners. The Secretary enquired whether all States had a system of registered Tax Practitioners and the general response was that all States had such a system. Shri Ritvik Pandey, CCT, Karnataka, stated that though there was a system of Tax Practitioner in the VAT, GST was a complicated tax regime and all Tax Practitioners, who qualified by virtue of having the prescribed period of experience, might not be of the desired standard. The Secretary suggested that there could be a transitional period of six months or a year for which the existing Tax Practitioners could be recognized under the GST regime during which they might clear the examination. The Hon'ble Chairperson observed that such a transitional provision would be useful and the existing Tax Practitioners could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prior to the Council Meeting on 3 June, 2017 along with the following amendment- (i) all existing Tax Practitioners who have five years of experience of working as Tax Practitioner shall continue to be a GST Practitioner for one year and should pass the prescribed examination within this period to continue to work as a GST Practitioner beyond the period of one year. Agenda Item 4: Finalization of the rates oftax and cess to be levied on commodities remaining after the Fitment exercise in the 14th GST Council Meeting: 9.1. Introducing this agenda item, the Secretary recalled that during the 14th Meeting of the Council held on 18 and 19 May, 2017 in Sri nagar, it was decided that GST rates for supply of some goods would be discussed in its next meeting. He suggested to take up discussion on each item. The record of discussion in respect of these goods is as below: - Cereals, pulses and flour put up in unit container and bearing a registered brand name: 9.2.1. Shri Alok Shukla, Joint Secretary (TRU-I), CBEC, informed that in the agenda notes, an illustrative Table of branded goods gave the percentage variation of retail prices of certain products like wheat fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his suggestion was not to differentiate in the same sector. 9.2.3. The Hon'ble Chairperson observed that such brand owners could avail input tax credit of the tax incurred on packaging and advertising. The Hon'ble Minister from Karnataka stated that this ) aspect was mentioned during the last Meeting ofthe Council and when he presented this argument to the stakeholders, they responded that many such retailers did not carry out advertisement and they were not eligible for input tax credit on the cost incurred on transportation and energy. He added that 80% of the cost of the output consisted of cereals. The Hon'ble Minister from Assam stated that all traders appear to make convincing points and tax should not be exempted on all of them. He added that value addition in many cases was substantial, and therefore, they should be taxed. The Hon ble Chairperson observed that one should also be cautious of the self-serving claims of the tax payers. The Secretary observed that sellers of branded cereals would be eligible for input tax credit on the cost incurred on transportation, packing, commercial leasing of buildings, etc. The Hon'ble Deputy Chief Minister of Delhi s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBEC stated that as per the list provided by the State of Uttar Pradesh, puja samagri included the following items: (i) incense sticks commonly known as agarbatti, dhupkathi or dhupbatti (GST rate at 12%); (ii) Sambhrani or lobhana (proposed GST rate at 12%); (iii) Rudraksha, rudraksha mala, tulsi kanthi mala, panchgavya (mixture of cowdung, desi ghee, milk and curd); (iv) Sacred thread (commonly known as / yagnopavit); (v) Wooden khadau; (vi) Panchamrit, (vii) Vibhuti sold by religious institutions, (viii) Unbranded honey (proposed GST Nil) (ix) Wick for diya (x) Misri, batasha, bura (proposed GST rate 18%). He further stated that goods like incense sticks commonly known as agarbattis, dhupkathi or dupbatti, sambhrani or lobhana were manufactured items and exempting them from GST would put domestic manufacturers of such goods at a disadvantage vis-a-vis imports and the agreed GST rate was 12%. He further stated that except the listed goods, namely, (i) incense sticks commonly known as agarbattis, dhupkathi or dhupbatti (to be taxed at GST rate of 12%); (ii) Sambhrani or lobhan (proposed GST rate 12%), (iii) Mishri, batasha, bura (proposed GST rate 18%), all other goods, namely, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the lower tax rate of 5% and in order to administer it effectively, it would be desirable to define this product. He added that the following definition was applied for the purposes of Central Excise exemption and the same could also be adopted under GST: Matches, in or in relation to the manufacture of which, none of the following processes is ordinarily carried on with the aid of power, namely: - (i) frame filling; (ii) dipping of splints in the composition for match heads; (iii) filling of boxes with matches; (iv) pasting of labels on match boxes, veneers or cardboards; (v) packaging. 9.4.2. The Hon'ble Deputy Chief Minister of Delhi stated that this definition could create confusion in the market as it would be difficult to identify which matches were handmade and which were machine made. The Joint Secretary (TRU-I), CBEC, explained that the tax would originate from a manufacturing unit and the description given during supply from a manufacturing unit would continue in the retail chain. After discussion, the Council agreed to this definition. Biscuits (Chapter 19): 9.5.1. The Joint Secretary (TRU-I), CBEC, explained that in Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be taxed at the rate of 5%. The Hon'ble Minister from Tamil Nadu suggested that as pizza, rusk and bread were being taxed at the rate of 5%, unbranded biscuits should also be taxed at the rate of 5% and branded biscuits could be taxed at the rate of 18%. He added that otherwise biscuits would get mis-classified as rusk. The Secretary stated that even small packs of biscuits were branded and iflower rate of tax was charged on the basis of retail price of biscuits, it would lead to huge loss of revenue which would have to be recouped by increasing tax on some other product. The Hon'ble Minister from Assam stated that as the proposed rate of tax on biscuits was less than the existing incidence, the proposed rate should be accepted in line with the principle adopted by the Council in its 4th Meeting (held on 3-4 November, 2016). He added that if a different line of argument was adopted for one item, it would cast a suspicion on the Council. After discussion, the Council agreed to tax biscuits at the rate of 18%. Power driven Agricultural, horticultural, forestry, poultry keeping or bee-keeping machinery, Harvesting or threshing machinery, machines for cleaning, sor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inister from Uttar Pradesh stated that items like thresher and biomass, biogas and biodiesel pump sets should also be taxed at Nil rate. The Hon'ble Minister from Telangana suggested to keep the tax rate at 5%. The Hon'ble Minister from Assam stated that the Council should stick to the fitment principle decided in the 4th Council Meeting (held on 3-4 November, 2016) and levy tax at the rate of 12%. The Hon'ble Minister from Goa stated that the principle offitment decided by the Council should be applied for all goods and exceptions should not be made only for some goods because some States made a lot of noise. 9.6.4. After further discussion, the Hon'ble Chairperson suggested that goods falling under Chapter headings 8432, 8433 and 8436 could be taxed at the rate of 12% and the goods falling under Chapter heading 8437 could be taxed at the rate of 5%. The Council agreed to this suggestion. 9.6.5. The Hon'ble Minister from Uttar Pradesh suggested that thresher and rotavator should also be kept in the tax bracket of 5%. The Joint Secretary (TRU-I), CBEC, informed that these goods were classifiable under Chapter heading 8433 and as per the Hon'ble Chairpe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a rate of 18% for all other categories of footwear. He stated that this was one commodity where the Council needed to decide whether tax rate should be based on a value based description. 9.7.2. The Hon'ble Minister from Kerala raised a question as to why reduce tax for some categories of footwear from the highest tax rate of about 30%. The Hon'ble Minister from Jammu Kashmir questioned the need to define such categories and thereby bring into GST, the distortions of Central Excise and VAT. He suggested to have a single rate of tax for footwear. He added that it was important to move towards the goal of one common GST rate of about 14.5% for goods and services over a time horizon of about 4-5 years. The CEA stated that distinction on the basis of objectively measurable criteria could be considered but rates on the basis of value would lead to evasion. 9.7.3. The Hon'ble Minister from Madhya Pradesh suggested to exempt plastic footwear and to tax the other categories of footwear. The Hon'ble Minister from Uttar Pradesh suggested to exempt plastic and rubber footwear and to tax the other categories of footwear. The Hon'ble Minister from West Bengal sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed GST rate on silk yarn was 5%. On silk fabrics, he stated that there was embedded tax on account of excise duty of 5.25% and on account of VAT of 3.15%. Hence, the proposed GST rate on silk fabrics was 12%. On garments, he stated that a rate of 12% was proposed irrespective of the fibre used. On wool, he stated that there was Nil duty of Central Excise and VAT, and therefore, the proposed rate of GST was also Nil. He stated that taking into account the present incidence of tax, and the proposal from the textile sector to maintain fibre neutrality, the proposed tax rate for woollen yarn was 5% and for woollen fabric and garments was 12%. He further stated that the tax rate on other natural fibre was proposed to be at the rate of 5%, while their fabrics and garments were proposed to be at GST rate of 12%. He stated that for man-made fibre and filament yam, the proposed rate of tax was 18% as the present incidence of tax was more than 18%. He added that taking into account the present incidence of tax, the GST rate for man-made fabrics and garments was proposed at 12%. 9.8.2. The Secretary stated that the overall picture in textile sector was that it was a fragmented chain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cotton fabrics. The Hon'ble Deputy Chief Minister of Gujarat stated that a lot of cheaper saris costing about ₹ 200 per sari were made in Surat and supplied all over India. The Hon'ble Minister from Rajasthan stated that it was difficult to differentiate between various proportions of cotton, manmade yarn, etc., and therefore, it was desirable to achieve fibre neutrality and impose tax on all types of textile goods at the rate of 5%. The ACS, Haryana, stated that it was important to remember that textiles was also used in packing, industrial use, cushioning, etc. 9.8.5. The Hon'ble Minister from West Bengal stated that raw jute should be exempt from tax instead of the present proposal to tax it at the rate of 5%. The Hon ble Deputy Chief Minister of Gujarat stated that cotton was also an agricultural product and by this logic, it should also be kept at Nil rate. The Secretary stated that there was a difference between jute and cotton as the former was used in making sacks etc. while the latter was used for making textiles. The Hon'ble Chairperson stated that the rates of tax on jute and cotton should be kept close to the existing rates and if jute attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be affected because the tax would be charged on reverse charge basis. The Hon'ble Deputy Chief Minister of Delhi stated that today, cotton fabric was also at Nil rate oftax. The Hon'ble Minister from Karnataka stated that reeler would bear full charge for value addition whereas he was only responsible for the act of reeling in the value chain. The Secretary observed that if there were only about 40,000 to 45,000 reelers, the fabric manufacturers could pay the tax on reverse charge basis, if need be. The Hon'ble Minister from Karnataka stated that silk industry was almost 2,000 years old and presently it was struggling for survival and as a producing State, they had exempted tax on it. After discussion, it was agreed that silk yarn would be charged to tax at the rate of 5%. 9.8.8. The Hon'ble Minister from Odisha suggested that hand loom should be charged to Nil rate of tax. The Secretary stated that the man-made fabric, cotton fabric, blended fabric and handloom were all proposed to be charged at the rate of 5% and it would be very difficult to make a distinction between handloom and machine-made fabrics. The Hon'ble Minister from Odisha stated that handlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Secretary (TRU-I), CBEC, clarified that IGST on imports would be leviable at the applicable GST rates. 9.8.12. The Joint Secretary (TRU-I), CBEC, stated that embroidery or zari articles falling under Chapter 58 was already agreed to be taxed at the rate of 5% in the last Council Meeting held in Srinagar (18-19 May, 2017). The Hon'ble Minister from West Bengal stated thatzari should be in the exempt category and recalled that the Hon'ble Minister from Uttar Pradesh and the Hon'ble Deputy Chief Minister of Gujarat had made a similar suggestion during the last Council Meeting. The Hon'ble Minister from Odisha supported this proposal and stated that tax on handicrafts would affect the livelihood of artisans. The Joint Secretary (TRU-I), CBEC, stated that zari was also now made of metallised yarn in factories. The Hon'ble Minister from West Bengal stated that poor women worked on zari and the Secretary responded that small workers would get covered under the exemption/compounding scheme. The Hon ble Minister from West Bengal stated that there was no Central Excise duty on small scale industry and as Central Excise exemption was being withdrawn, this would advers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ension to persons engaged in bidi making. He suggested that both tendu leaves and bidi should be kept at Nil rate. The Hon'ble Minister from Odisha stated that the rate of tax of tendu leaf in Odisha was 5% and tax rate on bidi was 10% .. His State being a tendu leaf bearing State, he suggested to keep the rate of tax at 5% on tendu leaves and 18% on bidi. 9.9.3. The Hon'ble Deputy Chief Minister of Gujarat raised a question as to whether dry tobacco leaves would also be covered under this category. The Joint Secretary (TRU-I), CBEC, clarified that it was already decided in the last Council Meeting that it would be charged to tax at the rate of 5% under reverse charge. The Hon'ble Minister from Jharkhand stated that presently in his State, there was 5.5% VAT on tendu leaves and no tax on bidi and suggested that tax on bidi should not be more than 12%. 9.9.4. The Hon'ble Minister from Karnataka stated that if tax treatment was to be differentiated on the consideration that it was hand-made, then he would present a list of products which should be given a similar differential treatment. He stated that by similar logic, tobacco should also not be subject to tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the entire quantity of tendu leaves was sold by the Forest Produce Corporation, a Government Undertaking, and if tendu leaves was taxed at 28%, a large part of tax would be collected at the first point of sale; otherwise a lot of tendu leaves would go to the unorganised sector and no revenue would accrue from such supplies. The Secretary observed that this was a good suggestion and suggested to keep the rate of tax on tendu leaves at 18%. The Hon ble Minister from Maharashtra suggested that tax on tendu leaves should be kept at 5% as the present incidence of tax was 6%. Shri R.K. Tiwari, ACS, Uttar Pradesh, stated that tax on tendu leaves should be confined to the existing level of taxation. The Secretary stated that as bidi rolling was done in unorganised sector, it was a good idea to get tax at the stage of supply of tendu leaves itself. 9.9.6. The Hon'ble Minister from Kerala stated that he still opposed equal rate of taxation on cigarette and bidi. The Hon'ble Minister from Karnataka stated that bidi would become cheaper as cigarette attracted Cess at the rate of 160% whereas no Cess was proposed to be charged on bidi. He stated that there was a stronger case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secretary stated that the Central Government had already taken a decision that for 5 years, tobacco products would only be charged to compensation cess and that the Central Government would not levy any extra duty of central excise, except by way of National Calamity Contingent Duty (NCCD). Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metals and articles thereof; imitation jewellery; coin (Chapter 71) 9.10.1. The Joint Secretary (TRU-I), CBEC, explained the present tax rates on various categories of precious stones and precious metals. He stated that pearls, diamonds, other precious stones and synthetic or reconstructed precious stones were charged to nil rate of Central Excise duty. He further stated that dust and powder of natural or synthetic precious stones was charged to Central Excise duty of 6%; silver unwrought or in semi manufactured forms at the rate of 8.5% and gold unwrought or semi manufactured form were charged to duty at the rate of 9.35% and base metals or silver clad with gold; platinum, unwrought or in semi manufactured form; and base metals, silver or gold clad with platinum not further worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that gold need not be treated as a special item to be taxed at a low rate. He observed that it was not an item of consumption by the poor people as the top two income deciles accounted for about 80% of the total consumption of gold in India. He stated this sector could afford to pay the tax and for poor persons, a subsidy could be given for buying gold to solemnise the marriage ceremony. He further added that gold was being used for investment purposes and therefore, it should not be subsidised by keeping it under a low tax rate bracket. He further added that during the last few years, the price of gold had increased by 300 to 400 times and if the market could absorb this increase in price, it could also absorb a small tax amount. He warned that there would be a big loss to revenue if rates on gold were low and following the advice of CEA, one would need to look at increasing the rate of tax on some other item. He proposed that the rate of tax on gold should be 5%. The Hon ble Minister from Goa supported this proposal and advised against having a new rate under GST. The Hon'ble Ministers from Odisha and Assam also supported a tax rate of 5% on gold as the present incidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om Kerala and Bihar for not supporting a low rate of tax but it also needed to be borne in mind that higher tax rates on gold would lead to smuggling as roughly the annual demand for gold in India was about 1000 metric tonnes. He stated that gold and cigarettes were the largest smuggled items in India. The Hon ble Deputy Chief Minister of Gujarat, suggested as a compromise, to keep the tax rate on gold and gold jewellery at 3% as this sector provided large scale employment and also attracted considerable investment. The Hon'ble Ministers from Assam and Kerala suggested a compromise rate of 4%. The Hon'ble Chairperson suggested to keep the rate of tax on gold, other precious metals and jewellery (including artificial jewellery) at the rate of 3% and to consider increasing it over the years, the target being to reach the rate of 5%. The Council agreed to the proposed rate of tax on gold and other precious metals and jewelleries thereof at the rate of 3%. 9.10.6. On rough diamond, the Hon'ble Deputy Chief Minister of Gujarat stated that almost all rough diamonds were imported into India and 90% of diamonds, after finishing was exported. He added that about 95% of the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nism where the Central Government would bear half the burden. He stated that refund of CGST and SGST could be given for supplies to CSD canteens and the subsequent supplies to the Unit Run Canteens and from there the customers could be exempt from the tax. He added that under this scheme, a different rate for supply to CSD canteen was not being applied and only a mechanism of refund would be implemented through a notification. The Hon ble Chairperson observed that earlier the entire burden of exemption for CSD Canteen was on the States but now 50% of this burden would be shared by the Centre while refunding the tax proceeds. 9.10.9. The Secretary requested the Council to consider whether the same treatment could be given to the para military forces. The Hon'ble Minister from Jammu Kashmir suggested that this scheme should be limited to the defence forces only. The Hon'ble Minister from Maharashtra suggested to give this benefit to para military forces also. The Hon'ble Minister from Uttar Pradesh suggested to give this benefit to the Provincial Armed Constabulary (PAC). After discussion, the Council agreed to limit this benefit only to CSD canteens. Addendum t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies to CSD through a reimbursement mechanism (where CSD would get refund of 50% of GST under Section 55 of the CGST Act and the SGST Acts) but no concession to be given from levy of Compensation Cess. The cost of concessions to CSD shall be borne equally by the Central Government and the State Governments; the subsequent supplies from the CSD to the Unit Run Canteens and from the CSD or Unit Run Canteens to the customers shall be exempt from GST. Agenda Item 5: Presentation on concept note on operationalizing the Anti-profiteering Clause in GST Law: 11.1. Introducing this agenda item, the Secretary stated that Section 171 of the CGST Act and the corresponding provision in the SGST Act required that any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit should be passed on to the recipient by way of commensurate reduction in prices. This Section also provided for constitution of an Authority or empowering any existing Authority to examine whether the benefit of input tax credit or reduction in tax rate availed by a registered person had actually resulted in a commensurate reduction in the prices of the goods or services supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized. 11.3. The Hon'ble Minister from West Bengal proposed that the body to be constituted under Section 171 should be autonomous, and not under CBEC, so that it could take independent decisions. He stated that this body could also be under the GST Council. He supported the suggestion of having a sunset clause and the decision to wind up the Body would depend upon the experience in regard to the working of the Body. He cautioned that this provision should not lead to an Inspectorate Structure. He further observed that it needed further discussion as to how to provide autonomy to such a Body; how it should operate within the Council; and what should be the period for sunset clause. The Secretary stated that it would not be practicable to create an autonomous agency under the Council as this would be a time-consuming exercise which would defeat the very purpose of this provision. He stated that one possible organisation to conduct investigation could be the Competition Commission of India. The Hon'ble Deputy Chief Minister of Delhi observed that the experience with the Competition Commission ofIndia was not good. 11.4. The Hon'ble Minister from Kerala stated that he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited in the Consumer Welfare Fund created under Section 57 of the CGST and SGST Acts. The Principal Secretary (Revenue), Telangana, stated that as the Council would change rates of tax many times, it would not be advisable to have a sunset clause for the anti-profiteering provision. He also observed that the incidence of tax should be given State-wise as figures of weighted average tax could be misleading. The Secretary suggested that such lists could be published at the State level using the same matrix. The CCT, Gujarat, stated that they had sent comments on this agenda item. He added that providing information on the present and the earlier incidence of tax was not sufficient. Information would also need to be given as to what was the input tax, what was the benefit of input tax credit, etc. as was done in Australia. He observed that this would be more scientific and it would indicate how much tax benefit was given to the consumer. After further deliberation, the Council agreed with the broad principles of the draft Anti-profiteering Rules that when a complaint was received, it would be referred to a Standing Committee which would decide whether an inquiry should be initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Regional Councilor the District Council. He added that consumption or sale of 'electricity' was a separate Entry 53 in the List-Il (State List) of the Seventh Schedule to the Constitution which read as follows: Taxes on the consumption or sale of electricity . He pointed out that the Hon'ble Supreme Court in a number of decisions had held that 'electricity' fell under the category of' goods'. He stated that gi ven these Constitutional provisions and the observations of the Hon'ble Supreme Court, a view needed to be taken as to whether GST would be applicable on supply of 'electricity' or not. 13.2. The Secretary informed that a reference in this regard was made to the Union Ministry of Law which had opined that having a separate Entry on 'electricity' in the State List did not preclude 'electricity' from being under the ambit of GST. With this interpretation, any GST imposed on supply of 'electricity' at any later date would be over and above any tax imposed on consumption or sale of 'electricity' by any State under Entry 53 of the State List of the Constitution. This would be similar to the treatment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t were yet to be notified. He stated that in this view, the benefit of Composition levy would have to be granted under the CGST Act, 2017 and such option would be deemed to be allowed under SGST Act and UTGST Act as and when such Acts were notified. The Secretary proposed that the Council could approve notifying Section 10 of the CGST Act relating to Composition levy from 19 June, 2017 and the States that had enacted their SGST Act could also notify the same Section. The Council agreed to this proposal. Notifying Provisions related to Appointment of Officers 16. Introducing this agenda item, the Secretary stated that Section 3 of the CGST Act, 2017 provided that the Central Government shall, by notification, appoint different classes of officers for the purposes of the CGST Act. Section 4 of the CGST Act empowered the Board (Central Board of Excise and Customs) to appoint officers as it might think fit in addition to the officers notified by the Government under Section 3. Section 5 of the CGST Act provided for powers of the officers. Section 3 of the IGST Act, 2017 provided that the Board might appoint such central tax officers as it thought fit for exercising the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontaining Sections 22 to 30 and Section 139 of the CGST Act on migration of existing taxpayers. He observed that Section 20 of the IGST Act, 2017 provided that the provisions relating to registration and transition, among others, as in the CGST Act shall, mutatis mutandis, apply to integrated tax. He stated that in this view, Section 20 of the IGST Act was also required to be notified. He added that 23 States had already passed the respective SGST Acts till 31 May, 2017 but most were yet to be notified. Therefore, issuance of registration certificates to migrated taxpayers and fresh registrations to new taxpayers would have to be granted under CGST Act, 2017 and such registrations would be deemed to be granted under SGST Act and UTGST Act as and when such Acts were notified. He proposed that the Council could approve notifying Sections 22 to 30 and Section 139 of the CGST Act, 2017 and Section 20 of the IGST Act, 2017 from 19 June, 2017 and the States that had enacted their SGST Act, could also notify the same Sections (other than the IGST Act). The Council approved this proposal. E-Way Bills: 18.1. Introducing the agenda item on e- Way Bills, the Secretary stated that co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no respite for the transporter. viii. The onus and responsibility of movement of taxable goods and other than taxable goods was getting blurred. The smooth movement of goods could be hindered because of the fault of a transporter. ix. Trade associations had suggested alternative model. 18.2. He stated that the feedback from the stakeholders was yet to be examined by the Law Committee, and finalisation of Rules and related Forms might take some time and software could be developed only after finalization of the Rules and Forms by the Council. Therefore, the Secretary proposed that the Council could discuss and advise the suitable date and modalities of the implementation ofe-Way Bill system in the GST regime. 18.3. The Secretary further stated that the feedback from the stakeholders was yet to be examined by the Law Committee and in this view, finalisation of Rules and related Forms might take some time and software could be developed only after finalization of the Rules and Forms by the Council. He suggested that implementation of the e-Way Bill system could be postponed by a few months. He informed that GSTN would require about six months to put the e- Way Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be allowed to retain their present system of validation. 18.5. The ACS, Uttar Pradesh, stated that his State also had a very robust e-Way Bill System which was found useful both by the traders and the Government. He noted that the system had helped to curb evasion. The Hon'ble Minister from Kerala stated that till the GSTN developed the e-Way Bill system, the existing system of the States should continue as they had proved to be useful and if these were discontinued without any alternative system, there would be large scale loss of revenue. The Hon'ble Minister from Bihar supported this proposal. The Secretary stated that as goods would move with payment of IGST, the relevance of checking goods at the border had considerably diminished. The Secretary also asked CEO, GSTN, to respond whether any problems could arise if an independent system was put in place for e- Way Bills. The CEO, GSTN, responded that they had already floated tender inviting companies for development ofthe software which would take about two months to select the eligible bidder. He added that the successful bidder would take further two to three months to develop the software, which would be test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish a mechanism to give compensation to the UT of Andaman and Nicobar. The Administrator of Lakshadweep also stated that they had no octroi etc. and introduction of GST would lead to increase in prices. The Secretary stated that their problems would be looked into separately. The Hon'ble Lt. Governor of Andaman and Nicobar also stated that presently they had no bureaucracy dealing with tax but they were training their staff and thanked the Central Government for extending help in this regard. Request for reviewing the rates of tax agreed earlier by the Council: 20.1. The Hon'ble Deputy Chief Minister of Delhi stated that he had received a large number of representations regarding the rates of taxes approved during the 14th Council Meeting (held in Sri nagar on 18-19 May, 2017) and he proposed to submit these requests before the Council. The Hon'ble Minister from West Bengal stated that he also proposed to suggest review of the rates of GST approved on eight goods and two services and requested that these could preferably be taken up for discussion in this Meeting itself. 20.2. The Hon'ble Minister from Tamil Nadu circulated a written speech duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Council. The Council agreed to this suggestion. 21. The Hon'ble Minister from West Bengal raised an issue regarding the timeline for implementation ofGST. He stated that the state of preparedness for GST roll out was not adequate because of several factors like Rules having not been finalised, GSTN not being fully ready, etc. He stated that because of this, July 2017 deadline for GST implementation looked difficult to achieve. He proposed that the deadline for implementation of GST should be extended by one month. The Hon'ble Chairperson observed that most of the issues relating to implementation of GST stood resolved by the Council. The Hon'ble Minister from Maharashtra stated that while passing the SGST Act, they had given an assurance in their Legislative Assembly that GST would be implemented by 1 July, 2017 and this deadline should not be changed. The Hon'ble Minister from Assam stated that the Council had decided the GST rollout by 1 July, 2017 and any extension in the deadline would adversely affect the entire market sentiment. The Hon'ble Minister from Chhattisgarh stated that extending the deadline for GST implementation would not send a good signa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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