TMI BlogMinutes of the 17th GST Council Meeting held on 18 June 2017X X X X Extracts X X X X X X X X Extracts X X X X ..... or Composition Levy to Special Category States ii. IGST on Shipping Vessels iii. Lottery 4. Any other agenda item with the permission of the Chairperson i. High Sea Sales ii. Notifying Sections iii. Exemption under Section 9(4) of the CGST Act, 2017 iv. Fund Settlement Rules v. Authorization of Banks for GST collection vi. Power to be exercised under Sections 37, 38 and 39 of the Central Goods and Services Tax Act, 2017 5. Date of the next meeting of the GST Council Discussion on Agenda Items Agenda Item 1: Confirmation of the Minutes of the 16th GST Council Meeting held on 11 June, 2017: 3. The Hon'ble Chairperson welcomed all the Members to the 17 th Council Meeting and invited comments of the Hon'ble Members on the draft Minutes of the 16 th Meeting of the Council (hereinafter referred to as 'Minutes') held on 11 June, 2017 before its confirmation. 4.1. The Secretary, GST Council (hereinafter referred to as 'Secretary') invited the Chairman, CBEC to lay before the Council requests received regarding the Minutes. Chairman, CBEC stated that a written request was received from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ickles, power driven pumps, fly ash bricks and rate of tax for supply of food and drinks in restaurants without air-conditioning should be brought down to 5%; frames and mountings for spectacles, and attachments of tractors should be taxed at 12%; cess should be restricted to Motor Cycles above 500 cc; and wet grinder, air compressors and weighing machineries, and electrical apparatus irrespective of capacity should be brought down to 18%. The Council agreed to include the speech of the Hon'ble Minister from Tamil Nadu in the Minutes. 4.4.1. Shri V.P. Singh, CCT, Punjab referred to the Minutes on page 21 of the detailed Agenda Notes for the I 7 th GST Council Meeting (hereinafter referred to as 'Agenda Notes') in respect of textile where the Hon ble Minister from Punjab had requested that tax rate on man-made fibre be kept at 18%, for yam at 12% and for cloth at 5%. He added that it was recorded in the Minutes that the Council decided not to change rates for man-made fibre and yarn while it was not so and that no finality was achieved on the issue. He further added that a detailed proposal was to be sent before deciding on the issue. The Secretary mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... burden would be 5% whereas in the case of a person in Ludhiana who made grey fabric, value addition was 15% and he would pay 18% on the yam resulting in his credit getting wasted. This would result in a situation where the power loom sector would be seriously affected in the new GST structure. He requested to consider it as it was an all India issue. The third point he raised was regarding drawback (DBK) rates on textile exports as 40% of textiles were exported. He wondered what would be the DBK rates on fabric as there would be 5% duty plus embedded taxes. He requested to address the issue regarding export and power loom sector. 4.4.3. The Secretary mentioned that all these points had been considered and that if imports were increasing from China and other countries, basic customs import duty could be raised. However, the Secretary raised an apprehension that there would be problems if imports were from countries with whom India had Free Trade Agreements (FTAs) and those problems were not in respect of textile alone but in respect of all goods. The Chief Economic Adviser observed that on imports, basic customs duty could be increased, however there would be a problem in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within this time. He also mentioned that many organizations were meeting him regularly to reduce the taxes on multiple commodities but decision on changing rates could not be taken arbitrarily and that tax rates would be reviewed after few months of the implementation of GST. 4.5. The Hon'ble Minister from Mizoram stated that it was recorded in the Minutes that no clear decision was taken regarding the applicability of increased threshold from ₹ 50 lakh to ₹ 75 lakh under the composition scheme to the Special Category States. The Secretary stated that there was a separate agenda on this issue. 4.6. Shri R.K. Tiwari, Additional Chief Secretary (ACS), Uttar Pradesh, stated that in paragraph 8.4 of the Minutes, there was an error showing revenue loss to the tune of ₹ 50,000 crore which should be ₹ 5,000 crore. The Secretary informed that this was a typographical error and it should be read as ₹ 5,000 crore in place of ₹ 50,000 crore. 4.7. The Hon ble Finance Minister from Uttar Pradesh referred to their request on paragraph 8.17 (vii) of page 15 of the Agenda Notes where items like singhada and makhana were requested to be exempte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op) and small plastic pouches, curry, other spices and mixture of spice powder known as masala powder, unbranded biscuits, beedi, concrete blocks/bricks, and films made in the local language of the State should be taxed at a lower rate; unbranded sugar confectionery, pickles, power driven pumps, fly ash bricks and rate of tax for supply of food and drinks in restaurants without air-conditioning should be brought down to 5%; frames and mountings for spectacles, and attachments of tractors should be taxed at 12%; cess should be restricted to Motor Cycles above 500 cc; and wet grinder, air compressors and weighing machineries, and electrical apparatus irrespective of capacity should be brought down to 18%. (iv) To replace, in paragraph 8.4 of the Minutes, ₹ 50,000 crore with ₹ 5,000 crore. 4.10. ln addition, it was decided to include dried singhada and makhana in the list of 5% GST items. Agenda Item 2: Approval of draft GST Rules and related Forms: 5. Introducing this Agenda item, the Secretary asked Chairman, CBEC to brief the Council on the agenda pertaining to Rules. The Hon'ble Deputy Chief Minister from Delhi requested to first take up Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the e-way bill system from 1 July 2017, while some other States and the Centre were not in favour of implementing it till a fool proof e-Way bill system was developed. The Hon ble Deputy Chief Minister of Delhi raised two points (i) that the limit of ₹ 50,000/- was very low and (ii) how many transit points (checks) were to be allowed in intra-State movement.By way of an illustration, he stated that during the course of movement from Narela to Greater Kailash in Delhi, checks at several transit points would create problems for traders. Chairman, CBEC was of the view that thee-Way bill should not be required within the city. The Hon ble Minister from Chhattisgarh stated that the e-Way bill system should not be brought from 1 July 2017. He added that in Chhattisgarh, all physical check posts had been removed and that any matter relating to evasion of taxes should be addressed through enforcement action. The Hon'ble Minister from Madhya Pradesh also supported Chhattisgarh's point of view and mentioned that it would be alright to wait for 2-3 months and then decide on its implementation. 5.4.2. The Hon'ble Minister from Bihar informed that Bihar had boundaries w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thee-Way bill system was a must and that in the Gujarat Chamber of Commerce, many tax payers advocated for thee-Waybill system as mobile physical checking led to more corruption. He added that those States which had such a system should be allowed to continue and intra-city movement could be left out. Ms. Smaraki Mahapatra,CCT, West Bengal supported thee-Way bill system but without intra-city movement. Dr. M.P. Ravi Prasad, Joint Commissioner, Commercial Taxes, Karnataka stated that his State had an e-Way bill system for the last 3 years and that trade had welcomed it. He added that physical checks had been reduced and for this, the e-Way Bill system in his State, i.e. e-SUGAM had received awards. 5.4.4. The Hon'ble Minister from Assam stated that Section 68 of the CGST Act provided fore-Way bill and that in its absence, there would be massive evasion of tax and would create the need to bring the static check posts leading to harassment and corruption. He added that intra-city movement could be relaxed. Shri J. Syamala Rao, CCT, Andhra Pradesh stated that in its absence, 20%-30% evaders would drive genuine taxpayers out.Shri TuhinKanta Pandey, Principal Secretary (Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profiteering Rules, the Commissioner (GST Policy Wing), CBEC highlighted the main features like constitution of Standing Committee, National Anti-profiteering Authority, etc. The Secretary informed the Council that the Anti-profiteering Rules had been prepared on the recommendation of the GST Council in its 15th Meeting. Starting the discussion on the said Rule, the Hon ble Minister from Bihar wondered as to why retired judges needed to be brought as Chairman of the Authority and why retired officers could not be considered. He opined that judges did not understand the tax complications and suggested that the Authority should be headed by officers and not judges. The Hon'ble Minister from Kerala asked what the exact meaning of profiteering was and that benchmark information was required. 5.5.2. The Chief Economic Adviser stated that there were already two meetings on this issue and that a sunset clause of 9 months to one year needed to be provided. He added that this was a transition provision and would lead to harassment and in the long run, it should die. The Hon'ble Minister from Goa stated that the narrative should change and we should trust the countrymen. He ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stry representative and a consumer activist to provide balance to the Authority. The Hon ble Chairperson observed that it would not be proper to have both officers and activists on board since it was necessary to have an effective deterrent effect. He added that activists would bring a plethora of complaints and cited an example of fast track courts, where the experience was not good. He further added that Government officers had some bindings of conduct rules and would be more effective. 5.5.5. Shri Raghwendra Kumar Singh, CCT, Madhya Pradesh stated that there should be suo-motu provisions for initiating investigation where profiteering was observed by the Government. The Hon'ble Chairperson stated that this body could comprise of technically qualified people from the State as well as the Centre.The Secretary stated that to have a deterrent effect on profiteering, it was necessary to constitute the Authority as early as possible, headed by a retired or even serving Secretary-rank officer and four other Members.He added that a Search Panel needed to be constituted to suggest names for the Authority so that they could put up names for approval in the next meeting. The Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover threshold to avail the Composition scheme from ₹ 50 lakh to ₹ 75 lakb, but its applicability to the Special Category States was not decided. He mentioned that for Special Category States like Mizoram, the annual turnover threshold for availing the Composition Scheme should remain ₹ 50 lakh and not be raised to ₹ 75 lakh. The Hon ble Minister from Assam stated that be would go by the consensus of the other North-Eastern States. The Hon ble Chief Minister from Puducherry requested that his State also be included along with the Special Category States for this provision. The Hon'ble Deputy Chief Minister from Manipur also supported the proposal to retain the annual turnover threshold of ₹ 50 lakh for Special Category States. The Hon ble Minister from Jammu Kashmir said that though his State was included in the list of Special Category States, he requested that his State may not be included with the Special Category States for this provision and that he would like the annual turnover threshold of ₹ 75 lakh to be applicable to his State. He also added that even in the case of the annual turnover threshold of ₹ 20 lakh for exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with curtailed input tax credit wherein input tax credit on goods will not be available, which would cause tremendous accumulation of credit with no avenue for set off and that the additional tax burden would adversely affect the Indian shipping industry, competitiveness and viability as the Shipping sector was already under severe stress. He added that the Fitment Committee had examined the reference received from the Ministry of Shipping in detail and proposed two options for the consideration of the Council. These two options are enumerated as follows - i. Whether to allow ITC of GST paid on ships which would provide level playing field to shipping lines which go for outright purchase of vessels/ships/tankers or ii. Whether to exempt 5% CSGT and SGST/ IGST on ships/vessels/dredger/tankers as recommended by the Ministry of Shipping. 7.2.2 The Secretary suggested that Option (i), i.e. allowing ITC of GST paid on ships which would provide level playing field to shipping lines which go for outright purchase of vessels/ships/tankers could be approved by the Council. The Council approved Option (i). The Adviser (Financial Resources) to Chief Minister, Punjab sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Council on the incidence of Service Tax on lottery distribution. He presented two options for levying GST on lottery, as recommended during the meeting of officers of the State Governments held on 11 June 2017, namely- (i) GST rate of 5% on face value (MRP) of lottery tickets sold, and (ii) GST rate of 28% on MRP of lottery tickets sold less prize pay-out (as published in the official gazette of the State Government). He also stated that, in addition, there was an option presented by the State of Kerala to tax lottery tickets at the rate of 28% of face value (MRP of lottery tickets sold). He stated that under both the options, GST may be levied by the State Governments on the first point of sale by the State Government to the lottery distributor or the sole selling agent appointed by the State Government and to exempt agents/stockists below the distributor. He explained that the lottery organising States (Sikkim, Arunachal Pradesh, Nagai and and Assam) earned royalty and the earnings out of it would be reduced if the rate of tax was high and keeping this in view, the States of North-East had favoured the option of charging tax at the rate of 5% on face value of lottery tickets. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Section 4 of the Central Act provides that tickets would be printed by the State Government; printing would be done by a security press and the money from sale of lotteries would come to the Consolidated Fund of the State. He stated that a few States had given lottery contract to certain people who violated rules with impunity, which created serious social problems. He also objected to the data put in the agenda notes on the basis of the information given by All India Federation of Lottery Trade and Allied Industries; it was the States who were running lotteries and only the States' data could be authentic. He reminded that profit earned from lotteries went to the State treasury for developmental works. He added that in order to curb manipulation, the rate of tax on lotteries should be 28% on face value. 7.3.5. The Hon'ble Minister from Sikkim stated that the tax rate of 28% on face value would hit their revenue and reminded that earnings from lotteries and tourism were their main sources of revenue. The Hon'ble Minister from Kerala stated that lottery was being run by profiteers and was creating legal and social problems in the State. He reiterated his guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared in advance but there was manipulation in giving money and there were several scandals regarding lottery draws. He further added that other issues such as pricing of tickets were another activity for unscrupulous elements to exploit. 7.3.7. The Hon'ble Minister from Assam stated that one had to be mindful that the rate of tax on lottery could not be the same as that for essential items like cereals, pulses, etc. He, therefore, suggested that the rate of tax should not be 5% but at least 12% or 18%. He added that no item which had negative connotation should be kept in the tax slab of 5%. The Hon'ble Chief Minister of Puducherry stated that the dispute was between the State-run lotteries and the State-authorised lotteries. He observed that this was an important source of revenue for the North-Eastern States. He added that in southern India, lottery was banned in many States. He expressed that there was a need to find a middle ground by which the royalty income of the North-Eastern States could be protected and the revenue of States like Kerala was also protected. The Hon'ble Chairperson stated that gambling and horse racing were being taxed at the rate of 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncrease in the rate of tax on gold would lead to large scale smuggling. A similar situation existed in lottery trade and a very high rate of tax would lead to increase in unauthorised activity like underground betting. 7.3.9. The Hon'ble Minister from Telangana stated that another experience was that a higher rate of tax would lead to evasion of tax. He observed that Maharashtra had a high rate of tax on horse racing but it had the lowest revenue. He suggested to keep the tax rate on lottery and horse racing at the same rate but at a lower rate. The Hon'ble Chairperson stated that it had already been decided that the rates of tax already approved should not be reopened. The Hon'ble Minister from Kerala stated that lottery had three elements, namely - commission, prize money and profit (or revenue earned by the State) and observed that the price of lottery as well as prize money would remain the same and only profit margin would come down. This would discourage private players to operate in the field of lottery. He stated that the law to control this activity was no longer in force. The Hon'ble Chairperson requested for views of the Hon ble Members on the possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of tax be 12% or 18% on face value of the tickets. The Hon'ble Minister from Sikkim supported the rate of tax at 28% on the MRP of lottery tickets sold less the prize money pay-out. The Hon'ble Chief Minister of Puducherry suggested that, to begin with, the rate of tax could be 18% on face value and it could be reviewed later on. The Hon'ble Minister from Sikkim stated that the revenue from lottery for his State was about ₹ 63 crore which could be affected if it was taxed at a very high rate. He added that socially, such kind of activity could not be eradicated by prescribing a high rate of tax. 7.3.11. The Hon'ble Chairperson observed that till now, the Council had already decided other issues by consensus but on this issue, the Hon'ble Minister from Kerala had very strong views which needed to be balanced with the views of the North-Eastern States. The Hon'ble Minister from Kerala reiterated that he was willing to sign a written guarantee by assuring the same revenue to the North-Eastern States under GST system as they were getting till today. The Adviser (Financial Resources) to Chief Minister, Punjab, stated that as lottery was being so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouncil also approved the proposal that tax could be levied by the State Governments on the first point of sale by the State Government to the lottery distributor or the sole selling agent appointed by the State Government and to exempt agents/stockists below the distributor. 7.3.14. In respect of the Agenda Item on Lottery, the Council approved the following - (i) The supply of lottery shall attract GST rates as under - a. Lottery run by State Governments - 12% of face value of lottery ticket (Face value to be inclusive of GST) b. Lottery authorized by State Governments - 28% offace value of lottery ticket (Face Value to be inclusive of GST) (ii) Tax can be levied by the State Governments on the first point of sale by the State Government to the lottery distributor or the sole selling agent appointed by the State Government on reverse charge basis and to exempt agents/stockists below the distributor. Agenda Item 4: Any other agenda item with the permission of the Chairperson: 8.1 High Sea Sales This agenda item was not taken up for discussion, and it was deferred. 8.2. Notification of remaining sections of the Central Goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered recipient will not only be liable for the payment of tax on such inward supplies on reverse charge basis but would also be responsible for the compliance. He added that this would create hardship for such registered recipients as they would be liable for compliance with subsection ( 4) of Section 9 for inward supplies even of petty amount. He further added that omnibus application of the said provision to all inward supplies may be counter-productive and would increase compliance hardship for the registered recipient. 8.3.2. Accordingly, it was proposed that inward supplies of goods or services or both, the value of which was five thousand rupees or less received by a registered person from an unregistered person per day may be exempted from the application of sub-section (4) of section 9 by exercising the power of exemption under Section 11 of the CGST Act. The Hon'ble Minister from Bihar supported this suggestion. Joint Commissioner, Commercial Tax, Karnataka stated that his State would not favour such a proposal. The CCT, Gujarat stated that only Government departments making TDS needed to be exempted from this provision. The CCT, West Bengal stated that ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y further comments on the Fund Settlement Rules could be sent within two days to the Fund Settlement Committee for consideration. 8.4.3. In respect of the Agenda Item on Fund Settlement Rules , the Council approved the Fund Settlement Rules subject to minorchanges that may be required. 8.5. Authorization of Banks for GST collection 8.5.1. Introducing this agenda item, the Secretary explained that banks needed to be authorized to collect GST. The agenda note proposed that the 24 banks that were currently authorized to collect indirect taxes could be authorized for collecting GST throughout the country, since these banks met the requirements cited in Paragraph 85 of the GST Payment Process Report. The 24 banks are as follows: 1. Allahabad Bank 2. Andhra Bank 3. Axis Bank 4. Bank of Baroda 5. Bank of India 6. Bank of Maharashtra 7. Canara Bank 8. Central Bank of lndia 9. Corporation Bank 10. Dena Bank 11. HDFC Bank 12. ICICI Bank 13. IDBI Bank 14. Indian Bank 15. Indian Overseas Bank 16. Oriental Bank of Commerce 17. Punjab and Sind Bank 18. Punjab National Bank 19. St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-10 September 2017 August 2017 16 - 20 Septemb er 2017 2 1 - 25 September 201 7 8.6.2. The Hon'ble Chairperson stated that small businesses would have 2.5 months to adapt to the new system and any glitches could be rectified. He added that from September 2017 onwards, the regular cycle would start. The Hon'ble Minister from Kerala stated that if GSTR-1 was delayed, GSTR-2 and GSTR-3 would also be delayed, thereby resulting in late payment of tax liabilities. The Secretary stated that a new simple form- GSTR-3B was being proposed to pay tax based on summary of outward and inward supplies which would be submitted before the 20th of the succeeding month.If, at a later date, there was a difference between the auto-generated GSTR-3 and GSTR-3B, the tax liability would be adjusted accordingly. The Hon'ble Minister from Kerala wondered if, after 2 months, the return-filing would become normal. The Chairman, GSTN replied that some glitches that were identified would be resolved and that a dedicated helpdesk was handling migration issues and resolving problems faced by assessees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 - 25 Sept 2017 26 - 30 Sep t 20 17 (iii) To provide a sense of comfort to the taxpayers and give them time to attune themselves with the requirements of the new system, no late fees and penalty shall be levied for the interim period, if the returns are filed by the extended period. 8.7. Other Items- Fitment of certain items 8.7.1. The Hon'ble Minister from Tamil Nadu expressed gratitude to the Council for having considered favourably some requests from his State. He further urged the Council to examine the rates of certain goods and services such as unbranded sugar confectioneries, roasted gram locally known as fried gram , sago, Wet grinder and Air Compressors, fishnet and fishnet twine, sanitary napkins, etc. He added that the rate of tax for supply of food and drinks in small restaurants should be brought down to 5% and that a distinction needed to be made between AC restaurants serving liquor and other AC restaurants that do not serve liquor. He mentioned that the fireworks industry which was largely located in Tamil Nadu was labour-intensive and was, at present, out of the purview of Central Excise an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to these proposals. 8.7.3. In respect of the Agenda Item on fitment of certain items, the Council approved the following: - (i) GST Rate on hotel rooms where tariff is ₹ 2,500 and above but less than ₹ 7,500 per day shall be 18% (ii) GST Rate on hotel rooms where tariff is ₹ 7,500 and above shall be 28% (iii) GST Rate on supply of food/drinks in air-conditioned restaurant in 5-star or above rated Hotel shall be 18% 8.8. Other Items- Eligibility for Composition Scheme 8.8.1. Initiating a discussion on this agenda item, the Secretary introduced a list of nine items which were proposed to be excluded from the Composition Scheme. The Hon ble Minister from Rajasthan stated that marble slabs should be allowed to avail of the Composition Scheme and requested for removing this from the negative list for Composition. Shri M. Balaji, Joint Commissioner, Commercial Taxes, Tamil Nadu requested to remove fireworks from the negative list. The Hon'ble Minister from Jammu Kashmir suggested that except for tobacco and pan masala, the negative list should be done away with. Shri Arvind Subramanian, Chief Economic Adviser supported this propo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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